Defence production units to get longer-term licences

The validity of the industrial licence has been extended to three years from the existing two years.

Industrial licence for defence production units will now run for three years instead of two. The commerce and industry ministry today extended the validity period of industrial licence for this and a few other industries, which still fall under licensing procedures, to three years.

While India did away with licensing for industries from 1991 when it liberalised the economy, defence including aerospace along with alcohol production, tobacco, industrial explosives and some hazardous chemicals were kept under its purview.

“In supersession of all earlier Press Notes, the period of validity of industrial licence is being extended from two years to three years as a measure for ease of doing business,” the department of industrial policy and promotion said in Press Note 5.

India Inc hailed the move and termed it as a significant step towards promoting productivity and cutting down inefficiency. “The ministry has sent a strong signal that the government is committed to enhance ease of doing business in India… Industrial licence has been one of the biggest pain points of the Indian defence industry… We hope that this would help in expeditious clearance of fresh industrial license applications and the extension of the existing ones,” Chandrajit Banerjee, director general, CII, said.

As per the existing policy, licence was for a period of two years within which the company had to start commercial operations. The progress was reviewed every six months.

However, an expert explained, given the complexities in commencing operations, companies were unable to meet the deadline following which they had to undergo a “rigorous renewal process which was as cumbersome as getting a licence”.

The clarification follows Press Note 4 through which the DIPP pruned the list of items for defence-related production. The ministry has reduced the items requiring industrial licence by about 60 per cent. Anything not mentioned on the list can be manufactured by the industry without a licence from the government.

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The government is already working on enhancing the cap for FDI in the defence sector to boost the domestic production and give a push to manufacturing. FDI is currently capped at 26 per cent and the DIPP has proposed it to go up to 100 per cent. A Cabinet note on the proposal has already been circulated.