India’s regulatory system anything but investor-friendly. Central licences for new investors as many as 767!

By: |
Published: July 21, 2020 8:00 AM

Project delays, caused by an intricate web of approvals and licences required from assorted agencies at the central and state levels, have impeded investments and fixed asset creation in the economy.

The idea in simple terms is to put in place a one-stop digital platform for investors to obtain all requisite central and state clearances/ approvals in a time-bound and hassle-free manner.The idea in simple terms is to put in place a one-stop digital platform for investors to obtain all requisite central and state clearances/ approvals in a time-bound and hassle-free manner.

No one ever thought investors come across with the necessary clearances in India effortlessly, but this would confound even the most pessimistic. A status check ordered by a committee of secretaries (CoS) revealed that the 35 central ministries/departments among them are presiding over a regime of as many as 767 pre-establishment/pre-operation licences! Add to these the multitude of inspections and approval renewals an investor is required to go through after the commencement of operations and, one could call the country’s regulatory system anything but investor-friendly.

Presenting the Budget FY21 in Parliament, finance minister Nirmala Sitharaman proposed to set up “an Investment Clearance Cell that will provide ‘end to end’ facilitation and support, including pre-investment advisory, information related to land banks and facilitate clearances at Centre and state level”.

The idea in simple terms is to put in place a one-stop digital platform for investors to obtain all requisite central and state clearances/ approvals in a time-bound and hassle-free manner. Global best practices are to be the benchmarks.

Under the directive of the CoS, which is headed by the secretary, department for promotion of industry and internal trade (DPIIT), stakeholder consultations have already been held with a few investors such as Foxconn, Samsung, Wistron and Yazaki, and their concerns have been shared with the ministries concerned. All ministries/departments would designate a nodal officer each to coordinate with DPIIT and Invest India as a single point contact for the Central Single Window System (CSWS). “The proposed portal may focus on a single-entry point for the investor providing seamless link for the existing portal and maximising vertical integration within a sector,” according to the note reviewed by the CoS.

Sources said discussions were going on with select states for integration with CSWS. A system integrator will start functional by September 1, 2020, and the scope of his work will include integration of the central ministries’ existing IT systems and the select state single-window systems.

Despite a jump of 79 notches in its overall ranking in the World Bank’s ease of doing business index over five years to a record 63rd in 2019, India’s performance in the ‘starting a business’ category has been well below par. The country’s rank in this segment improved by only 22 notches to 136th during this period.
Starting a business typically involves yardsticks such as procedures, time, cost and paid-in minimum capital to start a limited liability company.

Project delays, caused by an intricate web of approvals and licences required from assorted agencies at the central and state levels, have impeded investments and fixed asset creation in the economy. The adverse impact of the moribund clearance system on investments has been even more than entrepreneurs’ lack of access to finance or a prolonged NPA crisis of the past decade, referred to as twin balance sheet problem.

Delays in land acquisition haven’t been the principal impediment to efforts to fast-track national highway development. As far as mining projects are concerned, the elaborate processes to obtain forest and environment clearances have been a dampener. According to an order issued by the mines ministry on June 3, the system of embedded clearances will be tried in at five green-field blocks in each mineral-rich state on a pilot basis, with the intent to scale it up over time. Along with a system of single-licence with certainty of tenure across the mining value chain, the government has also come out with a scheme under which non-coal, non-fuel mining blocks will have most clearances ready before these are put up for auction. The system of embedded clearances are being tried in at five green-field blocks in each mineral-rich state on a pilot basis.

The DPIIT’s plan is to have 13 central ministries play a critical role in execution of CSWS. An information system comprising mapping of the industrial infrastructure available for 3,381 industrial parks across 31 states/UTs has been created. Also, a National GIS-enabled Land Bank is being developed within the framework of the existing system. Integrated Land Bank-Geographical Information Systems (GIS) of 6 States have already been integrated. In Industrial Information Systems of 595 industrial parks, plot-level attributes will now be available.

Meanwhile, the Telangana government’s labour department last week issued notification to allow computerised risk assessment-based inspections with random allocation of inspecting officers to facilitate ease of doing business. As per the order, units will be categorised on the basis of their risk profiles and depending upon the number of workers employed. The frequency of inspections for establishments under low risk category will be just once in 5 years, for establishments under medium risk, once in 3 years and for those under high risk is once in 2 years.

Also, start-ups will be exempted from inspection for the first year of setting up, upon submission of online self-declaration and if they continuously submit their integrated return/returns specified under different Acts without fail, they will be exempted from compliance inspections for a further period of four years the second year onwards.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Households’ FMCG consumption in April-June highest in two years: Report
2Factory output in June continues to shrink in double-digit; manufacturing IIP takes maximum hit in Q1
3Singapore’s economy sees worst ever quarterly contraction of 13.2%