How to Obtain a Factory License in India?

Factory owners in India are required to get their factory registered with the local authorities of their region under the Factory Act, 1948. The license issued by the local authorities is called a ‘Factory License’.

The Government of India introduced Factory Act, 1948 in order to safeguard the workers, and to affirm that factory owners are giving them a healthy and sound work environment. The Department maintains the record of each factory satisfying the conditions of the Factories Act, 1948 regarding their workers, power consumptions, chemical usages and accepts returns that fall under various acts from those companies on a periodical basis.

It is the responsibility of the Department of Factories and Boilers to issue factory licenses and ensure the safety and welfare of the workers.

Governing laws

Matters pertaining to factory licenses are primarily governed by Section 6 of the Factories Act 1948 and the state factories rules.

Category

• A factory with minimum of 10 workers and consuming power.
• A factory with minimum of 20 workers and without consuming power.

Note: The above two categories fall under the ambit of Factory Act, 1948.

Factories are further categorized into two subcategories:

• Hazardous Factories: Some hazardous processes are carried out in the factories, which can be harmful to workers and the environment if no proper care is taken.
• Non-Hazardous Factories: No hazardous processes are conducted at these factories and, therefore, there is negligible risk to the workers and the environment.

Objective of Factory License

• Specific provisions for employees such as safety, hygiene, working hours.
• Avail legal benefits (state department schemes, startup scheme and other government benefits).
• Enhance productivity.
• Ensure equal benefits (concept of Equal Pay for Equal Work).
• Regulate various other matters such as holidays, leaves, maternity benefits, child employment, hiring, termination, etc.

Pre-Requisite for Factory License

• Factory building/premises: Factory building or premises wherein manufacturing activities are carried out.
• NOC (No Objection Certificate) from the fire, water and pollution board: No Objection Certificate from various departments such as fire, water, explosive (as applicable), pollution control board, and electrical safety must be obtained.
• Factory layout plan: Layout plan to ensure all production equipment and machinery is rationally placed and ensure maximum efficiency and fuller utilisation of the space and must be flexible/adaptive to changes.
• A Notice must be sent to the Chief Inspector containing information such as name, address of occupier, location of factory premises, number of workers, nature of manufacturing activity etc.

Documents required for Obtaining Factory License

The below mentioned documents are required to obtain a factory license:

• Owner ID & Address Proof: A valid ID and proof of address. PAN, Aadhar and other KYC documents can be submitted for this purpose.
• Proof of Address of the Factory Premises: Any utility bills or documents that can establish the address of the factory premises.
• Consent from the Pollution Department: A consent-document from the pollution control department stating that the factory adheres to the relevant environmental standards.
• NOC from Fire & Water Departments: NOCs from the fire and water departments stating that the factory adheres to safety standards.
• Copy of Business PAN Card: Copy of the PAN card of the business entity. In case of company, Certificate of Incorporation, Memorandum of Association (MOA), Articles of Association (AOA), PAN, Goods and Services Tax Identification Number (GSTIN) of the company are required.
• Factory Layout and Building Plan: All the details of layout and construction plans for the factory’s premises.
• List of Directors: Credentials and details of all the company’s directors.
• Board Resolution or Partnership Deed: Apt legal drafts that showcase the factory owner’s right to file the application for a factory license.
• Particulars of Equipment and Raw Materials: All the details of the equipment, machines and raw materials used for the manufacturing processing along with the production capacity and list of all the products must be submitted.
• Particulars of Hazardous and Non-Hazardous Wastes: Details of how the factory’s hazardous and non-hazardous wastes will be managed and disposed of.
• Tax Receipts: Receipts of taxes paid such as Income Tax, GST, TDS, TCS and other applicable taxes paid.

Registration Process

• The factory owners must submit the factory plan to the state’s labour department. This must be submitted before the expansion or construction of a factory. Once the factory plan is approved, the factory owners can apply for a factory license.
• Owners must submit the application in Form-2, the relevant documents and the prescribed fees to the Director of Factories and Boilers.

Form 2 contains information such as name of factory, address, name and address of occupier, nature of manufacturing activity, details of workers, factory construction details etc.

• After the department receives the application, it shall be examined by the relevant authority.
• After the documents are reviewed, if everything is found to be correct, the process will be sent for the relevant authority’s approval.
• The documents are also scrutinized and if all is in place, the process is sent for approval to the concerned authority.
• The Inspecting Officer may visit the factory premises to carry out inspection.
• If any discrepancy is found in the application, the applicant needs to rectify the errors and re-submit in the stipulated timeframe.
• Once approved, a license and the registration certificate shall be provided, for which a cover letter would be needed.

Fees for Factory License

As prescribed and to be paid after submission of application (depending on horsepower installation of the factory).

Example I

Factory license in the state of Maharashtra:

1.    Obtain Maharashtra Pollution Control Board License.

2.    Appoint factory occupier.

3.    Submit Site and machine layout plan for approval in Form 1 to the Directorate of industrial Safety & Health office (INR 10 court fee stamp duly affixed) (https://lms.mahaonline.gov.in/)

Steps:

i.    Log on to the web site https://lms.mahaonline.gov.in/.

ii.    Click on “Create Employer User Profile”.

iii.    Furnish the details and complete the Registration process on the MAITRI portal.

iv.    Complete and submit the Common Application Form (CAF).

v.    Select the service provided as Approval of Plan from Directorate of Industrial Safety and Health Department.

vi.    Read the instruction carefully and confirm it.

vii.    Fill in the Questionnaire.

viii.    Fill in the details and complete Form-1 and upload the signed form on the portal.

ix.    Upload recent photograph and signature.

x.    Upload necessary documents – list attached.

xi.    Pay the necessary fees online.

xii.    Two copies of the plans to the relevant Directorate of Industrial Safety and Health office through Speed Post or trackable courier system.

xiii.    The application and plans shall be examined by the relevant department. If everything is correct, the same plans shall be approved within 45 days.

xiv.    You can download the approval letter from the same Login ID.

xv.    If the application is incomplete or filled with incorrect details, it shall be rejected.

xvi.    In case the application is rejected, you can apply again within 30 days.

4.    After approval of above, submit application in Form 2 for grant of license.

5.    Fees of the license depends on number of workers, horsepower installed and area of the factory premises.
 

Note: The exact process may vary from state-to-state. The above-mentioned example explains the process for the state of Maharashtra.

Penalties

In case the factory owner violates the provisions of Factory Act, 1948, he shall be liable for imprisonment for up to one year, a fine of up to INR 1 lakh or both.

Renewal of factory license

The factory license is valid for one year, followed by renewal each year. The process of renewal is the same as that for obtaining a new license.

Conclusion

Considering the importance of obtaining a factory license, owners must make sure to comply with all the relevant regulations, fulfill the necessary requirements and adhere to the defined procedure to obtain the license to avoid facing any unnecessary hassles. However, if you do make a mistake during the process, you can apply for a factory license again after a certain period.


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