1. Prologue
2. [Act 1] Industrial license & reserved sectors
3. [Act 2] Policies and Acts
   1. P1: Industrial policy 1991
   2. P2: National Manufacturing Policy 2011
   3. A1: Factories Act 1948 / Bill 2014
   4. A2: Apprentice Act 1961 / Bill 2014
   5. F1: Fodder: Why India needs labor reforms?
4.  [Act 4] Excise and Customs
   1. Custom Duty in Budget 2014
      1. #1: Electronics sector
      2. #2: Energy related
      3. #3: Mineral, Metal, Precious Stones
   2. Excise Duty in Budget 2014
5. [Act 5] Stupid statistics and rankings
6. Epilogue

Prologue

Economic Survey Ch.9 Industrial performance. Four subparts:

1. Industries, Acts, Policies, excise and customs duty
2. PSUs, Disinvestment, CPSE-ETF
3. Companies Act 2013
4. MSME sector

[Act 1] Industrial license & reserved sectors

Industrial License Required For	Areas Reserved For Public Sector
Alcoholic Drinks Tobacco & cigar products Defense & electronics aerospace Equipment Industrial Explosives, Including Matchboxes Hazardous Chemicals*	Atomic Energy Atomic Minerals Rail Transport Similarly, there are items reserved for MSME sector- bread, agarbatti etc. if large company wants to enter, they’ve to get license click me to know more.

 

*Hazardous chemicals that need license

Nitrocellulose	Guncotton. Originally used in film reels but stopped due to explosive nature. Used in pregnancy tests
Hydrocyanic acid	prussic acid (HCN) Used in gas chambers for judicial execution in some U.S. states.
Phosgene	COCl2 chemical (gas) weapon in WW1. Making plastics and pesticides. Phosgene –> Methyl Isocyanate (MIC) –>pesticides.
Methyl Isocyanate (MIC)	CH3NCO Union Carbide Company used Methyl Isocyanate (MIC) for making pesticides. (Brand name Sevin) 3rd December 1984: Bhopal tragedy due to leakage of this gas.

[Act 2] Policies and Acts

Industrial policy, National Manufacturing Policy 2011, Factories Act, Apprentice Act.

P1: Industrial policy 1991

1948	Shyama Prasad Mukerjee declared India’s first industrial policy.
1956	policy revised- main focus on Public sector undertakings.
1991	LPG reforms, Narsimharao’s new industrial policy.

Q. What’re the salient features of new Industrial policy 1991? (200 words)

1. Liberated industrial licensing. Presently, only five sectors require license.
2. For the industries that donot require license- they only need to submit an “industrial entrepreneur’s memorandum” to Department of Industrial Policy and Promotion (DIPP), under commerce ministry.
3. Reduced the no. of areas reserved for public sector. (at present only 3)
4. FDI relaxed for many sectors.
5. NRIs allowed to invest upto 100% in majority of the industries.
6. Software technology parks, Electronic hardware technology parks etc.
7. HRD focus: gainful employment and optimal use of Human resources.
8. Provided disinvestment of PSU
9. Govt. signed MoU with PSUs – giving them operational flexibility. Later Maharatna, Navratna, Miniratna categories to give them further freedom depending on profit making. (more details “PSU” subpart of this chapters’ summary).
10. To facilitate merger and acquisitions – Government relaxed the MRTP act (Monopolies and Restrictive trade practices Act 1969) => later Government replaced this act with Competition Act 2002 and established a statutory body “CCI” (Competition commission of India).

~160 words.

P2: National Manufacturing Policy 2011

Q. Write a note on the salient features of the national manufacturing policy 2011. (100 words)

• Enhance share of manufacturing industries in GDP to 25%. (At present ~15%)
• Create 100 million jobs over a decade.
• Will setup manufacturing promotion board- to coordinate between union and states.
• will simplify labor and environment laws => related topic factories bill and apprentice bill. (Given in separate section in this same article).
• will create enabling infrastructure via PPP => related topic REITs, INViTs under ch13, urban infra.
• will create of national investment and manufacturing zones (NIMZ)
• 16 NIMZ announced, 8 along Delhi-Mumbai Industrial Corridor (DMIC)=> related topic industrial corridors under Ch11.
• Tax reliefs on venture capital funds to increase fund-flow to startup companies.
• Funds to polytechnics for skill development
• Focus industries
  • employment intensive, produce capital goods, have strategic significance,
  • sector where India enjoys a competitive advantage (e.g. IT, textiles)
  • small and medium enterprises => related topic Government schemes for MSME.
  • Public-sector enterprises => related topic “Various Ratna”. (in this same article)

A1: Factories Act 1948 / Bill 2014

1. GS2 syllabus: Government intervention in various sectors.
2. GS3 Syllabus: Changes in Industrial policy, their impact on industrial growth.

