Industries Development and Regulation Act

Trimester I 2009

Industries Development and Regulation Act

The IDRA, 1951 was passed with the objective of effectively implementing the Industrial Policy. Until the economic liberalization ushered in 1991, the entry into business, growth and expansion of firms were regulated by licensing exercised by the Central Government under this Act.

Objective: The main objective of the IDRA is to empower the Government: To take necessary steps for the development of industries To regulate the pattern and direction of industrial development To control the activities, performance and results of industrial undertakings in the public interest.

Industries Development and Regulation Act

Industries Development and Regulation Act

Development Provisions

Regulatory Provisions

Advisory Council & Development Councils

Regulation of Conduct & Management of business Regulation of entry into & growth of business

Supervision, Investigation & Inspection Regulation of production, Supply, price & distribution

Take over of Management

Salient features of the Act

a) Development Measures: The IDRA seeks to ensure planned industrial development of the country by regulating, controlling and developing industries that have been included in the Schedule to the Act. These industries are known as Scheduled Industries. The Act provides for the establishment, by the Central Government of a Central Advisory Council, consisting of representatives of the owners of industrial undertakings, employees, consumers, primary suppliers etc. for the purpose of advising the Central Government on matters relating to the development of industries. It also provides for the establishment, for any scheduled industry or group of scheduled industries, a Development Council consisting of members having special knowledge of matters relating to the technical or other aspects of the industries, for purposes such as recommending measures for improving the performance of industries..

b) Registration of Existing Industrial Undertakings: The owner of every existing industrial undertaking is required to register the undertaking in the prescribed manner and within the prescribed period. Registration of an undertaking is not necessary if : It is a small scale industrial undertaking It is otherwise exempt from the licensing / registration provisions of this Act Where the undertaking concerned is not satisfying the definition of the term factory under the Act.

Salient features of the Act (contd.)

c) Regulation of Entry and Growth: The IDRA empowers the Central Government to regulate the development of industries by means of licensing with suitable exemptions as decided by the Government. A license is a written permission from the Government to an industrial undertaking to manufacture specified articles included in the Schedule to the Act. It contains the particulars of the industrial undertaking, its location, the articles to be manufactured etc. It is also subject to a validity period within which the licensed capacity should be established.

A license is necessary under the following circumstances: For establishing a new industrial undertaking For taking up the manufacture of a new article in the existing undertaking For substantial expansion of an undertaking For change in location of an undertaking.

Salient features of the Act (contd.) Prior to the economic liberalization in 1991, the licensing was a means to help achieve

the following objectives: Achieving the desired pattern of industrial dispersal especially promoting the backward regions encouraging new entrepreneurs prevention of concentration of economic power protecting the small scale sector regulating foreign capital and technology ensuring the use of proper technology and economies of scale controlling industrial pollution ensuring demand-supply equilibrium export promotion and import substitution conserving foreign exchange by proper allocation ensuring employment generation and socio economic equilibrium.

Licensing under New Policy: The Industrial Policy, 1991 has abolished industrial licensing except for certain industries related to security and strategic considerations, hazardous chemicals and environmental concerns. Now all industrial undertaking are exempt from obtaining an industrial license except for: Industries reserved for the public sector Industries retained under compulsory licensing Items of manufacture reserved for the small scale sector Proposals involving locational restrictions Industrial undertakings exempt from obtaining an industrial license are required to file an Industrial Entrepreneur Memoranda (IEM) with the Secretariat of Industrial Assistance (SIA) and obtain an acknowledgement. No further approval is required.

Salient features of the Act (contd.)

d) Supervision and Control: The Government under this Act can make a complete investigation if it is of the opinion that: In respect of any scheduled industry or undertaking there has been or is likely to be a substantial fall in the volume of output or a deterioration in the quality of output or an unjustified rise in price of the good Any scheduled undertaking is managed in a manner highly detrimental to the scheduled industry or to the public interest. Thereafter depending upon the results of the investigation, the Government is empowered to issue direction to the industrial undertaking for any of the following purposes: Regulating the production of any article and fixing the standard of production Requiring the industrial undertaking to take steps that the Government may consider necessary to stimulate the development of the industry. Prohibiting the industrial undertaking from resorting to any act which might reduce its production, capacity or economic value Controlling the prices or regulating the distribution, of any article which has been the subject matter of investigation. For the purpose of investigation, any person authorized by the Central Government on its behalf can: Enter and inspect any premises Order the production of any document, book, register or record Examine any person having the control of or employed in connection with, any industrial undertaking.

Salient features of the Act (contd.)

e) Take over of Management: The power of control entrusted to the Central Government under the IDRA extends to that of the take over of the management of the whole or any part of the industrial undertaking which fails to comply with any of the directions. The Government can also take over an industrial undertaking which is being managed in a manner detrimental to the industry or to public interest. In respect of the industrial undertaking the management of which the Central Government has taken over the IDRA empowers the Government to take steps in appropriate cases, to liquidate or reconstruct the company concerned. f) Price and distribution control: For securing equitable distribution and availability of fair prices of any article related to any scheduled industry, the Central Government is empowered to control its supply, distribution and price. Exemptions: The Central Government is empowered to exempt any industrial undertaking from all or any provision of the Act in certain cases in the public interest.

Current Scenario

Liberalization has diminished the importance of this Act. In the current scenario, most of the entry and growth restrictions and reservation of industries for public sector has been dismantled Responsibility for the development and to promote industries has now shifted to the State Governments Thus, several people argue that the Act has lost its relevance and it should be repealed.