Some Operational Licenses in India

The importance of possessing valid and applicable operational licences and permits for running businesses in India is well established and very much important.  Depending upon the nature of the business, a company is required to obtain its key operational licences and permits even before it could commence work.

Basically Under various legislations, permissions & approvals of industry  specific regulators are required to set up, maintain, operate and conduct day-to-day businesses activities.  

Operational licences and permits are those fundamental approvals without possessing which commencement of business activities (depending upon the nature of the industry) can be varied from case to case.

In this article, we focus on some of the key operational licenses related to construction and manufacturing activities.

Environment Clearance (EC) 

Most of the companies engaged in construction and manufacturing activities would require environment clearance certificate (EC) from State Level Environment Impact Assessment Authority depending upon the level of emission of any environmental pollutant.  Though under the present regulatory regime, the ECs are issued for a period up to seven years, almost all states regulations make it clear that the application for seeking extension should be made within the validity period of the EC.

Consent to Establish (CTE)

Before undertaking construction activities, which is likely to discharge sewerage or trade effluent into the environment or cause air pollution when setting up industrial plants, building large residential/commercial complexes, townships or area development projects, it is mandatory to obtain a Consent to Establish (CTE) from the relevant State Pollution Control Board. The validity of such CTE is mostly one year, though in certain cases, it can go up to three years.  However, any extension of the same has to be sought within the validity period.

Consent to Operate (CTO)

Once an industry or a plant is established along with the required pollution control systems, the entrepreneur is required to obtain Consent to Operate (CTO) the unit. It is obtained after obtaining/applying CTE. This consent is given for a particular period (usually for one to five years depending upon the nature of the industries and the regulation of the state where the industry is set up), and needs to be renewed regularly. Almost all the state regulations require that the application for renewal should be made within the validity period of the CTO.

Factories Licence

The Factories Act, 1948 has empowered the State governments to make rules regarding licensing and registration of factories under the Act. An analysis of Rules issued by various States indicates that such licence/ registration is granted or renewed for a specified period.

For example, in the State of Delhi under the Delhi Factories Rule, 1950 such licences can be obtained for one year or five years and accordingly their renewal can also be for one year or five years. Every application for the renewal of a licence should be submitted not less than 30 days before the date on which it expires.

In the State of Uttar Pradesh under the Uttar Pradesh Factories Rules, 1950, as amended from time-to-time, depending of the nature of the factory in question, a factory license can be granted for a period of 1 year, 3 years, 5 years or 10 years. For renewing each category of licence, an application has to be submitted electronically two months before the expiry of the validity period.

Similarly, the Maharashtra Factories Rules, 1963, prescribes that the application for renewal of a factories licence should be made two months prior to its expiry.

Registration under Shops and Establishment Act

Most businesses in India are governed by regulations under the Shop and Establishment Acts, enacted by every State in India. This Act is designed to regulate the payment of wages, hours of work, leave, holidays, terms of service and other work conditions of people employed in the shop and commercial establishments.

The Shop and Establishment Act is promulgated by the States and the regulations may slightly vary from State to State. However, it is mandatory to register every shop and establishment under this Act within a specified period of time, in accordance with the guidelines provided in respective State Acts. In most of the cases, the registration certificate has a specified validity period and is required to be renewed periodically. Even though some of the States have dispensed with the requirement of renewal of the registration and replaced it with payment of annual fee and receipt of acknowledgement to ensure continued validity of registration certificate, the requirement for renewal still exists in others.