7. Industrial Licensing.

8/8/2019 7. Industrial Licensing.

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` Merger is a fusion between two or more enterprises,whereby the identity of one or more is lost and theresult is a single enterprise by choice

` Amalgamation signifies blending of two or more

existing companies into one company, the blendedcompanies losing their identities and formingthemselves into a separate legal identity by choice

` When one company takes over another company, it isthe buyer who is the sole proprietor. Such deals are anacquisition - forced


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` Premises where manufacturing is carried out With aid of power if 50 or more workers are working or

were working 12 months preceding

Without the aid of power if 100 or more workers are or

were working in preceding 12 months

` Owner ultimate control over the affairs of

undertaking


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` Planned Industrial Development` Balanced Industrial Growth

Location regulations

` Directing Industrial Investment` Ensuring govt. control` Regulating industrial capacity` Preventing concentration of economic power and

monopoly` Checking unbalanced growth` Encouraging healthy entrepreneurship (healthy

competition)` Protecting small scale industries` Utilizing full capacities of large scale industries` Utilizing appropriate technologies


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` May 8, 1952

` Objectives Implement industrial policy

Ensure regulation and development of importantindustries

Ensure planning and future development of new

undertakings

Industrial Undertaking scheduled industry carried in one

or more factories


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` Preventive Provisions Registration and licensing provisions, investigation provisions,

revocation of license provisions

Section 10 all owners other than central govt. undertakingsneed to get registered

Section 11 no person or authority shall establish a newindustrial establishment without a license from the central govt.

Section 11 A no industrial undertaking shall manufacture anew product without a license issued by the central govt.

Section 13 no industrial undertaking can make substantial

expansion without a license issued by the central govt.


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` Curative Provisions Taking over the management or control industrial enterprises Control of supply, price and distribution of certain commodities. Section 18A empowers central govt. to authorize any person

or body of persons to take over or control any industrial

undertaking, if it fails to comply with the conditions. Section 18FA central govt. can authorize any person , with

permission of High Court, to take over any undertaking underliquidation.

Section 18 FC empowers central govt. to sell a runningundertaking or o reconstruct the same in the interest of general

public


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` Creative Provisions Concern for co operation with industry, labor and

consumers

Central Govt. retained the powers of license, take over,

permit expansion or levy and collect cess. Section 9 levy and collection of cess on all goods

manufactured in any scheduled industry.

Mandatory Licensing

x Starting a new unit

x Manufacturing a new product by an established unitx Effecting a substantial expansion by an established unit


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` No new industrial undertaking of a major size canbe started in the scheduled industry

` Section 15 govt. can order investigation into theworking of an industrial undertaking

` Section 5 establishment of Central AdvisoryCouncil (CAC) for advising the central govt. onmatters concerning development and regulation ofscheduled industries.

` Section 6 - Development Councils to beconstituted in respect of each scheduled industryor group of industries.


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` SIA Secretariat for Industrial Approvals

` No further clearances needed (foreign

collaborations, capital goods imports)

License carries a validity of two years Commercial production must start

Period may be extended twice for one year each


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` Clearances needed: LOI granted

` Validity 12 months

` Two extensions of six months each

`

1988 3years to max of five years` LOI Industrial License , if all financial

arrangements have been made for the project Prevention of pollution, effluent disposal, installing

pollution control equipment

` LOI holder should obtain permission for import ofcapital goods, foreign collaboration and foreign tie

ups.


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` 27 categories` Items not related in the first schedule` Items manufactured in an undertaking not coming under

the purview of factory` Items manufactured in the de - licensed sector` Expansion which does not come under substantial

expansion (upto 25% of existing capacity)` Small scale units subject to certain conditions` Items which do not fall under the category of new items` July, 1991

Section 10, 11, 11A, 13 abolished Only 18 industries now fall under the category of Industrial

licensing


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` The Industries (Development & Regulation) Act,

1951

` Industries Licensing Policy 1951 60

` Industries Licensing Policy 1960 - 70` Industries Licensing Policy 1970 - 77

` Industries Licensing Policy 1980 90

` Liberalization in Industrial Licensing 1991 and

after


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` Development of industries and encouraging industrialactivity

` Checking concentration of economic power

` Reduction of regional disparities

` Proper allocation of foreign exchange` Development, protection and encouragement of small scale industries

` Modernization of technology and achievement of

industrial growth` Welcomed by the private sector important role in

industrial development easy industrial licenses


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` Industrial Licensing Policy Enquiry Committee (DuttCommittee) 1969 Working of policy was not consistent with Industry Policy

Resolution of 1956 Promotion of large industrial houses and shut out other

entrepreneurs Unethical practices followed by a section of large business

houses multiple applications in different names for same item Preference by public financial institutions for lending to large

business houses

` Recommendation: converting a part of low yielding loanto high yielding equity private to joint sector enterprises.

` Restrictive Licensing Policy focus not on techno economic projects but source of sponsorship


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` 1970 banned entry of large industrial housesand foreign companies in any field except coreindustries, heavy investment projects, and export

oriented projects.

` 1973 def. of larger industrial houses changed;list of core industries enlarged

` 1977 priority to small scale, village and tinysector industries; geographical dispersal of

industries; District Industrial Centre (DIC) in eachdistrict to help the growth of small scale sector


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` Licensing not required for an existing licensed

undertaking to substantially increase production

capacity on existing lines; no license for small

scale units; preference to licenses which seek toestablish industry in specified geographical

regions

` Undertakings with fixed assets upto Rs. 50 Cr

exempted from license if they establish ineconomically backward regions


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` Industrial Licensing abolished except for a short list of industriesrelating to security and strategy etc.

` Other than cities with population of more than 1mn, no need toobtain industrial approvals from central govt. except forindustries subject to compulsory licensing.

`

Broad banding facility to existing units to enable production ofarticles without additional investment` Mandatory convertibility clause not applicable for term loans` All existing registration schemes abolished` Special Empowered board to be constituted to negotiate with a

number of large international firms and approve direct foreign

investment in select areas.` No permission needed to hire foreign technicians, foreign testing

of indigenously developed technology.


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` Licensing abolished for all projects except for afew related to strategic and security concerns.

` Projects where imported capital goods arerequired, automatic clearance will be given.

` All existing registration schemes abolished.

` Entrepreneurs now required to file only aninformation memorandum on new projects andexpansions

` Approval for FDI up to 51% foreign equity in highpriority industries.

7. Industrial Licensing.

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