Features Of The New Industrial Policy

Important changes in the NIP 1991, including the subsequent changes, can be recounted as follows:

Industrial Licensing Policy

Industrial licensing has been abolished for all projects except for a shortlist of industries related to security and strategic concerns, social reasons, hazardous chemicals and overriding environmental reasons, and items of elitist consumption.
Only three industries groups where security and strategic concerns predominate will be I reserved exclusively for the public sector. + Automatic clearance to be given for certain cases where imported capital is required. +
There is no requirement of obtaining industrial approvals from the Central Government (except for industries under compulsory licensing) for locations not falling within 25 km. of cities having a population of more than one million.
Industries of non-polluting nature such as electronics, computer software and printing can be located within 25 km. of the periphery of cities with more than one million population.
Other industries are permitted only if they are located in designated industrial areas.
All existing registration schemes will be, abolished the A Antrenteneurs will henceforth only be required to file an information memorandum on new projects and substantial expansion.
The system of phased manufacturing programmes run on an administrative case-by-case basis will not apply to new projects. +
The exemption from licensing will apply to all substantial expansions of existing units.

Foreign Investment :

Automatic approval is available to Foreign Direct Investment in almost all sectors except new sensitive ones. Automatic approval is available for 50 per cent, 51 per cent, 74 per cent and even 100 per cent in specified industry groups.

To provide access to international markets, majority foreign equity holding up to 5 equity will be allowed for trading companies primarily engaged in export activities. The Foreign Investment Promotion Board has been constituted to negotiate with a number of large international firms and approve direct foreign investment in select areas.

Foreign Technology Agreements:

Automatic permission will be given for foreign technology agreements in identified high priority industries.

Public Sector :

A portfolio of public sector investments will be reviewed to focus the public sector on strategic, high-tech and essential infrastructure. Whereas some reservation for the public sector is being retained there would be no bar for areas of exclusivity to be opened up to the private sector selectively. Similarly, the public sector will also be allowed entry in areas not reserved for Public enterprises which are chronically sick and which are unlikely to be turned around will, for the formulation of revival rehabilitation schemes, be referred to the Board of Industrial and Financial Reconstruction. To raise resources and encourage wider public participation, a part of the government’s shareholding in the public sector would be offered to mutual funds, financial institutions. general’- public and workers.

MRTP Act

The MRTP Act has been amended to remove the threshold limits of assets in respect of MRTP Companies and dominant undertakings, Provisions relating to the concentration of economic power, pre-entry restrictions about prior approval of the Central government for establishing a new undertaking, expanding an existing undertaking, amalgamations, mergers etc., have been deleted. Emphasis will be placed on controlling and regulating monopolistic, restrictive and unfair trade practices.

Effects Of The New Industrial Policy On The Industrial Scenario

The new policy overnight altered, the industrial scenario in India. In intent and scope, the industrial policy is a watershed that will be as significant for the economy as the IPR, 1956 which gave primacy to the role of the State in industrial development. Henceforth, industrial enterprise, efficiency and the market will be the determinants of industrial advancement.

The delicensing of a host of industries and the abolition of all registration schemes will enable entrepreneurs to quicken decision-making and move quickly to seize business opportunities. The scrapping of any asset threshold or market share prescription for the definition of an MRTP company and dominant undertaking might, on paper, suggest the giving up of an important social and economic objective. But the then-existing law had proved futile in achieving the result. So little is lost but much gained, in terms of allowing companies to go ahead with investment programmes without delay. So also with the scrapping of the mandatory convertibility clause for term loans from the financial institutions-a provision which had prevented many entrepreneurs from investing/borrowing for fear of indirectly losing shareholding control to the government. In the public sector, the policy quite correctly evaluates the role of the public sector in the economy. The public sector has entered areas in which no commercial logic is served. Therefore, it makes sense to disinvest the government’s holdings in these holdings.

The other area in which the government has taken a giant leap, breaking new and hitherto sacred ground, is concerning foreign participation in Indian companies, both in industry and external trade. The liberalisation of the rules relating to FDI, the earlier facilitation of foreign technology agreements, and other related measures constitute a historic landmark in the evolution of industrial policy in India.

Let us now know a little about Energy Policies.