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Monday, September 4, 2006

The Government's liberalization and economic reforms programme aims at rapid and substantial economic growth, and integration 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.
2.1 Industrial Licensing
All industrial undertakings are exempt from obtaining an industrial License to manufacture, except for
(i) industries reserved for the Public Sector (Annex I),
(ii) industries retained under compulsory licensing (Annex II),
(iii) items of manufacture reserved for the small scale sector (details given in para 2.6) and
(iv) if the proposal attracts locational restriction (details given in para 2.5).
2.2 Procedure for obtaining Industrial License:
(a). All industrial undertakings subject to compulsory industrial licensing are required to submit an application in the prescribed format, i.e. Form FC-IL. Licenses are granted under the provisions of the Industries (Development and Regulation) Act, 1951. The form is available in the Entrepreneur .Assistance Unit (EAU) of the SIA and at all outlets dealing in Government Publications, Indian Embassies, and can also be downloaded from the web site of the DIPP (
(b). Application in form FC-IL should be submitted to the EAU of the SIA, Department of Industrial Policy & Promotion, Ministry of Commerce and Industry, Udyog Bhawan, New Delhi. 110011.
(c). The application should be submitted along with a crossed demand draft of Rs.2500/. drawn in favour of the Pay & Accounts Officer, Depar1ment of Industrial Policy & Promotion, Ministry of Commerce & Industry, payable at New Delhi.
(d). Industrial Licence is granted by the Government on the recommendation of the Licensing Committee which considers the application. Decisions on applications are usually taken in 4-6 weeks of filing the application.
2.3 Procedure for Industries exempt from licensing. Industrial Entrepreneur Memorandum
Industrial undertakings exempt from industrial license, including existing units undertaking substantial expansion, are required to file an Industrial Entrepreneur Memoranda (IEM) in Part 'A’ (as per prescribed format) with the Secretariat of Industrial Assistance (SIA), Depar1ment of Industrial Policy and Promotion, Government of India, and obtain an acknowledgement. No further approval is required. Immediately after commencement of commercial production, Part B of the IEM has to be filled in the prescribed format. The facility for amendment of existing IEMs has also been introduced.
2.4 Procedure for filing n industrial Entrepreneurs Memorandum (lEM)
(a). The IEM form is available at all outlets dealing in Government publications, Indian Embassies, the Entrepreneurial Assistance Unit (EAU) of the Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and Promotion, Udyog Bhavan, New Delhi-110011, and can also be downloaded from the web site of the DIPP (
(b). The Memorandum (IEM) after filling in can be submitted to the EAU of the SIA in person or by post. The IEM should be submitted along with a crossed demand draft of Rs.1000/- drawn in favour of "The Pay & Accounts Officer, Department of Industrial Policy & Promotion, Ministry of Commerce & Industry", payable at New Delhi up to 10 items proposed to be manufactured in the same unit. For more than 10 items, an additional fee of Rs.250 up to 10 additional items needs to be paid through crossed demand draft.
(c). A computer acknowledgement containing the SIA Registration Number (for future reference) is issued across the counter immediately, if delivered in person, or sent by post, if received through post. No further approval from SIA is required.
(d). All Industrial undertakings also need to file information in Part 'B' of the IEM at the time of commencement of commercial production to EAU in SIA. No fee is required for filing part B. All industrial undertakings whether exempt or not from compulsory industrial licensing, are statutorily required to submit a monthly production return in the proforma at the following address every month, so as to reach the Industrial Statistics Unit (ISU) by the 1 0th of the following month positively.
Joint Director
Industrial Statistics Unit (ISU)
Department of Industrial Policy & Promotion
Room No.326, Udyog Bhawan,
New Delhi -110 011
Fax: 011-2301 4564
This information is used to compile the Index of Industrial Production (IIP), which is a time bound monthly exercise. A copy of the monthly production retum may also be submitted to the concerned Administrative Ministry/Department/Authorities, etc., as the case may be. Details and the prescribed format are available at the website: In the case of small scale industrial undertakings, the monthly production return should be submitted to the appropriate State Government or Commissioner of Industries and to the Department of Small Scale and Agro & Rural Industries, Government of India along with a copy to the Small Industries Service Institute.
