Hazari Committee was set up under the chairmanship of Dr. R.K. Hazari, a Planning Commission consultant to review the Industrial Licensing System under Industries Development and Regulation Act, 1951. This committee submitted its report in 1967 and brought out many defects of the licensing policy.
The committee observed that:
- The leading houses followed the practice of multiple applications just for the sake of foreclosing the licensable capacity.
- The licenses were sanctioned on the basis of “first come, first serve” basis. The big industrial houses maintained offices in Delhi and put in their application at earliest opportunity to grab the licenses. This also helped them to foreclose the licensable capacity.
- The industrial licensing did not achieve the cherished goal of balanced regional development.
- There was no proper follow up once the license was issued. Some houses did not utilize even half of licenses issued to them.
In summary, the licensing policy encouraged foreclosure of licensed capacity by select big industrial houses who could afford to sit tight on unutilised licences. Since there was no proper policy of revocation of licences issued, the large industrial houses prevented the entry of new entrepreneurs while they did not fulfil the targets laid down in the plans. Consequently, industrial licensing which was supposed to act as an instrument of industrial development became an impediment. The committee termed license as ‘passport’ to do business in India.