Legal requirements for establishment of a new unit1
Factories Act, 1948 Applicability of the Act Any premises with 10 or more persons with the aid of power or 20 or more workers without aid of power working on any day preceding 12 months, wherein manufacturing process is being carried on.2
Welfare measuresEmployer toensure Washing facilities Safety measureshealth of • Facilities for storing Fencing of machinery and drying clothing. • Work on or nearworkers • First-aid appliances- Registrationpertaining to machinery In motion. & Renewal of one first aid box (not •Employment less than one) for Factories prohibition of young every 150 workers persons on dangerousCleanliness • Canteens when there machines,Disposal of are 250 or more •Striking gear andwastes and workers. • To be granted by devices for cutting offeffluents • Shelters, rest rooms power. Chief Inspector o Factories onOvercrowding and lunch rooms when •Casing of new submission ofArtificial hum there are 150 or more machinery. prescribed form,idification workers. •Prohibition of fee and plan. • Creches when there employment of womenLighting are 30 or more women and children nearDrinking workers. cotton-openers.water • Welfare office when • Hoists and lifts.Spittoons there are 500 or more workers 3
Employment of young persons Prohibition of employment of young children e.g. 14 years. Non-adult workers to Carry tokens e.g. certificate of fitness.Working hours and over time of adults First-aid appliances-one first aidWeekly hours, not more than 48. box (not less than one) for everyDaily hours not more than 9 hours. 150 workerIntervals for rest at least 1/2 hour on working for5 hours.Overlapping shifts prohibited.Extra Wages for overtime double than normalrate of wages. Annual leave with wagesRestrictions on employment of women before 6A.M. and beyond 7 P.M A worker having worked for 240 days @ one day for every 20 days and for a child one day for working of 4 15 days Accumulation of leave for
• Muster Roll • Register of Wages • Workers Register • Register of Accidents • Overtime Register and Dangerous • Advance Register Occurrences • Register for Fine • Bond Inspection Book • Register for Deductions • Register of Cleaning and White Washing • Record of Examination of Parts of MachineryThere is another Act known as Shops & Establishment Act which is applicable to shops and business undertakings employing 5 or more persons. 5
Employees Provident Fund & MiscellaneousProvisions Act, 1952 the main objective of The Act was enacted with making some provisions for the future of industrial workers after their retirement and for their dependents in case of death. It provides insurance to workers and their dependents against risks of old age, retirement, discharge, retrenchment or death of the workers. It is applicable to every establishment which is engaged in any one or more of the industries specified in Schedule I of the Act or any activity notified by Central Government in the Official Gazette and employing 20 or more persons. 6
(EPFO). EPFO is one of the largest provident fund institutions in the world in terms of members and volume of financial transactions that it has been carrying on. It is an autonomous tripartite body under the control of Ministry of Labour with its head office in New Delhi. It however, relaxes a factory or establishment for an initial period of 3 years from commencement of business if the number of employees is more than 50 and for an initial period of 5 years if the number of employees is less than 50. The minimum contribution payable by the employer is 12% of the basic salary contribution and Dearness Allowance. 7 The employee also makes an equal contribution. The
The act was enacted to provide for the payment of bonus to persons employed in certain establishments on the basis of profits or productivity and for the matters connected therewith. every other establishment in which twenty or more persons are employed The Actfactory as every applies to: on any day during an accounting year. defined under However, the Government may, after giving two months notification in the the Factories Act, Official Gazette, make the Act 1948 applicable to any factory or establishment employing less than twenty but not less than ten persons. The Act is enforced through the Central Industrial Relations Machinery (CIRM). CIRM is an attached office of the Ministry of Labour and is also known as the Chief Labour Commissioner 8 (Central) [CLC(C)] Organisation.