(e). An IEM would be cancelled/deleted from the SIA records if, on scrutiny, it is found that the proposal contained in the IEM is licensable.
2.5 Locational Policy
Industrial undertakings are free to select the location of a project. Industrial License is required if the proposed
location is within 25 KM of the Standard Urban Area limits of city unless, it is to be located in an area designated as an "industrial area" before the 25th July, 1991. (List of cities with population of 1 million and above as per the 1991 census as given at Annexure-V). Electronics, Computer software and Printing and any other industry, which may be notified in future as "non polluting industry", are exempt from such location restriction. The location of industrial units is further regulated by the local zoning and land use regulations as also the environmental regulations, as applicable.
2.6Policy Relating to Small Scale Undertakings
An industrial undertaking is defined as a small scale unit if the investment in fixed assets in plant and machinery
does not exceed Rs.10 million. The small scale units can get registered with the Directorate of Industries/District Industries Centre in the State Government concerned. Such units can manufacture any item including those notified as exclusively reserved for manufacture in the small scale sector. Small scale units are also free from locational restrictions cited in paragraph 2.5 above. However, a small scale unit is not permitted more than 24 per cent equity in its paid up capital from any industrial undertaking either foreign or domestic. If the equity holding from another company (including foreign equity) exceeds 24 per cent, even if the investment in plant and machinery in the unit does not exceed Rs.10 million, the unit loses its small scale status.
2.7 Non-small scale unit can manufacture items reserved for the small scale sector by obtaining an industrial license as stated in para 2.1. In such cases, it is mandatory for the non-small scale unit to undertake minimum export obligation of 50 per cent of their production of SSI reserved items. This will not apply to non-small scale EOUs that are engaged in the manufacture of items reserved for the SSI sector, as they already have a minimum export obligation of 66 per cent of their production.
2.8 Procedure obtaining Carry on Business (COB) License
A small scale unit manufacturing small scale reserved item(s), on exceeding the small scale investment ceiling in plant and machinery by virtue of natural growth, needs to obtain a Carry-on-Business (COB) License. No export obligation is fixed on the capacity for which the COB license is granted. However, if the unit expands its capacity for the small scale reserved item(s) further, it needs to apply for and obtain a separate industrial/license. The application for COB License should be submitted in revised form "EE", which can be downloaded from the web site ( along with a crossed demand draft of Rs.2500/- drawn in favour of the Pay & Accounts Officer, Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, payable at New Delhi.
2.9 It is possible that a chemical or a by-product recoverable through pollution control measures is reserved for the small scale sector. With a view to adopting pollution control measures, Government have decided that an application needs to be made for grant of an industrial License for such reserved items which would be considered for approval without necessarily imposing the mandatory export obligation.
2.10 Entrepreneurs are required to obtain Statutory clearances relating to Pollution Control and Environment for setting up an industrial project. A Notification (SO 60(E) dated 27.1.94) issued under The Environment (Protection) Act, 1986 has listed 30 projects in respect of which environmental clearance needs to be obtained from the Ministry of Environment & Forest, Government of India. This list includes industries like petrochemical complexes, petroleum refineries, cement, thermal power plants, bulk drugs, fertilizers, dyes, paper etc. However, if investment is less than Rs.1000 million, such clearance is not necessary, unless it is for pesticides, bulk drugs and pharmaceuticals, asbestos and asbestos products, integrated paint complexes, mining projects, tourism projects of certain parameters, tarred roads in Himalayan areas, dis1illeries, dyes, foundries and electroplating industries. Further, any item reserved for the small scale sector with investment of less than Rs.10 million is also exempt from obtaining environmental clearance from the Central Government Powers have been delegated to the State Governments for grant of environmental clearance for certain categories of thermal power plants. Set1ing 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, Government of India. Details can be obtained at the website of Ministry of Environment and Forests (

Source: ITPO

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