EXIM POLICY

 The foreign trade of India is guided by the Export-Import policy of the Government of India.
 Regulated by The Foreign Trade Development and Regulation Act 1992.
 Exim policy contain various policy decisions with respect to import and exports from the country.
 Exim Policy is prepared and announced by the central government.
 Exim Policy of India aims to developing export potential, improving export performance, encouraging foreign trade and creating favorable balance of payment position.

General Objectives of Exim Policy

 To establish the framework for globalization.
 To promote the productivity competitiveness of Indian Industry.
 To Encourage the attainment of high and internationally accepted standards of quality.
 To augment export by facilitating access to raw material,intermediate, components, consumables and capital goods from the international market.
 To promote internationally competitive import substitution and self-reliance.

Highlights of the New Foreign Trade Policy

1.Special Focus Initiatives: Semi-urban and Rural Area
2.Agriculture : Vishesh Krishi Upaj Yojana and Agri Export Zones
3.Handlooms and Handicrafts: Mark under Market Access Initiatives Scheme and Proposed to Start new SEZ.
4.Gems and Jewellery: Import of gold of 18 carat and above has been permitted under the replenishment scheme
5.Leather and Footwear : Duty free import entitlement of specified items shall be 5% of FOB value of exports during the preceding year

Export Promotion Schemes

1.Assistance to States for Infrastructure Development of Exports [ASIDE]
2.Market Access Initiative [MAI]
3.Marketing Development Assistance [MDA]
4.Towns of Export Excellence
5.Target Plus Scheme
6.Served from India Scheme
7.Service Export Promotion Council
8.New Status Holder Categorization
9.Board of Trade: The role is to advising government on relevant issues connected with Foreign Trade Policy.

Implications of The Foreign Trade

Implications on Indian Economy:
This policy propose to simplify procedures and develop technology and infrastructure.

Implications on Agriculture:
Special Agricultural Produce Scheme has been introduced for promoting the export of fruits, vegetables, flowers, and their value added products.

Implications on Handlooms and Handicraft:
Establishment of Handicraft SEZ and Handicraft Export Promotion Council would promote development of Handloom and Handicraft Industry.

Implications on Gem and Jewellery Sector :
1.This is special thrust area in this policy.
2.Duty free imports of other inputs would give a further boost to this sector.

Implications on Leather and Footwear Industry :
1.Duty free import as a specified percentage of exports.
2.Exemption on customs duty on equipment for effluent treatment plants would help promoting export form this sector.

Implications on Service Industry :
1.An exclusive service promotion council has been set up in order to map the opportunities for key services in key market.
2.Develop strategic market access programmes like brand building in co-ordination with sectoral players and recognize nodal bodies of the service industry.

Annual Supplement to Foreign Trade Policy

Highlights of the Supplement:

1.Inter State Trade Council : To engage the State Government in providing an enabling environment for boosting international trade, by setting up an Inter State Trade Council.
2.Removal of Export Cess : Proposed to abolish cess on export of all agricultural and plantation commodities levied under various Commodity Board Acts.
3.Export Promotion Capital Goods Scheme (EPCG) : This scheme is extended to Agricultural sector, SSI sector, Retail Sectors in order to promote exports from them.
4.Service Export : To upgrade infrastructure in the service related companies.
5.Agri Export : Benefits under ‘Vishesh Krishi Upaj Yojana’ have been extended to exports of poultry and dairy products in addition to export of flowers, fruits, vegetables and their value added products.
6.Package for Marine Sector : Duty free import of specified specialized chemicals and flavoring oils as per a defined list shall be allowed to the extent of 1% of FOB value of preceding financial years export.
7.Advance Licensing Scheme : The Scope of Advance License for annual requirement has been extended to all categories of exporters having past export performance.
8.Duty Free Replenishment Certificate : Brass scrap, Additives, paper board, and dye stuff have been removed from the list of items prescribed for import under DFRC.
9.Procedural Simplification : Proposed to simplify procedures and reduce the documentation requirements so as to reduce the transaction cost of the exporters and thereby increase their competitiveness.
10.EDI Initiatives : DGFT shall introduce an automated electronic system for filing, retrieval and authentication of documents based on agreed protocols and message exchange with other authorities such including Customs and banks.

Public Sector Enterprises

The Industrial Policy Resolution of 1956 gave the public sector a strategic role in the Indian economy.
Public enterprises or public sector refers to that sector which is owned and
managed by the central government or the state government or a body set up
by the government to direct the undertaking in the public interest.

Forms or Types of Public Enterprises:


i. Departmental undertakings : Railways, Defence, etc
ii. Statutory Corporations : LIC, the Indian Airlines Corporations, etc
iii. Government Companies : Heavy Electricals Ltd, HMT Ltd, etc
iv. Holding Company : Steel Authority of India Ltd.

Objectives of Public Sector:

1.To promote rapid economic development through creation and expansion of Infrastructure
2.To generate financial resources for development
3.To create employment opportunities
4.To promote redistribution of wealth and income
5.To promote balanced regional growth
6.To promote exports and import substitution
7.To encourage SSIs

Role of Public Sector in Indian Economy:

•Capital Formation
•Development of Infrastructure
•Development of Defence Industries
•Development of Basic and Key industries:
•Iron and steel, cement, etc
•Development of Power projects
•Development of Banking and Insurance
•Balanced Regional development
•Balanced Economic Growth
•Strong Industrial Base
•Economies Of Scale
•Removal of Regional Disparities
•Import Substitution
•Export Promotion
•Expansion of Employment Opportunities
•Source of Revenue to the Government
•Saving in Foreign Exchange
•Better Allocation and Utilisation of Resources
•Diversity of Projects

Problems and Shortcomings of the Public Sector:

1.Mounting Losses
2.Price Policy of Public Enterprises
3.Delay in Completion of the Projects
4.Increase in Costs of Construction
5.Poitical factors influence decision about Location
6.Over-Capitalization
7.Under-Utilization of Capacity
8.Unfavourable Input-output Ratio
9.Use of Manpower Resources in excess of actual requirements
10.Faulty Planning and Controls
11.Inefficient Management
12.Labour Problem resulting in Strikes and Lockouts
13.Higher Capital Intensity -- Low Employment Generation
14.Shortage of Raw materials and Power

Remedies / Measures to be taken for the Performance of Public Sector:

1.Reduction in Unproductive Expenditure
2.Utilisation of Installed Capacity
3.Better Utilisation of manpower and materials
4.Proper Planning and Control
5.Improvement of Efficiency of Management
6.Suitable Price Policy
7.Making them Autonomous
8.Improvement of Industrial Relations
9.Motivation of Staff and Workers

Legal Environment

The government’s sets the legal framework within which business operates.
Legislations defining property and business organizations, laws of contracts and
bankruptcy, mutual obligations of labour and management and a multitude of laws and regulations constraining the way business activities are carried out constitute legal environment of business.
Economic legislations, as these, are often called, have a direct bearing on the business.
Economic legislations can be classified into two categories:

Legislations which have a facilitatory role.
Ex: The Contract Act provides the rules for systematic exchange transactions.
Legislations which are restrictive in nature.
Ex: MRTP Act and FERA

COMPETITION ACT

What is competition in the market?

In common parlance, competition in the market means
1.sellers striving independently for buyers’ patronage to maximize profit or other business objectives.
2.buyer prefers to buy a product at a price that maximizes his benefits whereas the seller prefers to sell the product at a price that maximizes his profit.

Why  do we need competition in the market ?

Competition

1.makes enterprises more efficient and offers wider choice to consumers at lower prices. 
2.ensures optimum utilization of available resources.
3.enhances consumer welfare since consumers can buy more of better quality products at lower prices.
4.beneficial for the consumers, producers / sellers and finally for the whole society since it induces economic growth.

What is meant by unfair competition?

Unfair competition means adoption of practices such as:

1.collusive price fixing,
2.deliberate reduction in output in order to increase prices,
3.creation of barriers to entry,
4.allocation of markets,
5.tie-up sale ,
6.predatory pricing,
7.discriminatory pricing,

What constitutes competition policy?

Competition policy is defined as those Government measures that affect the behavior of enterprises and structure of the industry with the view to promote efficiency and maximize welfare.
There are two elements of competition policy:-
First, a set of policies, such as liberalized trade policy, relaxed FDI policy, de-regulation, etc., that enhance competition in the markets.
Second, legislation to prevent anti-competitive practices with minimal government intervention.

When was the competition law enacted in India?

1.The Monopolies & Restrictive Trade Practices Act, 1969 is the first enactment to deal with competition issues and came into effect on 1st June 1970.
2.The Government appointed a committee in October 1999 to examine the existing MRTP Act for shifting the focus of the law from curbing monopolies to promoting competition and to suggest a modern competition law. Pursuant to the recommendations of this committee, the Competition Act, 2002, was enacted on 13th January 2003.
3.It provides for different notifications for making different provisions of the Act effective including repeal of MRTP Act and dissolution of the MRTP Commission.

Whether all provisions of the Competition Act have been notified?

Certain provisions such as those relating to establishment of the Commission, appointment of Chairperson and Members, appointment of staff, undertaking of competition advocacy have been notified.
Other provisions of the Act are yet to be notified such as those relating to adjudication of anti-competitive practices and regulation of combinations.

What are the objectives of the Competition Act?

The objectives of the Competition Act are
1.to prevent anti-competitive practices,
2.promote and sustain competition,
3.protect the interests of the consumers
4.ensure freedom of trade.

How would the objectives of the Act be achieved?

The objectives of the Act are sought to be achieved through the instrumentality of the Competition Commission of India (CCI) which has been established by the Central Government with effect from 14th October, 2003. 

What are the functions of CCI?  

1.CCI shall prohibit anti-competitive agreements and abuse of dominance, and regulate combinations (merger or amalgamation or acquisition) through a process of enquiry.
2.It shall give opinion on competition issues on a reference received from an authority established under any law (statutory authority)/Central Government.
3.CCI is also mandated to undertake competition advocacy, create public awareness and impart training on competition issues.

What is an “agreement” under the  Competition Act?

An agreement includes any arrangement, understanding or concerted action entered into between parties. It need not be in writing or formal or intended to be enforceable in law.

What is an anti-competitive agreement?

An anti-competitive agreement is an agreement having appreciable adverse effect on competition. Anti-competitive agreements include:-
1.agreement to limit production & supply
2.agreement to allocate markets
3.agreement to fix price
4.bid rigging or collusive bidding
5.conditional purchase/sale (tie-in arrangement)
6.exclusive supply/distribution arrangement
7.resale price maintenance
8.refusal to deal

New Economic Policy (NEP)

What is it?

in 1990-91-, Govt. was very low on cash, so they changed their economic policy, that's called LPG.

