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Ease of Doing Business Journey

The World Bank Ease of Doing Business Ranking was initiated in 2006 to rank countries on how conducive their business environment is to attract and support investors throughout the lifecycle of a business. In order to support this vision and recognizing the key role that states have to play in it, in India, a country-wide assessment and ranking of states on Ease of Doing Business was initiated by the Department for Promotion of Industry and Internal Trade(DPIIT) in association with the World Bank. The DPIIT, in 2015, onwards started releasing a list of recommendations (called Business Reform Action Plan) across various focus areas and assessed states on the implementation status of these recommendations. The objective of this exercise was to foster healthy competition among the states and in the process, collectively improve the business environment across the country to boost investor sentiment and attract investments.

In view of the above, Government of Kerala had decided to undertake reforms to help place the State on an equal footing amongst other top ranked States. As also, specific areas for improvement had been identified in various aspects of doing business in the State.

With this objective in mind, the Government of Kerala appointed Kerala State Industrial Development Corporation Ltd (KSIDC) as the nodal agency to implement the World Bank directed Ease of Doing Business initiatives in the State in liaison with other Departments / Agencies. In June 2016, KSIDC had entrusted an agency to undertake a study to reform the existing Rules and Acts and processes related to clearance procedures for starting, running and winding an enterprise under the 'Ease of Doing Business' initiatives.

The study was conducted in 4 phases, which are: As-Is analysis of the current legislative and procedural framework governing the issue of clearances; Study of leading practices in other states; Gap Analysis and Recommendations; Implementation roadmap in consultation with Department stakeholders. The study commenced during the last week of June 2016 and the total duration of the study was 120 days.

The Acts, Rules and procedures followed for issuing clearances, licences and registrations by 20 Departments/Agencies were examined as part of the study, with an objective to identify repetitive or obsolete clearances that could be avoided. As also, to bring about a streamlined process flow for evaluating applications so that they can be cleared in a time bound manner.

The final report on the Ease of Doing Business study was submitted by the agency on 22.11.2016 and the same has been approved by the Hon’ble Council of Ministers (Cabinet), Govt. of Kerala on 05.04.2017.

In view of the recommendations in the EoDB report, M/s National Informatics Centre (NIC) was engaged to develop KSWIFT-online clearance mechanism (http://kswift.kerala.gov.in) and an online Common Application Form (CAF), unifying the applications of the concerned departments/agencies, for speedy disposal of clearances in the State. KSWIFT, the online platform, for obtaining clearances was launched by Hon’ble Chief Minister during ASCEND KERALA 2019. Since then __ applications have been received through the system and approvals given.

Based on the recommendations of the study report by the Agency, amendments to following seven Acts were prepared by KSIDC and vetted by the concerned departments. The same was approved by the Cabinet and an Ordinance issued on 20.10.2017. The Act published Amendments to the following Rules based thereon had also been prepared by KSIDC and put up to Government; the same have been cleared by the concerned departments and are being issued shortly.

Amendments to Acts:

  • The Kerala Panchayat Raj Act, 1994
  • The Kerala Municipality Act, 1994
  • The Kerala Lifts and Escalators Act, 2013
  • The Kerala Groundwater (Control and Regulation) Act, 2002
  • The Kerala Head Load Workers Act, 1978
  • The Kerala Shops and Commercial Establishment Act, 1960
  • The Kerala State Single Window Clearance Boards and Industrial Township Area Development Act, 1999

Amendments to Rules:

  • The Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and factories) Rules, 1996
  • The Kerala Panchayat Raj (Profession Tax) Rules, 1996
  • The Kerala Municipality (Registration of Private Hospitals and Private Paramedical Institutions) Rules, 1997
  • The Kerala Panchayat Raj Building Rules, 2011
  • The Kerala Municipality Building Rules, 1999
  • The Kerala Factories Rules, 1957
  • The Kerala Inter-State Migrant Workers (Regulation of Employment and Condition of Service) Rules, 1983
  • The Kerala Contract Labour(Regulation and Abolition) Rules, 1974
  • The Building and Construction Workers(Regulation of Employment and Condition of Service(Kerala)) Rules, 1998
  • The Kerala Motor Workers Rules, 1962

An Investment Promotion and Facilitation Cell (IPFC), has been constituted by Govt. (vide G.O (Ms.)No.100/2017/ID dtd.12.10.2017.) comprising of nodal officers from concerned departments / agencies; towards facilitating the online clearance system and coordinating inspections among departments / agencies. The Cell is mandated to track the progress of applications submitted online, obtain regular feedback from the stakeholder departments / agencies, remove bottlenecks if any and ensure time-bound disposal of applications. MD, KSIDC is the ex-officio CEO of the State cell to be stationed in KSIDC; the requisite infrastructure is to be provided by KSIDC at the Thiruvananthapuram office. The IPFC shall function at the district levels also.

