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Image Courtesy: Tyre Corporation of India Ltd
The Department of Industrial Policy and Promotion (DIPP) has set a benchmark in the administrative efficiency by taking small but swift steps in the reforms process under the Modi Government.
DIPP, in consultation with Department of Defence Production (DODP) and Ministry of Home Affairs (MHA), has brought about a significant change in licensing regime through step-by-step approach.
DIPP continues to take one initiative after another often without facilitating ‘sound-bites’. The latest initiative in the pipeline is to convert State Governments’ delayed response to applications for defence projects into a “deemed approval.”  
According to a proposal discussed at a recent inter-ministerial meeting, a large number of defence licensing proposals are pending for want of comments of States where the projects are to be located. Certain applicants are also held up pending receipt of foreign investment clearance from Foreign Investment Promotion Board (FIPB). 
For timely clearance of applications, DIPP has proposed that “in future, in cases where State Government has not responded within three months, deemed approval may be inferred.” 
Similarly, industrial licence for defence equipment manufacturing may be issued with the stipulation that it would be subject to grant of FIPB approval. 
At a meeting held on 26th September 2014, Industrial Licensing Committee (ILC) opted for parallel processing of license applications and related foreign investment proposals by FIPB. 
This internal decision was taken after DIPP noted that DODP was returning the licence applications that envisaged foreign equity participation or already has foreign equity stake. DODP’s stand in such cases was that the applicant should first secure FIPB approval. Subsequently, DODP would submit its comments on the applications to DIPP for consideration of ILC.
The Committee thus decided that parallel processing of the applications for FIPB clearance and for licensing approval should be done to avoid delay in processing of proposals. 
DIPP has set a new efficiency norm in expeditious conversion of certain reforms initiatives into a notification, announcing them as Government’s policy decisions. DIPP took less than a month to move a few initiatives from putting agenda notes for ILC’s consideration to their notification as Government’s decisions.
It announced on 20th October 2014 the Government’s decision to dispense with stipulation of annual production capacity in the industrial licence. It also liberalized marketing of defence equipment within the Government sector.  DIPP also increased the validity of licences to seven years.
This administrative efficiency should serve as wake-up call for other ministries especially Ministry of Home Affairs (MHA), which is known for delaying submission of its comments on licence applications. MHA has also delayed the start of manufacture of small arms in the private sector for several years.
Similarly, the Department of Fertilizers is known for dragging its feet for years over grant of approvals for setting up of urea projects. 
Normally, departments take about 7-15 days to circulate the minutes of meeting of standing committees. Later, the committee’s recommendation is drafted as note for consideration of the ‘competent authority’.   In this case, the final competent authority happens to be the Minister of State for Commerce and Industry, Nirmala Sitharaman.  It is not clear whether the proposals required approval from higher political authorities.
DIPP first discussed reforms proposals with officials of Department of Defence Production (DoDP), MHA and Ministry of Civil Aviation (MOCA) at a meeting convened on 16th September. Later, it put the reforms proposals as a policy agenda items for a meeting of ILC held on 26th September. 
ILC has also cleared many applications that were pending for a few years for want of clarity on foreign institutional investment in the defence sector and on the list of defence items that required industrial licence. 
The industrial licensing approval for several applications became redundant after clarity on these issues achieved by the Modi Government. ILC thus promptly disposed of such cases. 
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