DR Act: The Industrial (Development and Regulation) Act, 1951 & 1956

Parliament passed the Industrial DR Act, 1951 (IDRA) in 1952 to manage and regulate industrial growth in the country. Its objectives were:

  • Industrial investment and production are regulated in accordance with set priorities and aims.
  • Small businesses must be protected from larger industries’ competition.
  • Monopolization and concentration of ownership in industries should be avoided.
  • Regional development is balanced in order to decrease disparities in development across different parts of the country.

Provisions of the DR Act

The act has two provisions:
  • Restrictive provisions: All of the actions in this category were aimed to stop industries from engaging in unfair business practices.
    • Registration and licensing of industrial undertakings
    • Inquiry of listed industries
    • Cancelation of registration license
  • Reformative provisions:
    • Direct regulation and control by the government
    • Control on price, distribution, and supply
    • Constructive measures

Industrial Policy Resolution of 1956

The purpose of the Industrial Policy Resolution of 1956 was to provide the mixed economy model and the philosophy of the Socialists’ design of society a real shape. The Industrial Policy Resolution of 1956 classified the entire industrial sector into three Schedules:-

Schedule A: The first category featured industries whose future development was solely the responsibility of the government. This category comprised 17 different industries. The industries were:-
  1. Arms and ammunition and allied items of defense equipment
  2. Atomic energy,
  3. Iron and Steel, Heavy castings and forgoing of iron and steel,
  4. heavy plant and machinery required for iron and steel production for mining,
  5. for machine tool manufacture and for such other basic industries as may be specified by the Central Government,
  6. heavy electricity plant including large hydraulic and steam turbines,
  7. coal and lignite,
  8. wolfram,
  9. mineral specified in the schedule to the atomic energy (control of production and use) order 1953;
  10. aircraft;
  11. air transport;
  12. railway transport;
  13. ship buildings;
  14. telephones;
  15. telephone cables;
  16. telegraph and wireless apparatus (excluding radio receiving sets);
  17. and generation and distribution of electricity.

Four of these businesses were to be Central government monopolies: armaments and ammunition, atomic energy, railways, and air transport. The state was to establish all new units in the remaining thirteen industries. Existing private-sector units, on the other hand, were allowed to continue operating and expanding. The state was supposed to help them whenever they needed it.

Schedule B: In this category, those industries were included that were progressively state-owned and in which the private enterprises would be expected only to supplement the efforts of the state. In this category, 12 industries were included. These were:-
  1. all other minerals (except minor minerals);
  2. aluminum and other non-ferrous metals not included in Schedule A;
  3. machine tools;
  4. ferrous alloys and steel tools;
  5. basic and intermediate products required by chemicals industries such as manufacturers of drugs;
  6. anti biscuits and other essential drugs;
  7. fertilizers;
  8. synthetic rubber;
  9. carbonization of coal;
  10. chemical pulp;
  11. road transport
  12. And Sea transport/in these industries,

The State government would create more units and grow its participation, but it would not restrict the private sector from the opportunity to create new units or expand current ones.

Schedule C: The third group covered all industries that were not listed in schedules A or B. The private sector was allowed to operate in these industries. As a result, the private sector was responsible for the establishment, function, and development of the industry, while the state may still start any industry it wanted. The state’s major function in this area, however, was to provide a suitable environment and infrastructure for the private sector to thrive.

For a long period, the lines of industrial activity listed in all three schedules A, B, and C effectively became specified industrial activities for the country’s entrepreneurs. As a result, the 1956 Industrial Policy Resolution became a major industrial Vedanta in the country’s industrial history.

Encouragement for Small sector

Various steps were proposed in the policy resolution to encourage the small sector, including (a) providing direct subsidies to the small scale sector, (b) providing appropriate tax relief to this sector, and (c) making it the state’s goal to protect the small scale sector by advancing technical assistance required for production and improvement of competitiveness. Foreign establishments were allowed under the 1956 Industrial Policy Resolution (DR Act), but these will progressively be replaced by Indian techniques.

Despite the fact that the policy correctly emphasized the development of basic and heavy industry in the public sector, as well as the encouragement of consumer goods production in cottage, village, and small-scale industries, the 1956 Industrial Policy Resolution portrayed consumer goods production in the cottage, village, and small-scale industries as something to be patronized.

Unfortunately, the government failed to combine these companies and their programs with the large-scale sector’s production programs. Furthermore, the administration failed to put in place adequate planning and execution mechanisms in the public sector.

The Industrial Policy Resolution of 1956 was based on the socialist ideology, and it was necessary to expand the public sector in order to achieve it. The 1956 Resolution (DR Act) broadened the scope of the public sector by reserving in Schedule A the future development of the 17 most significant industries. Aside from these, Schedule B designated 12 highly vital industries for growth in which the public sector was to play a major role.

However, critics pointed out that permits were awarded to private sector units in regions entirely allocated for state ownership or where future expansion was anticipated to be in the public sector for several years after the Resolution was adopted. Coal, oil, fertilizers, chemicals, engineering, and so on were among them.

The eradication of regional inequities and imbalances was one of the key goals of the Industrial DR Act of 1956. However, the policy’s actual implementation resulted in exacerbated regional disparities. According to the Dutt Committee’s findings, the four industrially advanced states of Maharashtra, Gujarat, West Bengal, and Tamil Nadu profited the most from the implementation of this program. 

In this regard, the Dutt Committee Report said that between 1955 and 1965, these four industrialized states accounted for 59.3 percent of applications and 62.42 percent of license approvals. Bihar, Orissa, Uttar Pradesh, and Madhya Pradesh, on the other hand, obtained only 15.5 percent of the total licenses approved. Despite all of this, the DR Act of 1956 served as the Industrial Economics Constitution for nearly two decades. Mother modification waiting was required after a long period of trial in 1977. 

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