8/15/2014 Mrunal Economic Survey Ch9: Industrial Policy, Factories Act, Labor reforms

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[Economic Survey] Ch9: Industrial Policy, Labor Reforms, Factories Act, Apprentice
Act, Customs & Excise duties in Budget 2014
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
8/15/2014 Mrunal Economic Survey Ch9: Industrial Policy, Factories Act, Labor reforms
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Desi Liquor, Tobacco Products, Defense Aerospace Electronics, Industrial explosive, Hazardous
chemicals
Industrial License
Required For
Areas Reserved For Public Sector
1. Alcoholic Drinks
2. Tobacco & cigar
products
3. Defense &
electronics
aerospace
Equipment
4. Industrial
Explosives,
Including
Matchboxes
5. Hazardous
Chemicals*
1. Atomic Energy
2. Atomic Minerals
3. Rail Transport
Similarly, there are items reserved for MSME sector- bread, agarbatti
etc. if large company wants to enter, theyve 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.
8/15/2014 Mrunal Economic Survey Ch9: Industrial Policy, Factories Act, Labor reforms
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Used in pregnancy tests
Hydrocyanic acid
prussic acid (HCN)
Used in gas chambers for judicial execution in some U.S. states.
Phosgene
COCl
2
chemical (gas) weapon in WW1.
Making plastics and pesticides.
Phosgene > Methyl Isocyanate (MIC) >pesticides.
Methyl
Isocyanate (MIC)
CH
3
NCO
Union Carbide Company used Methyl Isocyanate (MIC) for making
pesticides. (Brand name Sevin)
3
rd
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 Indias first industrial policy.
1956 policy revised- main focus on Public sector undertakings.
1991 LPG reforms, Narsimharaos new industrial policy.
Q. Whatre 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
entrepreneurs 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
8/15/2014 Mrunal Economic Survey Ch9: Industrial Policy, Factories Act, Labor reforms
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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 1948New 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 cant.
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 itll 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. (doesnt have to be Monday to Sunday)
9. Factory must provide cool drinking water in hot weather, irrespective of number of
8/15/2014 Mrunal Economic Survey Ch9: Industrial Policy, Factories Act, Labor reforms
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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 doesnt => 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 dont
like this bill. NOT ONE BIT.)
~300 words. But you may not recall all points in exam, so itll 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
8/15/2014 Mrunal Economic Survey Ch9: Industrial Policy, Factories Act, Labor reforms
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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 cant 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 dont 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 doesnt give his 100% because, he is not permanent.
Owner doesnt invest in his training /skill upgrade because he is not permanent =
low skill, low output, demographic dividend cant 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
8/15/2014 Mrunal Economic Survey Ch9: Industrial Policy, Factories Act, Labor reforms
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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
Its an indirect tax under CBEC same
1. TobaccoYes
2. Hemp, opium, other narcoticsNO
3. Desi LiquorNO
4. Alcohol used in medicinal and toiletry preparations.yes (e.g.
Deodorant, mouthwash)
Custom Duty in Budget 2014
well setup 24/7 clearance facility on selected airports and seaports
Indian Customs Single Window Project for traders. So theyve to submit all documents at
one site/office, and theyll be forwarded to respective organizations, files will be cleared
within given timeframe.
Result: Our ranking will improve in World Banks ease of doing business. At present top
3= Singapore, Hong Kong, NZ. Indias 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.
8/15/2014 Mrunal Economic Survey Ch9: Industrial Policy, Factories Act, Labor reforms
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#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
Chindus interim budget had reduced Excise duty on SUV,
small cars, two wheelers and mobile phones, for upto 30
th
June 2014, to boost domestic companies.
Jaitley promised to continue it till 31
st
December 2014.
Tobacco products.
pan masala=16%
unmanufactured
tobacco: 55%
Gutka=70%
cigarette less than
65mm=72%
Implications: less demand,
8/15/2014 Mrunal Economic Survey Ch9: Industrial Policy, Factories Act, Labor reforms
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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
1. coal
2. fertilizer
3. electricity
4. crude oil
5. natural gas
6. refinery products
7. steel
8. Cement

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

Manufacturing giants
MFG share in GDPWorld Export
8/15/2014 Mrunal Economic Survey Ch9: Industrial Policy, Factories Act, Labor reforms
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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 years budget and survey silent on them, hence not dwelling.
But if you want to check, click me for last years 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
URL to article: http://mrunal.org/2014/08/economic-survey-ch9-industrial-policy-labor-
reforms-factories-act-customs-excise-duties-budget-2014.html
Posted By Mrunal On 14/08/2014 @ 18:56 In the category Economy