Boosting Biz Environment: DPIIT Extends Industrial License Validity

In the business environment rankings for the period 2023-2027, India has climbed six positions to secure the 10th rank. This significant improvement is attributed to the government's persistent efforts to enhance the ease of doing business in the country.

Several measures have been implemented over the years to reduce the compliance burden on industrialists, leading to a more favourable and conducive business environment.

The renewal process of industrial licenses, especially for  the small industries, adds further to their existing compliance burden. These industries, which are regulated by the IDRA (Industries Development and Regulation Act) of 1951, were originally granted licenses for a period of three years.

 How DPIIT Is Reducing The Compliance Burden for Industrialists?

The Department for Promotion of Industry and Internal Trade (DPIIT) has announced a significant change in the duration of validity period of industrial licenses issued under the Industries (Development and Regulation) Act. The industrial licenses will now be valid for 15 years, a substantial increase from the previous three-year validity period.

"In supersession of all earlier Press Notes, the period of validity of industrial license is being extended from three years to fifteen years for all kind of licenses henceforth to be granted under IDR Act in line with the validity of licenses being issued for defence items as a measure for ease of doing business,” the DPIIT said.

In India, industrial licenses are regulated by the IDRA, 1951 Act, and are approved by the Secretarial of Industrial Assistance (SIA) on the recommendation of the licensing committee. 

The increase in the validity period will particularly help the small industries.

In a Press Notes, the DPIIT clarified that this extension aligns the validity of licenses with those issued for defense items. This move is part of the government's efforts to simplify procedures for businesses operating under the IDR Act.

What are the Extension Criteria and Guidelines?

The DPIIT outlined the guidelines for obtaining an extension of three years beyond the initial 15-year period. To be eligible for an extension, the existing license holder must not have commenced production within the initial 15 years of obtaining the license.

Applicants seeking an extension must fulfil specific conditions at the time of application. These include owning or leasing the required land for a minimum of 30 years, completing the construction of the project, and installing or commissioning the necessary plant and machinery.

"The application for extension of licence should be submitted to the concerned administrative ministry or explosive section, prior to the expiry of 15 years period or otherwise specified for the commencement of commercial production," the guidelines said.

Automatic Lapse for Non-Commencement of Production

 The DPIIT also stated that any industrial license where commercial production does not commence even during the extended period (15+3 years, i.e., a maximum of 18 years from the issue date) will be treated as automatically lapsed.

 This move is expected to provide businesses with greater stability and a conducive environment for long-term planning and investment. It also aligns India's industrial licensing policies with international best practices, fostering a more favorable climate for economic growth and development.