Opinion

Single window clearance has failed to solve licensing problems

Amar Patnaik/Jayanta Kumar Mohanty | Updated on June 07, 2020

Entrepreneurs who want to invest in India must still deal with unnecassry red tape to obtain the multiple licences from various authorities

An interaction with global Indian entrepreneurs showed that the seamless, scalable, process re-engineered and technologically-advanced online single window government clearance/licensing system, that the government boasts of, is still not able to lure pravasi Indians to invest in their country of origin. They compare the Indian licensing regime with other parts of the world — where it is free from red-tapism and other bureaucratic inconsistencies at the ground level.

Too many licences

A San Francisco-based Indian-origin entrepreneur wondered why he needs to apply for 50 different licences to produce an Ayurveda medicine? He would need separate licences for industry, factory, boilers, electricity supply, generators, pollution, labour, fire, water, alcohol, drugs, Ayush, laboratory, excise, GST, sales, import, export etc. In addition, he must get some licences from the State government and some from the Central government. Obtaining dozens of clearances from multiple authorities, even in a single-window, is a herculean task, because one needs to do a lot of paperwork. Most of the times, what is explained in the policies and mentioned on websites is not followed by the authorities themselves.

If the above-mentioned entrepreneur would like to do his business in the US, he may need just a quick approval from the FDA and two more licences — one each from the state and the federal governments. Before selling anything, he just needs to prove that his products are safe and stable for consumers by running what are called stability tests as prescribed under good manufacturing practices set by the FDA.

Can’t we replicate this in India? Can’t we just allow such companies to do stability tests on their finished products and get rid of the various licences required before the plant is even set up? If not, is there a possibility where the Parliament can pass a law to reduce these existing 50 or so licences to just 10, with an agreement or a non-repudiatory contract covering the remaining requirements, that the entrepreneur can read and sign?

If one wants to get into a restaurant business in Singapore or China, she/he need just four licences, whereas here it is 12-16 licences, depending on the State. The number is greater in metro cities — 26 in Delhi and Bengaluru and 22 in Mumbai. Plus, there is a ‘police eating house licence’ required in Delhi and Kolkata. And, the number of documents needed to obtain this licence from the Delhi Police is 45. Do we need these many documents to be read, signed and submitted for approval?

Too many licensing authorities

If one wants to get into a small spice business in our country, one needs to get a trade licence from the local municipal authority, followed by Udyog Aadhar, MSME registration and many more for availing subsidies under various schemes of the government. Then, there is food business licence/FSSAI licence, BIS certification, Agmark Certification, IEC, and compliance with all the FPO regulations.

In the US, the FDA regulates drugs, medical devices, clinical research, healthcare delivery, food safety, food packaging, nutrition and everything else related to drug, food and health. In India, why do we need so many licences and certifications from the FSSAI, BIS, Agmark etc.? Can’t we create a single organisation that addresses all approvals, licences, certifications, etc in one go?

Export nightmare

The nightmare actually begins when an entrepreneur starts sending shipment to outside India. A shipment that costs $2 to ship fromTaiwan, Philippines, Singapore or Vietman to the US, goes up to $10 to ship from India to the US. Then, the shipment goes through 50 inspections before it is given clearance from the port, adding to the transaction costs for the entrepreneur. Most times, the business owner needs to bribe the officers to get the shipment through. If the process of manufacturing and then exporting to global markets is so torturous, how can we expect global Indians to come back and set up businesses in India?

Pollution control headaches

Most entrepreneurs perpetually complain about handling the State pollution control boards and Ground Water Authority (CGWA) officials. They say that even if one ensures cent per cent effluent treatment and more rainwater harvesting than groundwater extracted, it’s still difficult to handle the officials of these two departments. So, can we reorganise the National Green Tribunal (NGT) and bring pollution control boards and CGWA under it, in order to bring efficiency and remove corruption? Maybe, a legislation in this regard is needed.

Why is ‘Make in India’ not able to achieve its goals? The contribution from manufacturing to GDP was even less after a year of the ‘Make in India’ campaign. Why is there a dip in private investment in the last three years, despite substantial improvement in ease of doing business rankings? It is because we are not able to see and analyse things that are not working at the micro level. We are missing the fine prints for the big banners. This is the time to bring new legislation and change old laws to reduce paperwork and expedite processing.

Patnaik is Member of Parliament, Rajya Sabha from Odisha, and former CAG official. Mohanty is a Delhi-based business & strategy consultant and an ex-CEO of a US company.

Published on June 07, 2020

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