INDIAN INDUSTRIAL ENVIORNMENT

MODULE II
 Important roles played by Industries in Economy
1. Utilization of natural resources
2. Balance Sectoral development
3. Enhanced capital formulation
4. Increase in National Income
5. Increase in job opportunities
6. Supplementing exports
7. Accumulation of wealth
8. Support to agriculture
9. Development of market
10. Contribution to defense, iron & steel, shipping, etc.,
11. Contributing to Govt. Exchequer
12. Attaining self reliance
 Goals & Objectives

The goals & objectives set out for the nations by Pandit Nehru o the eve of Independence:
1. Rapid Agricultural & Industrial Development of the Country.
2. Rapid Expansion of opportunities for gainful employment
3. Progressive reduction of social & economic disparities
4. Removal of poverty and attainment of self-reliance.

It prescribes the respective roles of:

5. Private, public, joint and cooperative sectors
6. Large, medium & small scale sector
7. Incorporates fiscal and monetary policies, tariff policy, labour policy
8. Govt. attitude towards foreign capital
 Phases of Industrialization
1. First Phase 1951- 1965:- Strong Industrial base.
◦ Huge investments were made in major industries.
◦ The acceleration in the annual compounded growth rate of industrial production i.e., from 5.7% to 9%
was made possible.
◦ A strong industrial base was made during this period.
2. Second Phase 1965-80: Deceleration & Retrogression
◦ Retrogression:- go back to an earlier and typically inferior state ( due to wars of 1962, 65,71)
◦ Deceleration:- Begin to move more slowly.
◦ In this phase, the industrial sector faced a structural retrogression.
◦ Growth rate was very low because of wars and successive droughts.
◦ Growth rate from 9 to 4%
3. Third Phase 1981- 1991- Industrial Recovery
◦ Growth rate varied from 7% to 8.6%
◦ New industrial policy &liberal fiscal regime as resulted from huge budgetary deficit ad creating
adequate supply responses through massive borrowing are responsible for this recovery.
4. Fourth Phase 1991- 98: Retrogression & Upturn
◦ 1991-1995: Negative growth retrogression 0.10%
◦ 1995-1996: Upturn, growth rate 12.1%
 Industrial Policy

 Industrial policy: the concept of industrial policy covers all those

procedures, principles, policies, rules and regulations which the industrial

undertakings of a country and shape the pattern of industrialization.

 It includes procedures, principles (i.e., the philosophy of a given

economy), policies, rules and regulations, in­centives and punishments, the

tariff policy, the labour policy, government’s attitude towards foreign

capital, etc.
 Objectives of the Industrial Policy

1. to maintain a sustained growth in productivity;

2. to enhance gainful employment;
3. to achieve optimal utilisation of human resources;
4. to attain international competitiveness; and
5. to transform India into a major partner and player in the
global arena.
 Industrial Policy Resolutions

1. IPR 1948
2. IPR 1956
3. IPR 1973
4. IPR 1977
5. IPR 1980
6. IPR 1991
 IPR 1948 ( 6th April)
 It defined the broad contours of the policy delineating the role of the State in industrial
development both as an entrepreneur and authority.
It made clear that India is going to have a Mixed Economic Model.
 It classified industries into four broad areas:

1. Strategic Industries (Public Sector): It included three industries in which Central Government had
monopoly. These included Arms and ammunition, Atomic energy and Rail transport.
2. Basic/Key Industries (Public-cum-Private Sector): 6 industries viz. coal, iron & steel, aircraft
manufacturing, ship-building, manufacture of telephone, telegraph & wireless apparatus, and mineral
oil were designated as “Key Industries” or “Basic Industries”.
These industries were to be set-up by the Central Government.
1. However, the existing private sector enterprises were allowed to continue.
3. Important Industries (Controlled Private Sector): It included 18 industries including heavy
chemicals, sugar, cotton textile & woolen industry, cement, paper, salt, machine tools, fertilizer,
rubber, air and sea transport, motor, tractor, electricity etc.
These industries continue to remain under private sector however, the central government, in
consultation with the state government, had general control over them.
4. Other Industries (Private and Cooperative Sector): All other industries which were not included
in the above mentioned three categories were left open for the private sector.
 Industrial Policy Statement 1956 ( 30th April)

 Government revised its first Industrial Policy (i.e. the policy of 1948)
through the Industrial Policy of 1956.
It was regarded as the “Economic Constitution of India” or “The Bible
of State Capitalism”.
 The 1956 Policy emphasized the need to expand the public sector, to build
up a large and growing coop­erative sector and to encourage the separation
of ownership and management in private in­dustries and, above all, prevent
the rise of pri­vate monopolies.
 It provided the basic framework for the government’s policy in regard to in­
dustries till June 1991.
 IPR, 1956 classified industries into three categories