An employer shall pay minimum bonus at the rate of 8.33% of the salary or wages the term employee means earned by an employee in an "any person employed on a year or one hundred rupees, whichever is higher. Here it is salary or wage not not required that the employer exceeding three thousand has any allocable surplus in and five hundred rupees the accounting year. per month in any industry to do any skilled or unskilled manual, supervisory, managerial, If an employee has not completed fifteen years of age administrative, technical or at the beginning of the clerical work for hire or accounting year, the minimum reward, whether the terms bonus payable is 8.33% or of employment be express sixty rupees, whichever is or implied". higher. An employee is entitled to be paid by his employer a bonus in an accounting year subjected to the condition that he/she has worked for not less than 30 working days of that year. 9
Payment of Gratuity Act , 1972 BENEFITS The quantum of gratuity is toAPPLICABILITY ELIGIBILTY be computed at the rate of 15 days wages (7 days• Every factory (as • Any person wages in case of seasonal defined in Factories employed on establishments) based on Act), mine, oilfield, wages/salary. rate of wages last drawn by plantation, port and the employee concerned for railway. • At the time of every completed year of• Every shop or retirement or service or a part thereof resignation or on exceeding 6 months. establishment to which Shops & Establishment superannuation, an Act of a State applies in employee should The total amount of gratuity which 10 or more have rendered payable shall not exceed the persons are employed prescribed limit. continuous service of at any time during the not less than five year end. years, In case where higher benefit• Any establishment of gratuity is available under employing 10 or more • In case of death or any gratuity scheme of the persons as may be disablement, the Co., the employee will be notified by the Central 10 gratuity is payable, entitled to higher benefit Government. even if he has not• Once Act applies, it completed 5 years of
• Gratuity = Monthly Salary x 15 days x No. ofCalculation yrs. of service 26of Gratuity • Max. Gratuity payable under the Act is Rs. 3,50,000/- (w.e.f. 24-9-1997) Penal Provisions Non payment of gratuity payable under the Act is punishable with imprisonment up to 2 years (minimum 6 months) and/or fine up to RS 20,000/-.Other contravention/offenses attract imprisonment up to 1 year and/or fine up to RS 10,000. In case where higher benefit of gratuity is11 available under any gratuity scheme of the Co., the employee will be entitled to higher benefit
Employees’ State Insurance Act It provides benefits to employees. In case of sickness, maternity and employment injury and for certain other matters in relation there to. The existing rates of employee’s contribution vary according to wages. It shall apply to factories employing 20 or more12 people.
Payment of Wages Act, 1936 The payment of wages to workers employed in certain specified industries and to ensure aspeedy and effective remedy to them against illegal deductions and/or unjustified delaycaused in paying wages to them. It applies to the persons employed in a factory, industrial or other establishment, whetherdirectly or indirectly, through a sub-contractor.Further, the Act is applicable to employees drawing wages upto Rs. 1600/- a month.State Governments are responsible for it in factories and other industrial establishments.The person responsible for payment of wages shall fix the wage period upto which wagepayment is to be made. No wage-period shall exceed one month.All wages shall be paid in current legal tender, that is, in current coin or currency notes orboth. 13All payment of wages shall be made on a working day.
Although the wages of an employed person shall be paid to him without deductions of any kind, The Act allows deductions from the wages on the account of the following :- fines; absence from duty; damage to or loss of goods expressly entrusted to the employee; housing accommodation provided by the employer; recovery of advances or adjustment of over-payments of wages; for repayment of advances from any 14 provident fund; income-tax;
Minimum Wages Act ,1948 Minimum Wages shall be paid in Cash Wage has to be paid without any deductions This Act prescribes minimum wages in all enterprises, and in somecases those working at home per the schedule of the Act Central and State Governments can and do revise minimum wages attheir judgment The minimum wage is further classified by nature of work, locationand numerous other factors at the carefulness of the government. The minimum wage ranges between 143 to 1120 per day for workin the so-called central sphere 15State governments have their own minimum wage schedules
The Indian Partnership Act, 1932 It provides rules relating to foundation of legal partnership. It states the rights and duties of the partners amongst themselves and outside It lays down rules regarding the16 dissolution of partnership.
The Income Tax Act, 1911 17 The Act governs the levy of income tax in India. It defines various terms and expressions It states the liability of a person to pay income tax. The rates and pattern of taxation, however, are changed from time to time.
Central Excise Law 18 Central Excise Law is levied on manufacturer or production of goods. The liability of paying the central excise is on the manufacturer. GOODs means: every kind of movable property other than actionable claims and money which are agreed to be severed before sale or under the contract of sale.
Sales tax: 19 It is applicable on actual sales. This tax paid to a governing body by a seller for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. Sales tax is tax levied by state and centre. Tax charged by state is called LST or Local Sales Tax . And tax charged by Centre is known as CST or Central Sales Tax.
