Monopolies Inquiry Commission (MIC) was set up in 1964 to review various aspects pertaining to concentration of economic power and operations of industrial licensing under the IDR Act, 1951. While emphasizing that the planned economy contributed to the growth of industry, the Report by MIC concluded that the industrial licensing system enabled big business houses to obtain disproportionately large share of licenses which had led to pre-emption and foreclosure of capacity.
Subsequently, the Industrial Licensing Policy Inquiry Committee (Dutt Committee), constituted in 1967, recommended that larger industrial houses should be given licenses only for setting up industry in core and heavy investment sectors, thereby necessitating reorientation of industrial licensing policy.
In 1969, the monopolies and restrictive Trade Practices (MRTP) Act was introduced to enable the Government to effectively control concentration of economic power. The Dutt Committee had defined large business houses as those with assets of more than Rs.350 million. The MRTP Act, 1969 defined large business houses as those with assets of Rs. 200 million and above. Large industries were designated as MRTP companies and were eligible to participate in industries that were not reserved for the Government or the Small scale sector.
The new Industrial Licensing Policy of 1970 classified industries into four categories. First category, termed as ‘Core Sector’, consisted of basic, critical and strategic industries. Second category termed as ‘Heavy Investment Sector’, comprised projects involving investment of more than Rs.50 million. The third category, the ‘Middle Sector’ consisted of projects with investment in the range of Rs.10 million to Rs.50 million.
The fourth category was ‘Delicensed Sector’, in which investment was less than Rs.10 million and was exempted from licensing requirements. The industrial licensing policy of 1970 4 confined the role of large business houses and foreign companies to the core, heavy and export oriented sectors.