◦ Schedule A consisting of 17 industries was the exclusive responsibility of the

State. Out of these 17 industries, four industries, namely arms and ammunition,
atomic en­ergy, railways and air transport had Central Government monopolies;
new units in the remaining industries were developed by the State Governments.
◦ Schedule B, consisting of 12 industries, was open to both the private and public
sectors; however, such industries were progressively State-owned, (Machine
tools, antibiotics, synthetic rubber, chemical pulp, road transport, sea transport,
etc.,)
◦ Schedule C- All the other industries not included in these two Schedules
constituted the third category which was left open to the pri­vate sector.
However, the State reserved the right to undertake any type of indus­trial
production.
 The IPR 1956, stressed the importance of cottage and small scale industries for
expand­ing employment opportunities and for wider decentralization of
economic power and activity
 The Resolution also called for efforts to maintain industrial peace; a fair share
of the proceeds of production was to be given to the toiling mass in keeping
with the avowed objectives of democratic socialism.
 The sector was kept under state control through a system of licenses.
 IPR 1973 ( 2nd Feb)
1. State would be directly responsible for the future
development of industries.
2. Role of Public Sector in attaining a Socialistic Pattern of
society. Both Public &Private sector assigned specific roles.
3. Initiative towards development of Joit Sector units.
4. FDI allowed in specific industries
5. SME given preferential treatment.
6. Cooperative enterprises encouraged in the area of agriculture.
 Industrial Policy Statement 1977 ( 23/ Dec)

 In December 1977, the Janata Government announced its New Industrial Policy through a
statement in the Parliament.
 Main Objectives:
1. Preventing Monopoly & concentration of Economic powers.
2. Maximizing production of consumer goods
3. Making industry responsive to social needs

Thrust Area of this Policy was:

4. Generation of rural employment opportunities
5. Development of small scale industries, Cottage, Tiny, Village & household industries.
6. Import of technology only in high-priority areas.

The 1977 Industrial Policy prescribed different areas for large scale industrial sector- Basic
industries, Capital goods industries, High technology industries and Other industries outside the list of
reserved items for the small scale sector.
 Industrial Policy of 1980 ( 23/July)

 Industrial Policy of 1980 sought to promote the concept of economic federation, to raise
the efficiency of the public sector and to reverse the trend of industrial production of the past
three years and reaffirmed its faith in the Monopolies and Restrictive Trade Practices
(MRTP) Act and the Foreign Exchange Regulation Act (FERA).

1. Promoting the process of Rural industrialization.

2. Removing regional imbalances

3. Regulating the excess capacity of the Private sector

4. Efficient operational management of Public Sector

5. Developing Small Scale Sector

6. Automatic expansion of large scale industrial units

7. Dealing with industrial sickness effectively.

 New Industrial Policy 1991

Background: Grave economic crises, internal debt trap from 1986, severe liquidity crises, on the
brink of defaulting on international payments, foreign exchange reserves not sufficient even for a
few weeks imports.

The long-awaited liberalized industrial policy was announced with New Regulators & liberal
economic reign by the Government of India in 1991 in the midst of severe economic instability
in the country.

The objective of the policy was to raise efficiency and accelerate economic growth:
1. Reducing the bureaucratic control
2. Liberalization of industrial & economic activities
3. Removing restrictions on FDI
4. MRTP restrictions removed
 Features of New Industrial Policy
1. To unshackle the Indian industrial economy from the cobwebs of unnecessary bureaucratic control.

2. To introduce liberalization with a view to integrate the Indian economy with the world economy.

3. To remove restrictions on FDI as also to free the domestic entrepreneur from the restrictions of MRTP
Act

4. Aim to shed the load of the public enterprises which have shown a very low rate of return or were
incurring losses over the years.

5. All these reforms led Government to take a series of initiatives in respect of polices in following areas:

a) Industrial licensing

b) Foreign investment

c) Foreign technology

d) Public sector policy

e) MRTP Act

f) Exclusive Small Sector Policy

 Industrial Licensing
 IL role changed from control to providing help & guidance by making procedures
transparent and eliminate delays.
 IL to be abolished for all projects except for a short list of industries related to security and
strategic concerns, social reasons hazardous chemicals and items of elitist consumption
industries reserved for the small scale sector will continue to be reserved.
 List of industries in respect of which IL will be compulsory:-
1. Coal & lignite
2. Petroleum (other than crude) & its distillation products.
3. Sugar
4. Animal fats & oils
5. Cigars & cigarettes of tobacco & manufacturing of tobacco substitutes
6. Asbestors & asbestor based products
7. Raw hides, swine leather
8. Motor cars
9. Paper newsprint
10. Aerospace & defense equipment
11. Industrial explosives
12. Drug & pharma
13. Entertainment electronics
14. Hazardous chemicals
15. White goods
 Compulsory licensing not applicable in respect of small scale units taking
up manufacturing of any of the above items reserved for exclusive
manufacturing in small scale sector.

