Industrial Licensing Policy

 Industrial Licenses are regulated under the Industries (Development & Regulation) Act, 1951. Industrial Licence is granted by the Government of India in the Secretariat for Industrial Assistance (SIA) on the recommendation of the Licensing Committee.With progressive liberalization and deregulation of the economy the requirement of industrial licensing have been substantially reduced. At present industrial licence for manufacturing is required only for the following:
i. Industries retained under compulsory licensing,
ii. Manufacture of items reserved for small scale sector by non-SSI units; and
iii. When the proposed location attracts locational restriction
iv. Industries reserved for the Public Sector

The following industries require compulsory industrial license:

• Distillation and brewing of alcoholic drinks
• Cigars and cigarettes of tobacco and manufactured tobacco substitutes
• Electronic Aerospace and defence equipment: all types
• Industrial explosives including detonating fuses, safety fuses gun powder, nitrocellulose and matches
• Hazardous chemicals
  (a) Hydrocyanic acid and its derivatives
  (b) Phosgene and its derivatives
  (c) Isocyanates and di-isocyanates of hydrocarbon, not elsewhere specified (example: Methyl Isocyanate);
• Drugs and Pharmaceuticals (according to modified Drug Policy issued in September, 1994 and subsequently amended in February, 1999)

In the new industrial policy, the Government has prepared a list of industries (Schedule II) for which industrial licensing is compulsory. For setting up a unit for the manufacture of any item listed in Schedule II, all entrepreneurs have to necessarily obtain an industrial licence irrespective of the category to which they belong and the investments involved.

SEZs/EPZs/EOUs are exempted from industrial licensing for projects manufacturing items reserved for Small Scale Industries

Small-Scale Sector    

 An industrial undertaking is defined as a small-scale unit if the capital investment in plant and machinery does not exceed Rs 10 million.
Small-scale units can get registered with the Directorate of Industries/District Industries Centre of the State Government. Such units can manufacture any item, and are also free from locational restrictions.
The Government has reserved certain items for exclusive manufacture in the small-scale sector.

Manufacture of items reserved for small-scale sector    

 Non small-scale units can manufacture items reserved for the 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 per cent of the production of SSI reserved items.

Locational Restrictions

 Industrial undertakings are free to select the location of their projects. Industrial License is required if the proposed location is within 25 KM of the Standard Urban Area limits of 23 cities having population of 1 million as per 1991 census. These cities are Urban area limits of Greater Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Bangalore, Ahmedabad, Pune, Kanpur, Nagpur, Lucknow, Surat, Jaipur, Kochi, Coimbatore, Vadodara, Indore, Patna, Madurai, Bhopal, Visakhapatnam, Varanasi and Municipal Corporation limits of Ludhiana.
The Locational restriction does not apply:

• If the unit were to be located in an area designated as an ‘’industrial area’’ before the 25th July, 1991.

ii) 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.

Procedure for obtaining Industrial License:

 Industrial License is granted by the Secretariat for Industrial Assistance (SIA) on the recommendation of the Licensing Committee.

Application in the prescribed form. (Form FC-IL) accompanied with a crossed demand draft of Rs.2500/- may be submitted to the PR&C section in SIA .
Decisions are usually taken within 4-6 weeks of filing the application..

Policy for Industries exempt from licensing – IEM
 Industrial undertakings exempt from industrial license are only required to file an Industrial Entrepreneur Memoranda (IEM) in Part ‘A’, in the prescribed format (Form IEM)

Procedure for IEM   
 The Application in the prescribed form. (Form IEM) can be filed with the PR&C section in SIA either in person or by post. The IEM should be submitted along with a crossed demand draft 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 Number, for future reference, is issued. In case IEM is sent by post, the acknowledgement is sent by post & no further approval is required.
An IEM would stand cancelled if the proposal requires compulsory license.
Upon commencement of commercial production, Industrial undertakings need to file information in Part ‘B’ of the IEM to PR&C Section in SIA. No fee is to be paid for filing Part B.
All industrial undertakings whether or not exempt from compulsory industrial licensing, are statutorily required to submit monthly production return in the prescribed proforma every month. This should reach the Industrial Statistics Unit (ISU) of the Department positively by the 10th of the following month.
Note: FC-IL and IEM forms are available in the Public Relation and Complaint Section (PR&C) of the SIA, all outlets dealing in Government Publications, Indian Embassies.

Carry on Business (COB) Licence

2.10 Small- scale units by virtue of their natural growth may exceed the investment limit prescribed for small-scale units. In such cases these units need to obtain a Carry-on-Business (COB) License based on the best production in the preceding three years. No export obligation is fixed on the capacity for which the COB license is granted.
The application for COB licence should be submitted in revised form “EE”, which can be downloaded from the web site http://www.dipp.gov.in along with a crossed demand draft of Rs.2500/-.
However, on further expansion of its capacity beyond the capacity included in COB license, the unit would need to obtain an industrial license.

Payment of prescribed fee

The fee prescribed for various applications, licenses are to be paid through crossed demand draft drawn in favour of the Pay & Accounts Officer, Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, payable at New Delhi.

Environmental Clearances

 Entrepreneurs are required to obtain Statutory clearances relating to Pollution Control and Environment as may be necessary, for setting up an industrial project for 31 categories of industries in terms of Notification S.O. 60(E) dated 27.1.94 as amended from time to time, issued by the Ministry of Environment & Forests under The Environment (Protection) Act, 1986. This list includes petrochemical complexes, petroleum refineries, cement, thermal power plants, bulk drugs, fertilizers, dyes, paper, etc.

 However, if investment in the project is less than Rs. 1 billion, such Environmental clearance is not necessary, except in cases of pesticides, bulk drugs and pharmaceuticals, asbestos and asbestos products, integrated paint complexes, mining projects, tourism projects of certain parameters, tarred roads in Himalayan areas, distilleries, dyes, foundries and electroplating industries.
Setting up industries in certain locations considered ecologically fragile (e.g. Aravalli Range, coastal areas, Doon valley, Dahanu, etc.) are guided by separate guidelines issued by the Ministry of Environment and Forests.