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New Industrial Policy 1991 (NIP 1991)

New Industrial Policy 1991 (NIP 1991)

  • NIP 1991, at an overall level, was one of the longer-term reforms incorporated in the New Economic Policy 1991 (NEP 1991). The multi-dimensional reforms under NEP 1991 had their roots in the severe Balance of Payments crisis that India faced in 1991. The crisis, in a way, also increased an acceptance of an overhauled industrial policy.
  • NIP 1991, announced in the wake of liberalization and stabilization policies marked a clear departure from the IPR 1956, and reformed the industrial sector in the following areas:
  1. Industrial Licensing:  The industrial licensing was abolished for all industries except 15, which affected strategic or environmental interests. This list has been further brought down to 6 industries. The six industries which still require an industrial license are: distillation and brewing of alcoholic drinks; cigars and cigarettes; electronics; aerospace and defence equipment; industrial explosives, hazardous chemicals; and drugs and pharmaceuticals.
  2. For the de-licensed industries:  no approval is required from the government. However, the related entrepreneurs are required to submit an Industrial Entrepreneur Memorandum (IEM) to the Secretariat for Industrial Approvals (SIA).                              New Industrial Policy 1991 (NIP 1991)
  3. Public Sector Policy: Under IPR 1956, 17 industries were reserved for the public sector. This number was brought down to 8 by NIP 1991. After reduction in such industries till 2001, now only 3 industries are reserved for the public sector: atomic energy; minerals specified in the Schedule to the Atomic Energy Act, 1953; and rail transport.

Some other policy measures under NIP 1991 in respect of PSUs were:

  • Granting more autonomy to PSUs through the system of MoUs.
  • A review of public sector investment portfolio to redirect such investments in strategic, hi-tech and infrastructure areas.
  • Chronically sick PSUs were to be referred to the Board for Industrial and Financial Reconstruction (BIFR).
  • Safety net for the workers who will be affected by closure of sick PSUs.
  • Disinvestment of part of government’s share to raise resources.
  • Boards of PSUs were to be made more professional, accountable and free from ministry and bureaucracy.

The MRTP limit which was raised five times in 1985, was finally done away with in NIP 1991. Thus, a level playing field was provided to all the firms and no firm required prior approval from the government for investment in the de-licensed industries.                                            New Industrial Policy 1991 (NIP 1991)



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