List of industries to be reserved for Public Sector:

a) Arms & Ammunition, defense
b) Atomic energy
c) Coal & lignite
d) Mineral oils
e) Mining of iron ore, manganese gypsum, gold, surplus and diamond
f) Mining of copper, lead, zinc, tin
g) Minerals specified in the schedule to the Atomic energy
h) Railways
 Foreign Investment

To attract FDI approval up to 51% was decided.

For promotion of exports of Indian products in world markets, the Govt. would
encourage foreign trading companies to assist Indian exporters in export activities.
1. Approval for FDI upto 51% in high priority industries. No bottlenecks in their
process. Such clearance will be available if foreign equity covers the forex
requirement for imported capital goods.
2. 100% FDI allowed by NRIs in high priority industries, tourism related
industries, shipping, hospitality with repatriation benefits.
3. Import of components, raw materials and intermediate goods and payment of
know how, technology, royalties would be governed by the general policy
applicable to other domestic units, payment of dividend- RBI monitoring.
Access to international markets
 Foreign Technology
 To inject desired levels of technological dynamism in Indian
industry, Govt. would provide automatic approval for
technology agreements related to high priority industries
within specified parameters.
 No permission will be necessary for hiring of foreign
technicians, foreign testing of indigenously developed
technologies.
 Automatic approvals for technology- imports in high priority
areas up to 1 Crore.
 Public Sector Policy
Public Sector Enterprises- showed very low rate of return on capital employed. It became a burden
than asset to Government.

Priority Areas of Growth: (a) Essential infrastructure goods & services (b)Exploitation of Oils &
minerals © Technology development (d) Production of defense equipment, etc.,

Measures for Sick PSEs:

1. Portfolio of public sector investments will be reviewed with a view to focus the public sector on
strategic, high tech and essential infrastructure.

2. Sick units referred to BIFR

3. To raise resources part of Government holdings to e offered to MFs, FIs, General public

4. BOD to be given more powers & Professional Management emphasized.

5. Autonomy in operations

6. Further liberalization by de-reservation:- in April 1993, 3 items were removed from the list of 18
industries reserved for compulsory licensing i.e., motor cars, white goods, raw hides & skins
 Liberalization

Meaning of liberalization:- dismantling of industrial licensing system,

reduction in quantitative restrictions on imports, reforms in financial system,

reduction in taxation, reduction in restrictions on foreign investment, opening

up of areas reserved for public sector (basic industries, power, transport,

banking, partial privatization of public sector, softening of MRTP Act)

 Liberalization Strategy

1. Relief to foreign investors:- foreign investment raised up to 51%

2. Devaluation of Indian rupee

3. New Industrial policy:- Industrial licensing dispensed except in 18

items, threshold of asset limit removed, automatic clearing of import of
capital goods, automatic permission for foreign technical agreement in
high priority industry up to 1 crore.

4. New trade policy

5. Removal of import restrictions, etc.,

Industrial Sickness
Sick Unit
 According to the criteria accepted by the Reserve Bank of India, “a sick unit is one which has
reported cash loss for the year of its operation and in the judgment of the financing bank is
likely to incur cash loss for the current year as also in the following year.”
 Industrial Sickness – Special Provisions Act, 1985
 The government defined industrial sickness for the first time in the Sick Industrial Companies
(Special Provisions) Act, 1985.
 According to this Act, a medium or large (i.e. non-SSI) company was defined as sick if:
 (1) it was registered for at least 7 years (later reduced to 5 years)
 (2) it incurred cash losses in the current year and the preceding year.
 (3) its entire net worth (i.e. paid-up capital and reserves) was eroded.
 A company is regarded, as weak or incipiently sick on the erosion of 50% of its peak net
worth during any of the preceding five financial years.
 Causes of Industrial Sickness
 Internal causes – which includes
◦ Faults at the initial levels of planning and construction.
◦ Financial constraints.
◦ Labour and management problems.
◦ Defective, inefficient, and age-old machinery.
◦ Incompetence on the parts of entrepreneurs.
◦ Unskilled laborers to work with modern technology.
 External causes are those which are beyond the control of its management
and include –
◦ Sudden changes in government policies.
◦ Erratic supply of inputs.
◦ Non-availability of energy resources and raw materials.
◦ Increased competition.
◦ Power cuts.
◦ Demand and credit restraints.
◦ Delay on the part of the Government in sanctioning licenses, permits,
etc
 Revival and Rehabilitation Measures