Why should I learn it?

1. Economy worth 100+M in Mains GS
2. International Relations worth 100+ Marks (GS paper 2 in Mains)


Whenever You want to understand india's Diplomatic relations with other nations, you've to see it pre & post cold war. same way
India's economic relation with others, you need to understand from pre & post LPG phase. that's why LPG is imp for international relation questions as well.

Why Govt. was low on cash?

1. First Gulf War = High crude oil prices
2. Fall of USSR (no one to help/ protect us)
3. Loss making Public sector undertakings (PSU)
4. Govt. was investing heavily in PSU, Development schemes, defence sectors.
5. these areas need lot money and it takes long gestation period after you see the recovery / benifit of that invested money.
6. + the usual Licence-Quota-Inspector raj. (explained later)

= Govt. has to borrow a lot from inside and outside the nation to run itself.
= We were so much out of money, that we could buy only 7 day's crude oil for the nation !

How did we get through it.

* We borrowed 7 billion Dollars from IBRD (Internation board of reconstruction & Development ) aka world bank
* But for that, we had to obey World bank's conditions - they wanted us to change our economic policies.
* thus came the LPG.


so LPG is one thing?
No its 3 different things

Liberalization
what does that mean?

* to put end on rules / Regulation to control economy
* Open up various sectors of Economy


wasn't our economy opened before LPG?

* No we had Licence-Quota-Inspector Raj.


what is Licence Raj?

* you want to open a new mobile phone making company you need to get licence from Govt..

Quota Raj
.

* even after you get the licence, you can't produce as many phones as you wish, you'll be given a quota

* say 1000 mobiles per month - you can't manufacture more than that.

Inspector Raj

* there will be a factory inspector, who will come and check how many phones you actually made,
* he gives you the certification only then you can take out your phones from warehouse to retail shops!

so when all 3 combine -its heavy delay, red tape and corruption.

Methods for Liberalisation .(Govt. used following)

End of Licence Raj (Libzn Method #1)
no more licence required for

* starting factory
* closing it or,
* deciding amount of production (= end of Quota Raj)

However you still need license for starting

1. Wine
2. Cigar
3. Hazardous Chem
4. Explosive
5. Drug-Pharma
6. Electronic
7. Aerospace

Dereservation of many things produced by Small scale industries
sectors reserved for PSU -are now only limited to

1. Defence
2. Atom
3. Railways

= means pvt players can't open machine gun making factory.


Finacial Sector Reformed (Libzn method #2)
RBI role reduced from regulator to facilitator
Financial institutions (Stock market, Forex market etc) can take decision with out consulting RBI like

1. freedom to setup new Branches
2. generate resources from India- Abroad

Result = introduction of

1. pvt Sector Banks,
2. Foreign Institutionl investors
3. Merchant Bankers
4. Mutual / Pension Funds


Tax Reform (Libzn method #3)

* Earlier income tax was high, so people used every trick to evade it.
* Now tax rates were reduced, more people came in Tax net.
* Method to collect indirect Taxes - also simplified.


Forex Reform (Libzn method #3)

* to solve BOP Crisis
* Rupee was Devalued = increased inflow of Forex
* Market to Determine Exchange Rate based on supply & demand of foreign currency. (earlier RBI was doing that)


Trade investment reform

* Quota barriers removed
* you don't have to pay high taxes on imported luxery items (gold watches / perfumes) like you had to do previously.
* no more import licence required except for Harardous materials.


Privatisation ( the 'P' of LPG)
Means Sheeding of Ownership / Management of Govt. owned companies.
How? = by Disinvestment = Privatization of PSU
by Govt. ,Selling of part of Equity to Public
Benifit of privatization

1. increased finacial discipline
2. modernisation
3. increased performance of PSU by
4. pvt Capital
5. Managerial tech.
6. FDI incoming

Problem

1. instead of making Navaratna a Global Player,
2. income generated from Disinvestment used to fill Revenue deficit

NavRatna

* = profit making PSUs were given Nav ratna statuts = they get more autonomy in their work
* (Govt. doesn't interfere much when they're buying raw material or taking other decisions.)


Globalisation (the 'G' Of LPG)
its result of L+P
e.g. Outsourcing = Co. hires regular service from External Source (country ) due to Cheap - Skilled Labour Force
Globalisation is facilitated via WTO
What is the use of WTO?

1. to administrater Multilateral Trade Agrement
2. provide Equal opportunity to all in international market
3. Govt.s can't put arbitrary restriction on imports.

Criticism of Globalization / WTO

1. Major volume of International trade betn Developed Nations
2. 3rd World has to open up for 1st world but their products can't get access to 1st world.


How LPG changed India's international relations?

* Before LPG we were doing 'Import Substitution' strategy.
* Means Govt. would either prevent entry of foreign players in our local market or put so much tax on imported items that we can't afford to buy it.
* Import substitution is when we'll (or have to) buy Bajaj Scooter even when Japanese Honda (foreigner) has a cheaper / better vehicle to offer. (but Honda prevented by Govt. using above methods.)
* this sounds great from patriotic point of view,but citizens are denied all luxeries of life, even when they want to enjoy it.
* Result of Import Substion strategy was that we were not importing any luxery electronic items , walkman, VHS players, Stereos, cars etcs from Japan, Taiwan, America, etc.
* thus we didnot have any high business relations with ASEAN or any other nation.
* After LPG, our market was flooded with cheap electronic goodies. Our trade relations with Japan, Singapore, ASEAN, & America improved.
* Once Established, the Economic ties are harder to break than diplomatic / military pacts.
* Thus more economic relations we have with the world= more friends we make.


How LPG changed your life?

* Today you're able to surf internet, buy computer, mobile phones,
* have dozens of toothpastes, cars, bikes to select from...
* all that thanks to LPG.

Industrial licensing

Industrial Licensing is governed by the Industries development & Regulation Act, 1951. The Industrial Policy Resolution of 1956 identified the following three categories of industries:
• those that would be reserved for development in the public sector;
• those that would be permitted for development through private enterprise with or without State participation; and
• those in which investment initiatives would ordinarily emanate from private entrepreneurs.
Over the years, keeping in view the changing industrial scene in the country, the policy has undergone modifications. Industrial Licensing policy and procedures have also been liberalised from time to time. A full realisation of the industrial potential of the country calls for a continuation of this process of change.
In order to achieve the objectives of the strategy for the industrial sector for the 1990s and beyond, it is necessary to make a number of changes in the system of industrial approvals. Major policy initiatives and procedural reforms are called for in order to actively encourage and assist Indian entrepreneurs to exploit and meet the emerging domestic and global opportunities and challenges. The bedrock of any such package of measures must be to let the entrepreneurs make investment decisions on the basis of their own commercial judgment. The attainment of technological dynamism and international competitiveness requires that enterprises must be enabled to swiftly respond to fast changing external conditions that have become characteristic of today's industrial world. Government policy and procedures must be geared to assisting entrepreneurs in their efforts. This can be done only if the role played by the Government were to be changed from that of only exercising control to one of providing help and guidance by making essential procedures fully transparent and by eliminating delays.
The winds of change have been with us for some time. The industrial licensing system has been gradually moving away from the concept of capacity licensing. The system of reservations for public sector undertakings has been evolving towards an ethos of greater flexibility and private sector enterprise has been gradually allowed to enter into many of these areas on a case by case basis. Further inputs must be provided to these changes which alone can push this country towards the attainment of its entrepreneurial and industrial potential. This calls for bold and imaginative decisions designed to remove restraints on capacity creation, while, at the same time ensuring that overriding national interests are not jeoparadised.
In the above context, industrial licensing will henceforth be abolished for all industries, except those specified, irrespective of levels of investment. These specified industries will continue to be subject to compulsory licensing for reasons related to security and strategic concerning social reasons, problems related to safety and overriding environmental issues, manufacture of products of hazardous nature and articles of elitist consumption. The exemption from licensing will be particularly helpful to the many dynamic small and medium entrepreneurs who have been unnecessarily hampered by the licensing system. As a whole the Indian economy will benefit by becoming more competitive, more efficient and modem and will take its rightful place in the world of industrial progress.
Industrial licensing policy
i. Industrial Licensing will be abolished for all projects except for a short list of industries related to security and strategic concerns, social reasons, hazardous chemicals and overriding environmental reasons, and items of elitist consumption list attached as Annex II). Industries reserved for the small scales sector will continue to be so reserved.
ii. Areas where security and strategic concerns predominate will continue to be reserved for the public sector (list attached as Annex 1)
iii. In projects where imported capital goods are required, automatic clearance will be given -
a. in cases where foreign exchange availability is ensured through foreign equity, - or
b. if the c.i.f. value of imported capital goods required is less than 25 per cent of total value (net of taxes) of plant and - equipment, upto a maximum value of Rs 2 crore.
In view of the current difficult foreign exchange situation, this scheme [i.e., (iii)(b) will come into force from April 1992. In other cases, imports of capital goods will require clearance from the Secretariat of Industrial Assistance (SIA) in the Department of Industrial Development according to availability of foreign exchange resources.
i. In locations other than cities of more than 1 million population, there will be no requirement of obtaining industrial approvals from the Central Government except for industries subject to compulsory licensing. In respect of cities with population greater than 1 million, industries other than those of a non-polluting nature such as electronics, computer software and printing will be located outside 25 km. of the periphery, except in prior designated industrial areas. A flexible location policy would be adopted in respect of such cities (with population greater than 1 million) which require industrial regeneration. Zoning the land use regulation and environmental legislation will continue to regulate industrial locations. Appropriate incentives and the design of investments in infrastructure development will be used to promote the dispersal of industry particularly to rural and backward areas and to reduce congestion in cities.
ii. The system of phased manufacturing programmes run on an administrative case by case basis will not be applicable to new projects. Existing projects with such programmes will continue to be governed by them.
iii. Existing units will be provided a new broad banding facility to enable them to produce any article without additional investment
iv. The exemption from licensing will apply to all substantial expansions of existing units.
v. The mandatory convertibility clause will no longer be applicable for term loans from the financial institutions for new projects.
Procedural consequences
vi. All existing registration schemes (delicenced registration, exempted industries registration DGTD registration) will be abolished
vii. Entrepreneurs will henceforth only be required to file an information memorandum on new projects and substantial expansions.
viii. The lists at Annex n and Annex m will be notified in the India Trade Classification (Harmonized System).

