Monopoly Legislation and Policy in India

Author(s): N. K. Chandra
Source: Economic and Political Weekly, Vol. 12, No. 33/34, Special Number (Aug., 1977), pp.
1405-1412+1414-1418
Published by: Economic and Political Weekly
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 Monopoly Legislation and Policy in India
N K Chandra

The package of measures now being implemented in India is more likely to accentuate rather than
remove the structural defects of the industrialisation strategy pursued in the post-war period. With
this strategy not only wuill monopolies continue to prossper at the expense of smaller units, but stag
tion in the market for industrial goods, due mttainly to the rising volumte and rate of utnemploymen
likely to worsen. At tHe same time a move towards twholesale liberalisation of the economy by dismant-
ling all sorts of controls in the spheres of industrial investment, imports and exports as recommended
by the World Bank, etc, will not alter the direction of change.
This paper examines the present law on monopolies and how it is being implemented. In the
second part of the paper the author poin1ts out the basic limitations of the present policies. In the
concluding section some alternative approaches are outlined.
ANTI-MONOPOLY feelings in India how it is leing implemented. In the or more undertakings are deemed to be
are at least as pervasive and as strong second part we -point out the basic I-C, if (a) one owns or controls the
as in any other country. Most political limitations of the present policies. In others, or (b) they are all owned by one
parties and their leading spokesmen the concluding section some alternative or more individuals, or by some other
over the decades have stood for con- approaches are outlined. firm(s) having at least one commOn
tainment, if not abolition, of private partner, etc.6 For purposes of 'control'
monopoly power. The old Managing I one-third of the voting power, or the
Agency system in colonial India, where- MRTP Act: Law and Practice right to appoint one-third of the
by a small coterie of people, mostly THE LEGAL FRAMEWORK directors, in a company is deemed
foreign, controlled a large chunk of sufficient.7 Further, if a company X is
The preamble to the Monopolies and
trade, industry and mining, became the I-C vith Y, and Y with Z, then X is
Restrictive Trade Practices (MRTP) Act,
favourite target of nationalist forces of deemed I-C with Z.8
1969, describes it thus: "An Act to
various shades until the system was
provide that the operation of the eco- The Act provides for a strict surveil-
abolished in thle early 1960s.
nomic system does not result in the lance of the LBH and DU. They must
At about the same time the Indian concentration of economic power to the seek the government's permission for
Parliament 'discovered' that a large part common detriment, for the control of substantial expansion,9 for starting a
of the wealth generated in the country monopolies, for the prohibition of new undertaking 10 and for merger,
since the inception of the Five-Year monopolistic and restrictive trade amalgamation and take-over. 11 More-
Plans a decade earlier, was getting practices and for matters connected over, the government also reserves
concentrated in a few hands. With therewith or incidental thereto."2 It the right to order an undertaking to
much fanfare a committee under p C follows that neither concentration nor divest itself of a part of it or even to
Mahalanobis was set up to enquire into monopolies as such will be affected; break it up into a number of indepen-
the 'distribution of income and levels action is envisaged only when the dent undertakings. 12 In all such cases
of living'. While it provided a good government thinks that these are acting the government may, but is not oblig-
deal of information on the second to, the common detriment. However, ed to, seek the views of the MRTP
aspect, the report gave few hard facts all monopolistic and restrictive trade Commission; the latter's recommenda-
on the former question or on the extent practices are to be eliminated. tions are not, however, binding.
or growth of private monopolies. Later, Measures relating to concentration Finally, wve note that all undertakings
two further commissions of enquiry which are themselves LBH or DU, or
wouild apply to two kinds of under-
were set up to investigate the monopoly are I-C with a LBH or a DU, were
takings: (i) An undertaking which,
issue, namely, the Monopolies Inquiry required to register themselves with
alone or together with other intercon-
Commission and the Industrial Licens- the government within a short time.
nected (I-C) holdings, owns a minimum
ing Policy Inquiry Committee. The
of Rs 200 million in assets.3 (Such We may now pass on to the mono-
latter concluded in its report of 1969
undertakings may operate in one or more polistic and restrictive trade practices.
that there had been a significant growth lines of business and will collectively A monopolistic trade practice is one
in assets controlled by the large busi-
be referred to as a large business house. which involves one or more 'monopolis-
ness houses (LBH) which needed to be (ii) A dominant undertaking (DUJ): tic undertakings'. The latter refers to
curbed in different ways. One major (a) whose assets, including those of either a DU, or a group of indepen-
recommendation of both the commit-
I-C undertakings constituting the DU, dent undertakings, controlling at least
tees was the enactment of a suitable, are not less than Rs 10 million;4 and one-half of the supply of any good or
piece of legislation and the creation of
(b) which, either by itself or along service. 13 A monopolistic trade pactice
a permanent Monopolies Commission with I-C undertakings, supplies at least is "deemed to be prejudicial to public
which would prevent the unnecessary one-third of any goods or services interest", if it "unreasonably" raises the
entry of the LBHs into new areas as within India as a whole or a substantial costs (to others), the prices and/or
well as eliminate monopolistic abuses part thereof.5 One should note that profits (of the suppliers), "unduly"
in product lines with only a few pro- the concept of DU is meant to apply restricts competition or leads to a
ducers. to some particular line of business. lowering of the quality.14 Whenever
In the present paper we first examine In both (i) and (ii) the term 'inter- the government suspects that such
the present law on monopolies and connection' plays a crucial role. Two practices are being resorted to, the

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Special Number August 1977 ECONOMIC AND POLITICAL WEEKLY

matter may be referred to the MRTP themselves having total assets of Rs modities for which the freight rates
Commission for its verdict which is 10,000 million. Whereas the Dutt are equalised all over the country, or
binding on all parties concerned. Committee had listed 280 concems for which transportation costs consti-
under the Birla family (the 'second- tute only a small fraction of the selling
Restrictive trade practice (RTP)
ranking LBH in the country) only 29 price, dominance. should be defined in
"means a trade practice which has, had
or registered themselves. The cor-
terms of regional markets, and not
may have, the effect of preventing, responding figures for other LBH's India as a whole. A number of rubber
distorting or restricting competition in were: Tatas (the top LBH) 84 and chemicals and minerals like limestone,
any manner. ." 15 A large number of 14; Martin Burn 24 and 2; Goenka 69 china clay, etc, would fall under this
types of agreements are specified 'in and 14; Thapar 63 and nil; Soorajmall categorv. 81
the Act which fall under its purview; 16 110 and 8, etc.24 After the Dutt Com-
Table 1 indicates the disposal of ap-
each one of !these should be duly mittee's report came out, the govern-
plications under the MRTP Act bet-
registered with the Registrar of Restric-ment was able to detect 17 more LBHs
ween June 1, 1970 when the Act came
tive Trade Practices, including the so that the extent of non-registration into force and March 31, 1974. It will
names of parties to the agreement. 17 was even more than what is indicated
be seen that while the number of ap-
The MRTP Commission may enquire above.25
plicationis received was very large, the
illto any of these agreements to see if
rejection rate was only 3 per cent.
these are in .the public interest or not; There are several reasons for this
discrepancy. The definition of inter- Even if we include the cases with-
in the latter case the Commission may
connection under the Act is such that drawn, the rate barely goes up to 15
order it to be discontinued. 18
one has to fi-nd a 'controlling' company per cent.
The Act also provides certain guide- in order to show that some other com-
The table relates to the final disposal
lines as to how 'public interest' should pany is I-C with it. Under Indian con-
and tells us very little about the num-
be judged. These include (a) 'produc- ditions it is quite possible that two ber of cases handled by the MRTP
tion, distribution and supply by most companies are not 'legally' inter-con- Commission. According to one mem-
efficient and economic means', (b) nected, but are in fact controlled by one ber of the Commission, it "plays an
ensuring that 'efficiency is progressivelybusiness family.26 The widespread prac- even less important role than the Act
increased', (c) encouraging 'new enter- tice of benand shareholding where- envisages". Only 31 or 32 cases for
prises as a countervailing force', and by the de facto owner for a variety of substantial expansion or new underta-
(d)l reduction in inter-regional dispari- reasons has the shares recorded in -the kings had been referred to it by the
ties. '9RTPs are permitted if their name of a relative or a protege, helps government out of a total of about
removal might cause (i) a rise in un- to underscore this above lacuna.27 400 in all upto the third quarter of
employment in an area, (ii). a fall in 1973.32 From the limited information
Two further reasons have been ad-
exports, (iii) a reduction in the bargain- at our disposal the Commission ap-
vanced why many DUs need not have
ing power of contracting parties is-a- proved most of the applications it was
registered. Firstly, there is the defi-
cis a supplier/buyer controlling 'a nition of the 'good'. Rules established asked to deal with. In the course of a
preponderant part of the market', talk delivered in August 1975, the
under the Act gave a list of 400 pro-
etc.20
ducts, whereas the 1964 Monopolies Chairman of the Commission noted
Inquiry Committee had classified pro- that only 50 out of 500 applications for
ducts under 1,100 groups of products. licenses were referred to the Commis-
ADMINISTRATIVE AspEcTs
It is obvious that the finer the clas- sion which rejected merely 5, or one in
As requtired by law, 829 undertakingssification, the larger will be the number ten.33
had registered themselves as LBH or of DUs.28 At present 'linoleum', foI Under the Act all trade agreements
D)U or as undertakings I-C with them, example is clubbed together with all have to be registered. But there is no
by the end of 1971. But 85 of thenm types of 'floor-covering' so that the presumption either one way or the
applied for cancellation of their regis- Birlas' India Linoleum which is a ma- other that these are harmful in terms
tration; in 4 cases the MRTP Com- jor producer is not a DU.22 Then of section 2(o) and are therefore to be
mission agreed to the request. On the J Stone & Co which has 60 per cent considered as restrictive trade practices
other hand, show cause notices were foreign equity, withdrew its applica- (RTP). But, surely, few parties to an
sent to 188 undertakings which, in the tion with the MRTPC since it had agreement would voluntarily admit
Commission's view, should have regis- ceased to be a DU under the revised that it is against public interest. The
tered themselves but did not; 84 of classification of eommodities.30 Many onus of proving that it is so lies with
these undertakings eventually registered other examples could be given. Secondly the government. - If, on the other hand,
themselves. 21 At the end of 1973 therea great deal depends on how the the recent British practice of consider-
were 917 undertakings registered with market is defined. Leaving aside com- ing any such agreement as illegal unless
the government of which 114 were DU
and the rest were I-C with LBH.28 The TABLE 1: NUMBER OF APPLICATIONS UNDER TIIE MRTP ACT upTO 31
corresponding figures at the end of MARCH 1974
1974 were 830 and 77 respectively.23
l

It would appear that a very large

number of undertakings are yet to be
registered. On the basis of the 1966
data, the Dutt Committee had found
that there were 48 LBH each with Substantial expansion 272 .80 5 23 83 81
assests exceeding Rs 200 million; to- -New 'underl:akings 63 11 -9 5 38
Merger, amalgamation
gether they controlled 1,500 companies
taken over 68 25 6 12 4 21
with com-bined assets of Rs 40,A00mil-
lion. Of thiem only 450 had registered
Source RBI, Report on Currency and Finance 1972-73, p 282.

