There are various approvals necessary from different authorities for setting up industrial units. Legislative provisions relating to this differ to some extent from State to State. They are however, similar in relation to the fundamental aspects.
There are several options for acquiring land for industrial projects. A company incorporated in India can buy land from the State governments in designated industrial areas. State governments have set up several such industrial areas/parks with provision of utilities and optional factory sheds.
If the requirement of land is large, State governments may assist entrepreneurs in acquisition of land. Land can also be bought from private parties. Subject to certain conditions, agricultural land can be converted into industrial land on application to local authorities. Land bought is required to be registered with local authorities.
Investors can also set up operations in the seven Export Processing Zones in India, all located close to major seaports or airports. These Zones provide necessary facilities including factory buildings/sheds and a duty free environment.
For some polluting industries, environmental clearance is provided by the Federal government and for others, by the State government. The concerned agencies at the central level are the Ministry of Environment and the Central Pollution Control Board. The State level agencies are Secretary (Environment) and the State pollution control board. Usually the district authority where the project is located, is involved at the initial level of clearance. For large projects, the government generally asks for an environmental impact assessment study and an environment rehabilitation plan.
Factory building designs need to be cleared from the angle of municipal construction specifications by the local municipal authorities, and by the Inspectorate of Factories under the Factories Act from the point of view of safety and working environment. The local fire authorities inspect the fire protection measures installed.
The cost of construction in India is relatively low and excellent architects and construction companies are available in most states. Office space in cities and commercial centres is readily available. Investors can advertise in local papers or seek the help of real estate agents in locating office space.
Capital goods, barring a few items on the negative list, can be freely imported into India without licence, subject to payment of relevant duty.
Trained managerial, professional and technical staff as well as skilled and unskilled workers are available in India at competitive emoluments. Managerial and supervisory jobs are usually filled through advertisements in the print media, campus recruitment and hiring consultants. For hiring workers, companies advertise locally, go to industrial training schools or contract local employment exchanges.
Appointing auditors of accounts, internal auditors and company secretary is required in most cases, through it is not a pre-investment condition.
Depending on the nature and size of the industrial venture, investors need to comply with certain other formalities. An indicative list of clearances required at the State level for setting up an industrial unit is given below:
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Clearances required Authority
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Clearances required by all industrial units
Land for project
Allotment of plot/shed in industrial estate State Industrial Development
Corporation (SIDC)
Allotment of Government land District Collector
Notified Authority permission District Collector or District
Development Officer
Construction of building
Plan approval in industrial estate SIDC
Plan approval in other area Local Authority
Water requirement
In industrial estate SIDC
River/Public service Department of Water Resources
Power requirement State Electricity Board
Other clearances
Environment clearance
No Objection Certificate, applicable to State Pollution Control Board
polluting industries like chemicals,
pharmaceuticals etc. Permission to be
obtained before selecting site to locate
the project and observe norms for disposal
of effluents under Prevention of
Environment Pollution Act as well as
Pollution (Water and Air) Act.
Site clearance certificate
applicable to 22 highly polluting Office of the Industries
industries Commissioner (IC)
Incentives
Investment subsidy for industrial District Industries Centre
units coming up in backward areas of
the State
Sales tax exemption/Elgibility certificate IC
Clearance for specific projects
Pharmaceutical and cosmetic project Foods and Drugs Control
Administration
Permission under boilers act: Permission Chief Inspector of Steam
to be obtained for installation of Boilers
boiler to meet safety requirements
Mining: Permission for extraction Director, Geology and Mining
of minerals; permission to be obtained
for lease and setting up mineral based
industry
Port location: Permission to locate Port Department/State Maritime
a project near the seashore Board
Clearance before going into production
Registration as Factory: Under the Chief Inspector of Factories
Factory Act, for the safety of the
workmen
Sales tax registration: Sales tax Sales tax officer
number is to be obtained from regional
sales office to effect sales of goods
produced which are liable to sales tax.
This is an important requirement to be
completed by an industrial unit after going
into commercial production.
Centre for Monitoring Indian Economy, Bombay
Contact Addresses for More Information
Last updated: May 1995.