 Financial Assistance
 As per the directions of the RBI, the commercial banks granted the
following concessions to sick industrial units:
 Rescheduling of loans and interest:
 Grant of additional working capital:
 Waiving off interest on loans:
 Moratorium on payment of interest, etc.
 Organizational measures
 The different organizational measures are given below:
 State-level inter-institutional committees: These are set up by the RBI to
ensure better coordination between the banks, state governments, and other
concerned financial institutions.
 Special Cell: It was set up by the Rehabilitation Finance Division of the
IDBI to assist the banks for the revival of sick units.
 Financial Assistance
 As per the directions of the RBI, the commercial banks granted the
following concessions to sick industrial units:
 Rescheduling of loans and interest:
 Grant of additional working capital:
 Waiving off interest on loans:
 Moratorium on payment of interest, etc.
 Organizational measures
 The different organizational measures are given below:
 State-level inter-institutional committees: These are set up by the RBI to
ensure better coordination between the banks, state governments, and other
concerned financial institutions.
 Special Cell: It was set up by the Rehabilitation Finance Division of the
IDBI to assist the banks for the revival of sick units.
Monopolistic Restrictive Trade
Practices Act (MRTP) 1969

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The monopolistic and restrictive trade practices Act, 1969 was enacted to
ensure that the operations of the economic system does not result in the
concentration of economic power in hands of few, to provide for the control
of monopolies, to prohibit monopolistic and restrictive trade practices and
regulation of unfair trade practices.

It can be said that the MRTP Act was successful to an extent. However, due
to scarcity of resources, lack of clearly defined procedures and rules and
regulations the act was not as effective as it was supposed to be. Also, the
changing economic and trade environment (brought by the new economic
policy, 1991) made it necessary for a change in MRTP Act. Currently the said
act has been renamed as the Competition Act, 2002 with a few changes to it.

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 Object of MRTP Act 1969
1. Prevention of the concentration of economic power to the common
detriment: (a) National Monopolies or (b) Product Monopolies
 (i.e., Undertaking with sizeable share of market i.e., one fourth or more of
total production is known as dominant undertaking.
 That is Hundred crore or more of assets was known as Dominant
undertaking, which was known as MRTP undertakings)
2. Prohibition of
 Monopolistic trade practices
 Restrictive trade practices
 Unfair trade practices

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Monopolistic Trade Practice: A monopolistic trade practice is that which
represents abuse of market power in production and marketing of goods and
services by eliminating potential competitors, charging= unreasonably high
prices, preventing or reducing competition, limiting technical development
deteriorating product quality etc.

Restrictive Trade Practice: Restrictive trade practices are targeted at the

consumers who are burdened with restriction and unjustified costs through
the practices of the trader. The trader manipulates the price or the conditions
of delivery of the product which results in restrictive trade practice. This
affects the supply of goods and services in the market.

Unfair Trade Practice: An unfair trade practice is the deceitful and

misleading representation of goods and services which portrays a false image
of the product. Information regarding utility, quality and standard, style etc of
goods and services may be twisted under this practice
 Monopolistic Trade Practice

 MRTP covers:
 Monopoly power- the power to dictate price
◦ Unreasonable charge of prices
◦ Unreasonableness in preventing or lessening competition in the market
◦ Unreasonably increasing prices, profits
◦ Limiting technical development to the common detriment, etc.

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 Restrictive Trade Practices
TP which Prevents, Distorts or Restricts The competition for goods and services in any manner.
1. Exclusive dealing: Distributor imposing a condition on manufacturer that they will not sell
the material to anyone else. Refraining the distributor/retailers from handling the products of
rival suppliers.
2. Refusal to Supply:- to coerce the distributor to accept exclusive dealing and Tie-In sales.
3. Full line forcing:- supplier encouraging distributor/ retailers to stock his principal products
or services but additionally other products/services from his range.
4. Aggregated rebate/Overriding discount” A business practice whereby a supplier offers
distributors/retailers a discount on their total purchases over a specified time period (usually
One year) rather than individual orders.
5. Bid rigging arrangements: practices or agreements resulting directly or indirectly in bid-
rigging or collusive tendering.
6. Market Allocation agreements: Practice in which market, sources of production or
provisions of services are shared by the persons or enterprises. Sharing maybe by allocation
of geographic area of market, type of goods or services or number of customers in the market
or in any other similar manner.
7. Output control agreements: it limits or controls production, supply, markets, technical
development, investment or provision of services.

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 Unfair / Deceptive trade practices
 An unfair trade practice consists of using various deceptive, fraudulent or unethical methods to obtain the
business.
 Unfair trade practice include misrepresentation, faking endorsements & guarantees, false advertising,
misrepresenting a product, giving misleading price information, failing to disclose pertinent information, tied
selling, false offer of bargain price, schemes of free gifts offer and prize, non-compliance, hoarding, destruction
of goods, insider trading and acts that are declared unlawful by State.