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ECONOMIC AND POLITICAL WEEKLY Special Number August 1977
the contracting parties prove it to the
contrary were followed then the num-
ber of RTPs would come down drasti-
cally. This argument put forward by
A N Oza3i seems to find ample con-
firmation. R Caves35 noted that before
the World War II price rings and
RTPs prevailed in trades accounting for
30 per cent of factory employment in
Great Britain. Thanks to the Restrictive
Practices Act, 1956, the Registrar of
Restrictive Practices could claim in his
1967 -Report that "the mass of price-
fixing agreements have been dismantled
and there is no backlog of important
agreements awaiting their turn to be
referred to the court".35 The 1968
Act tried to close a few more loop-
holes. Of the 2,000 agreements register- restrictive are the practices of trans-
ed under the 1456 Act, in 98 per cent
of the cases the parties either volun-
tarily cancelled it or failed to prove
before the courts that it was in the
general interest.37
Apart from the per se rule, according inserted into their agreements with the
to the British practice in the ealy
1960s, when a particular case was dis-
posed of by the court in a particular
manner, all other agreements of a
similar nature were deemed to have
been similarly disposed of.38 This
procedure saved a great deal of time.
Under the Indian MRTP Act, however,
each case has to be judged on its merit. dealers so that the favoured ones got
Upto the end of 1971 a total of 8,590
agreements were filed with the Regis-
trar of Restrictive Trade Agreements,
of which 1,100 were already examined
by him. In cetain cases some restrictive
clauses in an agreement were removed
by the parties concerned after discus-
sions with the Registrar. In only one
case, namely, that of eight tyre manu-
facturers who decided together on the
price to be charged, the Registrar passed
the matter on to the MRTP Com-
mission. In four other cases complaints
were received from the public and sent
to the Director of Inquiry for preli-
minary investigation.39 After 1971
several more cases were taken up by
the Registrar and referred to the Com-
mission. According to a statement bv
the Minister of Company Affairs in
Parliament in March 1975, a total of
34 cases had so far been considered by
the Commission.40
As for monopolistic paractices three
investigations were undertaken by the
Commission against transnationals like
Colgate-Palmolive, Coca-Cola and Cad-
bury-Fry. But in each case the High
Court at Delhi gave an order staying
the proceedings.
RESTRICTIVE TRADE PRACMICES
As we salready not'ed, relatively few
proceedings were instituted against
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RTPs. Some of the major types may capacity for safety matches, was forcing
be distinguished. many small manufacturers to produce
Many leading manufacturers, acting
for itself; in case of non-compliance
individually, entered into special agree- they were threatened witb closure as
ments with their respective dealers. In some of tl*h latter alleged.47 The
so far as the former enjoyed a degree Registrar of Restrictive Trade Practices
of monopoly power over the market charged that Bata, the leading shoe
this individual action was sufficient to manufacturer, while selling under its
restrain competition in the field. (i) A brand name shoes produced by small
large number of them like the Bengal manufacturers, required them to have
Potteries had sole selling agents which an exclusive arrangement with the com-
might not be necessary since the pro- pany, put a ban on the expansion of
duicts of the company carried a high
capacity by these smaller units with-
reputation and accounted for a majoi out an authorisation from the company,
part of the market.42 The practice of and enjoined' them not to sell any addi-
tional output from their existing capa-
appointing sole selling agents is being
discontinued over an increasing spect- city to a third party.48 It has been
rum of industries. (ii) More obviously alleged that India Tobacco, another
transnational giant, gets some of its
nationals like Cadbury-Fry and Wimco cigarettes manufactured by smaller
dominating the markets for confection-
units, as does Glaxo for its energy tab-
ary and safety matches, respectively. lets.49 Similar examples are those of
These companies were accused of Ciba for Binaca toothpaste, Warner
having exclusive dealership clauses Hindustan for chewing gum and .gripe
water, Richardson and Hindustan for
wholesalers in order to shut out poten-
lozenges and pastiles (Vicks), Warner
tial and actual rivals.43 This particular
Ltd, an associate of Sandoz, for Oval-
tne, Beecham (India) for Kruschen salt
practice was condemmed by the Com-
and many others.50 (vii) Recently, the
mission and appears to have gone out
of use. Cadbury-Fry also required its Commission ordered Carborundum Uni-
dealers to furnish regular information on versal to discontinue its graded system
its rivals.44 (iii) Then some companies of discount which gave monopolistic
were found to manipulate supplies to advantages to large buyers. A flat rate
was considered equitable.
far more than their due share. In one 'rhe second group of practices relate
case at least, namely, that of Indian to joint action by several companies in
Tube, it was found that high officials the same trade. Joint price fixing by
8 tyre manufacturers has already been
werle manipulating the supplies in their
own interests without the knowledge of mentioned as the first such case taken up
the top management. In the case of by the Registrar of RTPs. Their pricing
Hlindustan Lever, the Commission formula apparently did not take into
found that it was indulging in the same account quality variation between diffe-
practice as a part of the company's rent types of tyres. Another interesting
policy at the top levels.45 (iv) Next, case was that of the Joint Council of
resale price maintenance, it was alleged,
Pharmaceutical Trade which applied to
was being resorted to by many com- the MRTP Commission for permission
panies including transnationals like to fix uniform prices for various kinds
Hindustan Lever, Bata and Gramo- of medicine. The Commission rejected
phone Company of India, as well as a the application. Then the All-India X-
large Indian-held company, Carona Ray and Electro-Medical Traders'
Sahu. This practice, too, seems to have Association was found bv the Regis-
been abandoned. Manufacturers are nOw trar to be operating a price-ring, An-
allowed to specify the maximum retail other fairly important case is that of
prices only. (v) Another practice was the Petroleum Dealers' Association
'full-line forcing' whereby the dealers which fixes the charges for various
and/or consumers were obliged to take kinds of services rendered by petrol
up items that thev did not wish to. pumps. While the Commission ruled
Union Carbide was thus forcing the against it, the dealers took a court in-
sale of dry cells along with torches, junction. Eventually, the Commission's
v'hile Colgate-Palmolive was vending verdict prevailed. It also, ruled out of
shaving cream with razor blades.46 (vi) order a restrictive agreement among the
One way in which a few transnationals leading manufacturers of dyes like Co-
enhanced their dominant market posi- lour Chem, Chika, Hoechst and Indo-
tion was by buying from smaller firms kem. Two other cases of collusion to
in the same line and then selling the form a price ring were noted by the
commodities under their own brand Registrar of RTPs, namely, those bet-
names. Thus Wimco, a transnational ween Coates of India and five others
controlling 53 per cent of the industry in respect of printing ink, and between
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Special Number August 1977 ECONOMIC AND POLITICAL WEEKLY

