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REGISTERED No D- 221

The Gazette of India

EXTRAORDINARY

PART I—Section 1

PUBLISHED BY AUTHORITY

No. 189] NEW DELHI, SATURDAY, SEPTEMBER 28, 1968/ASVINA 6, 1890

Separate paging is given to this Part in order that it may be filed

as a separate compilation.

MINISTRY OF COMMERCE

RESOLUTION

New Delhi the 28th September' 1968

Tariff Commission Review Committee

No. 26(2)-Tar/67.—The Government of India in the Ministry of Commerce, under their Resolution No. 26(i)-Tar/63, dated the 19th February, 1966, appointed a Committee of Inquiry under the Chairmanship of Dr. V. K. R. V. Rao, then Member, Planning Commission and now Minister for Transport and Shipping, with the following terms of references :—

(i) to review the working of the Tariff Commission, Bombay since its inception in 1952; (ii) to suggest amendments in the Tariff Commission Act, 1951 in order to effect improve- ments;

(iii) to review the policy of protection to industries taking into account the present restric- tions on imports; and

(iv) to examine and suggest that other functions can be entrusted to the Tariff Commission having regard to the requirements of development planning in the country and to- recommend changes in the constitution and functions of the Commission.

2. The Committee submitted its Report to Government on the 31st August, 1967.

(803)

3. The C3iclusions and rccomii-ndations of the Committee are contained in Chapter VI of the Report. These have bicn considered by Government, and tho decisions taken thereon are set out in the Annexure.

4, Gavirnmsnt wish to place on record thiir appreciation of the valuable work done by the Committee.

ANNBXURB

Recommendation of the

D=cision of the Government

SI. No.

Tariff Comm ission

Review Committee

2

i

3

The essence of the role of the Tariff Com

i

- Noted.

mission lies in its selectivity, in its pick- ing of the right industries, in its recom- mending the correct measures which will enable the industries to grow with the minimum burden on the consumers and in its ensuring that the industries grow up strong and vigorous and become mature enough to face the world on their Own.

2 The Committee would like to strc3s the ( need for sticking Xh th* tJOtmal proce- dure before any decisions arc taken by Government to Impose protective duties.

government agree in principle that the normal procedure should drdirtatily be observed, but there may be occasions when economic developments will ne- cessitate immediate action without re- ference to the Commession. Government, therefore, consider that it will not be ap- propriate to tic their hands by amending the Act as proposed by the Committee.

Noted.

3

The Commission has played a very useful role in promoting the healthy growth of industries in India.

Under consideration.

4

Each industry has its own problems. It is nofpossible to fix a uniform rate of return for all industries and the rate is "bound to vary from Industry to indus- try, depending on its nature, the risks involved etc., the industry's need for funds, and from period to period, 4C- •pending on the current bank rate, the capital market etc. Under the circum- stances, attention has to be paid to pragmatic considerations in determin- ing the rate of return.

Under consideration.

3

While calculating depreciation the Tariff Commission may deviate from Income-Tax practice where actual working practice justifies such a course.

Accepted.

" Sich claim of rehabilitation allowance should be examined on its own merits in the light of the principles laid down by the Commission in 1961 In regard to the fair price payable to cement producers.

Under consideration.

7 Since our economy is passing through a phase of inflationary pressures pro- vision for contingency allowance should be avoided while fixing prices and the industry should be able to absorb small Increases in costs. However, an escala- tion clause is in order in suitablo cases for any major increase in costs which is b:yond the control of the manage- ment.

S

Accepted, subject to the qualification BUggest- cd, nam-ly that departures may be made under exceptional circumstances.

If ths C]mmis9ion is to fitiction effjc- . lively and coinmind respict from in- daitty, a healthy convention should be b'lilt up whereby the recommendations of the Commission arc usually accepted toy Government, departures therefrom being mide only under exceptional cir- cumstances.

9 Units under protection and price control should maintain their coit data in a scientific way. If they arc not able to do so, arrangements should be nnde for the Commission to assist them in this process. For implementing this seheme costing staff of the Commission msy be augmented to the extent necessary.

Government agree that the cost data should be maintained In a scientific way. The Company Law provides for the com- pulsory maintenance of cost records by any specified class of companies engaged in production etc. The Company Law Board will in consultation with the Com- mission decide upon a scientific method of maintenance of cost records a.nd enforce the maintenance of such records.

10

The attention of all concerned is invited to the need for giving full co-operation to the Commission.

In their own interest the industries and other coiccrned parties should extend their full co-operation to the Commis- sion to enable it to function smoothly. It is also worth considering whether soine legal obligation should not be Imposed on the producing units con- cerned for ensuring such co-operation-

The question of taking further legal powers to ensure co-operation will be examined after somo time in he light of the experience gained.

