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Incorporating a cement manufacturing unit in india

The document discusses setting up a cement manufacturing unit in India. It provides an overview of the cement industry and outlines the process for incorporating a cement company, including registering with the Registrar of Companies and obtaining necessary approvals. It also discusses India's industrial policies relating to licensing, locations, and incentives for special economic zones. Relevant labor laws and legal challenges are also mentioned.

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INCORPORATING A CEMENT MANUFACTURING UNIT A LEGAL PERSPECTIVE – ACTS, LAWS AND OFFICES
Agenda Cement Industry • Industry Overview Incorporation of a Cement Company • Private/Public Entities • Joint Ventures/Subsidiaries • Requests to RoC • Flow-chart view Industrial Policies • Industrial Licensing, IEMs , Location Policies • Procedures for Approval for E0Us/EPZs/FTZs/SEZs List of approvals/clearances and departments Government Involvement(Specific Acts and policies) List of Applicable Labour Laws in the Sector Legal Challenges to Cement Industry
Industry overview •Cement plants: 139 Large cement plants •Effective capacity: 234.3 mtpa Cement industry Mini & White cement •Cement plants: 365 plants •Effective capacity: 11.1 mtpa Exports to more 30 2nd largest market in the countries generating world , 7–8 per cent of employment for 50,000 global production people Per Capita consumption Annual production of more around – 170kg, world than 1 mn tonnes average 430 kg *Source : Ambit capital, Aranca research
Incorporation: An overview COMPANIES ACT 1956 • Governs Incorporation of a company in India • Part II of the Act deal with the incorporation of a company and matters related thereto Public Company Private Company Minimum Paid-up Capital - 100,000 Minimum Paid-up Capital - 500,000 Minimum number of members: 2 Minimum number of members: 7 Maximum number of members : 50 Maximum number of members : Unlimited Transerferability of shares : Transerferability of shares : Complete restriction No restriction Issue of Prospectus : Cannot Issue of Prospectus : Can issue prospectus issue prospectus Number of Directors : < =2 Number of Directors : >=3 * A public company is a private company which is a subsidiary of a company which is not a private company.
Incorporation of a Cement Company Obtaining approval for the proposed name of the company from the ROC (Form 1A) (Prevention of Improper Use, Act-1950) Drawing up the Memorandum of Association (Indian Stamp Act, 1899) Drawing up the Articles of Association (Indian Stamp Act, 1899) Getting the appropriate persons to subscribe to the Memorandum(Public company: Min. of 7, Private company: Min. of 2)
Incorporation of a Cement Company Payment of registration Fee to the ROC Receipt of Certificate of incorporation Obtain a certificate of commencement of business from ROC in case of a public company
Starting Operations in India Starting Taxation Corporate tax rate for foreign companies is operations 40%. The net tax rate includes various deductions and exemptions available under in India the tax laws. Tax holidays are available in Special Economic zones. Infrastructure Sector Projects enjoy special tax treatment/holidays. Electronic filing of As a Indian As a foreign customs documents is also there. company company Investment Facilitation Secretariat for Industrial Assistance (SIA) in Project Office Department of Industrial Policy and Wholly owned Promotion, Government of India provides a Joint Ventures Liaison Office single window service for entrepreneurial subsidiaries assistance, Investor facilitation and Branch Office monitoring implementation of the projects.
By forging strategic alliances with Indian partners foreign companies get following advantages. Joint Ventures •Established distribution/ marketing set up of the Indian partner •Available financial resource of the Indian partners •Established contacts of the Indian partners which help smoothen the process of setting up of operations •100% FDI is allowed in cement industry Wholly owned •Application to be filed to registrar of companies subsidiaries •Department of Company Affairs under Ministry of Finance is the regulatory authority Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India with Project Office RBI’s permission subject to specified conditions. • No activity other than the activity relating and incidental to execution of the project • Project Offices may remit outside India the surplus of the project on its completion • Not allowed to carry out manufacturing activities on its own ,subcontract these to an Indian manufacturer. Branch Office • Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines • A channel of communication between the principal place of business or head office and entities in India • Cannot undertake any commercial activity directly or indirectly and cannot earn any income Liaison Office • Its role is to collect information about market opportunities and providing info about the company and its products to prospective Indian customers •It can promote export/import from/to India and also facilitate technical/financial collaboration