Mysore Kirloskar, Mahindra-Mahindra, 1973 and 1974 when the number of The minarity of the Commission
Batliboi and Machine Tools of India in pages was cut by one-half to one-third, came to an Opposite Niew and wanted
respect of machine tools. The parties and (iv) raising prices by a bigger a rejection of the application. Firstly,
mentioned controlled practically the margin than what was warranted by the pro-posal would lead to vertical
whole of the market. the increase in excise tax.54 integration so that the' overall market
* Perhaps the -most publicised case of dominance of Hindustan Lever would
RTP was the so-called nylon pact EXPANSION OF EXISTING UNDERTAKINGS be greatly enhanced. Secondly, the
among four nylon spinners and some fact that the rate of dividend outflow
weavers' associations. The pact, drawn As sufficient published information is on foreign investments, is much higher
up with the full knowledge, if not con- not avai'lable on how the government than interest charges on long-term
nivance, of the official Textile Commis- or the Commission disposed of applica- loans, makes the argument (d) above
sioner, stipulated that a certain portion tions for new undertakings or substan- invalid. Even if the foreign share in
of nylon yarn output would be allocat- tial expansion by LBH (or DU) and on equity were reduced, the dividend
ed to the designated weavers' .associa- what grounds, the account below is outflow, as per data submitted to the
tions who would then distribute it necessarily partial and incomplete. We Commission by the company, would
among the member firms. A 'central may begin with some important indi- increase from Rs 14.6 million, in 1972
nylon committee' consisting of signa- vidual cases55 before giving an analyti- to Rs 22.6 million in 1975. Thirdly,
tories was set up to supervise the dis- cal summary. the Indian companies who were al-
tribution. When some differences arose One of the most controversial cases ready in the field cou1l be asked to
between the spinners and the weavers was the proposal of Hindustan Lever to expand their capacity in case a short-
over a new agreement in the middle set up a plant to manufacture Sodium age in STPP was apprehended. In the
of 1973, the former engineered a split Tripolyphosphate (STPP) and a few last analysis the other transnational,
among the weavers and a new all-India other intermediate products necessary AIbright Morarji and Pandit, might
weavers' body was created almost over- for the manufacture of synthetic deter-be asked to expand and reduce its
night which promptly camne to an gents. This ttansnational company is foreign equity from 40 to 26 per cent.
agreement with the spinners. After this one of the largest in the country rank-For, this latter company's sanctioned
voluntary agreement it was observed ing 19th among both public and pri- project with a capacity of 25,000 tons
that the open market price of various vate sector companies. Of its total envisaged a total project cost of Rs
types of nylon was between 60 and 110 equity capital of Rs 144 million only 52.5 million, iincluding Rs 9.6 million
per cent higher than the 'agreement' Rs 22 million came in the form of in foreign exchange; the corresponding
prices, Crimpers and twisters as well foreign exchange, most of the remain-figures for the Hindustan Lever pro-
as non-signatory weavers were obliged der being capitalised reserves; upto the posal were 30,000 tons, Rs 100 mil-
to pay the open market prices; more- end of 1972 its dividend outflow over lion and Rs 20 million. Clearly, the
over, they were forced to declare that the years amounted to Rs 149 million.former is morel economical from the
they were not 'actual users'. In addi- Further, the company is a major pro- national point of view. Moreover, the
tion, the crimpers and twisters had to ducer of both soaps and synthetic de- techrnical process for producing STPP
sell their output at prices predetermin- tergents; its share in the latter marketadopted by Hindustan Lever' involved
ed by the 'central nylon committee' to. has been as high as three-fifths. As forregular import of Dodcyl Benzene
'actual users', i e, weavers so designat- STPP, four other companies had al- (DDE), a petroleum by-product, the
ed by the same committee. It is no ready obtained licenses prior to Hin- price of which may go up: sharply;
wonder that in 1972-73 the-profit rates dustan Lever's application. While the the other prospective producers' of
(on total capital employed) earned b5y latter wanted a 30,000 ton plant, the STPP had in fact opted for another
the nylon spinners were usually above former group which included a public process which required no import o'f
21 per cent, whereas the average for sector- company, a transnational (much raw materials.56
201 giant Indian firms was only 10.9 smaller than Hindustan Lever), and two So far it has been assumed that
per cent. Whlen the matter camne to theIndian-held companies, was sanctioned
STPP is indeed necessary for the
MRTP Commission, its verdict went a total capacity of 91,000 tons of Indian economy at this stage. It has
squarely against the spinners. It decid-STPP. The majority of the MRTP been argued by another correspondent
ed that twisters and crimpers as well Commission voted in favour of the
that synthetic detergents as a whole
as all weavers must be reckoned as Hindustan Lever application for the are more capital-intensive (less labour-
'actual users'; the principles of distri- following reasons : (a) STPP is an
intensive) than soaps; further small
bution were also laid down in broad important product where supply might
producers can compete effectively
terms.52 Tariff Commission in the mean- lag behind demand by 1978-79 if the
against large ones in the production
while came to the view that the pre- proposal were rejected. (b) The com-
of soap, but not in respect of synthe-
valent nylon yarn prices were unusually panv had a good record of performance
tic detergents. Hence neither this lat-
high and called for a big reduction.53.in the past and was likely to imple-
ter industry nor that of STPP should
Another big probe recently started ment the project in a short time. (c)be encouraged at the present junc-
by the M;RTPC relates to the major Without such additional production
ture.57 Later, DCM, a large company
English language newspapers through-there would be heavy imports of STPP. belonging to one of top Indian mono-
out the 'country. It was alleged that (d) The company would be able to ob- poly houses applied for a 20,000 tons
theyr were acting either in concert ortain the requisite foreign exchange capacity plant. Despite another objec-
after mutual discussion or through thefrom the parent company. The majo- tion from Albri'ght Morarji on the
Indian and Eastern Newspaper Society rity made two stipulations: (i) Foreign ground of market saturation, it was
or through the latter's regional com- equity in the company should be re-
cleared. DCM was required to export
mittees. The newspapers were accused ducect from 85 fo 70 per cent; (ii) As 20 per cent of its capacity - a bur-
of (i) often charging the same price, the company did not have know-how,
den not imposed on others.58
(ii) raising the prices at the same time, it should look for an Indian source be-
fore going abroad. The proposal of Gabriel, another
(iii) keeping prices unchanged between

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ECONOMIC AND POLITICAL WEEKLY Special Number August 1977

transnational, for the expansion of its wanted to study the terms of foreign chemical complex wodld be the inevi-
plant for shock absorbers for vehi- collaboration entered into by Anil table result, but entry into these fields
cles met with stiff resistance from Starch as well as- the market survey by the LBI{ was at that time64 banned
small producers. They argued that the report which justified the setting up under the MRTP Act and the new
of a big new plant. The Commission, licensing policy. Besides, there was no
company wa# already the major pro-
ducer and its expansion would drive however, rejected these requests and shortage of caustic soda in the country.
the small ones out of the market. The approved the application. Several The Commission broadly endorsed the
MRTP Commission opined that the conditions were stipulated: (i) A mi- views of the rival company and rejected
expansion would lead to substantial nimum of 40 per cent should be ex- Hindalco's application. The Commis-
sion also felt that there was no need
exports inasmuch as Gabriel, was al- since there was no urgent
ported
ready selling abroad nearly a fifth of home demand; (ii) In the capital for foreign collaboration.65 Another
its output. It was stipulated that 5 structure of the new company Anil Birla concern, Century Spinning and
years after expansion the company Starch should have 40 per cent of Manufacturing, asked for a substantial
should export 30 per cent of its ad- the equity, the foreign collaborator 40 expansion of its capacity in soda ash.
ditional output. The small producers, per cent, the remainder going to pub- It was rejected since the capacity
however, argued that export at any lic financial institutions; (iii) No targets for the Fifth Plan period were
price is not good for the country. foreign brand names should be used; already fulfilled, and any new plant
(iv) Dividends to foreign collabora- would cause excess capacity. However,
The project was finally cleared by
tors should be met out of net export the same company's request for a pulp
the Commission.5 3
manufacturing unit was accepted by the
Apart from the Hindustan Lever realisation, i e, after deducting import
costs.
government under certain conditions,
case, there are many other instances
including that a new joint sector
where the Commission was sharply Philips, the well known transnational
ernterprise be set up for this purpose.66
divided within itself, practically para- and also a very large company in
Two other interesting cases are those
lysing itself. Another notable example India, proposed to set up a new unit
of two Indian-held companies, Telerad
is that of safety razor blades. H L for producing electro-medical equip-
and Atul Products. Telerad wanted to
Malhotra's Vidyut Metallics, a family ment with technology and plants im-
expand its production of tape recorders,
firm, greatly expanded its capacity in ported from its parent company.
record players, changers, etc. The
the 1960s, I especially between 1964 However, there was a strong resis-
government before putting the matter
and 1966 when new entry into the tanice to the entry of a a TNC in this
before the MRTP Commission had
field was banned. By the early seven- vital area, especially on the part of
stipulated that since these were luxuty
ties the company controlled 88 per the Electronics Commission, the
items, expansion in output was justified
cent of the existing capacity in the Director General of Trade and Deve-
if 60 per cent of it was destined for ex-
country. There were two other pro-' lopment, etc. Indigenous technology,
ports. The Commission, however, held
ducers. One marketed its output it was argued, would receive a set-
that since transnationals like Philips
thlrough Union Carbide; the other back if Philips were there. Hence
and Gramophone Co of India, etc, had
was associated with Hindustan Lever. the application was rejected by the a lower export commitment, Telerad,
Malhotra's request for substantial ex- Commission.62 too, should not be required to export
pansion was rejected by a majority of Hindustan Motors, a Birla concern, more than 40 per cent of its additional
the Commission on the grounds that: which is already the largest producer output.67
(a) he already controlled too high a of motor cars, and a major one in the When Atul Products (belonging to an
proportion of the market, (b) his ex- field of heavy trucks, proposed a LBH) wanted to manufacture some
port commitment could not be taken too substantial expansion in respect of the basic drugs like Tolbutamnide, etc, the
seriously because of his poor perfor- latter product. It wanted to have a Commission asked why it should not
mance in the past, and (c) he had foreign collaborationi agreement with confine itself to basic drugs in bulk
large unused capacity in two units. the US transnational General Motors. form only, leaving various' formulations
In order to counter (b) above, Mal- G M would control one-third of the to other (usually smaller) manufacturers.
hotra proposed a collaboration with equity, provide technical know-how The company was willing to release
Wilkinsons, which would greatly im- and bring in a total of Rs 60 million upto 50 per cent of its output to the
prove his exports. The minority of in foreign exchange. But the govern- latter; it also stated that there wpre
the Commission supported Malhotra's ment thought that since know-how only tvwo others, both transnationals, in
application" provided he (i) surrender- was locally available there was no the field, Hoechst and Pfizer. At this
ed his unused capacity in one loca- need to obtain it through foreign point Hoechst came forward to claim
tion and (ii) agreed to turn his family equity participation. The scheme was that there was an insufficient demand
concern into a public limited com- rejected.63 for these basic 'drugs and so the ap-
pany.60 A couple of other cases of rejectionplication should be rejected. The
Anil Starch Products is an Indian- of an application by large Indian-held~applicant retorted by stating that de-
held DU in its field and wanted to companies may be revealing, Hindustan mand was quite high and that its
expand with foreign collaboration. Aluminium, a Birla concern, wanted to production capacity would improve if
When the matter came to the Com- set up a small, captive unit producing it was allowed to enter the new field.
mission, 61 the competitors raised caustic soda with 21 per cent equity The Commission, finally, came in fav-
strong objections, inter alia question- our of the application and withdrew
participation by foreign- collaborators.
ing the need for foreign collaboration It was opposed by another company, its earlier stipulation that one-half of
in an area where none existed and Kanoria Chemicals, mainly on the the basic drugs be sold to other manu-
where the market was saturated. ground that the by-product from caus- facturers, since no such constraints
were made on two existing suppliers
(Anil Starch itself had earlier' in tic
thesoda, namely, chlorine, cannot be
wast;ed nor sold due to the difficult of the basic drugs.
fifties firmly opPosed the entry olf
transnationals.) The competitors also market conditions. A chlorine-based We may now examine the extent to