(GS3) Q. Write a note on the salient feature of the Factories Bill 2014 (200 words)

2010	Dr. Narendra Jadhav Committee to examine factory act
2014	Factories amendment bill as per Jadhav recommendations

First the definition of a “factory”

criteria	Factories Act 1948	New Bill 2014
mfg unit where power used	10 workers	20
power not used	20 workers	40

1. Redefines factory as a manufacturing units where minimum 20 workers employed in a given year (for units using power), OR 40 workers for non-power units.
2. Women workers permitted to do nightshift – with safety provisions and home transport facilities.
3. Nightshift not permitted for pregnant / lactating mothers.
4. Women workers can work on moving / heavy machinery. But pregnant women and disabled workers can’t.
5. Paid leaves reduced to 90 days (earlier 240!)
6. Each worker can do 100 hours overtime in every quarter (3 months).
7. Re-defined “hazardous substances” – it’ll include any item that can cause physical or health hazards to any person, animal, plant or the environment.
8. Factory can decide its own workweek. (doesn’t have to be Monday to Sunday)
9. Factory must provide cool drinking water in hot weather, irrespective of number of workers employed.
10. Installed Power capacity will be measured in kilowatts. (Earlier horsepower)
11. Factory owner will have to maintain spittoons, washing facilities, drying lines, sitting facilities etc. But if he doesn’t => compoundable offense i.e. he can do compromise with workers (victims), no need to waste court time in lengthy trial.
12. Factory owner has to open restrooms, lunchrooms if 75/more workers
13. Factory owner has to run canteen if 200/more workers
14. Factory expansion permitted via self-certification. Reduces the nuisance of inspections and bribes.
15. Even Union Government can make rules for factories. (Earlier only State Governments could do).

Overall, the new bill

1. Puts women workers on equal footing with men
2. Improves safety and facilities for workers.
3. Saves factory owners from getting arrested in minor issues. (Therefore, trade unions don’t like this bill. NOT ONE BIT.)

~300 words. But you may not recall all points in exam, so it’ll automatically “FIT” the 200 words limits.

A2: Apprentice Act 1961 / Bill 2014

• GS2 syllabus: issues relating to Development and Management of human resources.
• GS3 Syllabus: Issues relating to employment.

Q. Write a note on the salient feature of the Apprentice Bill 2014 (200 words)

• by Labor ministry
• To amend the original (And outdated) act of 1961

Minimum age of apprentice

non-hazardous industry	14
hazardous industry	18

• Government will decide the number of apprentices in each industry
• Government will provide the syllabus and equipment for “PRACTICAL” training, for specific trades.
• However, companies free to launch new courses other than designated trades.
• Companies can accept non-engineering graduates and diplomas for apprenticeship.
• Companies free to fix work / leave period for these apprentices.
• Multiple companies can come together to give common training.  Can even outsource the basic training (for teens that have received no institutional training e.g. grownup child laborers.)
• After training, the apprentice will have to give a certificate-exam by National Council for Vocational Training (NCVT).
• In case of violation – Reasonable fines and inspection. To reduce harassment and “inspection raj”.
• Web portal to file self-compliance reports.

Overall, new bill gives more flexibility to companies, and makes apprenticeship more attractive to youth, and will make them more employable in future, thus helping India to reap its demographic dividend.

~160 words.

Moving on…

F1: Fodder: Why India needs labor reforms?

• India has 44 labour acts union Government and 150+ labor acts from state governments.
• These laws have overlapping provisions= “inspection-raj”, Owner can’t comply with one act without breaking/side-stepping another law = bribery and inefficiency.

Industrial DisputesAct1947	If company has >100 workers. The owner must seek Government permission before laying them off / closing the firm. To evade this, companies hire workers via “Contractors” = no social security, no EPF. Even IT/Tech companies try to evade industrial dispute act, by hiring temporary staff from “supercontractors” like Teamlease.
Apprentice Act	Companies get tax benefits and CSR benefits for giving training to teens. But these young apprentices are made to work like a regular workmen/laborer. They don’t even get paid for overtime. And companies can remove them anytime.

• So in a way, companies misuse apprentice act, to evade the archaic “industrial dispute act” (100 worker firing).
• Ultimately both sides suffer.
  • Worker doesn’t give his 100% because, he is not “permanent”.
  • Owner doesn’t invest in his training /skill upgrade because he is not “permanent” = low skill, low output, demographic dividend can’t be reaped.

FactoriesAct 1948	Limits overtime in firms with more than 10 employees. Even petty offenses like not installing a “Spittoon” = can lead to criminal cases registered against owner.
Contract Labour Act, 1970	Companies with >20 workers have to setup cafeterias. Government can decide what food is to be served!

 

Labour reforms in Rajasthan (2014)

Provision	elsewhere	Rajasthan
Owner has to get Government permission before firing employees	if 100 workers	300
Trade union can be setup IF	15% workers join	30%
contract labour act applies IF workers more than	20	50
factories act applies to power units IF	10	20
factories act applies to non-power units IF	20	40

Q. If Union Government tables all these bills/acts in parliament then how can Rajasthan reform labor laws?

Ans. because Labour laws come into CONCURRENT list under 7^th Schedule.