The key advantages to the entrepreneurs, based on the Ordinance issued and amendments made in the Rules are highlighted below:

  • Employers shall no longer be obliged to hire the services of headload workers if they have their own manpower or machinery for loading/unloading tasks. An employer may henceforth arrange loading and unloading operations on his own.
  • Changed the name of "Dangerous & Offensive Trades and Factories" licenses for starting and running enterprises to a more industry friendly "Factories, Trades, Entrepreneurship Activities and Other Services", thereby removing all negative connotations.
  • Eliminated the need for NOC from the DMO for undertaking all activities. Henceforth, Clearance from District Medical Officers to be applicable only for hospitals, clinics, laboratories and paramedical institutions.
  • Specific time limits (15 days) fixed for issue or rejection of licenses beyond which deemed licences will be issued.
  • Approval based on Self-certification and Third party certification for specific levels is implemented in the State for clearances from LSG / PCB / CTP / Fire & Rescue. However, misrepresentations if any detected later, a penalty of maximum of Rs.5 lakhs shall be charged.
  • The power of the Local Body to issue stop memos to industries that have obtained all statutory approvals, on receiving complaints about nuisance created by the venture has been taken away; instead, the local body has to seek an expert opinion from the concerned departments and take action based on that.
  • Stop memos/prohibitory notices to be issued, if any, only if the establishment fails to comply with the corrective norms of the technical departments within the stipulated time frame.
  • Licences to be issued with a validity of 5 years and renewal of the same will also be for 5 years. Renewal will be automatic based on fee payment with no separate application process.
  • Introduction of self-certification for green category industries for Pollution Control Board and self-certification for factory licence from Factories & Boilers, for factories with less than 25 workers.
  • Investment Promotion and Facilitation Cell constituted on behalf of Kerala State Single Window Board and will be responsible for smooth interaction with applicants and issuing speedy approvals.
  • Single Window Board to have the power to issue composite clearances that will be binding to all departments/agencies. Deemed licenses may be issued by the respective Boards in cases where the stipulated time period of 30 days have exceeded.
  • Extraction of ground water below limits fixed for the Block concerned shall be permitted on the basis of self-certification of the unit concerned; however, in case of misrepresentation, a penalty of Rs.5 lakhs may be imposed.
  • All persons extracting ground water are now required to make provisions for treating, recycling and reusing used ground water.
  • The licence for lifts and escalators may now be issued for 3 years instead of 1 year at a time.
  • Only two documents required for obtaining electricity connections – proof of identity and proof of legal occupancy.
  • Coverage Area and Floor Area Ratios have been increased in the relevant rules thereby increasing he available land for construction
  • Categorizations of industrial activities in the 'Hazardous' category has been linked to the definition in Factories Act. The access road width, set back etc. will henceforth be dependent on this classification.
  • Delegation in powers of approval from the Department of Town and Country Planning have been ensured, with CTP being the appellate authority
  • Spot registration introduced under 5 labour laws
  • Orders issued for inspections to be done on the basis of a risk assessment of units, with the more risky to be inspected more often. Provision for joint inspection by departments have been introduced.
  • An online single window clearance mechanism (SWIFT) including online Common Application Form (CAF), unifying the applications of the concerned departments/agencies with online payment provision, for speedy disposal of clearances in the State have been introduced. Defined registration process for profession tax payers

Government of Kerala has also implemented an Invest Kerala Portal (https://invest.kerala.gov.in/), which is a single window facilitator for investment promotion for prospective and aspiring investors. The Invest Kerala Portal is the common repository for land bank details, investor wizard, various services, schemes, lenders etc.

With policies in place, the state government also identified priority sectors has also identified priority sectors viz., Petrochemical, Life science, Electronics, Food processing and Defence as the key drivers of growth for the years to come.

The Government has ensured setting up of dedicated industrial parks for each of the priority sectors enabling an all encompassed environment for industries in these sectors to start business. The Life Science Park with a total area of 75 acres is situated in Trivandrum, The Electronics Hardware Park with a total area of 100 acres is situated in Ernakulam District, Defense Park with a total area of 60 acres is situated in Palakkad District, Petrochemical Park with a total area of 481.79 acres is situated in Ernakulam District and the two Mega Food parks are situated in Palakkad and Alapuzha districts with an extent of 147.42 Acres.

The industrial parks would be the most prestigious projects of the State Government, promoting manufacturing, assembling units and R&D centers. Also, the State Government have put in place schemes for subsidy, grants etc. for industries being set up in the State. The state has developed allottable industrial land of over 2000 acres.

Apart from the aforesaid reform initiative the Government is keen to bring in further reform initiatives to spur the industrial growth by establishing a trusted environment between the Government and Entrepreneurs and they are:

  • To exempt all projects having capital investments up to Rs 10 Cr. and not falling under red category as notified by Pollution Control Board from licenses, approvals, permits etc. under various Acts for the first three years.
  • Strengthening of existing Single Window Boards at State, District and Industrial Parks by bringing amendments to the Kerala State Single Window Clearance Boards and Industrial Township Area Development Act, 1999

Government of Kerala have taken earnest and proactive steps to improve the business environment in the State. The amendments / modification made as a part of the Ease of Doing Business initiatives and the industrial infrastructure will create an enabling environment for establishing, running and winding up enterprises in the State. Kerala is now transforming itself as an emerging destination for setting up industries and doing business. It tops the chart in many social indices, and stands as the safest and secure State with peaceful and harmonious living. The State become a center point for investors, with its advantages of abundant skilled labour and educated human resources. The State could facilitate more industries and production centers given its industrial infrastructure across the state.

All the above positive factors help to accelerate the brand Kerala and to make it shine and prosper by ensuring a warm and healthy industrial environment and to make it a most sought-after industrial destination in the Country.