II

Accpted. On the question of staff, Government have taken note of the position and will consider any requisition from the Commission sympathetically, consistenet with the re- quirements of economy.

Reports of the Commission on price inquiries sho ild normally be completed within siK months from the dale of re- ference. In exceptional cases the period may be extended to ten months. The Committee is not in favour of the Commission submitting interim re- ports on a matter like price fixation. To prove the Committee's recommen- dation workable in practidj additional costing or other supporting staff that the Commission may require in con- nection with any price inquiry should be made available to all promptly.

Accepted.

n Government should normally announce their decision on the Commission's re- ports within the stipulated period pro- vided in the Tariff Commission Act, that is, three months.

*3

\ccepted. jovernment are of tho view that the principle of carrying out a review of de-protected industries two to three years after depro- tection is a useful one and may be adopted a ft a regular measure.

As an initial follow-up of the recommen- j dations of the Ct3mmittee'& Interim ( Report, Government a3kcd the Com- mission to examine on a sample basis the extent of protection available to two dc-protcctcd industries. The Committee feels that it would be use- ful to have similar quick examination made of other de-protected industries which have been suggested for such inquiry in its Interim. Report,

Noted.

14 In view of recent relaxations in imports and other changes in the economic situation in the country, tariffs have again acquired importance as an in- strument of plan policy.

Accepted.

"5

Selection of the industries to -be so reviewed will be made by Government in the various Ministries concerned.

Since the benefits of de-valuation in terms of pricc-compatition with im- ports, accrue also to other industries which have so far not been subjected to a Tariff Commission inquiry, it is ne- cessary that Government may nojv ini- tiate early action on the preliminary scrutiny of thec industries as contemp- lated in the Committcefs Interim. Re- port. On the basis of suoh scrutiny Government may refer selected indus- tries to the Tariff Commission for eaca- mining their case for protection.

Noted.

16 The protection inquiries will enable both the Government and industrial units to identify the scope for adopting cost reduction policies m respect of current production as well as of future expan- sion. The discipline imposed as a result of either the initial or the review idquiry by the Commission should itself be of assistance in preventing ad hoc or indiscriminate raising of costs.

17

Accepted, with the qualification that (1) Government will no t be statutorily bound to refer each and every case to the Com- mission! (2) a post-deprotcction enquiry within 2 to 3 year should be adopted m a regular feature.

The Commission should continue to be responsible for examining the cases for g^rant of protection as well aa for continuance or modification of protect tion as it has been doing hitherto. The present policy regarding protection embodied in Sections 11 to 15 of the Tariff Commission Act needs no modification.

18

So long as no other agency is set up, Govern- ment will utilise the experience and the assistance of the Commission for this purpose.

A suitable Government agency other than the Tariff Commission should be re- quired to look into cost and price as- pects of de facto and deprotected in- dustries on a regular and continuous basis. However, it is already open to Government to refer to the Commis- sion such of these industries as in their opinion require a detail examination by the Commission on the lines men- tioned in paragraphs 95 and 96 of the Report.

AH suo motu powers vested in the Com- mission under Section 73 of the Tariff Cnimission Act should continue.

Accepted with the clarification that '"prptec- tion" in this context is to bet aken as re- ferring to tariff protection, and that the suo motu powers will not extend to indus- tries which are "protected" by import control.

fPAAT I—SEC 1] THE OAZfeTTEOP INDIA EXmAOfiDINARY gi>7I 2 3

2.0,

Whenever Government desire to impose statutory control over prices of indus- trial products and non-agricultural r*w materials, they should refer all such cases to the Tariff Commission

CO Government agree that normally such cases should be referred to the Commis- sion. Government should not however be precluded from setting up ad hoc committees in special circumstances. Where it is found necessary to appoint such ad hoc committees, a convention should be established to associate the Chairman or a Member of the Com- mission with such Committees.

(it) Government agree that informal consultation with the Chairman of the Commission may be resorted to where such price fixation is effected without having a formal enquiry.

for inquiry and report. However where certain circumstances affecting cost of production have changed after the Commission submitted its reports, .Government may revise the prices after informal' consultations with the Chairman of the Commission. Further if circumstances of any particular case require immediate fixation of prices, •Government may fix an interim price by an executive order subject to a review- by the Commission. In any case, price inquiries should not be referred to ad~ hoc Committees.

(MY) Government consider that it is not ncces9ary to have an immediate post facto review by the Commission in cases where Government have fixed price* without a formal enquiry because of the urgency. However, the periodical review in such cases could be entrusted to the commission.

