Factory License in India

Overview of Factories License

In the last ten years, India has experienced significant expansion in its manufacturing industry across various states and union territories. Yet, this progress isn't solely attributed to enhanced production methods or the accessibility of advanced technologies; the instrumental role of favourable government policies and initiatives cannot be overlooked. Initiatives like 'Make in India’ and Ease of Doing Business have additionally accelerated the progress of this industry, which is projected to become the world's fifth-largest manufacturing hub by the conclusion of this year.

However, in order to ensure that the manufacturing entities ensure the safety & quality of the work environment of the workers, the Government of India mandated obtaining a factory license under the provisions of the Factory Act Registration of 1948. The Act mandates that all factory proprietors must register their facilities with the relevant authorities.

What is a Factories License?

The Factories Act, of 1948 provides that certain factories that fulfil the conditions given in the Act must register and obtain a factory license under the Act to ensure the safety of the workers. It is the primary legislation aimed at safeguarding workers and promoting a healthy work environment. It mandates that every factory owner must register their establishment with local authorities before starting operations. Additionally, factories covered by this act need to secure building plan approval from the labour and employment department prior to obtaining factory registration. This factory license serves as official authorization from authorities to conduct manufacturing activities.

Applicability of Factory License

As per Section 2(m), the term "factory" refers to any premises, along with its surroundings, where either:

At least ten workers are currently or were engaged on any day within the past twelve months, and some part of the premises is involved in a manufacturing process aided by power or is commonly used for such a process.

At least twenty workers are currently or were engaged on any day within the past twelve months, and some part of the premises is engaged in a manufacturing process not aided by power or is commonly used for such a process.

However, this definition excludes the following:

• a mine under the jurisdiction of the Mines Act, 1952
• a mobile unit owned by the armed forces of the Union, a railway running shed, or
• an establishment like a hotel, restaurant, or eating place.

Benefits of Factory License

Approval to Commence Manufacturing Operations: The prime objective for obtaining the factory license is to ensure that appropriate safety measures are adopted to promote the employees' safety, welfare, and health wherein the license acts as a municipal approval for the factory's business to ensure that the owners adopt appropriate safety measures to promote their workers' welfare and health.

1. Legal Compliance Benefits: Securing a factory license enables the factory proprietor to access legal advantages offered by the government as per the selected scheme.

2. Protects Interests of the Workers: Since the act has specific guidelines concerning salaries, health and safety, work conditions, and the number of hours, etc. It helps to safeguard the interests of the workers.

3. Boosts Productivity: Complying under the guidelines set by the Factories Act 1948 further enhances the productivity of all workers.

4. Compliance with Factory Act Law: Owning a Factory license helps the factory owners or manufacturing entities carry out their business operations without stress and prevents stringent penalties.

Documents required Factory License

• Business PAN Card Replication: Copy of the business entity's PAN card.
• List of Directors, Partners: Names and particulars of all company directors/partners.
• Ownership Verification and Registered Address: Valid identification and address confirmation (Aadhar, PAN) of the factory proprietor.
• Factory Premises Address Verification: Documentation such as a Rental Agreement/Lease Deed, Sale Deed of the property, or utility bills as proof of the factory premises' address.
• Pollution Department Approval Letter: Official consent from the pollution control department, affirming adherence to environmental regulations.
• NOC from Fire and Water Department: No Objection Certificates issued by fire and water departments, confirming compliance with safety protocols.
• Factory Layout and Construction Blueprint: Elaborate blueprints illustrating the factory premises' layout and structural design.
• Board Resolution or Partnership Deed: Relevant board resolution/agreement specifying the legal authority of the factory owner.
• Equipment and Raw Materials Particulars: Comprehensive details about machinery and raw materials employed in the manufacturing process.
• Information on Hazardous and Non-Hazardous Waste: Data about the handling and disposal methods of both hazardous and non-hazardous waste materials produced by the factory.
• Tax Receipts: Documentation as evidence of paid taxes, if applicable.

New Factory Registration Process in India

Step 1: Submission of Factory Plan: As part of the process, the owner of the factory or the person responsible is under the legal obligation to submit a thorough factory plan to the state labour department for endorsement. Such a plan shall adhere to the criteria established by the department, prioritizing worker safety and well-being. However, the entity shall possess prior consent from the state government for any extension or construction of industrial facilities. The application should encompass the following details:

• List of Employee
• Details of the manager
• List of tools & machineries
• Nature of manufacturing processes
• Factory name and owner's particulars
• Communication details email ID and contact number

Step 2: Filling & Submission of the Application: The factory owner is required to apply for the Factory License with either the state labour department or the department overseeing factories. The application must be presented in the prescribed format, accompanied by all necessary documentation.

Step 3: Payment of Fees: After application submission, the stipulated fees for acquiring the Factory License must be settled. The fee structure varies based on the state and the factory's classification (hazardous or non-hazardous).

Step 4: Verification and Inspection: If the application and proposals align with the statutory mandates of the Factories Act, 1948, and Factories Rules, 1950, the factory plan will be sanctioned by the Factories Director after assessing the recommendations put forth by the concerned Deputy Factories Director.

Step 5: Issue of License: Upon fee payment and scrutiny of the application, if the department verifies that all documents and the application form conform to the requisite regulations and standards, the Factory License will be granted. The license remains valid for a designated period, usually one year, necessitating renewal before expiry.

Factory License Validity & Renewal

Upon receiving approval, the factory license remains effective for one year, necessitating the submission of a renewal application before its lapse. This renewal application must be accompanied by the following documents:

• Form - 4
• Form - 4B
• Online Challan from the Treasury

If the renewal of the Factory license is neglected, a penalty of at least 10% of the license fee is mandated, which escalates by 10% each subsequent month.

Prerequisites of a Factory License

1. Factory Structure, Grounds: The physical area designated for the factory should be proper for conducting manufacturing operations securely.

2. Design of Factory Arrangement: A comprehensive design outlining the arrangement of the factory premises, encompassing the positioning of machinery and the workflow, needs to be provided.

3. Clearances from Fire, Water, and Pollution Authorities: Approvals from the fire, water, and pollution control authorities are essential to authorize adherence to safety and environmental rules.

4. Notification to Chief Inspector: The owner of the factory is obligated to send an official notification to the chief inspector at least 15 days before initiating any operations or inhabiting the factory space.

Penalties Associated with Factory License

In the event that an individual breaches regulations outlined in the Factories Act of 1948, penalties in accordance with the act will be enforced. The potential penalties include Imprisonment for a duration of up to one year, or Monetary fine reaching up to one lakh or A combination of both.

Factory License Consultant

Obtaining a Factory license in Delhi, Uttar Pradesh (UP), Haryana, and across India could be a bit challenging due to the complex process of the documents required and the processes involved. However, with the right amount of guidance and consultation, you could easily acquire the license within the prescribed time. At Agile Regulatory we are committed to helping budding entrepreneurs by enabling them to acquire business licenses smoothly and carry on their business.