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Industrial Licensing

Industries licensing policy are regulated under the
Industries Development Regulation Act 1951

To regulate the flow of investment in desired channels of
industries and locations and to match supply of industrial
commodities with demand on the lines of national
A license is a written permission from the Government to
an industrial undertaking to manufacture specific articles..

It includes particulars of the industrial undertaking,

its location, the articles to be manufactured, their
capacity on the basis of maximum utilization of plant
and machinery and other appropriate conditions which
are enforceable under the Act.
It is also subject to a validity period within which the
licensed capacity should be established.

Objectives of licensing
Encouraging small scale industries.
Encouraging new entrepreneurs.
Regulating the location of the enterprise.
Ensuring balanced regional development.
Promoting technological advancement.
Checking the concentration of economic power.
Development and control of industrial investment and

Compulsory Licensing
Following industries require compulsory industrial license under the
provisions of IDR Act, 1951.
Distillation and brewing of alcoholic drinks.
Cigars and cigarettes of tobacco and manufactured tobacco substitutes;
Electronic Aerospace and defense equipment: all types;
Industrial explosives, including detonating fuses, safety fuses, gun
powder, nitrocellulose and matches;
Hazardous chemicals;
Hydrocyanic acid and its derivatives
Phosgene and its derivatives
Isocyanates and di-isocyanates of hydrocarbon, not elsewhere specified (example:
Methyl Isocyanate).

Large industries undertaking

manufacture of items reserved
for SSI units
The Government has reserved certain items for
exclusive manufacture in the small scale sector. Nonsmall scale units can undertake the manufacture of
items reserved for small scale sector, only after
obtaining an industrial license.

Locational Restrictions
Industrial undertakings are free to select the location of their
projects. Industrial license 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.
In the case of Electronics, Computer software and Printing and any
other industry, which may be notified in future as non polluting
The location of industrial units is subject to applicable local zoning and
land use regulations and environmental regulations.

Procedure for obtaining

Industrial License
Industrial license is granted by the Secretarial of
Industrial Assistance (SIA) on the recommendation of
the Licensing Committee. For this purpose, Online
application in the prescribed form (Form FC-IL) (with
Applicable fees) may be submitted to SIA at ebiz portal
( developed by GOI and also

Procedure for filing IEM

Industrial undertakings exempt from industrial license are only required
to file an online Industrial Entrepreneurs Memorandum (IEM) in Part A,
in the prescribed format (Form IEM) with Secretariat for Industrial
Assistance (SIA), Department of Industrial Policy & Promotion (DIPP),
Ministry of Commerce & Industry, Government of India, New Delhi at
ebiz portal ( also available
Submission of IEM form requires a fee of Rs.1000/- for up to 10 items
proposed to be manufactured. For more than 10 items an additional fee
of Rs.250/- for up to 10 additional items needs to be paid.
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.

sick unit may mean a unit which is not healthy in terms
of yielding profits and fetching return on investment
It incurred cash losses for the current and the preceding




production (Installed Capacity)






Shortage of key inputs
Changes in Govt Policies Customs, Excise,

Overcapity of the plant
Technological Obsolescence
Changes in consumer Preference
Natural Calamities
Development in International Trade

Internal Causes
Function Wise
Human Resources
Imprpoer location of Plant
Bad/Wrong Technology in process
Unfeasible Plant size
Inadquate R&D
Less Maintenance

Inaccurate demand Projection
Improper product mix
Inadequate sales promotion
High distributi o n costs
Poor customer service

Wrong capital structure
Bad investment decisions
Weak budgetary control
Inadequate MIS
Bad cash planning & control
Improper tax planning


Ineffective leadership
Bad labour Industrial relations
Inadequate human resources
Poor commitment of employees