FOREIGN EXCHANGE MANAGEMENT ACT, 1999

FOREIGN EXCHANGE MANAGEMENT ACT, 1999

- Economic Liberalization
- FERA 1973 was reviewed in 1993
- Task Force set up - Submitted Report in 1994 - Resulted in FEMA
- Changes in Economy

1) Substantial increase in Foreign Exchange Reserves
2) Growth in Foreign trade
3) Rationalization of Tariffs
4) Current Account convertibility
5) Liberalization of Indian investments abroad
6) Increased access to external commercial borrowings
7) Participation of Financial Institutional Investors in our Stock
Markets

OBJECTS

1) To consolidate and amend law relating to Foreign Exchange
2) Facilitation of external trade and payments
3) Promoting the orderly development and maintenance of Foreign
Exchange market in India
EXTENSION
- Whole of India

APPLICATION

- All Branches, Offices and Agencies outside India owned or
controlled by a person resident in India
- Any contravention committed outside India by any person to whom
the Act applies

DEFINITIONS

1) Sec. 2(c) : ‘AUTHORISED PERSON’ - means an authorized dealer,
money changer, off-shore banking unit, any person authorized under
Sub-Sec. (1) of Sec. 10 to deal in foreign exchange or securities
2) Sec. 2(e) : ‘CAPITAL ACCOUNT TRANSACTION’ - means a
transaction which alters the assets and liabilities, including
contingent liabilities outside India of persons resident in India or
assets or liabilities in India of persons resident outside India and
includes transactions under Sec. 6(3)
3) Sec. 2(h) - ‘CURRENCY’ includes all currency notes, postal notes,
postal orders, money orders, cheques, drafts, travellor cheques,
letter of credit, bills of exchange and promissory notes, credit cards
or such other similar instruments, as may be notified by Reserve
Bank
4) Sec. 2( i ) - ‘CURRENCY NOTES ’ means and includes cash in the
form of coins and bank notes
5) Sec. 2(j) - ‘CURRENT ACCOUNT TRANSACTION’ means a
transaction other than a Capital Account Transaction and without
prejudice to the generality of the foregoing such transaction includes
a) Payments due in connection with foreign trade, other current
business services, and short term banking and credit facilities in
the ordinary course of business
b) Payments due as interest on loans and as net income from
investments
c) Remittances for living expenses of parents, spouse and children
residing abroad
d) Expenses in connection with foreign travel, education and
medical care of parents, spouse and children
6. Sec. 2( l ) - ‘EXPORT ’ with its grammatical variations and cognate
expressions means
a) the taking out of India to a place outside India any goods
b) provision of services from India to any person outside India
7. Sec . 2(m ) - ‘FOREIGN CURRENCY ’ means any currency other than
Indian currency
8. Sec. 2(n ) - ‘FOREIGN EXCHANGE ’ means foreign currency and
includes
a) Deposits, credits and balances payable in any foreign currency
b) Drafts, travellor cheques, letter of credit or bills of exchange,
expressed or drawn in Indian currency but payable in any
foreign currency
c) Drafts, travellor cheques, letters of credit or bills of exchange
drawn by banks, institutions or persons outside India, but
payable in Indian currency
9. Sec. 2(o) ‘FOREIGN SECURITY’ means any security, in the form of
shares, stocks, bonds, debentures or any other instrument
denominated or expressed in foreign currency and includes
securities expressed in foreign currency, but where redemption or
any form of return such as interest or dividend is payable in Indian
currency
10. Sec. 2(p ) ‘IMPORT ’ with its grammatical variations and cognate
expressions, means bringing into India goods and services
11. Sec. 2(q ) ‘INDIAN CURRENCY ’ means currency which is expressed
or drawn in Indian rupees but does not include special bank notes
and special one rupee notes issued U/S 28A of RBI Act, 1934
12. Sec. 2(u ) ‘PERSON ’ includes
a) An individual
b) A HUF - Hindu Undivided Family
c) A Company
d) A Firm
e) An association of persons or a body of individuals, whether
incorporated or not
f) Every artificial juridical person, not falling within any of the
preceding sub-clauses
g) Any agency, office or branch owned or controlled by such
person
13. Sec. 2(v ) - ‘PERSON RESIDENT IN INDIA ’ means
i) A person residing in India for more than 182 days during the
course of the preceding financial year but does not include
A) A person who has gone out of India or who stays outside
India, in either case
a) For or on taking up employment outside India or
b) For carrying on outside India a business or vocation outside
India or
c) For any other purpose in such circumstances as would
indicate his intention to stay outside India for an uncertain
period
B) A person who has come to or stays in India in either case
otherwise than
a) For or on taking of employment in India or
b) For carrying on in India a business or vocation in India or
c) For any other purpose, in such circumstances as would
indicate his intention to stay in India for an uncertain period
ii) Any person or body corporate registered or incorporated in India
iii) An office, branch or agency in India owned or controlled by a
person resident outside India
iv) An office, branch or agency outside India owned or controlled by
a person resident in India
14. Sec. 2(w) ‘PERSON RESIDENT OUTSIDE INDIA ’ means a person
who is not resident in India.
15. Sec. 2(y) ‘REPATRIATE TO INDIA ’ means bringing into India the
realized Foreign Exchange and
i) The selling of such Foreign Exchange to an authorized person
in India in exchange for rupees
ii) The holding of realized amount in an account with an authorized
person in India to the extent notified by the Reserve Bank of
India
and includes use of the realized amount for discharge of a debt or
liability denominated in Foreign Exchange and the expression
‘Repatriation’ shall be construed accordingly.
16. Sec. 2( zb ) ‘SERVICE ’ means service of any description which is
made available to potential users and includes the provision of
facilities in connection with banking, financing, insurance, medical
assistance, legal assistance, chit fund, real estate, transport,
processing, supply of electrical or other energy, boarding or lodging
or both, entertainment, amusement or the purveying of news or
other information, but does not include the rendering of any service
free of charge or under a contract of personal service.
REGULATION AND MANAGEMENT OF FOREIGN EXCHANGE
Sec. 3 - Dealing in FE shall be only with general or special permission of
Reserve Bank of India
i.e. Dealings or transfer of Foreign Exchange or Foreign
Securities through Authorized Person
Payments or credits to persons resident outside India
Payments on behalf of persons resident outside India
through Authorized Person
Financial transaction in India resulting in creation of asset
outside India
Exp. All remittances through Authorized Person
Transactions involving money - Foreign Trade
Sec. 4 - No person resident in India shall acquire, hold, own, possess or
transfer any Foreign Exchange, Foreign Security or immoveable
property situated outside India
Sec. 5 - Current Account Transactions through Authorized Person -
Central Government in public interest and on consultation with
Reserve Bank of India impose reasonable restrictions
Sec. 6 - All Capital Account Transactions through Authorized Dealer
- Reserve Bank of India with consultation of Central Government
- Specify class or classes of Capital Account Transactions which
are permissible and limit Foreign Exchange in such
transactions:
- Reserve Bank of India may specifically impose the following
restrictions
a) Transfer or issue of any foreign security by a person
resident in India
b) Transfer or issue of any security by a person resident
outside India
c) Transfer or issue of any security or foreign security by any
branch, office or agency in India of a person resident
outside India
d) Any borrowing or lending in Foreign Exchange in whatever
form or by whatever name called
e) Any borrowing or lending in rupees in whatever form or by
whatever name called between a person resident in India
and persons resident outside India
f) Deposits between persons resident in India and persons
resident outside India
g) Export, Import or holding of currency or currency notes
h) Transfer of immoveable property outside India other than a
lease not exceeding five years, by a person resident in
India
i) Acquisition or transfer of immovable property in India other
than a lease not exceeding five years by a person resident
outside India
j) Giving of a guarantee or surety in respect of any debt,
obligation or other liability incurred
i) by a person resident in India and owed to a person
resident outside India or
ii) by a person resident outside India
- A person residing in India may hold asset outside India if
acquired when they are inherited from person residing
there
- A person residing outside India may hold asset in India
acquired when residing here or inherited from person
residing here
- Reserve Bank of India to put restrictions for setting up
business in India by person outside
Sec. 7 - EXPORT OF GOODS AND SERVICES
- Every Exporter of goods to furnish following information to Reserve
Bank of India
a) Authority of declaration
b) Containing true and material particulars
c) Full export value or
d) Full export value as per market rate
e) Information for ensuring realization of export proceeds
- Reserve Bank of India to inform exporter the requirements to realize
export proceeds
- Every exporter of services to provide material particulars to Reserve
Bank of India
Sec. 8 - REALIZATION & REPATRIATION OF FOREIGN EXCHANGE
by person resident in India as per procedure of Reserve Bank of India
Sec. 9 - EXEMPTION FROM REALIZATION AND REPATRIATION in
certain cases - Secs. 4 to 8 not to apply in the following cases:
i) Possession of foreign currency or foreign coins by any
person upto limit provided by Reserve Bank of India
ii) Foreign currency account held or operated by such person
or class of persons and upto limit specified by Reserve
Bank of India
iii) Foreign Exchange acquired or received before 8/7/1947 or
any income arising or accruing thereon which is held
outside India by any person in pursuance of general or
special permission granted by Reserve Bank of India
iv) Foreign Exchange held by a person resident in India upto
such limit as the Reserve Bank of India may specify, if such
Foreign Exchange was acquired by way of gift or
inheritance from a person as in clause (iii) including any
income arising therefrom
v) Foreign Exchange acquired from employment, business,
trade, vocation, services, honorarium, gifts, inheritance or
any other legitimate means upto such limit as Reserve
Bank of India may specify
vi) Such other receipts specified by Reserve Bank of India
Sec.10 -AUTHORIZED PERSON
- Application to Reserve Bank of India - to deal in Foreign Exchange
and foreign securities i.e. to be a Dealer, Money Changer, Off-shore
Banking Unit
- Authorization granted in writing subject to conditions
- Authorization can be revoked by Reserve Bank of India
a) in public interest
b) violation of conditions, rules, regulations and law after
opportunity of hearing
- Authorized Person to comply with terms of authorization and special
and general directions of Reserve Bank of India
- Authorized Person to require declaration by person regarding
compliance with law and to report to Reserve Bank of India if person
fails to comply with declaration or fails to give it
- Any person fails to use acquired Foreign Exchange as per
declaration or fails to give it to Authorized Dealer has contravened
this Act
Sec . 11 - RESERVE BANK OF INDIA ’s POWER TO ISSUE
DIRECTIONS TO AUTHORIZED PERSON
- For the following purposes
a) Securing compliance with provisions of this Act relating to
Foreign Exchange and Foreign Securities
b) Ensure compliance with provisions of Act and supply of
information
- Failure of Authorized Person - Opportunity of being heard - fine of
upto Rs.10,000/-, Rs.2,000/- per day in case of continuing offence
Sec.12 - POWER OF RESERVE BANK OF INDIA TO INSPECT
AUTHORIZED PERSON
- By Inspector of Reserve Bank of India for following purposes
i) Verifying the correctness of any statement, information or
particulars provided to Reserve Bank of India
ii) Obtaining any information or particulars which such Authorized
Person has failed to furnish on being called upon to do so
iii) Securing compliance with the provisions of this Act of any rules,
regulations, directions or orders made thereunder
- Duty of AP to make available all documents and information for this
purpose
Sec.36 -DIRECTORATE OF ENFORCEMENT
- Central Government to establish Directorate of Enforcement with the
following personnel
a) Director
b) Officers of Enforcement - Its powers and duties
c) Additional Director of Enforcement
d) Special Director of Enforcement
e) Deputy Director of Enforcement
f) Assistant Director of Enforcement
Sec.37 -POWER OF SEARCH AND SEIZURE
- All the above to exercise power of investigation under this Act -
Powers of Income Tax Officers
- Also Officers of Central Government, State Government, Reserve
Bank of India not below rank of Under Secretary
Sec.38 -EMPOWERING OTHER OFFICERS
- Under Order of Central Government subject to conditions and
limitations
- Officer of Customs ) Exercise powers of
- Central Excise Officer ) Directorate of Enforcement
- Police Officer ) and powers of Income Tax
- Officer of Central Government or ) Officers
State Government )