Examples:

1. Chips packet –big in size- very few contents ( if the content information is not provided).

2. Maggi product being stated as healthy ( contains lead and MSG)

3. Cant use word “new”, if the product is more than 6 months old.

4. “wool” word to be used only if the sweater is 100% wool.

5. Cant call “limited offer” if its available for ever.

6. A dress used for 2 month being sold as “new”

7. Batter with 1 year guarantee wears out in One month.

8. A geyser not ISI approved has an ISI mark.

9. Need to buy good X, if one needs to buy good Y.

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 Unfair trade practice Vs. Restrictive trade practice

An unfair trade practice is the deceitful

 Restrictive Trade Practice, however, is

when traders try to change the flow of

and misleading representation of goods
money in the market in order to maximize
and services which portrays a false
their profits and to gain an upper hand in
image of the product. Information
the market competition. Here, independent
regarding utility, quality and standard,
sellers hike their collective profits by

style etc of goods and services may be limiting supply by controlling selling

twisted under this practice. prices or the prices of purchased inputs.

 Cases on Restrictive Trade Practices
 Bata Co Ltd [(1976) 46 Comp Cas 441]: Bata made agreements with
small scale producers of footwear and restrained them from purchasing
raw materials from parties other those approved by Bata and also
prohibited them from selling additional production to any other party or at
prices without Bata’s approval.
 In re Radhakrishnan International School [RTP Enquiry no 43/1992]:
Students were forced by the school to take at least one full booklet
consisting of fate tickets numbering 20 in one booklet. Each ticket was
rupees five each. Students were forced to pay for the unsold tickets as a
part of the school fees. It was held to be RTP.
 Erlanger Motors Inc. v Ford Motor Co [267 F 2d 11 (6th Cir. 1959)]:
An automobile manufacturer in his franchise agreement required his
dealers exclusively handle the manufacturer’s car parts and accessories.
 Cases on Unfair Trade Practices
 In re Hindustan Export Corporation [UTP Enquiry no. 29/1985]: The
respondent company offered free gift with every rupees fifty purchase
except wool. It also announced discount sale up to 40% on all winter
needs. It was held to be an UTP.
 In re Vijay International Products [UTP Enquiry No. 11/1984]: In this
case, the respondents were manufacturing and marketing stoves under the
brand name ‘Nutan’. The stoves were designed by Indian Oil Corporation.
They were sold without competent authority’s inspection and clearance.
The stoves that marketed were sub-standard. It was held to be an UTP.
 In re Shreeji Chemicals [UTP Enquiry No. 101/ 1988]: The company
offered free toothbrush with a pack of ‘Vimal’ washing powder under a
sales promotion scheme in 1985 from April to September. The company
increased the price of the detergent during the scheme in order to avoid
giving anything free of cost. It was found to be an UTP.
Competition Act 2002
 Competition Act 2002
 This act was enacted by the Parliament of India and governs Indian
competition law. It replaced the archaic the Monopolies and Restrictive
Trade Practices Act, 1969.
 Under this legislation, the Competition Commission of India was
established to prevent activities that have an adverse effect on competition
in India.
 This act extends to whole of India except the State of Jammu and Kashmir.
 It is a tool to implement and enforce competition policy and to prevent
and punish anti-competitive business practices by firms in the market.
 A competition law is equally applicable on written as well as oral
agreement, arrangements between the enterprises or persons.
 The Competition Act, 2002 was amended by the Competition
(Amendment) Act, 2007 and again by the Competition (Amendment) Act,
2009 and Competition( Amendment) Act, 2023
 Introduction of Competition Act 2002

 Competition Act 2002 was enacted to Shift the focus:

◦ From Curbing monopolies
◦ To Promoting competition

◦ As it was identified that only large companies could survive in the new
global competitive markets and therefore “size” should not be a
restraint. Thus, there was a need to shift the focus from curbing
monopolies to promoting competition.
◦ Extent: whole of India except J&K also has an extra territorial
jurisdiction.

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Anti-Competitive Agreements- When enterprises, persons or associations of
enterprises or persons, including cartels, enter into agreements in respect of
production, supply, distribution, storage, acquisition or control of goods or
provision of services, which cause or are likely to cause an "appreciable adverse
impact" on competition in India are called anti-competitive agreements.

Such agreements would consequently be considered void.

Agreements which would be considered to have an appreciable adverse impact

would be those agreements which-

Directly or indirectly determine sale or purchase prices, Limit or control

production, supply, markets, technical development, investment or provision of
services, Share the market or source of production or provision of services by
allocation of geographical area of market, nature of goods or number of customers
or any other similar way, Directly or indirectly result in bid rigging or collusive
bidding.
 Fair means and Unfair means

 Fair Means:
◦ Innovation
◦ Quality improvisation
◦ Cost effectiveness
Unfair means:
◦ Predatory pricing ( Ola accusation on Uber, Jio)
◦ Tied selling ( eg: Bank Mortgage)
◦ Abuse of dominant position

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 Purpose/Aim
1. Protects the interest of the consumers and ensures freedom of trade in
markets

2. Prohibits the agreements/practices that restricts free trading and also the
competition between two business entities.

