INDUSTRIAL LICENSING POLICY IN INDIA

By: Harshit Khandar

For organized growth and development of Industrial India, the Parliament has enacted the Industrial (Development and Regulation) Act, 1951. This legislation mandates certain industries with regulatory norms, to be strictly prescribed by them like compulsory registration and licensing. The IRD Act, 1951 provisions apply to “Industrial Undertakings” which means an undertaking pertaining to a scheduled industry carried on in one or more factories by any person or authority. The chapter III of the IRD Act, 1951 which pertains to regulation of Scheduled industries makes it mandatory for every existing industrial undertaking to seek registration from Central Government. Also, every new Industrial Undertaking has been mandated to obtain a license in that behalf by the Central Government. Moreover, a registered or a licensed industrial undertaking is restricted to manufacture a new article unless the license for new article has been obtained or prior license has been amended to include it, as the case may be. Before granting any license or permission, the Central Government may require an officer/authority to make a full and complete investigation, in respect of application. The rules regarding the grant of registration certificate and license are provided under the “The Registration and Licensing of Industrial Undertaking Rules, 1952”. At present, industrial license is required only for Industries retained under compulsory licensing, Manufacture of items reserved for small scale sector by larger units and when the proposed location attracts restriction. The industries requiring compulsory licensing are distillation and brewing of alcoholic drinks, Cigars and cigarettes of tobacco and manufactured tobacco substitutes; Electronic Aerospace and defense equipment; Industrial explosives, including detonating fuses, safety fuses, gun powder, nitrocellulose and matches; Hazardous chemicals;

The Government has reserved certain items for exclusive manufacture in the small scale sector. Non-small scale units can undertake the manufacture of items reserved for small scale sector, only after obtaining an industrial license. In such cases, the non-small scale unit is required to undertake an obligation to export 50% of the production of SSI reserved items. As regards locational limitations industrial undertakings are free to select the location of their projects. Industrial licence is however required if the proposed location is within 25 km of standard urban area limits of 23 cities having a population of one million as per 1991 Census. The Locational restriction however does not apply if the unit were to be located in an area designated as an “industrial area” before the 25th July, 1991 or in the case of Electronics, Computer software and Printing and any other industry, which may be notified in future as “non polluting industry”. The location of industrial units is subject to applicable local zoning and land use regulations and environmental regulations. The application for registration has to be made to the Central Government along with the fee (In
form of a Crossed Demand Draft of Rs. 2500, drawn on The State Bank of India, Nirman Bhavan, New Delhi, in favour of Pay& Accounts Officer, Ministry of Industry (Department of Industrial development), Government of India, New Delhi). After due consideration, the government then issues the

Certificate of Registration. Similarly an application (Form IL-FC) for obtaining a license by a new undertaking has to be made to the Central Government along with the fee after which the Ministry issues a license. Industrial license is granted by the Secretarial of Industrial Assistance (SIA) on the recommendation of the Licensing Committee. After a an Industrial Undertaking has obtained a license or permission as above, it becomes eligible to the allotment of controlled commodities and for issue of Import license for goods required by him for construction and operation of his Industrial Undertaking. De-licensed Industries These are the categories of industry which have been exempted from the requirement of being licensed. Industries exempted from the provisions of Industrial License are required to file Industrial Entrepreneur’s Memorandum (IEM) along with a fee.

On filing the IEM, an acknowledgement containing the SIA registration No. for future reference is issued. This acknowledgement is sent by post and no further approval is required. Upon commencement of commercial production, industrial undertakings need to file information in Part-B of the IEM to SIA. No fee is to be paid for filing Part-B. The Government’s liberalization and economic reforms programme aims at rapid and substantial economic growth, and integration with the global economy in a harmonized manner. The industrial policy reforms have reduced the industrial licensing requirements, removed restrictions on investment and expansion, and facilitated easy access to foreign technology and foreign direct investment.

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