Labor laws for enterprise establishment Workmen’s Compensation Act ,1923 • This Act compensates a workman for any injury suffered during the course of his employment or to his dependents in the case of his death. • The Act provides for the rate at which compensation shall be paid to an employee. • This is one of many social security laws in India. 20
Industrial Employment (Standing orders) Act ,1946APPLICABILTY Every industrial establishment wherein 100 or more (in many States it is 50 or more). Any industry covered by Bombay Industrial Relations Act, 1946. Industrial establishment covered by This Act Industrialemployers in industrial establishments to M.P. requires Employment define and post the Act, 1961. of employment by issuing so- (Standing Orders) conditions called standing orders. These standing orders must be approved by the government and duly certified. These orders aim to remove flexibility from the employer in terms of job, hours, timing, leave grant, productivity measures and other matters. The standing orders mandate that the employer classify its employees, state the shifts, payment of wages, rules for vacation, rules for sick leave, holidays, rules for termination 21
Industrial Disputes Act of 1947 Object of the Act Provisions for investigation and settlement of industrial disputes and for certain other purposes APPLICABILITY industrial establishment carrying on any business, trade, manufacture or distribution of goods and services irrespective of the number of workmen employed therein. Every person employed in an establishment for hire or reward including contract labour, apprentices and part time employees to do any manual, clerical, skilled, unskilled, technical, operational or supervisory work, is covered by the Act. This Act though does not apply to persons mainly in managerial or administrative capacity, persons engaged in a supervisory capacity and drawing > 10,000The Act also executing managerial functions and persons subject to p.m or lays down:The Army Act, Air Force and Navycompensation to the service or on provision for payment of Act or those in police workmanaccount of closure or layaoff or retrenchment officer or employee of prison.The procedure for prior permission of appropriate Government 22for laying off or retrenching the workers or closing down industrialestablishments
to the employee with a copy of the notice to appropriategovernment office seeking governments permission,explain valid reasons for termination, and wait for onemonth before the employment can be lawfullyterminated. The employer may pay full compensationfor one month in lieu of the notice.Furthermore, employer must pay an equivalent to 15days average pay for each completed year ofemployees continuous service. Thus, an employeewho has worked for 4 years in addition to variousnotices and due process, must be paid a minimum ofthe employees wage equivalent to 60 days beforeretrenchment, if the government grants the employer apermission to layoff. 23
FOOD LAWS AND REGULATIONSTo meet a country’s sanitary and phytosanitaryrequirements, food must comply with the local laws andregulations to gain market access. These laws ensure the safety and suitability of food forconsumers, in some countries; also govern food qualityand composition standards. 25
a country may adopt international norms developed by theCodex Alimentarius Commission of the Food and AgricultureOrganization of the United Nations and the World HealthOrganization;or a country may also have its own suite of food regulations 26
Usually more than one agency is involved in foodregulations e.g. health and agriculture, they may have centralized or regionally controlled food regulations, and different agencies may be involved in enforcement activities 27
TYPES OF FOOD SAFETY AND QUALITYSTANDARDS THAT APPLY IN MOST COUNTRIES: 28
Food Safety and Standards ActThe Indian Parliament has recently passed the Food Safety andStandards Act, 2006 that overrides all other food related laws. Itwill specifically repeal eight laws:•The Prevention of Food Adulteration Act, 1954•The Fruit Products Order, 1955•The Meat Food Products Order, 1973•The Vegetable Oil Products (Control) Order, 1947•The Edible Oils Packaging (Regulation) Order, 1998•The Solvent Extracted Oil, De oiled Meal, and Edible Flour(Control) Order, 1967•The Milk and Milk Products Order, 1992•Essential Commodities Act, 1955 relating to food 29
The Act establishes a new national regulatory body, the Food Safetyand Standards Authority of India, to: develop science based standards for food and regulate and monitor the manufacture, processing, storage,distribution, sale and import of food so as to ensure the availabilityof safe and wholesome food for human consumption.All food imports will therefore be subject to the provisions of theAct and any rules and regulations made under the Act. 30
Prevention of Food Adulteration ActA basic statute (Prevention of Food Adulteration Act (PFA)of 1954 and the PFA Rules of 1955, as amended) protectsIndia against impure, unsafe, and fraudulently labelledfoods.The PFA standards and regulations apply equally todomestic and imported products and cover various aspectsof food processing and distribution.These include : food colour, preservatives, pesticide residues, packaging and labelling, 31 regulation of sales
Standards of Weights and Measures Act, 1976Standards for weights and measures are administered by theMinistry of Consumer Affairs, Food and Public Distribution underthe Standards of Weights and Measures Act, 1976 and relatedrules and notifications.All weights or measures must be recorded in metric units andcertain commodities can only be packed in specified quantities(weight, measure or number).These include baby and weaning food, biscuits, bread, butter,coffee, tea, vegetable oils, milk powder, and wheat and rice flour. 32
The Pulses, Edible Oilseeds and Edible Oils(storage)order, 1977 Empowers the government to put maximum stock limits on wholesalers and retailers of pulses, oilseed and oils and is designed to maintain supplies and ensure equitable distribution and availability at fair prices of these items 33
Fruit Products Order, 1955The fruit and vegetable processing sector is regulated by theFruit Products Order, 1955 (FPO), which is administered by theDepartment of Food Processing Industries. The FPO contains specifications and quality controlrequirements regarding the production and marketing ofprocessed fruits and vegetables, sweetened aerated water,vinegar, and synthetic syrups. All such processing units are required to obtain a license underthe FPO, and periodic inspections are carried out. Processed fruit and vegetable products imported into the 34country must meet the FPO standards.
