Dutt Committee

The Dutt Committee, officially known as the Industrial Licensing Policy Inquiry Committee (ILPIC), was constituted by the Government of India in 1967 under the chairmanship of Dr. Subimal Dutt, a distinguished civil servant and diplomat. The committee was appointed to review the industrial licensing policy introduced after India’s independence and to suggest measures for improving industrial efficiency, ensuring balanced regional growth, and promoting competition within a controlled economic framework.
The committee’s recommendations had a significant impact on the evolution of India’s industrial policy, especially in identifying the emerging issues of monopolistic concentration and inefficiencies caused by excessive state control and licensing.

Background and Context

After independence, India adopted a mixed economy model, combining public sector dominance in key industries with private sector participation regulated by state controls. The Industries (Development and Regulation) Act, 1951 introduced the industrial licensing system, under which private entrepreneurs needed government approval to establish, expand, or diversify industrial units.
While the system was intended to:

• Prevent the concentration of economic power,
• Ensure equitable regional development, and
• Direct investment into priority sectors,

By the mid-1960s, it became evident that the policy had led to several distortions:

• Bureaucratic delays and red tape,
• Inefficiency and lack of competition,
• Unequal distribution of licences favouring large business houses, and
• Slow industrial growth.

In this context, the Dutt Committee was established to examine the functioning and effectiveness of the licensing system and to recommend necessary reforms.

Objectives of the Dutt Committee

The committee was tasked with:

1. Reviewing the working of the industrial licensing system introduced under the Industrial Policy Resolution (IPR) of 1956.
2. Assessing whether the system had achieved its objectives of preventing monopolies and promoting balanced regional and sectoral development.
3. Evaluating the role of large industrial houses and foreign enterprises in the Indian economy.
4. Recommending measures to make the licensing system more transparent, equitable, and efficient.
5. Suggesting steps to ensure that the benefits of industrialisation reach small and medium enterprises (SMEs).

Major Findings of the Committee

The Dutt Committee’s investigation revealed several weaknesses in the existing licensing policy:

1. Concentration of Industrial Licences:
   • The majority of industrial licences were granted to a small number of large business groups (e.g., Tata, Birla, Dalmia, and others).
   • This resulted in monopolistic tendencies, contrary to the original objectives of the licensing policy.
2. Bureaucratic and Procedural Delays:
   • The process of obtaining licences was complex and time-consuming, leading to inefficiency and corruption.
3. Neglect of Small and Medium Enterprises:
   • Small-scale industries were often sidelined in favour of established large industrial houses.
4. Regional Imbalance:
   • Industrial development was concentrated in a few states such as Maharashtra, Gujarat, and West Bengal, while backward regions lagged behind.
5. Inefficient Use of Resources:
   • The licensing policy led to overcapacity in some industries and underutilisation in others due to poor planning and coordination.
6. Foreign Collaboration:
   • The committee noted that foreign collaborations were often concentrated among large industrial houses, limiting technology diffusion to smaller enterprises.

Key Recommendations

The Dutt Committee made several important recommendations to reform India’s industrial licensing and regulatory framework:

1. Identification of Large Business Houses:
   • Suggested preparing a list of large industrial houses (business groups with total assets exceeding ₹350 million) to monitor and regulate their expansion.
2. Restriction on Expansion of Large Houses:
   • Recommended that large industrial houses should not be allowed to expand in non-priority sectors or in areas already dominated by them.
   • Their investment should be directed only toward priority or core industries such as steel, power, heavy engineering, and chemicals.
3. Encouragement of Small and Medium Industries:
   • Proposed greater support for small-scale and medium enterprises to promote decentralised industrial growth.
4. Balanced Regional Development:
   • Emphasised setting up industries in backward regions by offering incentives like tax concessions, infrastructure support, and financial assistance.
5. Rationalisation of Licensing System:
   • Suggested simplification of licensing procedures to reduce administrative delays and corruption.
6. Monitoring Industrial Concentration:
   • Recommended continuous monitoring of ownership patterns to prevent concentration of economic power.
7. Foreign Collaboration Policy:
   • Proposed stricter scrutiny of foreign collaborations to ensure that technology transfer benefits the national economy and smaller enterprises.

Impact and Significance

The Dutt Committee’s report was a landmark in shaping India’s industrial policy during the late 1960s and early 1970s. Its findings directly influenced subsequent legislative and policy developments, particularly regarding the control of monopolies and concentration of wealth.

1. Foundation for the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969:
   • The committee’s recommendations laid the groundwork for the enactment of the MRTP Act, which sought to prevent concentration of economic power, regulate monopolistic practices, and ensure fair competition.
2. Industrial Licensing Reforms:
   • Although the licensing system continued, the process became more regulated and selective. The concept of core and non-core sectors emerged, allowing selective control over strategic industries.
3. Increased Focus on Regional Development:
   • Encouraged policies promoting industrial dispersal and setting up of industrial estates in less developed regions.
4. Promotion of Small-Scale Sector:
   • Strengthened policies for small-scale industries (SSIs), which were later given protection and financial support under the Industrial Policy Resolutions of 1977 and 1980.
5. Reevaluation of Public and Private Roles:
   • The report encouraged rethinking of the balance between state control and private initiative in industrial growth.

Criticisms of the Dutt Committee

While the committee’s work was pioneering, it faced several criticisms:

• The recommendations were viewed as too restrictive on private sector expansion, particularly for large business houses.
• The criteria for identifying large firms were considered arbitrary and failed to account for industrial diversification.
• Implementation of recommendations led to bureaucratic overreach, increasing rather than reducing administrative control.
• Critics argued that excessive regulation stifled competition and innovation.

Nevertheless, the report provided a crucial analytical foundation for future policy debates on economic concentration and state regulation.

Legacy

The Dutt Committee holds a significant place in India’s economic history as one of the earliest attempts to systematically analyse the interaction between industrial policy and market structure. Its legacy can be summarised as follows:

• It bridged the gap between planning and market regulation.
• It introduced the concept of industrial accountability and competition policy.
• It highlighted the need for inclusive and regionally balanced industrialisation.
• It influenced later reforms that culminated in the gradual liberalisation of India’s industrial policy from the 1980s onwards.