NEW INDUSTRIAL POLICY

1. The Committee have been informed that the new Industrial Policy announced in July 1991, besides liberalisation of economy and globalisation, also aimed at building upon the gains achieved, to correct the distortions, maintain a sustained growth in productivity and gainful employment and attain international competitiveness. It envisaged pursuit of these objectives to be tempered by the need to preserve the environment and ensure the efficient use of available resources. All sectors of industry whether small, medium or large, belonging to public, private or cooperative sectors were to be encouraged to grow and improve on their post performance. The New policy also encompasses encouragement of entrepreneurship, development of indigenous technology through investment in research and development, brining in new technology, dismantling of the regulatory system, development of the capital markets and increasing competitiveness for the benefit of the common man. The spread of industrialization to backward areas of the country will be actively promoted through appropriate incentive, institutions and infrastructure investments. While recognizing the role of public sector, the new policy seeks to ensure that the public sector is run on business lines envisaging privatization, disinvestments and public sector restructuring. The Committee have also been informed that in pursuit of the above objectives, it was decided to take a series of initiatives covering the following areas:

(a) Industrial Licensing

(b) Foreign Investment

(c) Foreign Technology Agreements

(d) Public Sector Policy

(e) MRTP Act (Monopoly and Restrictive Trade Practices Act



NEW ECONOMIC POLICY

2. When asked about the impact on the socio-economic conditions of various sections of the society of the economic policy, the Committee were informed that under the new economic policy, the role of the Government and Public Sector are getting redefined. Requirement of manpower of the Government Department is being reassessed and fresh recruitment in Government Departments and institutions is kept limited to the minimum essential needs.

3. In the Budget Speech for 2001-02, it has also been indicated that all requirement will be scrutinized to ensure that fresh recruitment is limited to 1% of total civilian staff strength. As about 3% retire every year, this will reduce the manpower by 2% per annum achieving a reduction of 10% in five years as announced by Prime Minister.

SOCIO-ECONOMIC IMPACT OF THE NEW POLICY

4. As regards the economic impact of the new policy, it was stated that the new industrial policy is aimed at development of the national economy as a whole. As a result of this policy, there have been changes in the foreign investment, industrial development, infrastructure development as well as reforms in the financial sector and public sector. In the Budget speech for 2001-02, it has been stated that economic reforms began in 1991, the economy has grew at an average rate of 6.4% per a year since 1992-93 in comparison to 5.8% recorded in the 1980s. Further, poverty had shown declining trend from 36% in 1993-94 to 26% or less now. While no specific information is available on the impact of the new economic policy of the Government in the improved conditions of the Scheduled Castes and Scheduled Tribes in particular, the new policy has led to higher rate of growth of the economy. It is expected that the SCs and STs might have also been benefited as a result of these new economic reforms.

5. The Committee have also been informed that according to Department of Economic Affairs, in view of the economic reforms in 1991-92, the country has recorded a growth rate of 6-7 per cent annually. Though this is an improvement over the previous decade it is still inadequate to reduce the backlog of the country’s poor masses and common man Economic reforms are aimed at accelerating the GDP growth, particularly in sectors which are important for employment generation. Acceleration in growth of employment in various sectors is possible only if the country registers a minimum GDP growth rate of 8 to 9 percent per annum. Socially disadvantaged groups such as Scheduled Castes (SCs), Scheduled Tribes (STs) Other Backward Classes (OBCs) and Minorities have received special focus over the years. Various programmes for welfare and development of SCs, OBCs and Minorities are implemented by the Ministry of Social Justice & Empowerment. For STs the Ministry of Tribal Affairs was set up in October, 1999 exclusively to attend to the needs of tribal population keeping in view their special needs and problems. The financial institutions viz. National Scheduled Castes and Scheduled Tribe Finance and Development Corporation (NSFDC), National Backward Classes Finance and Development Corporation (NBCFDC) have been strengthened by enhancing their authorised share capital with the aim of improving their performance and coverage.

6. It was also clarified by the Ministry of Tribal Affairs that as regards the Scheduled Tribes, the purpose of economic liberation is to put resources to the social sector from the Industrial and other sectors where Government was investing on a large scale. With private sector funds coming into industrial and other infrastructure development sectors, the Government would be in a better position to invest more in the social sectors like health, education, rural development, drinking water supply and other social activities. This increased allocation to the social sectors will be beneficial for the Scheduled Caste and Scheduled Tribes and they will be able to get better coverage in health, education, drinking water supply etc. from the Government budgetary resources.

7. When asked to explain whether profit making public sector undertaking are being disinvested, the Department of Disinvestment in a written note have stated that the decision of the Government for disinvestments of its equity in any public sector enterprises is governed by the declared disinvestment policy. This policy of the Government is applicable to all public sector enterprises, irrespective of the fact whether it is profit making or loss incurring. As stated in the Budget speech for the year 2000-2001, the disinvestments policy of the Government, applicable to the public sector enterprises in the non-strategic sector, is to bring down the Government equity to 26% or below in the generality of cases. IN cases of public sector enterprises involving strategic considerations, Government will continue to retain major holding.

8. The Committee have also been informed that the public sector enterprises have been classified as strategic and non-strategic as indicated below:

(i) The Strategic Public Sector Enterprises would be those in the areas:

· Arms and ammunitions and the allied

· Atomic energy (except in the areas related to the generation of nuclear power and applications of radiation and radio-isotopes to agriculture medicine and non-strategic industries).

· Railway transport.

(ii) All other public sector enterprises would be non-strategic. For the non-strategic Public Sector Enterprises, the reduction of Government share to 26% would not be automatic and the manner and pace of doing so would be worked out on a case-to-case basis. A decision in regard to the percentage of disinvestments i.e. Government share going down to less than 51% to 26% would be taken on the following considerations:

(a) Whether the industrial sector as a countervailing force to prevent concentration of power in private hands, and

(b) Whether the industrial sector requires a proper regulatory mechanism to protect the consumer interests before Public Sector Enterprises are privatised.



SAFEGUARDS FOR THE INTEREST OF SC/STs

9. On being asked as to how the constitutional safeguards provided to SCs and STs would be ensured under the changing circumstances, the Department of Personnel and Training replied that the intake of persons belonging to SC/ST is governed by the number of posts in any cadre. If the cadre strength changes, the number of posts reserved for SCs & STs will change accordingly. Following the judgement of the Supreme Court in R.K. Sabharwal’s case, the number of vacancies is no longer relevant except to the extent that the proportion of SC/ST in the intake, in any year, cannot exceed 50% except in the case of backlog vacancies. In a situation where serving staff in the Government/PSUs and autonomous bodies are rendered surplus, personnel belonging to the SC/ST will not be rendered surplus, until consequent upon their being discharged as surplus, percentage of reservation in service/grade/posts falls below the prescribed level of 15% and 7.5% for SC/ST, respectively.

10. Clarifying further the Ministry of Heavy Industries and Public Enterprises stated that Article 16(4) provides for reservation of appointments or posts in favour of any backward class of citizens, which in the opinion of the State is not adequately represented in the services under the State. Decreased in Government’s equity/share capital in Central Government owned Public Sector Undertakings will not alter the position as long as they retain the character of ‘State’ as defined in Article 12 of the Constitution. With this in view, in the cases of disinvestments involving transfer of management control, appropriate provisions are made in the share-purchase agreement and the shareholders agreement with the strategic partner. Even after disinvestments in the shareholder’s agreements being signed not only were the interests of the existing workers being protected, a ‘best endeavour’ clause was being incorporated to persuade the new managements to accord the importance to the reservation policy of the Government. Typically, the agreements include a recital stating that the strategic partner recognizes that the Government in relation to its employment policies follows certain principles for the benefit of the members of the Scheduled Castes/Scheduled Tribes, Physically Handicapped persons and other socially disadvantaged sections of the society and that the strategic partner shall use its best efforts to cause the Company to provide adequate job opportunities for such persons. The initiative however would be with the private management.

11. On being asked what steps are being taken to ensure that the interest of SCs/STs are not adversely affected due to retrenchment of staff in PSUs, it was sated that the restructuring of public sector organizations are based on the economic viability of such enterprise. If an enterprise is not economically viable, retrenchment of the staff is to be undertaken as per the statutory provisions. Instructions exist to the effect that in the context of retrenchment of staff, SC/ST employees should not be included in the list of employees to be retrenched from a grade so long as the total number of SC/ST employees in that grade has not reached the prescribed percentage of reservation for SC/ST respectively in that grade.

