Coupon Accepted Successfully!



Post-incorporation, entities engaged in the manufacturing sector are required to observe certain formalities under the Industries (Development and Regulation) Act, 1951 (IDRA). Post 1991, liberalization of the economy led to opening up of various sectors progressively. The government issued a series of notifications from time to time, progressively abolishing the applicability of the license regime.

   Licensing requirements have been removed pursuant to the Department of Industrial Policy & Promotion Notification No. 477 (E) dated 25.7.1991 and subsequent notifications. Index of notifications indicating list of items which have been reserved or de-reserved since 1991 under IDRA is available on the link


Currently, most industries are exempt from obtaining an industrial license – these industries are only required to file an Industrial Entrepreneur Memorandum (see below).


Industrial undertakings in the following sectors are required to obtain a license before commencing operations, or if they have started manufacturing different products (assuming the new products pertain to a sector which requires a license):

 Industries reserved for the public sector


Currently, atomic energy and railway transport are the only industries reserved for the public sector. Although post 1991 the Indian government has liberalized most industries, if it subsequently reserves any industry for the public sector, a business entering such industry would require an industrial license.


ii. Industries which are still under the compulsory licensing regime, that is:


a) Distillation and brewing of alcoholic drinks

b) Cigars and cigarettes and manufactured tobacco substitutes

Electronic aerospace and defense equipment of all types

 Industrial explosives including detonating fuses, safety fuses, gun powder, nitrocellulose and matches


e) Certain hazardous chemicals

iii. Entities which intend to manufacture articles reserved for manufacturing by micro and small enterprises


Setting up a manufacturing industry in certain sectors is reserved for micro or small enterprises (as defined under the Micro, Small and Medium Enterprises Act, 2006 which is discussed in a subsequent chapter in this module). If any other entity intends to set up a manufacturing unit in such a sector, it will be required to obtain an industrial license.


Manufacture of food and allied industries, glass, ceramics, certain chemicals, wood and paper products and certain equipment are some of the sectors reserved for small and micro enterprises. The full list of items that are reserved for exclusive manufacture by micro and small enterprises is available at the link.                    


iv. Industries to which a locational restriction applies


Setting up any industry within 25 kilometres of a city which has a population of 10 lakhs requires an industrial license, unless:


a) if the unit is located in an area specifically designated as an “industrial area”,

b) or in case of industries in electronics sector, computer software, printing or any other industry which is notified as a “non-polluting industry” by the government.


Industries which do not fall within items (i) to (iv) above are exempt from the requirement of industrial licensing. Such industries are only required to submit an Industrial Entrepreneur Memorandum (IEM) at the time of establishment for statistical records of the government.


Note: At the stage of filing IEM, the Government only checks that all the requisite columns in the form are filled in but does not examine whether the applicant should obtain an industrial license, or whether an IEM will suffice. Therefore, the applicant should independently determine (with the help of advisors, if necessary) whether licensing requirements are applicable. Source: Press Release from Ministry of Commerce and Industry dated 20 January 2012; Press Notes 22 (1991 Series) & 17 (1997 Series).



A sample format of the IEM can be accessed here.


The procedure for filing an IEM and for applying for an industrial license is described below:



Statute/ rules



Filing Industrial Entrepreneur’s Memorandum (IEM)

Press Note 9 (1991) and Press Note 4 (1998) issued under Industries (Development and Regulation) Act, 1951

IEM must be filed in ‘Part A’ of Form IEM along with prescribed fees with Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion (DIPP).


The applicant will receive an acknowledgement containing the SIA registration number for future reference by post.


Upon commencement of commercial production, industrial undertakings need to file information in ‘Part B’ of the Form IEM to SIA. No fee is to be paid for filing Part-B.


Sample format of the IEM can be accessed here.


Imprisonment of up to 6 months and/or fine of up to INR 5000.

Obtain industrial license

Industries (Development and Regulation) Act, 1951

An application for industrial license must be made in Form FC-IL to PR&C Section of the Secretarial of Industrial Assistance (SIA) which grants the license based on the recommendation of the Licensing Committee.

Imprisonment of up to 6 months and/or fine of up to INR 5000.


Test Your Skills Now!
Take a Quiz now
Reviewer Name