Industrial Policy All industrial undertakings Industrial Licensing are exempt from obtaining 1. Industries reserved for the Public Sector an industrial license to 2. Industries retained under compulsory licensing Manufacture, except for: Industrial Policy 3. Items of manufacture reserved for the small Reforms scale sector 4. If the proposal attracts location restriction Industrial Entrepreneurs Memorandum (IEM) Removed restrictions on Facilitated easy access to Reduced Industrial investment and expansion foreign technology and Licensing requirements foreign direct investment Industrial undertakings exempt 1. In Part ‘A’ with Secretariat of Industrial Assistance from obtaining an industrial (SIA), DIPP, GOI, and obtain an acknowledgement license are required to file an 2. After commencement of commercial production, Part ‘B’ of IEM the IEM has to be filled
Industrial Policy Locational Policy In the case of cities with population of more than a million (as per the 1991 census): Industrial undertakings are • The proposed location should be at least 25 KM away from the free to select the location of Standard Urban Area limits of that city a project • Located in an area designated as an "industrial area" before the 25th July, 1991 The location of industrial units is further regulated by the local zoning, land use regulations & also the environmental regulations Policy Relating to Small Scale Undertakings* • Get registered with the Directorate of Industries/District Industries Centre in the concerned State Government • Also free from locational restrictions cited above (An industrial undertaking is defined as a small scale unit if the investment in fixed assets in plant and machinery does not exceed Rs 10 million)
Industrial Policy Environmental Clearances A Notification issued under The Environment Protection Act 1986 has listed 29 projects in respect of which environmental clearance needs to be obtained from the Ministry of Environment, GOI: Cement Industry is one of these. Foreign Direct Investments Policy • The GOI has allowed FDI up to 100% in the cement and gypsum products industry • FDI can be bought through: Automatic Government Route Approval New Existing Government approvals are accorded on the Ventures Companies recommendation of the Foreign Investment Promotion Board (FIPB), chaired by the Secretary, DIPP (Ministry of RBI has given permission to Indian Cement Commerce and Industry) with the Union Finance companies to accept investment under this Route Secretary, Commerce Secretary, and without obtaining prior approval from RBI other key Secretaries of the Government as its members.
Industrial Policy Clearances and Approvals Required Approvals/Clearances Required Department to be Approached and Consulted Incorporation of Company Registrar of Companies Registration/IEM/Industrial license DIC for SSI/SIA for large and medium industries Allotment of land State DI/SIDC/Infrastructure Corporation /SSIDC Permission for land use a. State DI b. Dept. of Town and Country Planning NOC and consent under Water and Air Pollution Control Acts State Pollution Control Board Approval of construction activity and building plan a. Town and country planning b. Municipal and local authorities c. Chief Inspector of Factories d. Pollution Control Board Weights and Measures Inspector of Weights and Measures Quality Marking Certificate Quality Marking Center of the State Government
Industrial Policy Regulation Competition Commission of India is a body of the Government of India responsible for enforcing The Competition Act, 2002 throughout India and to prevent activities that have an adverse effect on competition in India. It was established on 14 October 2003 •The Competition Commission of India says that cement firms met regularly to fix prices, control market share and hold back supply • The Commission claims that cement companies in India had been organizing Problem: themselves in a cartel for a while now, colluding, during industry body meetings, to fix production levels as well as the price of a bag of cement — in this case Cartelizing of cement doubling it between 2004 and 2011 — so they could make windfall, illegal profits firms • Consequently, the CCI has slapped a fine totaling Rs 6,307.32 crore on the top-10 cement companies here and the industry body Cement Manufacturers’ Association
Government Involvement NODAL AGENCY  Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce Rules and Orders, DIPP State Level Statutory Clearance Site and Building Plan approval Cement Control Order, 1967 Health clearance Cement Cess Rule, 1993 Fire service clearance Environmental clearance from State Pollution Control Board Cement (Quality Control) Order,1995 Registration with Inspector of Factories under Factories Act Registration under Boilers Act (For Boilers) Cement (Quality Control) Order, 2003 Safety Certificate from Chief Electrical Inspector
Applicable Labour Laws •Promotion of new manpower at skills and improvement/refinement of old skills APPRENTICES ACT, 1961 •Apprenticeship Advisor •Obligations of employers and apprentice •Offences and punishment •To regulate the employment of contract labor and abolish it in certain cases •Applicability CONTRACT LABOUR ACT, 1970 •Revocation and amendment of licenses •Liability of principal employer •Eligibility EMPLOYEES’ PROVIDENT FUNDS & •Benefits MISC. PROVISIONS ACT, 1952 •Applicability •Applicability of the act EMPLOYEES’ STATE INSURANCE ACT •Benefits 1948 •Penalties •Contribution period