2 1.

Noted.

The Committee is generally in agreement with the procedure and practice followed

TJy the Commission for price fixation.

22.

Government do not consider it necessary to invest the Commission with such suo motu powers, as they can seek the advice and assistance of the Commission whenever it is considered necessary.

The Commission should be vested with suo motu powers enabling it to review industries, prices of the products of which are statutorily controlled by -Government after reference to the Commission,

2 3.

Accepted.

Government may find it useful to utilise the expertise and quasijudicial nature of the Commission to thoroughly inves- tigate specific prohlems to an export industry.

3 4.

Accepted. The Commission should obtain the specific concurrence of Government before inquiring into any Deiencc under- taking.

Tho present arrangements of reviewing public sector undertakings by the Parliamentary Committee on Public Undertakings and the Bureau of Public Enterprises appear to be adequate, -However, the Commission should continue to be empowered to review any Public sector under taking if it is part of an industry which is being in- quired into cither for protection or for price fixation.

Noted.

25. It is appropriate that the Ministry of finance while reviewing and analysing other aspects governing fixation of customs and excise duties, should keep in view the protection policy pursued by Government on the recommendations of the Commission from time to tim". If necessary, they may consult the Chairman of the Commission before fixing the rates of duties on protected and price controlled commodities.

Cost reduction vigilance studies assume considerable khportahce m an eco- nomy ridder"with inflationary pressures inch as are being witnessed in our country today. The Ctwramittee is of the opinion that BUch studies may -be attempted by an appropriate agency 6ther than the Tariff Commission n "n integral part of Government's watch ov" prices.

Government have noted the observation that cost reduction vigiJince studies have assumed considerable importance They agree that such vigilance would not be an appropriate futtcdon of the Commission, However, Government consider that while making recommen- dationi the Commission should also- to the extent possible, recommend measure) for cost reductiont. The Com- misiion may also indicate in its racommen

Governrnent Bhotdd advise its various

department t(> teep the Commission Informed on miners relating to any Industry which the Commission has inquired Into or other closely allied industries.

Accepted. The Department wifl inform the com- mission of matters relating to such industries in order to enable the Commission to keep this information in view while conducting examination of other industries or of these industries in case any future reference regarding: tbowiwdustrias w nwd" ;Q the Commission, by Government.

While agreeing generally, Government consider that it would be useful to have a residual clause in the Tariff Commission Act, I95IJ enabling them to remit to the- Commission inquiries into specific questions connected with any industry,, particularly where factors such as the- cost of production or the competitive: efficiency of the industry are invol- ved.

Th" CoKWiittc* anticipates that the Commission will be frilly occupied if all protection and price cases are refpr- red to k and the Commission keeps a close and continuous watch over their progress after Government have taken decisions on protection or price, as the case may be. The Committee is not therefore in favour of any further expansion in the functions of the Commission.

Considering the highly specialised Baturt Noted.

29.

of the Commission's work the committee ia of the opinion that the Tariff Commission should be a compact body and its membership should not exceed five. Additional Members not exceeding two may be appointed, if necessary, for special inquiries and for specific period for which there j" already a provision in Clause 3 of the present Tariff Commission Act. The Committee is not in favour of the appoint- ment of part-time mcmberB on the Commission,

It is desirable that on" of the Mambers of the Tariff Commission should be an expert in cost accountancy and another, aperson with wide managerial experience.

This recommendation will be imple- mented to the extent possible, taking into account the availability of suitable p"rsons. It is not considered necessary to make a specific amendment of thfr Tariff Commission Act for this purpose.

31.

These pvQ recommendations will be further considered by Gttveramtfirt) "nd decisions taken In accordance with the general principles applicable to such onset.

The ranking of the Chairman and Mem- bers of 5jb*T T^tiff ConunlMion ii" the warrant of precedence issued by the Government of India may be tti"d. It is dwiraWe that the office of the Tariff Commission be upgraded from a subordinate office to an attached office in order to increase its administra- tive efficiency.

32

Having regard to the decisions indicated abovej Government will consider whether the amendment of the Tariff Commission Actj 1951, is necessary, arid if so, legislation will be undertaken in due course.

If the recommendations as well as otfwr suggestions regarding the functions and the constitution of the Tariff Commission are accepted relevant changes will have to be made in the piyWJf Tijrlff Commission Act. The broad lines on which amendment may be made arc indicated in paragraph 115 of the Report,

ORDER

Ordered that the copy of the resolution be communicated to at all concerned and that it be

pttbliehod ia the G"uettc of India for General Inftwnwtion.

H. K. KOCHAR, Joint Secy.

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