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Industrial Licensing in India: Norms and

Policy
 August 18, 2020 Posted by India Briefing (ht t ps://www.india-briefing.co m/news/aut ho r/india-briefing/)
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Since t he liberalizat ion and deregulat ion of t he Indian economy in 1991, most indust ries have
been exempt from obt aining an indust rial license t o st art manufact uring in India. Government
at t ent ion is reserved only for t hose indust ries t hat may impact public healt h, safet y, and
nat ional securit y.
In India, indust rial licenses are regulat ed by t he IDRA, 1951 Act , and are approved by
t he Secret arial of Indust rial Assist ance (SIA) on t he recommendat ion of t he licensing
commit t ee.

The provisions of t he Act rest rict a licensed indust rial undert aking from manufact uring a new
art icle unless t he license has been renewed or a new license has been obt ained t o include
t he new art icle.

Indust ries t hat require indust rial licensing for manufact uring in India include:

Indust ries under compulsory licensing; and,

Indust rial undert akings at t ract ing locat ion rest rict ions. The licensing provision also
applies t o t he expansion of t he exist ing indust rial unit s.

Removal of manufacturing curbs on products

previously reserved for MSMEs
Earlier, large indust ries t hat manufact ured it ems t hat were exclusively reserved for Micro,
Small, and Medium Ent erprises (MSME) also needed t o obt ain an indust rial license.

MSMEs were previously known as Small Scale Indust ry (SSI). The provision was aimed at
prot ect ing indigenous manufact urers from unequal compet it ion wit h large scale indust ries.

However, in April 2015, t he government unreserved t hese it ems t o encourage great er foreign
invest ment , incorporat e bet t er t echnologies, and enhance compet it ion in t he Indian and
global market for t he product s.

Large indust ries are now permit t ed t o manufact ure it ems, including bread, pickles and
chut neys, must ard oil, groundnut oil, wooden furnit ure, firework, st eel chairs and t ables,
padlocks, st ainless st eel and aluminum ut ensils, glass bangles, exercise books and regist ers,
wax candles, laundry soap, safet y mat ches, agarbattis, et c. wit hout obt aining an indust rial
license.

Industries subject to compulsory licensing in India

Businesses planning t o est ablish indust ries t o produce any of t he following it ems in India
must obt ain a compulsory license:

Tobacco it ems
 Defense aerospace and warships

Hazardous chemicals

Indust rial explosives

These indust ries require compulsory licensing because of environment al, safet y, and
st rat egic considerat ions.

The Indust ries (Development and Regulat ion) Amendment Act , 2016
(ht t ps://dipp.gov.in/sit es/default /files/indust ries_ Amendment _ Act _ 2016.pdf) excluded t he
product ion of alcohol for pot able purposes (domest ic consumpt ion) from t he ambit of t he
Act . (The Supreme Court in a 1997 judgment demarcat ed t he regulat ion of product ion of
alcohol bet ween t he cent ral government and t he st at es. Thus, t he cent ral government
regulat es t he product ion of alcohol for indust rial use and st at es regulat e t he product ion of
alcohol for domest ic consumpt ion.)

According t o t he Depart ment for Promot ion of Indust ry and Int ernal Trade (DPIIT), given
t hat t he government of India does not issue licenses in any ot her case, Press Not e 17 (1984
series) had become irrelevant and t hus wit hdrawn.

See here (ht t ps://dipp.gov.in/sit es/default /files/Press_ Not e_ 3_ 02July2020.pdf) for Press
Not e No.3 (2019 Series), which wit hdraws t he previous not ificat ion – Press Not e 17 (1984
series) – t hat applied t o environment al clearance, condit ions of let t er of int ent , and indust rial
licenses.
Furt her, indust rial or arms license is not required for t he manufact urer of any part s or
accessories in t he defense sect or – unless t hey are specifically list ed for procuring licenses
from t he DPIIT.

The depart ment is t he licensing aut horit y for t he following product s – defense aircraft ,
warships, body armor, and specialized equipment for milit ary t raining. In May 2017, t he DPIIT
was grant ed aut horit y t o process and grant licenses for t he manufact uring of defense it ems;
prior t o t his, t he aut horit y lay wit h t he Minist ry of Home Affairs.

Location restrictions for industries in India

Under t his provision, indust ries locat ed wit hin 25 kilomet ers of t he periphery of cit ies having a
populat ion of at least one million, must obt ain an indust rial license from t he federal
government .

This locat ion rest rict ion does not apply in t he following cases:
 Indust ries manufact uring elect ronics, comput er soft ware and print ing, or any ot her
indust ry t hat may be classified as a ‘non-pollut ing indust ry’; or

Indust ries locat ed in an area designat ed as an ‘indust rial area’ before July 25, 1991.

The locat ion of indust rial unit s is subject t o appropriat e local zoning, land use regulat ions, as
well as environment al regulat ions in order t o maint ain ecological discipline.

License registration for industries

The DPIIT has est ablished t he Depart ment for Promot ion of Indust ry and Int ernal Trade G2B
Port al (ht t ps://services.dipp.gov.in/lms/) – a single window port al t o obt ain clearance from
various government s and government agencies. The port al is an int egrat ed plat form t hat
provides access t o government t o business (G2B) services, such as filing of Indust rial
Ent repreneurs Memorandum (IEM) and Indust rial License (IL) applicat ions online. The online
port al has t he required aut hent icat ion mechanisms for submit t ing IEM and IL applicat ions.

Previously, t he applicat ion for regist rat ion was made t o t he Secret ariat of Indust rial
Assist ance (SIA), Depart ment of Indust rial Policy & Promot ion (DIPP) along wit h a fee.

Once t he license is obt ained, an indust rial undert aking is eligible for t he allot ment of
cont rolled commodit ies and for t he issuance of an import license for goods required for it s
const ruct ion and operat ion.

For more informat ion and assist ance, please feel free t o email us at india@dezshira.com
(mailto:%20india@dezshira.com).

Editor’s Note: The article was first published in June 2012 and has been updated on September
6, 2017 and August 18, 2020.

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