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 Special Number August 1977 ECONOMIC AN1D POLITICAL WEEKLY

which the small and medium firms so andl/or (b) the product concerned (8) While in some cases the compa-
were protected against large under- had a low priority in terms of social nies have been allowed to go for loanis
takings. The proposals of Hoechst and objectives. The percentage of export from public financial institutions, if
Polyolefins, both interconnected with might vary from as low as 10 per centnot encouraged to do so, in at least one
the Mafatlals, to manufacture vynil to as high as 50 per cent. In several case of a transnational firm, the English
acetate, etc, were rejected on this instances the initial percentages were Electric, the opposite was insisted
ground.68 Similarly for the special tools later revised downwards as with Tele-upon. This company's application was
project of E I D Parry,69 the scheme rad, Telco, etc. A- commitment to approved by the government on condi-
for substantial capacity expansion by export has often helped large firms, tion that it did not raise any funds
Shriram Refrigeration Industries in especially foreign concerns to get round from public financial institutions in the
respect of pneumatic-electronic gauges,70 other objections. Thus Lucas-TVS country. A similar stipulation was
and the TV sets manufacturing project scheme to increase the capacity of made when Tata Chemicals wanted to
of Hindco Lighting, a GEC subsidiary.7 starters, generators, etc, was opposed expand its soda ash capacity.80
Other factors which went against the on the ground that it would enhance (9) Since the Industrial Licensing
above companies were the lack of ex- its existing monopoly power in a highly Policy Inquiry Committee pronounced
port commitment on their part, and, atprofitable line. But the company's in favour of the joint sector,80 there
times, a related demand to enter into promise to dilute foreign equity and has often been an insistence on the
foreign collaboration agreements. On export 10 per cent of the new capacity 'convertibility' clause whereby public
the other hand, objections from small tilted the authorities in its favour.79 sector financial institutions retain the
and medium suppliers were often over- Two other cases have already been cited right to convert long-term loans into
ruled on various grounds. Such was in the previous paragraph. equity. Such stipulations were made
the case with the Escort's application both by the government and the MRTP
(3) As we saw above with the pulp
for pistons and gudgeon pins,72 Gramo-
project of Century Spinning and Manu- Commission in a large number of cases
phone Co of India's request for pick- before setting their seal of approval on
facturing, no foreign collaboration
up cartridges and styluses,37 English
agreement was permitted in implement- application from a transnational or
an
Electric's proposals for cartridge fuses, a large Indian company.
ing the project. This is done in areas
etc,74 and Siemens' cobalt moving beam
where 'adequate' indigenous technolOgy (10) in some cases, the government
radio therapy.75 In the first three cases
is available. actually insisted that the expansion be
government agencies like the DGTD or in the joint sector. Regarding Cominco
the Development Commissioner for (4) In at least one case, that of
Binai Zinc Co, it was felt that the pro-
Small Industries and the Department ofAnil starch, the use of foreign brand
duct concerned is a vital raw material
Electronics helped the applicant ccm- names was prohibited in order to con-
normally reserved for the public sector.
panies by stating that the respective serve royalty payments abroad as well
The reasons for a similar stipulation in
areas were not reserved for the small as to protect the intercst of other indi-
respect of Birla's Kesoram Cement
sector and that there was sufficient genous manufacturers. Similar attempts
Industries' expansion plan is not clear.82
domestic demand. In the second case, are being made in many other fields.
(11) The Gramophone Co of India,
some export commitment created a
(5) In two cases a maximum import a transnational DU, was allowed to
favourable climate. Siemens, however,
content per unit of product has been diversify and enter a new market83
got through by claiming to introduce
laid down. - This was obviously an where it would be in a dominant posi-
a high technology product. Willingness
attempt to push through the import- tion On the grounds that (a) it would
to dilute foreign-held equity also helped substitution policy, This import-sub-
lead to import substitution and (b) no
the applicants in some of these cases.
stitution argument was also involved new capacities were needed.
Having described some inidividual in approving Gramophone Co of Indlia's (12) In several cases, e g, Telco's
cases we may now briefly note some application in the luxury goods sector.request for expansion of heavy vehicles
of the typical stipulations made or
(6) In a couple of instances of output,84 the expansion proposals by a
reasons given in approving or rejecting number of tyre companies,85 including
foreign collaboration, it has been sti-
applications for substantial expansion or pulated that there should be no net some transnationals, and the proposid
new units under an old undertaking. outflow of foreign exchange. All pay- of Saurashtra Chemicals, a DU, for
(1) Transnationals have generally ments for dividends, royalties, imports, increasing its soda ash capacity,86
been asked to reduce the proportion ofetc, have to be paid from export earn- 'potential' rather than 'actual' market
foreign equity whenever it exceeded ings. Examples are Carborundum concentration was considered. Since
40 per cent. This is in line with the Universal and Atul Products, as noted other producers in these fields were
recent government policy to increase earlier. granted licenses for new capacities and
local participation which, among other (7) For closely-held Indian compa- it was hoped that the latter would im-
factors, may help to restrict the foreign plement them, the eventual concentra-
nies, i e, where a family or a small
exchange outflow on dividends.76 But tion would be lower.
group of persons owns a large propor-
at least in one case, the steel cord con- tion of the equity, a wider dispersion (13) In certain cases there have
veyor belting project of Dunlop, no of holdings has often been made a been attempts to neutralise the effects
such condition was imposed.76 When prerequisite. This was to ensure public of concentration by laying down the
EID Parry and ITC wanted to enter participation in the affairs of largesales policy. Thus the government was
the export-oriented marine products companies and also to bring them aware that the pulp production scheme
field, the equity dilution clause was under the discipline of Stock Exchanges.of Birla's Century Spinning and
waived.78 In some cases the exact capital struc- Manufacturing would lead to vertical
ture was spelled out, indicating the integration. The consequences were
(2) Export obligations, usually on
additional output, have been imposedpercentages to be retained by the 'old' mitigated by stipulating that one-half
owners, the public, financial institu- at least of the pulp output would be
whenever it was thought that (a) the
tions, etc. sold to other paper manufacturers. A
company might be in a position to do

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ECONOMIC AND POLITICAL WEEKLY Special Number August 1977

further condition was that the company
should adopt a certain product-mix
with a view to ensuring the supply of
those items where scarcity conditions
might prevail.87 The majority of the
MRTP Commission similarly approved
Carborundum Universal's proposal to
remained the same as before. Instead
exp,and its capacity for grinding wheels
and bonded abrasives despite the risks
of vertical integration. Finally, the
government alowed a lower capacity,
but imposed obligations regarding ex-
ports and supplies to other producers.
(14) In important sectors the ap-
plicant's reliability as a supplier has
been a factor. Thus one of the reasons
why ACC, a DU in cement industry,
was allowed substantial expansion, was
that this would ensure fulfilment of the
Plan target. In a similar vein one
strong argument in favour of Telco's
application for commercial vehicles was
that the company was a good defence
supplier.89
(15) The location of a project in a
backward area has often been cited in
its favour along with other reasons.
The projects of Dunlop, Birla's Kesoram
Cement Industries, etc, belong to this
category.90 An application by Bangur
Brothers for a paper mill in Madhya
Pradesh was approved on the same
ground, although it was subject to the
condition that the new undertaking
should be in the joint sector. 9I
AMALGAMATION AND TAKEOVER
Unlike the scene in developed market
economies amalgamations and takeovers
are rather rare occurrences in India.
There are a nunmber of reasons behind
this. In the post-independence years,
particularly since the late 1950s, public of business the proposal was accepted
sector financial institutions like the
Life Insurance Corporation and Unit
Trust of India are increasingly holding
a very significant part of the equity in tions were approached by Bharat
bigger companies. Such institutions
have a built-in bias in favour of the
'old' managerial/entrepreneurial groups, least 10 per cent of its annual produc-
reinforced by a similar inclination on
the government side. Hence a take-
over bid can often be easily frustrated.92
Few such attempts bypassing the go-
vernment have been reported.
The MRTP Act, as we saw in section
I, contains provisions giving a great
deal of power in this regard to the
government. More than ever it is now
impossible for a large private concern
to take over another without official
consent. According to a parliamentary
statement, there was a total of 16 cases
probably as rampant as ever and with
where amalgamations were approved by very pernicious conseauences. Quite
the government.93
In 5 cases out of 6 for which details
have been published the main considera-
tion behind government decision has
been the expected decline in foreign
equity holdings. When Larsen and
Toubro first proposed to acquire some
equity of Utkal Machinery belonging to
two West German individuals in ex-
change for its own shares, it was reject-
ed since foreign holdings would have
the government suggested that the first
companv should purchase outright the
equity h'eld by the non-residents.94
Then TISCO's proposal to buy 6,000
shares of Tata Robins Fraser,95 the
amaigamation between Tata Fison
Industries and Rallis India,98 and
amalgamation of the UK-based EID
Parry Ltd with the India-based EID
Parry (India) Ltd97 -all these were
approved by the government since in
two of these cases (the first and the
third) foreign share of the eauity came
down and in the third this share was
left unchanged. On the other hand,
Guest Keen William wanted to acquire
some equity of Sankey Wheels from
the British-owned Commonwealth
Development Finance Co Ltd on the
plea that this would reduce foreign
holding in Sankey Wheels. But since
the applicant company was foreign-
owned and already held some shares
in Sankey Wheels, the government
found that the proposal would turn the
latter into a subsidiary of the former.
The move was rejected.98
Finally, one may note t-he case of
Thilips Carbon Black which wanted to
buy some new equity (amounting to
32 per cent of the total) to be issued
by Bharat Carbon. Although this would
lead to a direct link between two of
the major producers in the same line
subject to: (i) the insertion of a
convertibility clause in the loan agree-
ment in case public financial institu-
Carbon for any loans; and (ii) a com-
mitment by the company to export at
tion.99
II
Limitations of the Present Policies
RESTRICTIVE TRADE PRACTICES
The judgments passed by the Mono-
polies Commission on various instances
of restrictive trade practices that came
to its notice are by and large unexcep-
tionable. Yet the fact remains that in
the country as a whole RTPs are
often there may not be any written
agreement among manufacturers or
sellers and yet cornering of stocks and
artificial price increases take place. I?n
short, the Commission is virtually
ineffectual except in a narrow legal
sense.
Even without a radical structural
change at the socio-economic or politi-
cal level, certain improvements can be
brought about by two 'simple' amend-
ments. Firstly, all RTPs per se could
be declared to be illegal; the onus of
proving that these are not prejudicial
to the general interests of the society
should be passed on to those who
originally entered into such agreements.
Such is in fact the case in most of the
advanced capitalist countries. The
mother legislation on this subject, the
Sherman Act, passed by the US Con-
gress in the 1890s declared (1)
"Every contract, combination in the
form of trust or otherwise, or conspi-
racy, in restraint of trade or commerce
among the several States or with
foreign nations, is hereby declared to
be illegal.. .". (2) "Every person who
shall monopolise, or attempt to mono-
polise, or combine or conspire with
any other person or persons, to mono-
polise any part of the trade or com-
merce among several States, or with
foreign nations, shall be deemed guilty
of a misdemeanour ..." Elsewhere
in the capitalist world, with exceptions
like France and Belgium, such stringent
laws- are generally in force wherever
restrictive practices affect the domestic
consumes. 101 Secondly, in several coun-
tries invocation of the penal provision
in the anti-trust laws has put real teeth
into them. Thus in the US treble
damages have successfully been claimed
both bv public agencies, e g, US De-
partment of Justice, and by private
parties (individuals or firms) from sup-
pliers who violated the law. Towards
the end of the 1960s manufacturers of
electrical equipment in the USA had to
pay damage to the extent of $ 1,000
million. Producers of tetracycline
offered to settle all outstanding claims
for a total of S 120 million.L02 In 1972
the Federal Cartel Office in West
Germany imposed a fine of nearly $ 16
million on nine fimins in the synthetic
fibres industry for price-fixing and
market-sharing; the matter went to the
court. 108 In 'England the government
claimed damages of $-24 million in 1973
against Roche for overpricing in respect
of librium and valium. Further examples
could be given.
While advocating the introduction of
similar measures in India we must enter
a couple of caveats. Despite such
seemingly stringent measures price-
rigging on a wide front still conti-
nues in those countries, even if it may
not be as obvious or as scandalous as
in Tndia. Further, ours being an