3. To ban the abusive situation of monopoly.

4. To provide the opportunity to the entrepreneur for the competition in the

market

5. To have the international support and enforcement network across the

world.

6. To prevent from anti-competition practices and to promote a fair &

healthy competition in the market.
 Objectives of Competition Act 2002

1. To protect the interest of the consumers by providing them good

products & services at reasonable prices.

2. To promote healthy competition in India.

3. To prevent the interest of the smaller companies or prevent the abuse of

dominant position in the market.

4. To prevent those practices which have adverse impact on competition in

the Indian markets.

5. To regulate the operation & activities of combinations (acquisitions,

mergers & amalgamations)
 The Act mainly covers

1. Prohibition of anti-competitive agreements: No enterprise or association of

enterprises or person or association of persons shall enter into any agreement in respect of production,
supply, distribution, storage, acquisition or control of goods or provision of services which causes or is
likely to cause an appreciable adverse effect on competition with India.

2. Prohibition of abuse of dominant position: Dominant position means a

position of strength enjoyed by an enterprise, in the relevant market in India, which enables it to: (i)
operate independently or competitive forces prevailing in the relevant market: or (ii) affect its
competitors or consumers or the relevant market in its favor, indulge in predatory pricing.

3. Regulation of combinations: No person or enterprise shall enter into a

combination which causes or is likely to cause an appreciable adverse effect on competition
within the relevant market in India and such a combination shall be void .

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 RTP under Competition Act, 2002

1. Price Fixing Agreements:- practice determines sale or purchase price of goods or services

2. Output control agreements:- it limits or controls production, supply, markets, technical

development, investment or provision of services

3. Market Allocation Agreements:- Allocation of geographical area of market, type of

goods or services or number of customers in the market

4. Bid rigging arrangements:- practices or agreements resulting directly or indirectly in bid

rigging or collusive tendering.

5. Tie- in arrangement’ includes any agreement requiring a purchaser of goods, as a

condition of such purchase to purchase some other goods. It is a compulsory purchase
agreement.

In Eastman Kodak Co v Image Technical service Inc , it was defined as an agreement by a

party to sell one product on the condition that the buyer also purchases a different(or tied)
product, or t least agrees that he will not purchase that (tied) product from any other supplier.
6. Exclusive Supply agreement: Any agreement restricting the purchaser
from acquiring or otherwise dealing in any goods other than those of the
seller or any other person. Such restriction is applicable on the purchaser in
the course of his trade restricting him in any manner from acquiring or
dealing.
7. Exclusive Distribution Agreement: Any agreement which limits, restricts
or withholds the output or supply of any goods or allocate any area or market
for the disposal or sale of the goods.
8. Refusal to deal: any agreement which restricts or is likely to restrict
persons to whom goods are sold or from whom goods are bought.
9. Resale Price Maintenance: Resale Price Maintenance (RPM) is defined
under Section 3(4) (e) of the Act as including any agreement to sell goods on
the condition that the prices to be charged on the resale by the purchaser shall
be the prices stipulated by the seller unless it is clearly stated that prices
lower than those prices may be charged.
 Competition Commission of India
 Competition Commission of India has taken the place of MRTP
Commission. They have same duties as of MRTP Commission
 The Competition Commission of India strives for fair competition for
greater good and ensures the prohibition of the practices that may be
detrimental to a healthy market.

Duties of CCI:
1) To promote and sustain competition
2) Prevent practices having an appreciable adverse effect on competition
3) To protect the interest of consumers.
4) To ensure freedom of trade ( free entry and exit)

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 Amendment of Competition Act 2002 vide the Competition Act 2023

 All M&A above Rs.2000 Crore in deal value must obtain CCI approval.

Deal Value threshold:

Key criteria to determine substantial Business Operations (SBO) in India, the CCI’s regulations have
outlined 3 key criteria:
1. The number of users, subscribers, customers or visitors, gross merchandise value & turnover.
2. If any of these criteria exceed 10% of the global figures during the 12 months preceding the
relevant date, the transaction is considered to have SBO in India, necessitating merger control.
 De Minimis Exemption: A threshold that allows companies to avoid prior approval from the
Competition Commission of India (CCI) for transactions. The de minimis exemption applies to
transactions where the asset value in India does not exceed ₹450 crore or the revenue from India does
not exceed ₹1,250 crore. These revised thresholds are applicable for two years, starting on March 7,
2026.
 Latest Trivia

 Pending cases at CCI are of alleged antitrust misconduct of Apple, Amazon,

Flipkart, Google, Pharma associations, Cement, Tyre companies.

