The Industry: confined in control: Small Cars

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On the national front, the Industries Development and Regulation Act was passed in 1951. An industrial license was required for a unit with more5O workers or, for 100 or more workers without power.

This ensured that it would be possible to establish a new unit, expand output by more than 5 per cent, change the location, manufacture a new product, or conduct business if a policy change were to occur. Even in the year 1956, the Industrial Policy Resolution did not classify automobiles under either its Schedule A or Schedule B The implication here was that growth would only be left to the initiative and enterprise of the private sector.


This undefined state of affairs (1945 to 1956) led to the dilution of the Government’s efforts to intervene and invest in the automobile industry. To get a firmer grip, the Foreign Exchange Regulation Act (FERA) passed in1973 brought down the maximum amount of foreign equity to just 40 percent.

The system was growing but its functioning was not properly defined. In the mid Seventies, a maximum growth rate of up to 25 percent in five years was permitted to Commercial Vehicle (CV), automobile, ancillary and tractor manufacturers. The year 1975 eventually saw the regulation of excess capacity for CVs, and two and three—wheelers as well.

In the Eighties, MRTB/ FERA firms were allowed to apply for capacity expansion if the additional output was exported in accordance with the directions of the Government The list centralized industries was expanded to include cars, jeeps, three-wheelers and two¬ Wheelers.

In 1984, all types of automobiles were brought under Schedule IV. This meant that the industries would be specially regulated on the grounds of raw material shortage, possible high pollution and infrastructure constraints — this implied that none of the automobile firms would benefit from the expansion schemes applied to the other vehicle categories.
 
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