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Special Number August 1977 ECONOMIC AND POLITICAL WEEKLY

essentially unorganised economy with facturers; capital'intensity. Further, a TNC tends

an unusually large trading sector it (5) in considering the impact or, to swallow up or push out of the
may be somewhat more difficult to product-concentration, take into market indigenous private capital or
locate the culprits here than in the account not the actual, but the prevents the emergence of new indigen-
case of advanced countries. At best, hypothetical market shares of ouis units. Concrete instances from
then, more stringent measures along the the large business concerns. India could easily be cited in support
lines described above can act as no The cumulative outcome of all these of each of the above statements.
more than palliatives. No long-tenn premises is such that very few applica- Finally, a TNC, other things remaining
or meaningful check on restrictive tions for expansion from the LBH or equal, is likely to use local know-how,
practices is possible unless the under- other big companies get rejected; the equipment and raw materials to a far
lying conditions of production and dis- anti-monopoly objective is quietly lesser extent than a fully indigenous
tribtition are suitably altered. sacrificed in the name of some other unit; thus the 'backward links' of a
overriding national priority. At a first TNC are likely to be correspondingly
EXPANSION, AMALGAMA IJON AND TAKE-
glance none of the premises appear to less. (d) While a TNC may initially
OVER OF EXISTING CONCERNS
be objectionable; however, if these are be 100 per cent export-oriented, there
in assessing the functioning of the carried too far as they have been in is no guarantee that it would continue
Monopolies Commission or the role of practice, these are both wrong-beaded to remain so. Once begun, local em-
the government in promoting or curb- and harmful to the economy. We ployees (prompted by the management)
ing the concentration of economic shall now endeavour to establish this are likely to create enough pressure for
power in this country certain bald facts assertion. employment and production to be
have to be borne in mind. According maintained; thus falling exports may
Promotion of exports appears to have
to our own estimates the share of the be compensated by increased domestic
been the single dominant factor in
assets of the top 20 LBH in the overall sales. 109 All the negative consequences
decision-making. Thus schemes with
corporate sector assets (excluding bank- mentioned in (c) above will then come
some export potential got the top
ing and insurance companies which are into force. (e) If exports are promoted
priority; other drawbacks of a scheme,
now almost wholly nationalised) in- through joint ventures, i e, TNCs own-
namely, excessive market concentration,
creased from 20.05 to 23.22 per cent in ing enterprises jointly with local
reduced opportunity for small and
1966-71; as against the private corpo- entrepreneurs, there is hardly any im-
medium industries, etc, were invariably
rate sector the share of the same LBHs provement so long as the key know-
overlooked whenever export possibilities
rose over the same period from 26.14 how comes from the foreign partners.
appeared. This 'exports first' strategy,
to 32.90 per cent. 104 Since then the In export marketing, too, the latter are
as we have termed it elsewhere, 106
share has most likely gone up even likely to have a dominant role. (f)
is also being strongly recommended by
further. Simultaneously, the foreign Export-oriented industries without any
the World Bank, the OECD antl similar
companies in India increased their foreign capital participation can hardlv
organisations. The basic limitations
share of sales from 24.5 in 1964-65 to be set up except in a narrow range of
of this approach are by now well-
29.8 per cent in 1972-73 vis-a'-vis the products requiring specific natural re-
known. 107 (a) Given the preponderance
private corporate sector (excluding sources not available elsewhere. (g)
of transnational corporations (TNCs) in
banking, insurance and financial com- Emphasis on export-oriented industries
the world exports of manufactures, an
panies) and from 23.0 to 24.4 over the may lead to the introduction in the
increasing dominance of TNCs within
same period as against the total corpo- domestic market of a number of pro-
the Third World countries is unavoid-
rate sector, i e, including the public ducts like consumer durables that have
able if export-oriented industrialisation
sector companies. 105 Hence' there is an export potential. In this way do-
is to make a significant headway.
little doubt that there is a failure of mestic resources mav be misdirected
(b) A compar.son of the foreign ex-
public policy to curb monopolies. Tle into industries that have a low social
change costs and benefits of foreign
Monopolies Commission, as we saw priority.
private investments in Third World
earlier, feels itself incapacitated owing
countries reveals that costs are far More generally, for a country like
to the reluctance of the government greater.
to 108 (c) Even if in individual India exports are bound to play a fairly
pass on to it appropriate cases; the cases a TNC brings in more of foreign insignificant role in the industrialisation
Commission in fact examined a relative-exchange than it repatriates in various process. Advocates of an exports first
ly small number of cases. But is there forms, its impact on the domestic strategy often cite- the examples of
a substantial difference in the ap- scene is more likely to be negative than Hong Kong, Taiwan, Soth Korea, etc.
proaches of the Commission and the positive. For, it employs high techno- As Bairoch has noted, if in 1970 all
government? There has indeed been logy which cannot be initegrated into non-Socialist Third World countries
very little difference. the economic structure of a typical were to achieve the same per capita
Going back to the individual cases as Third World economy for reasons of exports of manufactures as Hong Kong,
well as the analytical summary given both high sophistication and high then the volume of world trade in
above, the underlying premises can now
be catalogued as follows: TABLE 2 AVERAGE ANNUAL GROWTH RAT1ES 1N THE VOLUME OF NATIONAL
(1) top priority should be given to INCOME AND IMPORTS, 1950-51 ro 1973-74
exports; (Percentages)
(2) encourage import-substitution to
conserve foreign exchange: 1950-51 1950-51 1960-61 1969-70
to to to to
(3) dilute foreign equity holdings in 1973-74 1960-61 1973-74 13
foreign controlled companies
in order to reduce foreign ex-
National Inconme 3.24 3.36 2.90 1.66
change outgoings; Imports 2.85 4.92 1.04 2.94
(4) in key areas preference should
be given to 'dependable' manu- Source: RBI, Report on Currencty

