Exemption from Licensing

With the introduction of the New Industrial Policy on 24th July, 1991, all industrial undertakings have been exempted from industrial licensing requirements provided:

The proposed article(s) of manufacture is/are not included in:-

i. .Annex I i.e. list of industries reserved for the public sector;

ii.Annex II i.e. list of industries which are subject to compulsory licensing; and

iii.List of industries reserved for small scale/ancillary sector.

The proposed project is not located within 25 Kms of the standard urban area limits of a city with a population of more than 10 lakhs (1 million) according to the 1991 Census.

List of cities having population more than 1 mln

Location of such cities in India

Note:-

• This condition will not apply to electronics, computer software, printing and other non-polluting industries so notified from time to time.

• This condition will also not apply to other industries provided they are located within the areas designated as
  "industrial areas" by the State Govt..(s) before 25th July, 1991.

Notwithstanding the above, location of industrial projects will also be subject to Central or State Government environmental laws or regulations including local zoning and land use laws and regulations.

Small Scale & Ancillary Undertakings

Small Scale Unit

An industrial undertaking having investment in fixed assets in plant & machinery, not exceeding Rs.60 lakhs, is defined as a small scale unit. However, units exporting 30% of their production can go upto Rs.75 lakhs.

Ancillary Industrial Undertakings

Industrial undertakings having investment in fixed assets in plant & machinery not exceeding Rs.75 lakhs is defined as ancillary industrial unit provided they are:

• engaged in the manufacture of parts, components, sub- assemblies, tooling or intermediates, or the rendering of services.

• supplies or render not more than 50% of its production or service, as the case may be to one or more other industrial undertakings.
  

All small scale and ancillary undertakings are exempted from industrial licensing requirements for all articles of manufacture excluding those listed in Annex I and Annex II.

In addition all small scale and ancillary undertakings are also exempted from industrial licensing for the article(s) of manufacture exclusively reserved for the small scale/ancillary sector even if they happen to be included in Annex II.

Small scale/ancillary units are, as before, exempted from locational conditions, subject to the provisions of any Central/State environmental laws or regulations including localzoning and land use laws & regulations.

Manufacture of Items Reserved for Small Scale Sector

Manufacture of these items can be taken up by units other than small scale units provided they undertake an export obligation of a minimum of 75% of the new or additional production to be achieved within a maximum period of 3 years. The condition of export obligation in the case of readymade garments will be restricted to 50% in case the investment in plant & machinery is upto Rs.3 crores. Units intending to manufacture reserved items will need to apply for and obtain an industrial licence from the Secretariat for Industrial Approvals as per the procedure applicable to the licensed sectors. In case an existing small scale unit crosses the investment limit of Rs.60/Rs.75 lakhs, as the case may be, it is manufacturing an unreserved and delicensed item, it would only have to file an IEM. In case it is manufacturing a reserved or licensable item, it would need to apply for a Carry on Business Licence as per procedure.

Locational Requirements

The New Industrial Policy has removed the earlier restrictions on location of industrial projects. The only restriction in force is that the proposed project should not be located within 25 Kms from the periphery of the standard urban area limit of a city having a population of more than 10 lakhs according to 1991 census. However, if the industrial units were to be located in an area designated as industrial area' by the concerned State Govt.. before July 25, 1991, this restriction on location will not apply. Further, this restriction on location will not apply to electronics, computer software, printing or other non-polluting industries notified from time to time. No further industry has been notified to be as non-polluting so far. The location of industrial projects will further be regulated by the local zoning and land use regulation as well as environmental legislations. Various State Govts. have issued land use bye-laws restricting setting up of certain industries in certain areas in their respective territories. Similarly, various Ministries of Government of India have also enacted laws which inter alia, restrict setting up of industries in some locations. For example, Ministry of Urban Development while drawing a Master Plan for NCT of Delhi have recommended a ban on setting up of medium and large scale projects in the territory of Delhi. Government of Maharashtra have also divided Bombay Metropolitan into three zones specifying categories of industries which can be set up in these zones. Entrepreneurs would have to ensure that the location of their proposed project is not violative of such land use restrictions.

Environmental Clearances

Entrepreneurs are required to obtain necessary clearances form the environmental angle before setting up an industrial project. In the case of small scale units, filing of an application would be sufficient for items with a low pollution load and there would also be no need for the industry to obtain periodic renewal consent till such time that a unit changes its process. Environmental clearance in respect of certain projects including Petrochemical Complexes, Petroleum Refineries, Chemical Fertilizers, Bulk drugs, Distilleries, Dyes, Cement, etc. specified in Schedule I of Notification No. S.O.60(E) dated 27.1.1994 issued by the Ministry of Environment & Forests will need to be obtained from the Central Govt.. In the Ministry of Environment & Forests. In case of items not falling in Schedule I of the Notification dated 27.1.1994, application for environmental clearance is to be submitted to the Department of Environment of the concerned State Government. The procedures for seeking environmental clearance in Central Govt../State Govt.. as outlined in Notification projects like refineries, chemical fertilizers, petrochemical complexes, thermal power plants, paper and cement etc. if the investment is less than Rs.50 crores. Environment clearance for setting up projects in Aravalli Range, Coastal Stretches, Doon Valley etc. is guided by separate guidelines issued by Ministry of Environment and Forests. For further details regarding procedure for environmental clearances of industrial project, entrepreneurs may approach

Ministry of Environment & Forests,
Paryavaran Bhavan,
Phase-II, CGO Complex, Lodhi Rd.,
New Delhi - 110 003.

Substantial Expansion

Substantial expansion of existing units is also exempted from the requirements of industrial licensing provided the item of manufacture is not listed in Annex-I or Annex-II and is not reserved for the small scale/ancillary sector. However, substantial expansion will be subject to the locational conditions outlined above.

Broad Banding/Manufacture of New Articles

Existing units are permitted to manufacture any new article without additional investment provided the article is not subject to compulsory licensing. This facility is available notwithstanding any locational conditions.

Source: Doing Business with India

Last Upate: July 31, 1998