6 Procedural Changes for Industrial Licensing in India

Some of the procedural changes for industrial licensing in India are as follows:

1. The New Industrial Policy Statement 1991 has substan­tially reduced the requirement for various types of industrial approvals.

With a view to implementing this Policy State­ment in respect to industrial licensing, the Government has issued a notification No.477 (E) dated 25.7.1991 under the Industries (Development and Regulation) Act, 1951.

2. Under this notification, Industrial undertakings have been exempted from the operation of Sections 10, 11, 11 A, and 13 of the Industries Act, 1951 subject to the fulfillment of certain conditions. Section 10 refers to the requirement of registration of existing industrial units.


Section 11 refers to the requirement of licensing of new industrial undertakings. Section 11A deals with licences for the production of new articles. Section 13 deals with the requirement of licensing for effecting substantial expansion.

3. The notification has three schedules:

Schedule I

Lists the industries reserved for the public sector (Vide Annexure I)


Schedule II

Lists the industries which are subject to compulsory licensing (Vide Annexure II).

Schedule III

Lists the articles reserved for the small-scale / ancillary sector and remains the same as before.


4. Exemption from Industrial Licensing: Licensing is abolished for all industrial undertakings including MRTP/FERA companies, and small-scale and ancillary industries. The following conditions will govern this exemption from licensing:

A) Licensing is exempted for industrial undertakings (in­cluding MRTP/FERA companies) other than those in the small-scale/ancillary sector, if

i) The proposed article(s) of manufacture is not included in Annexure I, II or is not reserved for the small-scale/ancillary sector.

ii) The proposed project is not located within 25 kms from the periphery of the standard urban area limits of a city having a population of more than 10 lakhs according to the 1991 Census.

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This condition, however, will not apply to electronics, computer software, printing industry and other non-polluting industries that may be notified from time to time. This condition will also not apply to other industries provided these are located within areas designated as ‘industrial areas’ by the State Government(s) before July 25, 1991. All other units wishing to locate within restricted locations will require an industrial licence.

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

B) Small-scale and ancillary undertakings are exempted from licensing for all articles of manufacture which are not covered by Annexure I and Annexure II.

Small-scale/ancillary units are, as before exempt from locational conditions subject to the provisions of any central or State environmental law or regulations including zoning and land use laws and regulations.

C) Substantial Expansion: Substantial expansion of exist­ing units will also be exempt from licensing provided the item of manufacture is not covered by Annexure I, Annexure II or reserved for the small-scale/ancillary sector. However, substantial expansion will be subject to the locational conditions set out in 4 (A) above.

D) Broad banding/Manufacture of New Articles: Existing units will be permitted to manufacture any new article without additional investment if the article is not otherwise subjected to compulsory licensing. This facility would be available notwithstanding any locational conditions.

5. Abolition of Existing Registration Schemes: In consequence of the New Industrial Policy, existing schemes of registration namely, the De-licensed Industries Registration Scheme (DLR), Exempted Industries Registration Scheme (EIR) and registration with other technical authorities, namely the Textile Commissioner and the Development Commissioner for Iron and Steel have been abolished.

6. Filing of Memoranda: In respect of new projects for manu­facture of articles not covered by compulsory licensing or their substantial expansions the only requirement would be that the industrial undertaking shall file a memorandum in the prescribed form with the Secretariat for Industrial Approvals (SIA) in the Ministry of Industry. Such a memo­randum will also have to be filed by those industrial undertakings to be engaged in non- scheduled industries, i.e., those not covered under the Industries Act, 1951.

The memorandum will be accompanied by a crossed demand draft for Rs. 1,000 in favour of the Pay and Accounts Officer, Department of Industrial Development, Ministry of Industry, payable at the State Bank of India, Nirman Bhawan, and New Delhi. The receipt of the memorandum will be acknowl­edged by the SIA and a reference number will be given.

The industrial undertakings should quote this reference number in all future correspondence, if any, with the SIA. The industrial undertakings shall also file another memorandum in the prescribed form with the SIA at the time of commencement of commercial production. No pay­ment will accompany this memorandum.

Performance of the memorandum are shown in Annexure IV.

Small-scale and ancillary units are not required to file the above memoranda with the SIA. Such units may continue to get themselves registered with the Director of Industries of the State Government concerned.

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