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Special Number August 1977 ECONOMIC AND POLITICAL WEEKLY

manufactures would have had to be sion by the Indian authorities. In a great advantages to the monopoly
three times higher than it was. 110 static ceteris paribus context, it may groups. Being more conversant with
Thus it is fallacious to generalise on be conceded, the lower the foreign the latest trends in the western coun-
the basis of a handful of very small share the smaller is the outgo of for- tries they are able to seize new opportu-
countries none of which moreover can eign exchange. It is not necessarily so nities much faster than the smaller
boast of a significant breakthrough in if the company is expanding. (a) Given concerns. Even if licenses are granted
living standards. Our arguments above the high profitability of TNCs, they to the latter, the monopoly groups are
should not be misconstrued. We are are generally far more successful in often able to start production much
not against any and every industry mobilising funds from investors than earlier and -reap supernormal profits
catering for the export market, nor are local companies. Hence equity dilution before others can come in. Such has
we advocating any form of autarky. may slow down the growth of local been the case recently with TV sets
What we are sceptical about is the private capital. (b) Assuming that the and electronic calculators.
'exports first' strategy whereby every company remains in the same line of Several other considerations have
ot:her socio-economic objective is sub- business it may now be able to increase often helped monopolies and foreign
ordinated to the 'need' for augmenting its market share and overall profitabi- firms, (i) In certain key industries,
exports. lity. The rate of dividend remittance ,particularly in the field of defence,
Import-substitution has been another may corisequently go up. (c) If the preference has been given to firms
main plank in our industrialisation company diversifies into a new line, which have established their reputation
strategy. This has been continued in often with a higher profit rate than in as dependable suppliers. It goes with-
our licensing policy and is equally the old field, again the dividend out- out saying that this criterion will al-
reflected in the deliberations of the flow may increase. Further, fresh im- most inevitably work against the smal-
MRTP Commission. The theoretical ports in the form of equipment, spares, ler concerns in most cases; it will be
pitfalls of this strategy are by now intermediate goods, or raw materials doubly so in a country like India where
much too well-known, especially in the may be a concomitant of such diver- shortages of crucial materials and
economic literature on Latin America. sification; such imports can be over- machinery are regular features of the
In India there still remains some fasci- invoiced through the transfer price economy. Had more thought been
nation with it on the mistaken belief mechanism within the TNCs. Once given as to why larger units appear
that import substitution is in fact takingagain foreign exchange outflow may to be more dependable and how the
place. As a matter of fact, despite rise as a consequence. (c) If a foreign obstacles faced by srmaller units could
the official claims and despite significant
company intends to enter an export- be removed, it is possible that the re-
progress in an increasing number of oriented sector, the authorities rarely liability factor would become less one-
industries towards import-substitution, insist on equity dilution. Besides, the sided (ii) In several instances licenses
on an aggregative plane the evidence drawbacks of export-oriented joint vent- have been issued to foreign and mono-
appears to be conflicting as Table 2 ures have already been discussed. poly concerns on the basis, not of their
indicates. In the preceding discussion we have actual market shares, but of their
Over the whole period from 1950-51 throughout assumed that the foreign potential shares at a time when all the
to 1973-74 national income increased owners retain decisive control over the existing license-holders would have
almost imperceptibly faster than the company even after the latter's equity completed their projects. Such was the
quantum of imports. During the first is diluted. This is a realistic assump- case in the tyre industry, for example.
decade imports grew faster, but the tion in the context of' India as well as It the production targets indicated in
situation was reversed between 1960-61 most other Third World countries. the Five-Year Plan documents were
and 1973-74. However, in the latest Only in a few exceptional cases like realistic, then potential concentration
period of the Fourth Five Year Plan oil, copper, etc, or old established would indeed be lower. But is it not
imports outpaced national income. It industries like textiles, etc, can the likely that some at least of the poten-
would perhaps be fair to infer that foreigners be coaxed or obliged to tial entrants would be sufficiently
there is no pronounced trend towards remain as junior partners. deterred by the knowledge that TNCs
import-substitution for the post-inde- Coming to official policy towards and Indian monopoly houses are already
pendence period as a whole. Indian monopoly houses, many of the well entrenched? Such dangers increase
The basic fallacy with the import- points raised in the preceding discus- at recessionery times. (iii) On several
substitution strategy lies in accepting sion are equally pertinent. Thus eqpity occasions the government and the
uncritically the desirability of domestic dilution in these concerns merely ex- MRTP Commission have tried to at-
production of any good once imported tends their control over industry and tenuate the consequences of market
from abroad without reference to the trade, while the capital market 'tends concelitration by stipulating that domi-
overall implications from a social point to become even, tighter for small and nant producers should dispose of their
of view. We have in mind not only medium enterprises. 'The accent on output in a prescribed manner to enable
consumers' durables, like synthetic exports once again favours the mono- smaller competitors to thrive. In fact,
textiles and detergents, etc. but also poly groups with their own special especially in periods of shortage, the
producer goods like those going into export houses; besides, many of the major suppliers can change their sales
the above products, oil-consuming (as larger houses, as we noted else- strategy in a subtle manner which can
against coal-consuming) equipment, etc. where, are associated in various ways almost throttle the small units without
As a result the direct and indirect im- with TNCs. 1 is doubtful if many -violating the letter of the law. 14 (iv)
port requirements of old and new' of the Indian LBH have an indepen- In industrially backward areas many
industries together tend to outpace dent export network. Moreover, the incentives are provided to potential
the growth in domestic production. practice of under-invoicing exports entrepreneurs. Foreign firms and mono-
As a part of the same overall policy appears to be fairly widespread there- poly houses often avail themselves of
to conserve foreign exchange, dilution by reducing the net foreign exhange this privilege when they are doubtful
of foreign equity holdings has often earninrgs for the country. Further, the of getting a license to start a factory
been made a precondition for expan- import-substitution strategy also brings elsewhere. From the point of view of