APPLICABILITY OF RESERVATION ORDERS AFTER DISINVESTMENT

12. As regards applicability of reservation orders after sale/disinvestment the Department of Disinvestment, have informed the Committee that the job reservation orders etc would remain in force in such cases of disinvestment where the company remains a Government company and where transfer of management control is not passed to the strategic buyer. In cases of strategic sale with transfer of management where the company no longer remains a Government Company, it would be governed by the provisions of the Companies Act as applicable to similar companies, as also by the terms and conditions of strategic sale. Reservation issues for non-Government companies, once public sector enterprises are privatised, are broad national issues. The Department of Disinvestment is of the view that the provisions being made in the Shareholders agreement and the Share Purchase Agreement are adequate to safeguard the interests of various sections of employees.

13. With regard to adverse affect on employment opportunities for SCs & STs after privatisation of some Public Sector Undertakings, the Department of Disinvestment in a written reply has intimated that when the decision of the Government relating to disinvestments of a unit involves the transfer of management and control of the company, issues relating to employees are appropriately addressed in the terms and conditions of sale, in consultation with the prospective bidders.

14. On the point of extending reservation for SCs/STs in private sector companies including multinational companies as well as contemplating to bring legislation to protect the interest of SC/ST employees in Private Sector, the Committee have been informed that according to the advice of the Attorney General, reservation in the Private Sector will not be permissible under Article 16(4) of the Constitution. No data regarding representation of SCs/STs in the private organized sector is available. According to Ministry of Finance, (Department of Economic Affairs), they are not in favour of extending reservations in the private sector because of its far-reaching implications as it would adversely affect the objective of the new industrial policy to attain international competitiveness.

15. The Committee, during the evidence, enquired about reservation position in those Institutions where disinvestment/privatisation is being done such as BALCO & Modern Foods etc. The Secretary, Department of Disinvestment replied as under:-

“So far as private companies are concerned we have made provision. As you have asked about BALCO, it is provided in the recital that parties envision that all employees of the Company on the date hereof will continue to be in the employment of the company…….”

16. The Committee further asked if the Government change their policy in future then what will happen to the SCs/STs? The representative further added:-

“The Government have some policies about strategic partners. There is a clause about reservation. The strategic partner will make its best efforts to continue those policies. We cannot bind them, because in law there is no provision for reservation in Private Sector, even then they will follow this policy. It involves change of policy. Reservation in Private Sector is a constitutional question.”

17. When the Committee wanted to know whether there is any legal binding over the strategic partners when they do not implement reservation orders of SCs/STs and what steps are proposed by the Government in that situation. The Secretary, Department of Disinvestment clarified;

“Since the provision regarding reservation is for the Government and subsequently the Public Sector, therefore, for Private Sector Companies which are defined in our law as those companies which have a Public Sector share of 50 + 1, the moment you go below 50, that policy does not apply.”

18. Taking into consideration of immense potential in Private enterprises, the Committee had examined the issue of extending reservation for SCs and STs in Private Sector as early as in 1975 in their 41st Report (5th Lok Sabha) and they had recommended as follows:-

“employment potential under the Private Sector is immense and there is a vast scope for absorption of Scheduled Castes and Scheduled Tribes therein. Even though Government had requested the Employers’ Organisations to take up with their constituents the question of stepping up the employment of Scheduled Castes and Scheduled Tribes, there has been no response from them worth the name. Since the private sector employers have not perfomed the duty expected from them in this regard, the Committee recommend that Government should compel the private sector employers by law to follow the reservations for Scheduled Castes and Scheduled Tribes in all cases where the Government give them assistance in any form including grant of loans, land, licences or other facilities.

The Committee in their 18th Action Taken Report on the above Report (Sixth Lok Sabha) had also reiterated its earlier recommendation and has also desired that legislation should be enacted to give effect to their recommendation.

19. Later on, in the year 1992 the Committee again examined the subject relating to Reservation for SCs and STs in Private Sector Employment. Their main recommendations in 4th Report (10th Lok Sabha) are recapitulated below:-

(a) ensuring that the reservation policy in employment covering the government and public sector is extended to cover all new employment opportunities in that segment of economic activity which is handed over to the private sector by the Government.

(b) extending the reservation policy in all such industrial service and trading organizations, which receive any type of assistance from the Government in the shape of loans from financial institutions, subsidies from the Central and State Governments, concessions in the form of land allotment or other incentives from the Government.

(c) ensuring that any retrenchment of the staff working in the Government and public sector organisation as a consequent of the new economic policy or economy measures, does not adversely affect the interest of SC/ST and render the employees belonging to these categories unemployed.
SPEECH OF HON’BLE PRESIDENT ON THE EVE OF REPUBLICDAY 2002

20. The Committee have pointed out that while addressing the nation on the eve of Republic Day, 2002, the Hon’ble President of India, Shri K.R. Naryanan praised the Indian democracy, but on the other, he argued that its success would be relevant only if it is reflected in the social milieu. For achieving the same, he emphasised upliftment of the deprived classes, which according to him comprised specifically of women and dalits. A part of his speech is reproduced below:-

“the discrimination being suffered by women, the Scheduled Castes and Scheduled Tribes is a crying denial of the democracy that is enshrined in our Constitution. Recently a conference was held in Bhopal of Dalit and tribal intellectuals and activists. They issued a declaration called the Bhopal Declaration charting out a new course for Dalits and the tribal people for the 21st century. After calling for the implementation of the policies enshrined in our Constitution for their development, the declaration emphasizes the importance in this present era of privatization, of providing for representation for these deprived classes, not only in Government and public institutions but in private corporations and enterprises which benefit from Government funds and facilities. Indeed in the present economic system and of the future, it is necessary for the private sector to adopt social policies that are progressive and more egalitarian for these deprived classes to be uplifted from their state of deprivation and inequality and given the rights of citizens and civilized human beings. This is not to ask the private enterprise accept socialism but to do something like what the Diversity Bill and the affirmative action that a capitalist country like the United States of America has adopted and is implementing.

My fellow citizens, I have talked to you about these social questions because if our great democracy is to remain great and relevant to the problems of the masses, we will have to pay heed to these crying socio-economic issues. With such attention to the problems affecting the masses of our people, our country will be strong and powerful to pursue the policy of peace and co-existence that we have followed in the world, especially with regard to our neighbours in the sub-continent and in Asia.”
BHOPAL DECLARATION

21. The Hon’ble President specifically referred to the Bhopal Declaration adopted at the conference of Dalits and Tribal intellectuals held on 12-13 January, 2002 in the capital of Madhya Pradesh. The said declaration inter alia include following points:-

(i) Make the reservation quota applicable in all the public and private educational institutions from primary to technical and professional levels.

(ii) Ensure diversity or SC/ST's due representation in all public institutions of India, whether universities or academic or autonomous or registered bodies.

(iii) Make affirmative action mandatory in all private institutions, including industries and corporate sector, which receive state patronage in any form from land at concessional rate to tax benefits etc. and also develop the capacities and skills of Dalits to help them meet the demands of these different sectors.
NATIONAL COMMISSION TO REVIEW THE WORKING OF CONSTITUTION

22. The committee also point out that National Commission to Review the Working of Constitution (NCRWC) in its report has also reiterated the need to extend reservation in private sector. The panel said “Government should step in firmly and clearly to bridge the gap between private prejudices camouflaged in the name of “efficiency” on the one hand and the just aspirations of the SC,ST and BC including BC Minorities and Women on the other.”

23. The Committee point out that the Government should have looked around to see how the Government in other countries have tackled similar problems. In the developed countries like America, they have the policy to encourage by affirmative action to elimination of discrimination because of race, creed, colour or national origin in employment on work involving federal financial assistance, to the end that employment opportunities created by Federal funds shall be equally available to all qualified persons which is mentioned in Civil Rights Act of 1964.

24. As back as on March 6, 1961, American President John F.Kennedy issued Executive order which established the President’s Committee on equal employment opportunity. The order required federal government contractors to “take affirmative action to ensure that applicants are employed and that employees are treated during employment, without regard to their race, creed, colour or national origin.” This was the first time that the phrase “affirmative action” which had been used in another act in the context of redressing unfair labour practices, was linked to civil rights enforcement policy.

25. In the United States of America, to eradicate discrimination in employment, there are two separate federal organizations, namely (i) the President’s Committee on Equal Employment Opportunity established in 1961, and (ii) the Equal Employment Opportunity Commission(EEOC) created under Civil Rights Act of 1964. Even though a non-statutory body, the President’s Committee has been endowed with wide spread responsibility and powers clearly defined from the very beginning. The Commission is empowered to direct the Head of each Department or agency to take affirmative action to implement the equal opportunity policy of the nation. The Commission of Equal Employment Opportunity is a statutory body having jurisdiction on all Government employers, including federal, state and local entities and their sub units, private employers, employment agencies, education institutions and labour organisations. It is a standing Parliamentary Commission which has to submit an annual report to the Congress and to the President. It has been endowed with full investigating powers and powers to refer matters to the Attorney General and to enforce compliance of a court order. Under most EEOC enforced laws, compensatory and punitive damages are also available where intentional discrimination is found. Damages may be available to compensate for actual monetary losses, for future monetary losses and for mental anguish and inconvenience.

26. In addition to the two aforesaid federal organisations, there is Special Fair Employment Practices Commissions functioning in the various states of the USA. They are the administrative machinery for the enforcement of the State Laws prohibiting discrimination in employment. They function more or less in the pattern of the Federal Commission.

27. The Committee note that in regard to the question of extending reservation and fair employment policy for SCs and STs to private enterprises/sector, particularly in respect of those enterprises who receive government grants and loans or other assistance, the government have stated that according to Department of Personnel and Training the matter was examined in consultation with the Attorney General of India who advised that “reservation in private sector will not be permissible under Art. 16(4) of the Constitution and will be violative of the equality provisions in the constitution.” In the opinion of the Committee this Article has not been interpreted properly and correctly because Article 16(4) does not debar reservation for SCs and STs subject to specific provisions made for reservation for certain classes of the Soceity. The Committee are, therefore, seriously concerned over the unfavourable attitude of the Government for not extending national policy of reservation for SCs and STs in private sector and the Government, in the era of globalisation/disinvestment is still depending on the solitary advice of the Attorney General on such a vital matter of public importance and constitutional provisions. The Committee, therefore, strongly recommend that the Government should change their policy and seriously reconsider the matter of providing reservation in private sector also in the changed scenario of the Indian economy keeping in view the significant contribution made by these communities in the nation building. The Government must evolve a mandatory condition the agreement for adequate representation for SC and ST in the jobs while disinvesting any Government Institutions for making Private Sector for safeguarding the interests of SC & ST in jobs as guaranteed in the constitution.