Meat Food Products Order, 1973Regulations for the production of meat products are covered bythe Meat Food Products Order, 1973.The Order: Specifies sanitation and hygiene requirements forslaughterhouses and manufacturers of meat products. Contains packing, marking and labeling provisions forcontainers of meat products. Defines the permissible quantity of heavy metals,preservatives, and insecticide residues in meat products. 35
The Directorate of Marketing and Inspection at the Ministry ofAgriculture is the regulatory authority for the order, which isequally applicable to domestic processors and importers of meatproducts. 36
Livestock Importation Act, 1898India has established procedures for the importation of livestockand associated products under the Livestock Importation Act,1898.Under the regulations, the import of meat products, eggs andegg powder and milk products require a sanitary import permitfrom the Department of Animal Husbandry, Dairying andFisheries at the Ministry of Agriculture.A detailed import risk analysis is carried out, taking into accountthe disease situation prevailing in the exporting countrycompared with the disease situation in India. 37
Milk and Milk Products OrderThe production, distribution and supply of milk products iscontrolled by the Milk and Milk Products Order, 1992.The order sets sanitary requirements for dairies, machinery, andpremises, and includes quality control, certification, packing,marking and labeling standards for milk and milk products.Standards specified in the order also apply to imported products.The Department of Animal Husbandry, Dairying and Fisheries atthe Ministry of Agriculture is the regulatory authority. 38
Essential Commodities Act, 1955: The main objective ofthe Act is to regulate the manufacture, commerce, anddistribution of essential commodities, including food. A number ofControl Orders have been promulgated under the provisions ofthis Act. These are: Standards of Weights and Measures Act, 1976 and the Standardsof Weights and Measures (Packaged Commodities) Rules, 1977:The Act governs sale of packaged commodities and provides formandatory registration of all packaged products in the country. Consumer Protection Act, 1986: The Act provides forconstitution of District Forum/State/National Commission forsettlement of disputes between the seller/service provider and the 39consumer.
The Infant Milk Substitutes, Feeding Bottles and Infant Foods(Regulation of Production, Supply and Distribution) Act, 1992 andRules 1993: This Act aims at promoting breast feeding and ensuringproper use of infant milk substitutes and infant food. The Insecticide Act, 1968: The Act envisages safe use ofinsecticides so as to ensure that the leftover chemical residues donot pose any health hazard. 40
LEGISLATIONS AND REFORMS IN INPUT MANAGEMENT•Fertilizer legislations The Industries (Development andRegulation) Act, 1951 (IDRA).•Seeds Act, 1966•Protection of Plant Varieties and Farmers’ Rights Act, 2001•Pests and pesticide legislations pesticides is regulated under theInsecticides Act, 1968 and Insecticides Rules, 1971•Genetically modified organisms (GMOs) and agriculturalbiotechnology are regulated products in India since 1989. 41
Export (Quality Control and Inspection) Act, 1963: The Act aimsat facilitating export trade through quality control and inspectionbefore the products are sold to international buyers. Environment Protection Act, 1986: This Act incorporates rules forthe manufacture, use, import and storage of hazardousmicroorganisms / substances / cells used as foodstuff. Pollution Control (Ministry of Environment and Forests): A no-objection certificate from the respective State Pollution ControlBoard is essential for all dairy plants. 42
(i) Industrial Licences: No licence is required for setting up a dairyplant in India. Only a memorandum has to be submitted to theSecretariat for Industrial Approvals (SIA) and an acknowledgementobtained. However, a certificate of registration is required underthe Milk and Milk Products Order (MMPO), 1992. 43
Voluntary StandardsThere are two organizations that deal with voluntarystandardization and certification systems in the food sector.I. The Bureau of Indian Standards (looks after standardization of processed foods) andII. The Directorate of Marketing and Inspection (standardization of raw agricultural produce is under the purview of the) 44
Bureau of Indian Standards (BIS) The activities of BIS are two fold the formulation of Indianstandards in the processed foods sector and the implementationof standards through promotion and through voluntary and thirdparty certification systems. BIS has on record, standards for most of processed foods. Ingeneral, these standards cover raw materials permitted and theirquality parameters; hygienic conditions under which products aremanufactured and packaging and labelling requirements. Manufacturers complying with standards laid down by the BIScan obtain and "ISI" mark that can be exhibited on productpackages. BIS has identified certain items like food colours/additives, 45vanaspati, and containers for packing, milk powder andcondensed milk, for compulsory certification.
Directorate of Marketing and Inspection (DMI)The DMI enforces the Agricultural Produce (Grading and Marking) Act,1937.Under this Act, Grade Standards are prescribed for agricultural and alliedcommodities.These are known as "Agmark" Standards. Grading under the provisions ofthis Act is voluntary. Manufacturers who comply with standard laid down by DMI are allowed touse "Agmark" labels on their products. 46