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ECONOMIC AND POLITICAL WEEKLY Special Number August 1977
backward regions, however, a few
capital-intensive industries having
almost no links with the regional
economy, hardly bring much succour.
Hence this is in effect just another
escape route which helps the growth
of foreign and monopoly concerns
rather than that of backward regions.
(v) The joint sector concept has in
practice helped foreign firms and mono-
poly concerns (in partnership with the
government) to enter new fields from
which they might otherwise be kept
out. Moreover, the formula for financ-
ing such ventures is extremely attractive
in so far as the promoter's contribution
is greatly reduced. Further, operational
management in joint-sector ventures is
usually left in the hands of the private
party with the government acting as
a sleeping partner.
For all these reasons we believe that
the package of measures nOw being
implemented in India is more likely to
accentuate rather than remove the
structural defects of the industrialisa-
tion strategy pursued in the post-war
period. With this strategy not only
will monopolies continue to prosper at
the expense of smaller units, the basic
drawback in our set-up, namely, stag-
nation in the market for industrial
goods due mainly to the rising volume
and rate of unemployment in the eco-
nomy, is also likely to worsen if the
strategy is not changed. A move
towards wholesale liberalisation of the
economy by dismantling all sorts of
controls in the spheres of, industrial
investment, imports and exports as re-
commended by the World Bank, OECD,
etc, would not alter the direction' of
chnge.
III
Alternative Strategy
Few people today would disagree
that the only sensible policy for a
country like India is to build more and
more of labour-intensive industries in
lieu of capital-intensive ones. This is
indeed the only way in which a part
of the huge unemployed or under-
employed workforce can obtain a gain-
ful occupation. The implications,
however, of such a strategy have not
been clearly spelt out.
(a) Once the accent is on labour-
intensive types of industries it is ob-
vious that the production units should
generally be small in size. For, it is
the indivisibility of machines that
makes large units imperative, some-
times bringing in its train significant
economies of scale. If wmachines are
to Xbe used to a much lesser extent,
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there is little purpose to be served by authorities at, say, the district levels.
having large units of manufacturing in Each district should have the power to
these product lines. ban the entry of goods made elsewhere
(b) No large scale modern type in order that it may generate industries
industries should be allowed in areas within its own teritory catering to local
earmarked for the small sector. On demand without any central assistance.
paper the current policy in India is However, vetoing power may be retain-
along these lines. But in practice there ed by the provincial and central
are many industries where the two authorities to ensure that the district
sectors coexist. If one is to pay more does not exercise its power arbitrarily.
than lip-service to the need for small (f) For small industries not catering
industries, not only should future ex- to local markets, powerful marketing
pansion of big units in these borderline networks on a national level must be
industries be banned, but they should created. These will act as a bridge
be compelled increasingly to look for between the suppliers and clients who
exports in order to utilise their existing might be located far away from one
capacity. In case exports cannot be another. Indeed, the major constraint
made, big units may be forced into faced by small industries in this coun-
new areas that require relatively more try has been the absence of adequate
complicated technology and have a marketing facilities.
high social priority. In no circumstan- (g) The structure and modus op-
ces should they be allowed to invade erandi of financial institutions need a
a market actually held by the small drastic overhaul. Presently, the written
sector on the plea that there is a lack rules and unwritten conventions greatly
of demand in their existing fields. For, favour the large borrowers. Thus small
from a national point of view, one per borrowers are, for instance, obliged to
cent capacity underutilisation in a furnish collateral security; but this
mechanised unit will reduce employ- condition is waived for the bigger
ment and effective demanid far less clients. Most small entrepreneurs and
than a similar shortfall in the labour- artisans (and cultivators) do not possess
intensive sector. As for 'modern' any collaterals and are therefore obliged
industries like textiles which cantoneither turn to the moneylender. If groups
find export markets nor be converted of small industries could come under
into some other lines which do not the umbrella of a public sector or co-
compete with the small sector, their operative marketing agency, then the
production may be pegged to the exist- risks from the side of banks could be
ing levels; all future expansion may be practically eliminated. Further, financial
reserved for the small labour-intensive institutions today generally allow a
units. much higher debt-equity ratio for big
(c) Systematic research must be borrower (upto 4: 1) than for small
made at the national level to demarcate ones (upto 2: 1). Promoters' contribu-
more and more areas where 'viable' tion for big projects can be as low as
small units can be established. 'Viabi- 10-15 per cent of the total project
litv' should be understood not in the costs, including working capital, where-
narrow sense of private profitability or as few small scale promoters can hope
even of social costs-benefits calculated to start off with less than 50 per cent
for individual projects, but only within of own capital. Although in theory
the framework of national and regional the small borrowers are expected to pay
plans. One may begin by identifying a somewhat lower rate of interest, in
the products suitable for small scale practice they rarely do so; there is no
production as well as the appropriate reason why substantially lower interest
techniques. rates cannot be charged from them.
(d) The basic orientation of small Above all, institutional credits must be
industries should be the satisfaction of made available to a far greater extent
the simple needs of the common masses than at present; while big borrowers
in.the country as well as the provision rarely starve for the lack of such funds,
of simpler types of inputs for agricul- comparatively few small industries get
ture. It is obvious that such a pattern any such loan at all.
will obviate the need for imported At this point one may ask whether
technology or materials. There is, how- the Japanese type of suibcontracting
ever, no need for the small units to whereby large organisations (trading or
withdraw from areas where they are manufacturing or both) farm out jobs
already well-entrenched, eg, as ancil- to small units, cannot be introduced.
laries or as exporters. This is how industrialisation in that
(e). No significant development of country was launched and it continues
small industries in a country like India to a considerable extent even today.
is possible without considerably en- There is little doubt that such a policy
hancing the powers of the regional would be far superior to the strategy
1415
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Special Number August 1977 ECONOMIC AND POLITICAL WEEKLY
in India today. It would, be however,
a 'second best' policy. If monopoly
houses or foreign companies are al-
lowed to play the pivotal role, there
may be certain inherent dangers.
Firstly, as with private middlemen
throttling most of the small indus-
tries today, the corplorate giants are
almost certainly going to use their
superior bargaining power to increase
their own margin at the cost of the
small enterprises. To the extent that
profits are accumulated increasingly in
fewer hands the expansion of the inter-
nal market will be hampered and growtf
will be slowed down. Secondly, since
most monopoly houses and many of
the large foreign firms are engaged in
products which, in our view, should
be increasingly turned over to the
small sector, the whole process will be
aborted if the former are permitted to
control the market for the latter. How-
eve, subcontracting under the aegis of
a public sector undertaking is an al-
together different matter. Assuming
that the public sector acts in the
genuine interest of the masses (this is
hardly true of our public sector), its
closer links with the small scale enter-
prises is vitally necessary.
If the public sector can be expanded
fast enough along with the growth of
small units, there is hardly any eco-
nomic justification for the continuance
of either private monopoly houses or
of transnationals. The only area in
wbich their absence might have an
adverse impact, particularly in the
short run, is that of exports. But a
temporary fall in exports need not be
catastrophic if the demand for imports
can be cut down substantially. For
India at least a substantial part of the
import bill really goes towards the
luxury consumption of the affluent.
Imports of raw cotton, food, 113a part
of fuel, electronic goods, etc, are thus
inessential for the country. Domestic
production of fertilisers, steel, etc, can
be substantially raised to cut back im-
ports further. There are also avenues
of raising the exports of a number of
products like sugar, coffee, leather
goods, etc, where the special connec-
tions of transnationals or monopoly
houses are redundant.
The scheme just outlined will have
Ibid, section 34, p 34.
two major advantages as compared to
Ibid, section 37, p 37.
the present pattern of industrialisation.
lbid, section 28, pp 28-9.
First and foremost, it will generate a
Ibid, section 38, pp 38-40.
great deal of employment in industries
The First Report on the Working
and thereby extend the benefits of
industrialisation to a much larger num- t.ices Act, 1969: For the Period
ber of people. At the same time, it will
reduce the existing disparities in
22 "Monopolies: Growth with Gov-
income and opportunity among social
classes.
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The main difficulty is, however,
political. The power and influence
commanded by domestic monopolies as
well as transnationals in India is so
great that our proposals are unlikely to
be translated into a coherent set of
policies in the near future. Despite
occasional rhetoric against monopolies
and transnationials from govemmental
leaders at the national and state levels,
the State 'machinery in contemporary
India cannot but reflect the collective
interests of the big bourgeoisie along
with those of the landlords. And thus
the prospets in the near future are
bleak. A political upheaval which
brings representatives of the direct
producers to power can alone redress
the situation by doing away with the
vested interests and releasing the latent
productive forces of the common mas-
ses.
Notes
[The first draft of this paper was
completed in, early 1976. I have bene-
fited from the comments by Krishna
Bharadwaj, Ashok Mitra and R Krishba-
murthy. However, I have not been
able to take into account information
that came to light, after December
1975.].
1 No discussion on monopoly policy
in India can be complete without
reference to the industrial licens-
ing policy and the more recent
Foreign Exchange Regulation Act.
We propose to deal with them
separately on a subsequent occa-
sion. Our present study, we bope,
is in no way vitiated by these im-
portant lacunae.
2 The Monopolies and Restrictive
Trade Practices Act, 1969, Delhi,
1972, p 1.
3 Ibid, section 20(a), p 18.
4 Ibid, section 20(b), p 18.
5 Ibid, section 2(d), p 2.
6 Ibid, section 2(g), pp 4-5.
7 This was introduced in a later
amendment.
8 MRTP Act, section 2(g) Illustra-
tion, p 5.
9 I e, rise in assets or production by
25 per cent or more. Ibid, section
21(2), Explanation (a), pp 19-20.
10 Ibid, section 22, pp 21-22.
11 Ibid, section 23 and 24, pp 22-24.
12 Ibid, section 27, pp 26-28.
13 Ibid, section 2(j), pp 6-7.
14 Ibid, section 32, pp 31-2.
15 Ibid, section 2(o), p 8.
16 lbid, section 33, p 32-3.
17
18
19
20
21
and Administration of the Mono-
polies and Restrictive Trade Prac-
from 1st June, 1970 to 31st Dec-
ember, 1972, p 8.
ernment Blessings", EPW, May 18,
1974.
All use subject to https://about.jstor.org/terms
23 "Registration under Section 26 of
the MRTP Act", CNN, April 1975.
24 "Facade of Licensing", EPW, Feb-
ruary 17, 1973; and F L Berarwal-
la, "Concept of public Interest
under Monopolies Act", ET,
August 8, 1972.
25 "High Product Concentration in
Several Industries", ET, May 8,
1973.
26 A N Oa, "Putting Teeth into the
Monopolies Act", EPW, Special
Number, July 1971.
27 Sections 187C and 187D of the
Companies (Amendment) Bill, 1972,
were designed against such behami
holdings, See the Reserve Bank
of India, Report on Currency and
Finance, 1972-73, Bonbay, p 280.
Its implementation is doubtful, to
say the least.
28 Oza, op cit, fn 26 and Ande.
"Monopolies Act - A Dead
Horse", ET August 9, 1972. The
full list is given in "Monopolistic
and Restrictive Trade Practices
(Classification of Goods) Rules,
1971", CNN, July 1971.
29 "Monopolies: Elimination by
Definition", EPW, February 19,
1972.
30 "Another Co Opts Out MRTP
Probe", ET, December 6, 1973.
31 'These examples are based on the
author's personal observation. In
the US the anti-trust authorities
often take iiito account the supply
position in a regional market. See,
for example, the Department of
justice ruling in the merger
between British Petroleum and
Standard Oil, Ohio. OECD,
"Mergers and Competition Policy",
Paris, 1974, p 58.
32 "Monopolies Commission: The
Scapegoat," EPW, November 17,
1973. Upto December 31, 1971
there were 157 applications for
substantial expansion, 33 for new
undertakings, and 30 for amalga-
mnations, etc; of these the Com-
mission deliberated upon 16, 4 and
2 cases respectively. See the First
Report, pp 8-9, cited in fn 21.
33 -Retarded Growth Not Due to
MRTPC, says Nain," Times of
India, August 23, 1975. Foi
details see below.
34 See Oza, op cit, fn 26; also the
same author's "Restrictive Trade
Practices", EPW, February 28,
1972.
35 See his chapter in the Brookings
Report on the UK, London, 1969.
36 Quoted in S Brittan's article in
J B Heath (ed), "International
Conference on Monopolies, Mergers
and Restrictive Practices", London,
1971, p 54.
37 Ibid, p 54. Also Oza, op cit, fn 34.
38 Brittan, op cit, p 55.
39 See above fn 21.
40 "34 Cases Filed with MRTPC",
ET, March 18, 1975 and CNN,
April 1975.
41 Institute of Company Secretaries of
India, "Report on the Study of
MRTP Act", (unpublished).
42 The Monopolies Commission ruled
that no selling agent should get
more than 10 per cent of the
product. "MRTPC tells Bengal
Potteries : Sole Selling Agency
Mlust Go," ET, October 20, 1975.
 ECONOMIC AND POLITICAL WEEKLY Special Number August 1977
It was found, too, that the direc-
tors of the company had personal
ties with the partners of the selling
agent. See also "RTP Enquiry
No 6 of 1972", CNN, October
1974.
43 "WIMCO Case: Monopolies
Panel Begins Probe", ET, April 28,
197-2, and "Cadbury-Fry Accepts
MRTPC Terms", ET, September
10, 1972 and "Probe into Cadbury",
ET, September 21, 1973.
44 "Proceedings under Section 37
Application under Section 10(a) (iii)
ot the MRTP Act, 1969", CNN,
September-December 1972.
45 "MRTPC Action against Lever",
ET, July 5, 1974.
46 "MRTPC Will Start Probe", ET,
October 5, 1973.
47 "WIMCO Case: Monopolies
Panel Begin Probe", ET, April 28,
1972.
48 "3 Top Firms Face Enquiry by
MRTPC", ET, November 17, 1974.
49 "Foreign Firms Need Curbs",
letter by K Gopalkrishna, ET,
November 2, 1972. There was no
denial of the above allegations by
spokemen of the firms concerned.
50 "MP Wants Foreign Cos Probe",
ET, July 9, 1972.
51 "MRTPC Order against Carborun-
dum", ET, Decembr 7. 1975.
52 The full judgment is given in
CNN, February 1975.
53 See the weavers' full-page adver-
tisement in the ET, July 21, 1973;
and "Nylon Pact Full of Restric-
tive Practices: MRTPC Ruling",
ET, October 22, 1973.
54 "Major Newspapers: MRTPC In-
stitutes Probe in-to Certain Allega-
tions", Statesman, September 7,
1975.
55 Apart from the references given
below, we have used the work cit-
ed in fn 41.
56 See in this context "Monopolies
Commission at a Dead-End",
EPW , October 20, 1973, "Licens-
ing: Under Favour to Alien Firms
Criticised", FE, October 26, 1973;
"Hind Lever Project for STPP
Unwartanted", FE, October 27,
1973; and A N Oza, "Foreign
Companies and Public Interest
A Case Study", ET, March 5 and
6. 1974.
57 Ibid. It is interesting to note that
the Chief Minister of the state in
which the Hindustan Lever project
was to be located strongly cam-
paigned in its favour. See "Hind
Lever Project: Bengal for Mono-
poly Curb Relaxation". FE, Octo-
ber N0, 1973. But West Bengal was
not alone in this regard; other
states vied with each other to at-
tract large houses and thereby aug-
ment industrial production and
employment within their own
areas. This attitude is verv similar
to the scramble among the deve-
loping countries to entice foreign
'Private capital. "More CMs for
Big House Licensing", ET, Decem-
ber 27, 1972, notes the views of
W Bengal, Haryana, Madbva Pra-
desh, etc; only Orissa stood apart.
More recentlv the same' views Keen and Williams ("Notice ui/s 21
were reiterated. See, for example,
of the MRTP Act", CNN, Tanuary
"Naik for Liberal Issue of Licen-
ses". FE, November 6, 1973 (for
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Maha,rashtra); "Ray Lays Stress on
the Role of Big Business Houses",
Statesman, February 22, 1975 and
"Ray Defends Statement", ET,
February 28, 1975 (for W Bengal);
and "Punjab Welcomes 'Giants' ",
ET, January 2, 1975.
58 "Order u/s 22 of the MRTP Act,
1969", CNN, August 1974.
59 "MRTPC Clears Gabriel Plan",
ET, February 17, 1974.
60 See A N Oza, "On Razor's Edge",
EPW, March 25, 1973.
61 See "Self-Reliance in Reverse
Gear", ET, July 21, 1973; and
"Confidential Matter Need Not be
Disclosed - Monopolies Panel",
FE;, January 12, 1974.
62 "MRTPC Turns Down Philips
Plan", ET, October 31, 1974.
63 "GM-HM Equity Tie-up Plan
Rejected", ET, July 16, 1974.
64 Later the policy was modified. If
the plant was not for captive use,
then the LBH were allowed to
enter. See "Caustic Soda Policy
Changed", ET, August 28, 1973.
65 "Hindalco Asked To Prove Soda
Shortage", E T., August 10, 1973;
"Hindalco's Caustic Soda Unit
Plan Opposed", ET, August 15,
1973; "MRTP's No to Hindalco
Project", ET, September 2, 1974;
and "Caustic Soda Unit: Hindal-
co's Proposal Rejected". ET,
March 4, 1974.
66 "Notice u/s 21 of the MRTP Act",
CNN March-June 1972. Once
again the MRTP Commission was
divided on whether or not this
would enhance the Birlas' mono-
poly power in that line.
67 "MRTP Panel Allows Telerad's
Expansion", ET, May 14. 1973.
68 "Orders u/s 21 of the.MRT -P Act,
Panel", FE, July 2, 1973.
1969", CNN, March 1975.
69 Ibid
70 "Orders u/s 21 of the. MRTP Act,
1969", CNN, October 1974.
71 "MRTP Act, 1969, Appeals u/s 21
of the Act and Govemment's Ord-
ers", CNN, June 1971.
72 "Application u/s 22/23 of the
MRTP Act, 1969", CNN, March-
June 1972.
73 "MRTP Act, 1969, Applications
u/s 23(4) of the Act and Govern-
ment's Orders", CNN. November
1971.
74 Ibid.
75 "Order u/s 21 of the MRTP Act,
1969", CNN, March 1975.
76 Apart from the Hindustan Lever
case other examples were those of
Union Carbide when. it wanted to
set up a pesticide plant, Gramo-
phone Co of India when it wanted
to expand its output of record
plavers, etc. See "Applications u/s
22/23 of the MRTP Act", CNN,
January-February 1972 and "MRTP Act", CNN, June 1975.
Act 1969-Application u/s(4) of the
Act and Government's Orders",
CNN, December 1971. Similarly
for Alkali Chemicals expansion in
rubber chemicals ("Notice u/s 21
of MRTP Act, 1969", CNN. Sept-
ember-December, 1972), 'Gramo-
nhone Co of India (see fn 73),
English Electric (see.fn 74), Guest
1974) and Indian Aluminium ("Ord-
er u/s 21 of .the MRTvP Act",
All use subject to https://about.jstor.org/terms
CNN, September 1974).
77 "Monopoly Panel Divided Again".
ET, April 23, 1972. However, the
minority of the MRTP Commission
asked for such a stipulation.
78 "Orders u/s 21 of the MRTP Act",
CNN, October 1974.
79 "Order u/s 21 of the MRTP Act",
CNN, May 1974.
80 "Notice u/s 21 of the MRTP Act",
CNN, July 1971 and March-June
1972.
81 This will be discussed separately
later on.
82 See above fn 73.
83 "New Unit Should Be in Joint
Sector", ET, July 29, 1973. Fur-
ther stipulations on reduction in
foreign equity, etc, are mentioned
in "MRTP 'Act, 1969. Appeals u/s
21 of the Act and Government
Orders", CNN, June 1971.
84 "TELCO Expansion Terms Fina-
lised", ET, July 10, 1972 and
"Notice u/s 21 of the MRTP Act",
CNN, July-August 1972 and Octo-
ber 1973.
85 "Tyres: Forever Dependent on
Foreign Companies?", EPW, April
28, 1973.
86 "Notice u/s 21 of the MRTP
Act", CNN, December 1973. A
further argument in favour of
Saurashtra Chemicals was the loca-
tion of the plant in a backward
area.
87 See above fn 66.
88 "MRTP Act, 1969-Application
u/s 21 of the Act and Govern-
metnt's Orders", CNN, November
1971.
89 See above fn 84.
90 "Lucas-TVS, Kesoram Expansion:
Conditional Clearance by Monopoly
91 "Applications u/s 22/23 of the
MRTP Act", CNN, July-August
1972.
92 In the early 1970s the Goenkas
sought to corner the shares of
Indian Iron and Steel whose assets
exceeded Rs 1,000 million in 1966.
The LIC and UTI intervened on
government orders anti allowed the
old management to continue. For
reasons of inefficiency the compa-
ny's management was eventually
taken over bv the government.
93 See CNN, April 1975, pp 48-9.
94 "MRTP Act, 1969 - Applications
u/s 23(4) of the Act and Govern-
ment's Orders", CNN, December
1971.
95 "Application u/s 23(4) of the
MRTP Act", CNN, July-August
1972.
96 "MRTP Act, 1969 Appeals u/s
21 of the Act and Government's
Orders", CNN, October 1973.
97 "Order u/s 23(2) of the MRTP
98 "Applications u/s 22, 23 of the
MRTP Act", CNN, July-August
1972.
99 "Orders u/s 23 of the MRTP Act".
CNN. Tanuary 1974.
100 15 USCA 1-7. Quoted in D F
Greer "United States of America",
in UNCTAD, "Restrictive Business
Practices: Studies on the United
Kingdom of Great Britain and
Northern Ireland, the United States
of A\merica and Japran", New York,
1973, (sales No TlD/B/390), p 43.
1417
Special Number August 1977 ECONOMIC AND POLITICAL WEEKLY

