Chapter 6Legal Requirements for Industrial Development

6.1 Industries (Development and Regulation) Act, 1951

The Industries (Development and Regulation) Act, 1951 provides for development and regulation of certain industries. The Act has been amended time to time. The last amendment in the said Act was - The Industries (Development and Regulation) Amendment Act, 1984. It provides for Establishment of the Central Advisory Council and Development Councils; regulation of the industries through the processes of registration, licensing and investigation into industries liquidation or reconstruction of companies and miscellaneous provisions. The Act gives a list of industries which requires compulsory licensing.

The first Industrial policy of the Government of India was announced in year 1948. The 1991 Industrial policy aims to maintain sustainable growth in productivity, enhance gainful employment, achieve optimal utilisation of human resources, attain international competitiveness and transform India into a major partner in the global arena. The policy is focussed on the following:

Industry de-regulation

Market responsive industrial development

Provision of a policy regime for facilitation and growth of Indian industry.

The major provisions of the policy are as given below:

1) Liberalization of Industrial Licensing Policy

a) Industries requiring compulsory licensing

As per the Industries (Development and Regulation) Act, 1951, industries required compulsory licensing. As of year 2014, only five types of industry sectors require compulsory licensing on account of environmental, safety and strategic considerations, these are:

Distillation and brewing of alcoholic drinks

Cigars and cigarettes of tobacco and manufactured tobacco substitutes

Electronic aerospace and defence equipment

Industrial explosives including detonating fuses, safety fuses, gun powder, nitrocellulose and matches.

Specified hazardous chemicals i.e (i) Hydrocyanic acid and its derivatives, (ii) Phosgene and its derivatives, (iii) Isocyanates&diisocyanates of hydrocarbon.

b) Industries under public sector

Since, 1991 only two industry sectors have been reserved for public sector. They are:

Atomic Energy – Production, separation or enrichment of special fissionable materials and substances and operation of the facilities, specified in the Department of Industrial Policy and Promotion.

Railway transport

2) Industrial Entrepreneurs’ Memorandum (IEM)

The industries which are exempted from compulsory licensing require filing an Industrial Entrepreneurs’ Memorandum (IEM) with the Secretariat for Industrial Assistance (SIA). No industrial approval is required for the exempted industries.

URDPFI Guidelines provide the sections of the Consolidated FDI Policy, 2013 which have relevance to the preparation of Regional or Urban Development Plans and its implementation.

Promotion of Foreign Direct Investment (FDI) forms an integral part of Industrial Policy. It helps in accelerating economic growth by means of infusion of capital, technology and modern management practices. The FDI policy is announced through issue of Consolidated FDI Policy Circulars. The latest Circular is effective from April 2013. As per the circular the sectors which have been liberalised are mentioned in Table 6.1.

Source: Consolidated FDI Policy, 2013

Foreign Investment Implementation Authority (FIIA) has been established to strengthen the foreign investment. As per the Consolidated FDI Policy (effective from April, 5^th 2013) salient features relevant to FDI in industrial parks (cited in section 6.2.12, page no. 59) and manufacturing (from section 6.2.5, page no. 45 of the Consolidated FDI policy, 2013) have been mentioned below:

Industrial Parks: FDI allowed in industrial parks is 100%, provided the following conditions are satisfied:

The Industrial park shall comprise minimum of 10 units and none shall occupy more than 50% of the allocable area.

Minimum percentage of area to be allocated for industrial activity shall not be less than 66% of the total allocable area.

Manufacturing: FDI in MSE (Micro, Small and Medium Enterprises) is subject to sectoral regulations. Any organization other than MSE but manufactures items reserved for MSE sector and has foreign investment in capital of more than 24% would have to come through Government Route. Additionally, such organization shall require industrial license for manufacturing. It has to achieve minimum 50% export of the MSE products within a period of three years.

The Government of India has announced the National Manufacturing Policy in year 2011 with the objective to enhance the share of manufacturing in GDP upto 25% within a decade and creating 100 million jobs. The National Manufacturing Policy outlines creation of clusters. The clusters play a critical role in technological propagation by facilitating technological learning and manufacturing through the presence of an entire ecosystem in the same geographical location. The XII Five Year Plan of Planning Commission also suggests a cluster approach for promotion of manufacturing industries.

URDPFI Guidelines provides the following Acts / Policies / Guidelines in relevance to the preparation of Regional, Industrial or Urban Development Plans and its implementation:

National Manufacturing Policy, 2011

National Investment and Manufacturing Zones (NIMZs) Guidelines

Special Economic Zone (SEZ) Act, 2005

Various schemes for cluster development under Ministries

Provisions for Micro Small and Medium Enterprises (MSME)

National Manufacturing Policy, 2011 and NIMZ Guidelines, SEZ Act, 2005 and Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 are appendices respectively in AppendixS, T and Uof Volume II B.