28. The Committee may only presume that after privatisation of the public sector companies, the strategic partner will make best efforts to continue policies of the Government, but in fact that the Government cannot bind the private sector to provide reservation to SCs/STs because there is no law for reservation in private sector companies. The Committee are of the view that there is a veil difference between the private sector and a particular unit which was a public sector till recently and now converted into private sector because of disinvestment policy of the Government. Though it has become a private sector unit yet it is not fully private because of Government’s share in the company. The Committee are of the strong opinion that reservation in private sector should be made a legal binding by entering into an agreement between Government/public sector and private sector in the Memorandum of Understanding at the time of disinvestment, so that the basic element of reservation should remain there, which is the constitutional right of the people belonging to SCs/STs. The Government should not , so simply, transfer the money of the people invested in a public sector to a third party without protecting the right of SCs & STs. The Committee desire the Government to ensure that the reservation policy in the public sector is continued even after converting it into a private sector after disinvestment.

29. The Committee note that where the investment in a particular Public Sector/Company goes below 50% then it becomes Private Sector Company and over all control goes into the private hands. The Committee feel that the problem crops up because of reduction of the share of Government below 50%. The Committee, therefore, after examining the pros and cons of this aspect recommend that the Government should not disinvest its share below 51 per cent so that the control remains in the hands of the Government. By doing this, the claim of whole galaxy of SC/ST people in the Public Sector will remain intact. The Committee observe that the infrastructural facilities like railways, posts, telegraph, water, electricity, National Highways etc are provided by the Government and without the help of these facilities it is not at all possible to carry out any business/Industrial service/Trading in Private Sector. The Committee, therefore, recommend, that reservation policy for SC and STs should be extended to all such Industries/Trading Organisations which receive any type of such assistance from the Government in addition to loans from financial institutions/Banks, subsidies from Central and State Governments, land allotment or other facilities/concessions received from the Government.

30. The Committee also note that though there is no provision of reservation in private sector, a recital has been included in the disinvestments process which is as follows:-

“The strategic partner (SP) recognizes that the Government in relation to its employment policies follows certain principles for the benefits of the members of the SCs, STs, Physically Handicapped persons, those in the other socially disadvantageous categories of society. The SP shall use its efforts to cause the company to provide adequate jobs for such persons. Further, in the event of any reduction in the strength of the employees of the company, the SP shall use its best effort to ensure that the physically handicapped persons, Scheduled Castes and Scheduled Tribes are retrenched at the end.”

The Committee are of the opinion that inspite of above recital there is no guarantee that private sector shall implement it in letter and spirit. The Committee, therefore, recommend that whenever retrenchment of the staff working in the Government/Public Sector organisation becomes inevitable due to new economic policy/disinvestments, it should not adversely affect the interest of SCs/STs for rendering them unemployed. Moreover, some mandatory provisions should be made in the terms and conditions with the strategic partners so that SCs & STs should not face economic and social problems.

31. The Committee are of the opinion that it would be naïve to think that only an act could make reservation in private sector mandatory coupled with the fact that, the zeal of the implementing authority is also of vital importance. The Committee, therefore, observe that casual approach has been made by the Government to abide by Committee’s earlier recommendations made in this regard in their 41st Report (5th Lok Sabha) and 4th Report (10th Lok Sabha). The Government are not seems to be serious in respect of these recommendations which is deeply disturbing and a matter of grave concern to the Committee. It is also evident from the Republic Day Speech of the Hon’ble President of India, Bhopal Declaration, Report of National Commission to Review the working of the Constitution etc. Keeping in view the overall prevailing circumstances at present, the Committee strongly recommend that enactment should be done to bring private/public sector under gamut of the reservation provisions as well.

32. The Committee are surprised to note that whenever a question of implementation of reservation order arises, the concerned Ministries tries to shift their responsibilities on each other’s shoulders. During the evidence, when the issue of implementation of reservation orders by the State Government arose, the representative of DOPT replied as under: -

“……..We do not have any legal power to tell the State Government what to do with their employees.”

On being questioned whether DOPT is only for the Government of India, the witness further clarified:-

“………We are DOPT for Government of India. We are not DOPT for the State Government. We can play an advisory role……” We have issued circulars issued by the Government of India to all the State Governments” we have received requests for clarification…….we are in the process of clarifying it………”

He further clarified “ … we impress upon all the circulars. It all depends on the State Government that how promptly they implement it…..”

The Committee feel that there is total lack of coordination/Liaisoning among Department of Personnel and Training, Ministry of Social Justice & Empowerment, Ministry of Tribal Affairs and the State Governments. The Committee are pained to learn that there is no Central Authority at the moment to exercise its authority to ensure that the intake of the SCs & STs is as per the Government of India reservation orders. In Committee’s view, in case of any doubt/dispute in regard to implementation of reservation orders arises, instead of shifting responsibility by one Department to another, concrete and concerted efforts should be made to solve the problem. Further, the Committee is of the strong opinion that in the absence of any nodal Ministry for monitoring and coordination of implementation of reservation policy, the very purpose of reservation policy for SCs and STs has been getting defeated in the whole country in all the sectors. The Government should designate only one Ministry which should be a nodal Ministry to look after proper implementation of reservation orders. The Committee further recommend that there should also be a Central law to regulate the implementation of reservation policy for SCs & STs in all the State Governments, Ministries, Departments of the Government of India, Public Sector Undertaking and Private Sector.

Economic Environment

There are three types of economic systems :-

Capitalism

Socialism

Mixed economy

Capitalism :-
It is that profit-oriented system where the factors of production are privately owned.


USA, Spain, England, Sweden, South Korea all have capitalist economy.

It is characterized by: :-

Private ownership of means of production

Production for the market

Price mechanism

Labour power as a commodity

Exploitation of labour

Growing wealth of capitalists

Emergence of the working class

Class contradiction

Socialism :-

Here there is social ownership of factors of production and objective of economy is to maximize social benefit rather than private benefit.

It was 1st established in Russia. Gradually countries of Europe, China adopted the socialist system.

It is characterized by :-

Social ownership of means of production

Predominance of public sector

Decisive role of planning

Production guided by social benefit

Abolition of exploitation of labour

Mixed economy :-

It is an economic system where elements of both capitalism as well as socialism are found. It is characterized by:-

Private and state ownership of means of production.

Decisive role of market mechanism and supportive role of planning.

Intervention role of the state.

Public sector activities guided by social benefit.

Supportive role of economic planning.

Economic factors

Nature of economic environment:-

Business is dependent on economic environment for inputs.

Business is dependent on economic environment for selling its finished goods.

Economists are supplying macro economic forecasts to various industrial establishments.

Factors affecting business:-

Growth strategy
Economic systems
Economic planning
Industry
Agriculture
Infrastructure
Removal of regional imbalances
Price and distribution controls
Human resources
Per capita and national income

Growth strategy:-

Growth strategy of India was based on Soviet model.

State owned and invested capital and mobilized savings.

Private sector activities had to be strictly regulated and controlled.

Foreign trade had a relatively smaller role.

It was thought that labour force in developing countries could only be absorbed in industry and hence agriculture was neglected.


Economic systems:-

The concept of welfare state has become popular which is a modification of capitalism that provides for state intervention when certain deficiencies occur.

India’s economic philosophy:-

Mixed economy has been chosen under which we have three parts:
Sectors in which

1. Both production and distribution are managed and controlled by the State
2. State and private enterprise jointly participate in production and distribution
3. Private enterprise has complete access subject to general state regulation

Economic planning:-

The public sector will have to operate according to certain priorities to realize.

specific social and economic goals.

Close watch is kept on private sectors’ operations.

Objectives of 5-year plans:
Increase production to have greater NI.
Achieve full employment.

Industry:-

During 1960s, India was ahead of South Korea, Malaysia, Taiwan, Thailand and Indonesia etc.


But administrative controls like product reservation for public sector and small scale industries, tariffs and quotas, labour market rigidities held the country behind.


Although services sector is India’s strength it has not grown in double digits in last 9 years

Industrial sector should overtake services sector, if India were to attain 8% growth in GDP.

To improve industrial performance:-

1.Indian firms must come out of the local- market enough mindset and think in global terms.
2.SEZs should be encouraged.

Indian labour laws need to be reformed and made flexible and industry friendly


Skill development of workers should be given additional attention

National income and Per Capita Income:-

Aggregate flow of goods and services during a time period by the factors of production is known as national income or national product.
A high growth rate indicates that the economy is a developed one.
Primary reason for low growth in NI is:-
1.Deficiency in investment
2.High capital-output ratio

Low agricultural growth

Low industrial growth

Population explosion

Human resource :-

People provide market for goods produced and services rendered.

People together constitute one of the factors of production.

Degree of economic prosperity depends on the quality of its people.

Agriculture:-

Contribution of agriculture to GDP has come down from 57% in 1950 to 18% in 2006-07.

Major source of livelihood-more than 70% of working population engaged in agriculture.

Agricultural exports mainly are tea, coffee, oil, fruits, vegetables, spices, tobacco, cotton, cocoa, sugar etc.

Industrial production precedes economic growth and agriculture precedes industrial growth through
Product contribution

Market contribution

Factor contribution

Foreign exchange contribution

Infrastructure:-

Distinguishing features
Public Goods
Externalities
Monopolies
Public sector

It includes energy, transport and communication.

Growth of Infrastructure:-

Power generation in 2003-04 stood at 5,32,430 mn units from 3,80,084 mn units during 1995-96.

Indian Railways runs about 14,000 trains everyday to transport 13 mn passengers and 1.3 mn tones of freight.

IR contributes 1% to the GDP and employs 1.6 mn people.

India has one of the largest road networks in the world 3.3 mn km.

The subscriber base in telecommunications segment grew from 41.48 mn in 2003 to 42.84 mn in 2004.

Internet subscriber base has increased from 3.32 mn in 2003 to 4.92 mn in 2004.


There are about 189 Internet service providers operating across India.

Balanced Regional Development:-

It means the fullest development of the potentialities of an area according to its capacity so that the benefits of overall economic growth are shared by the inhabitants of all the regions.


It means widespread diffusion of industries to backward areas so far as it is economically feasible

Causes for backwardness and regional imbalances:-

British developed some regions at the cost of others.
Richness of factor endowments of a region is also a cause for regional imbalances.
Political factors also contribute to regional imbalances.
Financial institutions prefer borrowers from developed regions.

Disparity among different states in the provision of educational and training facilities, particularly technical education.