101 A' whole number of 'gateways' March 30, 1976. necessitated by the abnormally
or 'escape routes' are available 113 It is wvell-known that India im- high cereal consumption by the
in case of exports. As the ports finer varieties of raw top 10 per cent in rural areas.
UNCTAD Secretariat noted in cotton for the consumption of NK Chandra, "Food Imports:
reference to these countries; the rich. As for food imports Why and for Whom ?" EPW,
"As a generalisation restrictive it can be shown that these are Annual Number, February 1975.
practice laws tend to operate a
dual standard bv attacking
restrictions affecting the domestic
market and by turning a blind
eye to restrictions affecting the
foreign markets." "Restrictive
Business Practices", 1975, (TD/
B/C-2/156), p 26.
102 J W Markham, "The Constraints
Imposed by Anti-Trust", in J B
Heath (ed) "International Confe-
rence on Monopolies, Mergers
and Restrictive Practices", HM-
SO, London, 1971, p 103.
1l03 "Why Germany Ruled against
Nine Firms", Business Europe,
April 14, 1972.
104 "Growth of Monopolies in India,
1951-71", 1975 (unpublished).
105 "Role of Foreign Capital in
India", Social Scientist, April
1977.
106 "Western Imperialism and India
Today", EPW, Annual Number,
February 1973 and February 17,
1973.
107 For a powerful critique of
this position see A K Bagchi,
"Theory of Efficient Neo-colonial-
ism", EPW, Special Number,
July 1971.
108 Chandra, op cit, in fn 106. In
some quarters an opposite result
is shown by considering the
transnationals' production in the
host country as import-substitu-
tion. This is wrong because
few if any of the host countries,
couid afford to import on a
continuing basis the annual
production of all transnationals
operating within their borders.
Further, domestic companies
could in most cases produce
similar goods, if necessary, by
purchasing foreign know-how
and equipment. Hence it is
illegitinate to regard local pro- _ _ ~~~~It's the little bike from Escorts,
duction by transnationals as a _ _ ~~~~~buillt to gi've you a great feel.
foreign exchange contribution to Right from the word go you can feel
a host countrys balance of pay- its 175 cc engine punch up an
ments. incredible speed of 90 km. per hour
109 On the limited prospects of in I1 seconds flat I Economical too.
augmenting export earnings by The GTS carries 8 litres in its tank and
Third World countries with the
help of TNCs operating in their takes in more mileage than fuel. There's
midst, see D Nayyar "The Im- rmore. Its sleek lines and smooth finish makes
pact of Transnational Corpora- the Rajdoot GTS what it is - a little bike with a
tions on Exports of Manufactures great feel.
from Developing Countries", a
studv prepared for UNCTAD. Like the other two-wheelers from Escorts - the
August 1975; and G K Helleiner, motorcyoeland the scooter, the GTS has been
"Transnational Enterprise. Manu-
designed especially for Indian road conditions.
factured Exports and Employ-
ment in Less Developed Coun-
tries", EPW. Annual Number,
February 1976.
110 P Bairoch, Le tiers monde dans Escorts Limited
limpasse, Paris, 1971, p 222. Motorcycle and Scooter Division
111 Chandra, op cit, in fn 105.
It *19/6. Mathura Road
Faridebed ( Haryana)
112 For an example of how it can
happen, see the case of' the elec-
trical lamp industry described in
"New Marketing Strategy", ET,

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