Despite an aggressive push by the department of industrial policy and promotion (DIPP), some states seem to have adopted a light approach on creating a conducive ecosystem for start-ups.
Despite an aggressive push by the department of industrial policy and promotion (DIPP), some states seem to have adopted a light approach on creating a conducive ecosystem for start-ups. Less than a third of the 36 states and union territories heeded (until the second week of January) the central government’s request to relax inspection of start-ups under certain labour laws in initial years, even around a year after the Start-Up India programme was launched.
Those who have concurred with the Centre’s notification on labour laws are Rajasthan, Uttarakhand, Madhya Pradesh, Chhattisgarh, Delhi, Jharkhand, Gujarat, Chandigarh, Punjab and Daman and Diu, sources told FE.
In June last year, the Union labour ministry had sent a communication to state governments and central labour enforcement agencies, saying start-ups may not be inspected under six labour laws in the first year of their establishment and they may be asked to submit an online self-declaration instead. Prior to that, in January 2016, the Union labour ministry had also conveyed to the states that from the second year onwards and up to three years from the setting up of units, such “start-ups may be taken up for inspection only when very credible and verifiable complaint of violation is filed in writing and the approval has been obtained from at least one level senior to the inspecting officer”.
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The six labour laws are: the Building and Other Construction Workers’ (Regulation of Employment and Conditions of Service) Act, 1996; the Interstate Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979; the Payment of Gratuity Act, 1972; the Contract Labour (Regulation and abolition) Act, 1970; the Employees’ Provident Fund and Miscellaneous Provision Act, 1952; and the Employees’ State Insurance Act, 1948.
Prime Minister Narendra Modi had on January 16 last year unveiled a package of incentives to boost start-ups, offering them a tax holiday and inspector raj-free regime for three years and capital gains tax exemption.
He also announced a ‘fund of funds’ of R10,000 crore to act as an enabler in attracting private investment in the form of equity and quasi-equity for start-ups. Modi had also announced a liberalised regime to help start-up businesses register patents, for which the fees were to be slashed 80%, apart from an easy exit option that would be provided under the bankruptcy Act so that start-ups can exit within 90 days.