Fiscal policy by favoring high income areas for public investment and spending

Measures to remove regional imbalances:-

Financial support to backward regions

Special are development programmes

Dispersal of industries

Growth centers

Banking policy

Increasing Government expenditure

Price and distribution controls:-

Objectives:-
Supply of essential commodities at reasonable prices.
Prevention of hoarding and black-marketing.
Maintain quality of goods and services.
Prevent monopoly and unfair trade practices.
Ensure supply of inputs to priority sectors.
Ensure price stability.
Ensure minimum returns to producers.

JOINT SECTOR ENTERPRISES IN INDIA

Introduction

Adoption of planning in India led to a variety of initiatives by the state to promote and regulate industrialisation. For this, the overall framework was provided by the Five Year Plans. The essence of planning, while comprising of enlarged investments, is in achieving new pattern of investments. The pattern of resource allocation under a planned process, in contrast to market oriented economies, is governed by long term and a variety of socio-economic concerns and not by the market demand. The process of planning implies determination of a set of relative priorities and ensuring effective and timely implementation of plan targets. To translate the plan objectives the policies and programmes can broadly be categorised under three heads, namely, (i) Regulatory; (ii) Promotional; and (iii) Direct participation. The regulatory systems are by their very nature restrictive, but the nature and degree of restrictions vary from one regulatory policy to another. Regulatory mechanisms provide a positive support to the desired activities by warding off the undesired. Reservation policies, similarly, seek to place a premium on some; in effect placing the non-qualifying at a relative disadvantage. The regulatory mechanisms, however, cannot generate investments on the desirable lines. It may be possible to restrict one type of economic activity but this does not follow that the activities of the desired types would start taking place on their own. There would, therefore, be a justification, along with regulations, for evolving of promotional and support mechanisms in the processes of planned socio-economic development. The wide network of financial, technical and developmental institutions whose primary task is to finance easy and cheap credit can rightly be categorised as promotional. The same holds true of fiscal and monetary concessions and agencies which provide risk capital to new ventures or render technical guidance and assistance to new entrepreneurs. The third category of state action for promotion of overall industrialisation in a plan framework would be in the activities undertaken by way of direct participation in economic activity by the state. This may be in the form of creating new economic infrastructure (transport, power, banking) or in the
form of state enterprises. This is irrespective of the fact whether the enterprises are established as commercial establishments or not. Of the three types of state interventions in the economy a good deal of work has been done to examine the functioning and efficacy of different regulatory mechanisms. The state regulatory mechanisms in India have come under frequent reviews for various reasons. The ones who are deprived can only be expected to react and plead for abolition
of these systems. By their very character criticism of regulatory mechanisms should be a predictable phenomenon. The shortcomings of the system would be highlighted by those
who fail to enjoy the preferences they expected from the regulatory policies and mechanisms. The Hazari Report, Industrial Licensing Policy Inquiry Committee (ILPIC) Report, Memoranda submitted to Government by the Federation of Indian Chambers of Commerce and Industry (FICCI) and a number of other individual studies on the functioning of industrial licensing system in India are an indicator of the scrutiny that the industrial regulatory mechanisms have received over the past three decades. Similarly, the third type of state activity, that is, direct state intervention in economic activities, attracts considerable public attention and scrutiny that goes with public accountability. There are a multiple of institutions which continue to monitor and
evaluate the functioning of activities undertaken directly by the state. The Bureau of Public Enterprises (BPE), Parliamentary Committee on Public Undertakings (COPU), and the Comptroller and Auditor General of India (C&AG), are engaged in annual reviews on
the working of Public Enterprises. There is, however, one category of policies and programmes which gets very little attention; the category is that of 'promotional' activities. While we have drawn a distinction between regulatory, promotional and direct intervention it is true that the distinctions are not always easily discernable in many concrete situations. For instance, the difference between direct participation and promotional policies can be a thin one. To illustrate, one would find it difficult to say if the fact of having a substantial share in the risk capital in a private sector company should be equated with direct participation with regulatory motive or undertaken as a promotional measure. It is well known that public sector financial institutions hold a substantial share in the risk capital of the Indian corporate sector in general and the large private corporations, in particular.4 The present situation has emerged out of three types of independent developments. One, due to nationalisation of insurance and large private commercial banks the public sector institutions have emerged as important share holders. Two, the public sector financial institutions had to take up the 'left overs' due to the underwriting activity of the public issues floated by the private sector companies. Also, the financial institutions had to acquire shares in the open market not only for earning higher returns but also to bail out some of the private enterprises and to ensure the stability of the stock market. Three, in a few cases loans provided to private sector companies were converted into equity as per the initial understanding. And four, public sector institutions acquired significant shares to provide security to new investments. The last category is a follow-up of the policies to promote joint enterprises where in public sector and a private entrepreneur set up a new enterprise and the risk capital is so shared as to have almost equal stake of both.

Joint Sector: The Concept

The concept of joint sector wherein Government and private entrepreneurs join hands to establish new enterprises is indeed an old one. It was quite normal for many of the erstwhile princely States (the state of Baroda, Travancore & Cochin and Hyderabad to name only a few) to share risk capital in large industrial projects. At the international level, however, positive contribution by the Japanese Government in promoting new commercial enterprises is only too well known. Even prior to India's political independence it was a widely shared view that the
state in the independent India would have to play an active role in providing financial and
other support to new and small entrepreneurs. The need for the establishment of Industrial
Finance Corporation to promote and assist new enterprises was underlined by the National Planning Committee as also by the Economic Programmes Committee, both under the Chairmanship of Jawahar Lal Nehru -- the first Prime Minister of India. The World Bank Team which visited India in 1954 recommended that India needed financial institutions which can promote as also provide initial risk capital to those who have no support of the already well established business families.6 While the Industrial Finance Corporation of India (IFCI) was established by the Government in 1948, the recommendations of the World Bank team led to establishment of the Industrial Credit and Investment Corporation of India (ICICI) in 1955.Later in 1964 Industrial Development Bank of India (IDBI) was established. In addition to these, India has three major public sector investment bodies, namely, (a) the Life Insurance Corporation of India (LIC); (b) the General Insurance Corporation of India (GIC); and (c) the Unit Trust of India (UTI). Besides these, there is Industrial Reconstruction Corporation of India (IRCI) which provides term finance to rehabilitate sick industrial units.
In the early 'fifties it was also realised that in view of the large size of the country the task of promoting new and small entrepreneurs could not be left to a few national level institutions. Thus, State Financial Corporations Act was enacted in 1952 to "assist smaller industries in different provinces".8 As a consequence of this legislation there are by now (i.e. the year 1986) 18 State Financial Corporations (SFCs) and 25 State Industrial Development Corporations (SIDCs).9 The functions of these institutions are wide ranging in nature, covering different aspects of promotional and developmental activities in addition to advancing of term loans and financing of industrial projects. The State Financial Corporations (SFCs), were basically visualised to extend assistance to small and medium level industries. The SIDCs were expected to provide assistance by conducting techno-economic surveys, identification of projects, selection and training of entrepreneurs, development of backward areas, constructing industrial sheds, providing infrastructural facilities and directly participating in the share capital of new enterprises.
The State Industrial Development Corporations (SIDCs) and State Industrial Investment Corporations (SIICs) have come to occupy an important place in most of the States of India. There are, however, variations in the nature and size of their operations. The SIDCs, generally speaking, obtain Letters of Intent/Industrial Licenses for setting up industries in the fields where there is scope for development and in particular where private risk capital is not easily forthcoming for establishment of new industries. After obtaining the necessary permission/ license from the Government of India, the SIDCs identify private parties which could implement the industrial projects in the form of 'joint sector' enterprises (JSEs)
.
The Joint Sector Enterprises in India:

The main thrust to the joint sector came during the post-1970 period. Prior to India's independence a number of Joint Enterprises were established by a few erstwhile Princely States. Air India International provides another notable example. The company was established by the Tatas in 1948. The Government of India provided 49 per cent share in its equity. The Government subsequently acquired an additional 2 per cent equity from the Tata Sons Ltd to convert it into a government company. In spite of the government holding 51 per cent of the equity the Air India continued to be under the management of the Tatas until it was fully taken over by the Government of India in 1953.There were twelve other undertakings in 1966-67, in which the Central Government had a substantial stake in equity capital without having direct managerial control. In a few cases equity participation by foreign enterprises in the public sector
enterprises was also allowed. Madras Fertilizers Ltd. for example, was established as a joint enterprise in participation with Amoco Inc. (USA) and National Iranian Oil Co.(Iran). The same foreign companies were partners in Madras Refineries Ltd too. Cochin Refineries Ltd. was established with the participation of the Phillips Petroleum Co. (USA) and Duncan Brothers Ltd.; Lubrizol India Ltd.; with the Lubrizol Corporatio (USA); and Triveni Structurals Ltd., with Voest Alpine (Austria). Maruti Udyog Ltd., is one of the latest cases where a foreign private corporation has been invited to join hands with the Government. A feature of all the above cases appears to be that public sector holdings are of majority nature and these are managed by Government nominated boards. The Industrial Policy Resolution (IPR) of 1956 had classified industries into three main categories, depending on the role that the state was to play in each industry;
1. The industries, the future development of which will be the exclusive responsibility of the state.
2. The industries which will be progressively state-owned and in which the state will generally take the initiative in establishing new undertakings and wherein private enterprise will be expected to supplement the efforts of the state in developing these industries.
3. The non-scheduled Industries are left to the initiative and enterprise of the private sector.