Applicable Labour Laws •Applicability of the Act •Registration & Renewal of Factories FACTORIES ACT, 1948 •Welfare Measures •Employment of Young Persons •Provisions for investigation and settlement of industrial disputes and for certain other purposes. •Power of Labour Court to give appropriate Relief INDUSTRIAL DISPUTES ACT, 1947 •Period of Operation of Settlements and Awards •Prohibition of Strikes & Lock Outs •Applicability of the Act •Matters to be provided STANDING ORDERS ACT, 1946 •PENALTIES •Provide for fixing minimum rates of wages in certain employments •Composition of Committee Penalties MINIMUM WAGES ACT, 1948 •Payment of Minimum Rates of Wages
Applicable Labour Laws •To provide for fixing minimum rates of wages in certain employments MINIMUM WAGES ACT, •Fixing Hours for normal working •Composition of Committee 1948 •Maintenance of registers and records •Claims, Penalties, Offence, Punishment •To provide for the registration of Trade Union & define the law relating to registered Trade Unions TRADE UNIONS ACT, 1926 •Minimum Requirement for membership of Trade Union •Registrations and Cancellation of Trade Unions •Penalties, Offence and Punishment •To provide for the payment of equal remuneration to men and women EQUAL REMUNERATION workers and for the prevention of discrimination •Advisory Committee to regulate the process ACT, 1972 •Power of Government for appropriation •Penalties and Offence
Applicable Labour Laws •To regulate the payment of wages of certain classes of employed persons PAYMENT OF WAGES ACT, •Applicability and Coverage 1936 •Legal deductions •Offences and Penalties •To provide workmen and/or their dependents some relief in case of WORKMEN’S accidents, arising out of and in the course of employment and causing either death or disablement of workmen COMPENSATION ACT, •Applicability, Coverage and Employer’s Liability •Amount of Compensation 1923 •Report of Incidents and Penalties •To provide for a scheme for the payment of gratuity to employees PAYMENT OF GRATUITY •Applicability, Qualification, Nomination ACT, 1972 •Forfeiture of Gratuity •Protection of gratuity and Penalties
Environmental Laws and Acts Stated in Constitution of Referred by Directive Guided by Fundamental India Principles of State Policy Rights structure Hazardous Waste The Public Liability The National The Environment The National (Management and Insurance Act and Environment (Protection) Act - Environmental Handling) Rules - Amendment -1991 & Appellate Authority 1986 Tribunal Act – 1995 1989 1992 Act – 1997 The Water The Water The Forest The Air (Prevention (Prevention and (Prevention and (Conservation) Act – and Control of Control of Pollution) Control of Pollution) 1981 Pollution) Act – 1981 Act – 1974 Cess Act – 1977
Practice required by law India China United States Standard work day 9 hours 8 hours 8 hours Severance pay for redundancy dismissal of employee with 5 year 10.7 week salary 21.7 week salary None tenure Severance pay for redundancy dismissal of employee with 1 year 2.1 week salary 4.3 week salary None tenure Premium pay for overtime 100% 50% 50% Minimum Wage (US$/month) 29.9 182.5 1242.6 Minimum rest while at work 30 minutes per 5 hour None None Maximum overtime limit 200 hours per year 1 hour per day None Government approval required Yes No No for 9 person dismissal Government approval required Yes No No for 1 person dismissal Government approval
Legal Challenges to Cement Industry Competition Act – 2002 ( Amendment in 2007) • Competition Commission of India • Competition Appellate Tribunal •6300 Crore Rs Penalty on Cement Companies for cartelization •Orders for CMA Obsolete Labor Laws • World Bank Report on Indian Labor Laws- 2008 •“………India’s labor regulations - among the most restrictive and complex in the world - have constrained the growth of the formal manufacturing sector where these laws have their widest application. Better designed labor regulations can attract more labor- intensive investment and create jobs for India’s unemployed millions and those trapped in poor quality jobs. Given the country’s momentum of growth, the window of opportunity must not be lost for improving the job prospects for the 80 million new entrants who are expected to join the work force over the next decade”…..
Links References •http://www.cmaindia.org/– Cement Manufacturers’ association •www.mhupa.gov.in - Ministry of Housing and Urban Poverty Alleviation •www.cidc.in – Construction Industry Development Council , set up by Planning Commission •www.ncbindia.com – National Council for Cement and Building Materials •www.dipp.nic.in – Department of Industrial Policy and Promotion under Ministry of Commerce and Industry, Govt of India •http://www.fipbindia.com/ - Foreign Investment Promotion Board •http://www.mca.gov.in/ - Ministry of Corporate Affairs •http://finmin.nic.in/ - Ministry of Financial Affairs •http://moia.gov.in/ - Ministry of Overseas Indian Affairs •http://envfor.nic.in/ - Ministry of Environment and Forests •http://www.investindia.gov.in Articles, Papers and Reports •FDI Circular for consolidated FDI policy 2012- Department of Industrial Policy and Promotion under Ministry of Commerce and Industry, Govt of India •The Labour Laws Manual •Indian Cement Industry – CII •The Competition (Amendment) Act, 2007 – Competition Commission of India •Equal Remuneration Act, 1976 •Ninety fifth report on performance of cement industry – Parliament Report ( Presented to Rajya Sabha & lok sabha in 2011)