Dutt Committee

Dutt Committee or “Industrial Licensing Policy Inquiry Committee” was set up under the chairmanship of  Mr. Subimal Dutt as a follow up to the reports of Monopolies Inquiry Commission and Hazari Committee. This committee’s mandate was to inquire into the working of licensing system in India. The committee had submitted its report in July, 1969.

Key Findings of Dutt Committee

This committee defined large business houses as those with assets of more than Rs. 35 Crore. It identified 20 Larger Business Houses, 53 Large Industrial Houses and 60 large independent concerns. Its key finding were as follows:

• Corruption prevailed in the system as the licensing authorities were bought over by the large industrial houses. Multiple licenses were granted in the same industry to same house. They granted capacities much higher than necessary on techno-economic grounds and thereby concentrated licensed capacity among a few units belonging to the Large Industrial Sector. The licensing authorities did not bother to prevent monopoly.
• The licensing authorities ignored the objectives of the Industrial Policy 1956 and reasons for adoption of the licensing system.
• The areas reserved for the public sector was widely opened for private sector. Regional imbalance was created as only four states viz. Maharashtra, West Bengal, Gujarat and Tamil Nadu were able to acquire 62 per cent of the total licences issued.
• Foreign collaboration was allowed even in small consumer goods where it could be avoided.
• The large Industrial houses grabbed all the financial assistance provided by the Government towards industrial expansion, leaving little for public or small industries sector.
• The public sector investment institutions such as LIC, UTI etc. favoured large business houses.

The committee thus pointed out that the Industrial licensing system miserably failed to achieve the objective of planned economic development. It could not prevent concentration of economic power in the hands of a few large industrial and business houses.

Key Recommendations of Dutt Committee

The committee recognised the fact that industrial licensing was a negative instrument and it could play only limited role in industrial development. However, the committee favoured continuance of the licensing system so as to make it a positive instrument of industrial growth. The other recommendations were:

• Larger industrial houses should be given licenses only for setting up industry in core and heavy investment sectors.
• A monopolies commission with necessary teeth should be established to deal with the problems of concentration of economic power or product monopolies.
• Industries should be classified into Core sector, Non Core sector, reserved sector etc. The large industrial houses should be entered to the core sectors.
• The committee observed that due to the license raj, a very strong nexus has developed between the Industrial houses, politicians and bureaucrats and there was a need to harmonize the social interest with private interest.

On the basis of recommendation of Dutt Committee , MRTP Act was enacted in 1969.