 Initially, CCI raises questions on proposed Merger of Reliance Industries Limited

and Walt Disney in India, after a preliminary assessment that the $8.5 billion deal

would hurt competition.

 Later, CCI approved the Joint Venture, in which RIL will own 16.34% , Viacom

will own 46.8% and the remaining 36.84% will b owned by Disney. However, the

JV will be controlled by RIL. Together they will compete with India’s biggest

entertainment players Netflix, Sony and Amazon.

 Google
 Google enjoys more than 80% share since atleast 2009.
 Google’s “near-complete” control of key distribution channels- A major
barrier of entry for other search companies.
 Goggle paid billions of dollars to Apple & Samsung t be the default search
engine on their phones & tablets.
 In October 2002, CCI levied a fine of Rs.936 Crore on Google for abusing
its dominance in the play store ecosystem.
 CCI also imposed a penalty of Rs 1337.77 Crore on Google for abusing
dominant position in multiple markets in the Android mobile device
ecosystem.
Foreign Exchange Regulation Act (FERA), 1974

AGBS, Hyderabad 53
 When countries do Bilateral Trade with each other they require money flow for
payments.
 Almost all of the international financial transactions involve exchange of one
currency with another.
 The ratio in which they are exchanged are called as exchange rates.
 Foreign exchange markets provide a mechanism which helps to exchange
different monetary units for each other.
 Simply stating Foreign exchange markets are those markets where foreign
exchange transactions take place. Here the national currencies are bought and
sold against one another.
 Foreign exchange is the system or process of converting one national currency
into another and of transferring money from one country to another.

AGBS, Hyderabad 54
 The 1973 law was created during the tenure of Prime
Minister Indira Gandhi with the goal of conserving
India's foreign exchange resources.
 The country was facing a trade deficit, which was
followed by a devaluation of the currency and an increase
in the price of imported oil.
 The act specified which foreign exchange transactions
were permitted, including those between Indian residents
and nonresidents
 The FERA deals with laws which relate to foreign exchange in India.
 The Foreign exchange transactions were earlier regulated in India by Foreign
Exchange Regulations Act (FERA 1973).
 This Act helped to regulate many aspects of the conduct of business outside
the country by Indian Companies and in India by foreign countries.
 FERA was described as “Draconian” and “Obnoxious” law, as any offence
was criminal one which included imprisonment as per code of Criminal
Procedure, 1973
 The main aim of FERA was the conservation and effective utilisation of
foreign exchange resources the country.
 When FERA was passed country was facing severe foreign exchange crises
and it was a highly controlled regime.

AGBS, Hyderabad 56
 Objectives of FERA

1. To regulate dealings in foreign exchange and securities

2. To regulate transactions, indirectly affecting foreign exchange

3. To regulate the import and export of currency

4. To regulate acquisition, holding of immovable property in India by non

residents thereby reducing dominance of MNC’s

5. The proper utilization of foreign exchange so as to promote the

economic development of the country.

AGBS, Hyderabad 57
 Provisions
 Regulation of dealing in foreign exchange.
 Restrictions on payments.
 Restrictions regarding assets held by non residents and import & export of
certain currency & bullion .
 Duty on persons entitled to receive foreign exchange and payment for
exported goods.
 Restriction on appointment of certain persons and companies as agents or
technical or management advisers in India
 Restriction on establishment of place of business in India
 Prior permission of Reserve Bank required for taking up employment in
India by nationals of foreign state
 Restrictions on immovable property
Foreign Exchange Management Act
(FEMA), 1999
 FEMA

 FEMA is a very important and useful Act applicable in India which

regulates and control the foreign exchange of the country.
 This Act was passed in 1999 and came into effect from June 1, 2000 to
whole of the country.
 FEMA replaced the earlier prevalent Act i.e FERA, Foreign Exchange
Regulation Act.
 FEMA was most suitable for India corporate sector instead of FERA
because almost all strict regulations of FERA were removed in FEMA

AGBS, Hyderabad 60
 According to the official notification of FEMA 1999

 “It is an Act to consolidate and amend the law relating to foreign exchange with
the objective of facilitating external trade and payments and for promoting the
orderly development and maintenance of foreign exchange market in India”
 It extends to the whole of India.
 It also applies to all branches, offices and agencies outside India owned or
controlled by a person resident in India and also to any contravention there under
committed outside India by any person to whom this Act applies.
 Contravention is the breach of provisions and norms under the Foreign Exchange
Management Act, or FEMA 1999.
 Compounding of contraventions refers to the process where the individual or the
corporate entity can admit the contravention and seek redress from the Reserve
Bank, restricted to a specific sum

AGBS, Hyderabad 61
Objectives of FEMA
1. Main objective of FEMA is to facilitate foreign trade as well as payments.