 [Act 4] Excise and Customs

EXCISE DUTY	CUSTOMS DUTY
on goods manufactured in India	on imported goods on exported goods
as per Central Excise Act, 1944	as per customs Act 1962
It’s an indirect tax under CBEC	same
Tobacco…Yes Hemp, opium, other narcotics…NO Desi Liquor…NO Alcohol used in medicinal and toiletry preparations….yes (e.g. Deodorant, mouthwash)

Custom Duty in Budget 2014

• we’ll setup 24/7 clearance facility on selected airports and seaports
• Indian Customs Single Window Project for traders. So they’ve to submit all documents at one site/office, and they’ll be forwarded to respective organizations, files will be cleared within given timeframe.
• Result: Our ranking will improve in World Bank’s “ease of doing business”. At present top 3= Singapore, Hong Kong, NZ. India’s rank slipped from 131 to 134 (2014).

#1: Electronics sector

import of	custom duty
Cathode ray tubes (for TVs mfg by MSME, for poor junta)	0
LCD, LED panels (<19″)	0
Other specific inputs in mfg. of these TV	0

Implications: cheaper TVs for poors and middleclass, boost in demand, boost in electronics sector and employment.

#2: Energy related

Already discussed in ch.11 energy but for the recap

RENEWABLE	NON-Renewable
0% on import of certain specific items used in solar plants. 5% on other plant/machinery for solar, Bio-CNG plants 5% on wind mill steel rings implications: Boost to clean energy sector	Simplified tax regime on all variety of coal (2.5% custom duty and 2% CVD). previously each had separate tax rates = disputes between companies and CBEC Raised clean energy cess on imported coal, peat and lignite (Rs.100 per ton) => more money for clean energy projects

#3: Mineral, Metal, Precious Stones

Bauxite Export: increased to 20%	less exploitation of this mineral resource from India
Ship breaking: reduced (Steel)	more orders from abroad
All type of cut/semi-processed diamonds (2.5%) Diamond export (pre-form): 0%	Earlier each had separate tax rates.Now simplified = less litigation between traders and CBEC.
Baggage allowance	raised from 35,000 to 45,000 =aam junta can bring more items (for personal use) from abroad while on tour/vacation

Excise Duty in Budget 2014

not important except for “Stress” interviews in Bank/MBA

Decreased	increased
Chindu’s interim budget had reduced Excise duty on SUV, small cars, two wheelers and mobile phones, for upto 30th June 2014, to boost domestic companies. Jaitley promised to continue it till 31st December 2014.	Tobacco products. pan masala=16% unmanufactured tobacco: 55% Gutka=70% cigarette less than 65mm=72% Implications: less demand, less cancer. Atleast in theory.
food processing and packaging machines	carbonated drinks Implications: less demand, less weight gain and lifestyle disorders.
footware upto Rs.500 = 0%, upto Rs.1000=6%	Smart Cards

 

Overall (not important)

Absolute Earning	Custom Duty	Excise Duty
we earned this much in 2013	1.75 lakh crore	1.79 lakh crore
we hope (estimate) to earn this much in 2014	2.02 lakh crore	2.07 lakh crore

 

Ranking (important)

2013(Actual)	Corporation > IT > Excise > Custom > Service > Wealth
2014(Estimate)	Corporation > IT > Service > Excise > Custom > Wealth

[Act 5] Stupid statistics and rankings

share in GDP	services > Industry > Agro
share in employment	Agro > services > Industry

 

8 Core industries in IIP

coal fertilizer electricity crude oil

natural gas refinery products steel Cement

 

World Ranking

Steel	China, Japan, USA, India (4th)
Sponge iron	India First rank.

 

Manufacturing giants

	MFG share in GDP	World Export
China	34.1	14.6
India	14.9	2

Industrial Growth

POSITIVE	NEGATIVE
Textile Electrical equipment	Mining – declined, 3rd consecutive  year manufacturing Automobiles (low per capita income) gems-jewelry (gold import controls) Diesel consumption declined 1st time since 2001

Negative growth because:

1. inflation = input cost increased
2. Low demands in Indian and world economy due to inflation and slowdown.
3. Investment declined since last three years
4. mega projects stalled, new projects not coming up
5. land accusation, rehabilitation, environment clearance problem
6. infra bottlenecks, rail road power connectivity, coal supply

Epilogue

1. Last years’ survey contained lot of topics like Industrial gears, foundry clusters, jute mission, TUFS etc. But this year’s budget and survey silent on them, hence not dwelling. But if you want to check, click me for last year’s survey.
2. Industrial corridors already covered under Chapter.11 on infra
3. IIP along with ch4 on inflation
4. export, import etc. under ch7 international trade
5. Location factors for various industries: under Mrunal.org/GEOGRAPHY