The IPR, 1956 envisaged that the state would help the private sector in fulfilling the role assigned to it within the planning framework and the industrial policy in force from time to time. In doing so, the state will continue to foster institutions to provide financial aid to these industries, and special assistance will be given to enterprises organised on co-operative lines for industrial and agricultural purposes. In suitable cases, the State may also grant assistance to the private sector. Such assistance, especially when the amount involved is substantial, will preferably be in the form of participation in equity capital, though it may also be in part in the form of debenture capital. In September 1960, the Government of Maharashtra appointed a Consultative Committee on the Third Five Year Plan, which set up a Study Group on "Joint Sector Enterprises for Industrial Development" under the Chairmanship of Shri R.G. Saraiya.
The Committee, in its report submitted in May 1961 expressed the opinion that: There can be no doubt that there exists considerable scope and justification in equal measure to establish industrial undertakings in the "Joint Sector". The Industrial Policy Resolution, 1956, has reserved certain types of industries exclusively for establishment by the Government and certain others have been listed where both Government and private enterprise can operate. Another important purpose of the Joint Sector scheme ought in our view to be the need to attract entrepreneurs to the relatively backward areas of the State in the matter of industrial development. Many of these have valuable resources but risk capital is not easily attracted to
them because of the many other uncertain factors of industry in the minds of the entrepreneurs. State partnership would help considerably in removing such doubts in cases where the scheme is otherwise economic and proven. Thus, the concept of joint sector as visualised by the Saraiya Committee was in the form of an industrial organisation that would promote industrial development in the State (Maharashtra in this case).
The development of the joint sector in its present form, can also be associated with the recommendations of the Industrial Licensing Policy Inquiry Committee (ILPIC), 1969.
It was based on the consideration that since a large proportion of the cost of the new projects was financed by the public financial institutions directly or indirectly, the financial institutions should be allowed to share the profits and capital appreciation in the private sector companies. According to the Committee: When public sector financial assistance on any significant scale is provided for the private sector ..., project should (also) necessarily be treated as belonging to 'joint sector' with proper representation for the state in its management. The Committee favoured conversion of loans given to large projects into equity. The joint sector form was also expected to "ensure that the management of industry is conducted according to the overall policies laid down by government and that public interest and not merely private profit would guide the operations of large industrial undertakings in the private sector". The Committee saw a way of curbing the concentration of economic power with the help of this approach. In their view joint sector, as formulated along the lines suggested, would be "an important instrument for the
attainment of this objective and it is likely to be more effective than licensing." The ILPIC's recommendations covered many other aspects of industrial policy.
Following these recommendations, the Government issued a policy statement in February 1970. It was announced that the "joint sector" concept as suggested in the ILPIC Report was "accepted in principle".It was also stated that this concept would be applied in "appropriate cases" of major projects taken up by the private enterprise groups in the core and heavy investment sectors.18 The reactions to this decision were of varied nature. In particular, the Indian Big Business became quite apprehensive of this move. They feared that joint sector could amount to "back door nationalisation". FICCI and other business associations expressed their concern over the acceptance of the ILPIC recommendations.
The views of the private industry seem to have been reflected in the Memorandum submitted by J.R.D. Tata to the Government of India on May 17, 1972. Tata suggested that a Joint Sector enterprise should be intended to be a form of partnership between the private sector and Government in which government's participation will not be less than 26 per cent and the day-to-day management will normally be in the hands of the private sector partner and control and supervision will be exercised by board of directors on which Government is adequately represented. Regarding the Central and State participation, the Memorandum suggested that the Central Government should involve itself in a joint sector company only when the project required very large funds and leave the smaller ones to the State Government. In case where a majority equity was not considered necessary, the Tata Memorandum suggested: the ownership of capital should be distributed as 26 per cent by the government, 25 per cent by the private company and the balance by the general public.
According to J.R.D. Tata, the management of a joint sector enterprise should remain in the hands of private sector partner and the joint sector company should not be burdened with cumbersome and time consuming procedures enforced in the public sector enterprises. Further he opined that there was a need to examine if "some of the well run public enterprises can be brought under the Joint Sector". This was expected to release public funds for other priority projects. Thus in his scheme of things, the joint sector was to play only a promotional role in contrast to the objectives and the philosophy of the ILPIC's recommendations.
In February 1973 the Government of India clarified its stand on the concept of 'joint sector'. It was explained that : In appropriate cases, the Central and State governments have taken equity
participation either directly or through their corporations with private parties .... This type of Joint sector units is a device which may be resorted to in specific cases having regard to the production targets of the Plan. Each proposal for establishing a joint Sector unit of this nature will have to be judged and decided on its merits in the light of government's social and economic objectives. The joint sector will also be a promotional instrument, as for instance, in cases where state governments go into partnership with new and medium entrepreneurs in order to guide them in developing a private Industry.
The Government was expected to ensure an effective role for itself in order to guide the
"policies, management and operations". To operationalise this policy decision the Government issued guidelines on February 8, 1973. The instructions issued were as follows:
1. The State Industrial Development Corporations (SIDCs) hold a minimum of 26 per cent in the equity capital of the companies promoted by them;
2. No private partner holds equity capital more than the SIDCs except with the prior approval of the Central Government; and
3. No Large Industrial House (LIH) or Foreign majority company can have any holding at all in the projects promoted by SIDCs except with the prior permission of the Central Government.
This was concurred by the IDBI and in all joint sector projects government or its nominees were to hold more than 25 per cent in the equity capital. In practice, a variety of joint sector enterprises have come into being. They may be described as:
a) An enterprise established by two or more partners; one of them being a state government or state public enterprise.
b) An enterprise established by the central government or a central public undertaking with equity participation of the private sector.
c) An enterprise which is already in existence as a public enterprise or subsidiary of a public enterprise transformed into a joint sector enterprise through the disinvestment of a part of the shareholding of the government to private companies or general public singly or collectively.

Joint Sector : Over-View

To begin with, for undertaking any study of the working of the scheme one needs to identify joint sector enterprises established by different State Governments. Since the implementation of the joint sector has been entrusted to the States there is no one central agency to monitor the progress of the scheme.21 As the State level promotional organisations are also participating in non-joint sector ventures and taking up varying levels of equity, identification of joint sector companies becomes a difficult task. The task becomes more difficult since a number of other corporations (besides SIDCs and SIICs) like electronics development corporations at the State level have also started promoting industrial projects in the joint sector. Keeping track of conversion of existing companies (belonging both to the private as well as state level public sector) is also a formidable task. This might probably explain the lack of many serious empirical studies on the functioning of the joint sector. We shall, in the following, make an attempt to construct a profile of the joint sector companies, draw broad conclusions and raise issues for further debate. In our discussion we shall keep in mind the general objectives of the joint sector scheme which are reflected in various official announcements. These can broadly be stated as follows:
1. Social control over Industries: Participation in the ownership and management of enterprises jointly with private entrepreneurs gives the state an effective instrument of controlling monopolies, concentration of economic power and business malpractices; and

2. Development of Backward areas: Due to the active role assigned to the state, joint sector enterprises can be made to be located in relatively industrially backward areas which would help in achieving balanced regional development. This was necessary because many of the backward
areas possess rich natural resources but risk capital was not easily forthcoming.

3. Resource Mobilization: State participation to the extent of 25 per cent or more in equity capital in an enterprise would lead to the mobilization of 70-75 per cent of the resources by the private promoters and general public.
As discussed above, an enterprise is called a joint sector enterprise if the SIDCs or Government hold 26 percent equity or more, private promoter 25 per cent and the balance by the general public. When the degree of equity participation by the SIDCs varies between 10 to 15 per cent of the equity capital and balance is held by private promoters and the general public, the project is termed as assisted sector venture. In the present study, we are concerned with joint sector enterprises only.
The sources of information for the compilation of joint sector enterprises are mainly the Annual Reports of SIDCs, Directories brought out by SIDCs, the Bombay Stock Exchange Official Directory, Company Prospectuses, and Press Clippings of the Corporate Studies Group. Individual SIDCs and other state level public sector enterprises were also approached directly to provide list of joint sector companies promoted by them.
It was decided to take all the cases where the projects were designated as joint sector companies by their respective promoters. For the purpose of the present study, we have excluded the ones where there is no identifiable private promoter. In all we have identified 485 cases of joint sector enterprises.

Table – 1

Showing Growth of Joint Sector Companies in India Since 1970
S.No. Year of Incorporation Number of Companies
(1) (2)
1 before 1970 12
2 1970 6
3 1971 7
4 1972 12
5 1973 25
6 1974 35
7 1975 29
8 1976 26
9 1977 17
10 1978 26
11 1979 31
12 1980 35
13 1982 33
15 1983 31
16 1984 33
17 1985 31
18 1986 48
Total 485

Source: Institute for Studies in Industrial Development.

Table - 1 shows the distribution of the 485 companies according to their respective year of incorporation. Understandably more than five per cent of the JSEs were established during the pre - 1972 period. Between 1972-74, 82

Table – 2

Government Companies Converted into JSEs during 1973 – 86

S.No. Name of the company State House Association
(1) (2) (3)
1 Gujarat Prime Movers Ltd Gujarat
2 Bodh Gaya Ceramics Ltd Bihar
3 Punjab Agro-Furane Ltd Punjab
4 XLO Beral (Punjab) Ltd Punjab FCC
5 Bihar Sponge Iron Ltd Bihar
6 Madhya Pradesh Fibres Ltd Madhya Pradesh APEEJAY
7 Vindhya Telelinks Ltd Madhya Pradesh BIRLA
8 IPITATA Sponge Iron Ltd Orissa TATA
9 IPITEX International Ltd Orissa
10 Webel Televion Ltd West Bengal NICCO
11 Damodar Cement & Slag Ltd West Bengal
12 Gujarat Insecticides Ltd Gujarat
13 Gujarat Binil Chemicals Ltd Gujarat
14 Gujarat Mulco Electronics Ltd Gujarat
15 S.N. Corporation Ltd Orissa
16 Haryana Concast Ltd Haryana
17 Webel Vedio Devices Ltd West Bengal GOENKA
18 Webel Tele. Inds. Ltd West Bengal PHILIPS
19 Andhra Pradesh Heavy& Engg. Andhra Pradesh
20 Dielectro Magnetics Ltd Kerala
21 Girnar Scooters Ltd Gujarat
22 Aravali Sarachalit Vahan Ltd. Rajasthan
23 Bihar Finished Leathers Ltd Bihar
24 Punjab Engg. Cutting Tools Ltd Punjab
25 Upai Ltd Uttar Pradesh
26 Punjab Display Devices Ltd Chandigarh THAPAR
27 Tawi Scooters Ltd J & K
28 Gujarat Aromatics Ltd Gujarat LALBHAI
29 Gujarat State Machine Tools Gujarat
30 Andhra Pradesh Rayons Ltd Andhra Pradesh THAPAR
31 Deccan Fibre Glass Ltd Andhra Pradesh GOENKA
32 Andhra Pradesh Refractories Ltd Andhra Pradesh
33 Madhya Pradesh Vidyut Yantra Madhya Pradesh
34 Goa Carbon Ltd Gujarat GOENKA
35 Punjab Breweries Ltd Punjab UNITED BREW
36 Karnataka Blades Ltd Karnataka GOENKA
37 Almora Manganesite Ltd Uttar Pradesh TATA
38 M.P. Agro Morarji Fertilizers Madhya Pradesh D MORARJI
39 Maharashtra Scooters Ltd Maharashtra BAJAJ
40 U.P. Twiga Fibreglass Ltd Uttar Pradesh
41 A.P. Automobiles & Tyres Ltd Andhra Pradesh
42 Punjab Spinning & Weaving Mills Punjab
43 Malwa Cotton Spinning Mills Ltd Punjab OSWAL