2. Another objective of FEMA is to promote, foster and encourage orderly

development and maintenance of foreign exchange market.

3. To investigate into violations of the Act, the Central Govt. has established
a department called ‘Enforcement Directorate’.

4. This Act extends to the whole of India and also applies on all branches,
offices and agencies outside India owned or controlled by a person resident
in India. It is also applicable on any contravention committed outside India
by any person to whom this Act is applicable.

AGBS, Hyderabad 62
Various provisions (measures) of FEMA, 1999
 Section 3 - Prohibits dealings in foreign exchange except through

an ‘authorised person’ (forex dealer).

 Section 2(c) - defines ‘authorised person’ as one who is an

authorised dealer, money changer, off shore banking unit or any

other person for the time being authorized (by RBI) to deal in
foreign exchange or foreign securities.
 Section 4 – provides that no person can, without a general or special

permission of the RBI-

(a) Deal in or transfer any foreign exchange or foreign securities;
(b) Make / receive any payment to/from any person resident outside
India;
(c) Enter into any financial transaction for acquiring any asset outside
India.

63
Section 5 - provides that any person may sell or draw foreign
exchange to and from an authorised person for a current
account transaction, provided that the Central Government may,
in public interest, impose such reasonable restrictions as may be
prescribed.
Section 6 - provides that any person may sell or draw foreign
exchange to and from an authorised person for a capital account
transaction, provided that the Central Government may, in public
interest, impose such reasonable restrictions as may be
prescribed.
 Section 7 - deals with export of goods and services. Every

exporter is required to furnish to the RBI or any other authority, a

declaration regarding full export value.
 Section 8 - casts the responsibility on the persons resident in

India who have any amount of foreign exchange due or accrued

in their favour to get same realised and repatriated to India
within the specific period and the manner specified by RBI. 64
 Sections 10 and 12 - deal with duties and liabilities of the
authorized persons.
 Sections 13 and 15 - of the Act deal with penalties and
enforcement under the Act.
 Section 36 and 37 - pertains to the establishment of
Enforcement Directorate and its powers to investigate any
violation of under the Act.

65
ENFORCEMENT DIRECTORATE (ED)
The ED is mainly concerned with enforcing the provisions of the FEMA for
preventing the leakage of foreign exchange. Such leakage of foreign
exchange generally occurs through following malpractices
(contraventions of FEMA):-
1) Foreign exchange remittances by Indians otherwise than through normal
banking channels;
2) Acquisition of foreign currency illegally by a person in India;
Non-repatriation of export proceeds;
4) Under-invoicing of exports and over-invoicing of imports and any other
type of invoice manipulation;
5) Unauthorized maintenance of accounts in foreign countries;
66
6) Illegal acquisition of foreign exchange through Hawala
 Capital Account Current Account

A transaction which alters the Transactions other than a Capital account

assets/liabilities, outside India of transaction, payments due in connect with
persons resident in India foreign trade, short term banking, payments due
assets/liabilities in India of persons as interest on loans, remittances for living
resident outside India. expenses of family, children living abroad,
expenses for foreign travel, education, medical
care expenses of parents, spouse, children.
All Capital account transactions are
prohibited unless otherwise permitted. All Current account transactions are permitted
unless otherwise prohibited (drugs, arms, etc.,).
 Difference between FEMA and FERA
Points of Comparison FEMA -2000 FERA -1973

1.Content There are 49 sections There were 81 sections

out of which 12 section out of which 32 sections
relate to operational related to operational
part and rest with penal part and rest deals with
provisions penalty, appeals etc.

2. Nature Basically it is a civil law It was considered as a

criminal law
3. Applicability The Act applies to all The Act applied to all
branches , offices and citizens of India and to
branches outside India branches and agencies
owned or controlled by a outsides India and to
person resident in India branches and agencies
outside India

4. New Terms Capital account These terms were not

transactions, current defined.
account transactions,
persons, services like
new terms are
5.Penality Limited to three times the Five times of the sum
sum involved if it is involved + imprisonment
quantifiable .If it is not in most of the cases
quantifiable .
6. Object The object is to encourage The object was to
external trade. control, regulate and
prohibits foreign
exchange transactions
7. Legal Help The complainant has full There was no provision
right to take legal help from for legal assistance
a lawyer or a chartered
accountant
8.Power of Police The power to the police Extensive powers had
Authorities officers has restricts to great given to police officer
extent
9. Definition of It has been extended to It was limited in case of
“authorized person” include banks, money FERA
changes, off shore banking
units etc
10.Definition of The term has defined in The term defined was
“Resident” accordance with income tax not in accordance with
act income tax act