While setting up a manufacturing unit, there are several factors to consider apart from land, machinery, finance, raw material, and manpower. Before constructing the plant or putting it for commercial use, entrepreneurs may need to obtain several licences, permissions, registrations, and NOCs (No Objection Certificates) from various regulatory agencies.
A common mistake that many entrepreneurs make is to ignore approvals as an integral part of plant construction. Some licences may impact the choice of the land, layout, plant location, storage, utilities, and safety. Hence, missing out on some critical permissions may lead to venture delays or increased cost.
The permissions needed would depend on the product, process, location, capacity, pollution, and storage, along with state-specific rules.
Why authorization should be planned early
It is not unusual for an entrepreneur to purchase land and prepare the layout without considering statutory requirements. However, it may result in several challenges when a regulatory authority asks for modifications to the plan or layout.
For instance, chemical plants, handling combustible or flammable products, have unique requirements related to safety, distance, and storage. Similarly, pollution control boards often ask for specific permissions based on the type and quantum of activity.
Proper venture planning must factor in an authorisation matrix even before the capital is committed for plant construction.
The matrix must highlight the following details:
Particular Authorisation/Licence/Registration
Concerned authority
At what stage
Documents needed
Processing time
Cost/fees (if any)
Validity and renewal
Person responsible
A simple exercise can save significant project costs by avoiding several authorization-related delays.
Approvals and NOCs needed for a manufacturing project
Land and Building Authorizations
Before finalizing a plot for a factory, entrepreneurs must ensure that it complies with all land-use rules. It may include obtaining approval for land use, industrial plot, building plan permissions, site plan permissions, local development authority approvals, water and drainage permission, and electricity clearances.
Industrial estates may have their own approval policy and checklist. For instance, Gujarat Industrial Development Corporations enlist building plan, fire, environmental, and utility authorizations as part of industrial development permission, while others depend on the industry.
Pollution Control Board Authorizations
Complying with the pollution norms is one of the critical aspects of any manufacturing project. Some units may require Consent to Establish (CTE) and Consent to Operate (CTO) clearances based on their category.
The requirements differ from one industry to another. Further, some changes have been proposed in consent norms, making it essential to cross-verify the latest guidelines for the proposed venture category.
An entrepreneur must consider the following aspects:
- Air emission
- Wastewater
- Hazardous waste
- Solid waste
- Process emission
- Effluent
- Waste storage
- Environmental monitoring
It is always better to address such issues early than to make expensive amendments later.
Factory Licence
A factory licence is mandatory for any manufacturing unit, which also requires registration under labour and factory laws.
The application for a factory licence typically requires submitting the following documents:
- Factory building plan
- Process
- Machinery
- Raw material
- Site plan
- Workers
- Safety
As per government websites, factory applications mandate providing details such as details of the manufacturing process, layout and other relevant plans, machinery, raw materials, and applicable NOCs.
Fire NOC
Fire NOC assumes great significance for a factory dealing with flammable, combustible, or gas-producing substances or having large storage, warehousing, processing plants, high electrical load, or processing areas.
The fire department typically evaluates the fire safety plan and scrutinizes the layout, fire hydrants, alarms, exits, storage, road access, and other relevant details.
For some of the applications mentioned above, fire department consent/NOC and fire safety documents may be mandatory.
PESO Approvals
The Petroleum Explosive Safety Organisation (PESO) regulates petroleum, gas, explosives, and pressure vessels. Several approval are mandatory before any activity can commence at a plant dealing with petroleum products, gas, and pressure vessels.
Further, PESO conducts inspections and lays down standards for petroleum and gas installations concerning safety, storage, and transportation. As such, the application for PESO approvals is crucial for ensuring the smooth passage of a venture.
A plan may require approval depending on the materials being stored, stored in large quantities, the equipment being used, applicable rules, and PESO guidelines. Hence an entrepreneur should not mandate PESO approval for all chemical plants as it depends on various factors.
Electrical Approvals and Water Connections
Apart from the approval mentioned above, a project may also need approval concerning high-tension electricity connections, electrical installations, transformers, DG sets, electrical safety inspections, water connections, groundwater permission (if any), and steam or boiler approval if applicable.
Such approvals must be planned as a part of the engineering design and not as an afterthought.
Boiler and Pressure Equipment Approvals
A boiler and pressure equipment approval may be mandatory for a plant using a boiler or pressure vessel, gas cylinders, etc. It becomes even more critical for process industries involving the production of steam, gas, hydrogen, oxygen, etc.
For instance, PESO has several approval mandated for pressure vessels and compressed gas installations as per the relevant rules.
Hazardous Waste Authorisation
Chemical and process industries generate a range of hazardous waste, including waste containers, spent chemicals, sludge, solvents, residue, etc. A plan should consider the following:
- Type of waste generated
- Quantum of waste generated
- Storage of waste
- Treatment of waste
- Waste disposal procedure
- Authorised waste disposal agency
- Maintaining records of the waste authorized for disposal
Again, these aspects must be kept in mind while designing the plan to avoid additional expenditures later.
Why absence of permissions cause plan delays
Most approval are not applicable to individual departments but cut across departments. For instance, if a change in the layout is required to meet the approval conditions, it can impact several factors, including layout, civil work, machinery placement, utilities, and safety.
Further, the alterations can also add to the venture cost and schedule, impacting the implementation timeline.
Statutory planning must always be aligned with DPR, engineering design, costing, and project schedule. Apart from that, the bank or financial institution sanctioning the loan may also ask for such details.
How a DPR can help
A detailed project report (DPR) must always include a compliance section that highlights various approvals applicable to the plan.
For an industrial plan, the following must be included:
- License applicable
- Various regulatory approvals, including Environment, Labour, Factories, Fire safety, etc.
- Environmental aspects, if any
- Factory requirements, if any
- Fire and safety aspects
- Utility approvals
- Chemical storage requirements, if any
- Project implementation schedule
- Additional expenditures on approvals and compliances
Once again, this will assist an entrepreneur to have a bird’s-eye view of the plan before committing substantial funds.
Approvals planning checklist
Before constructing the plant, entrepreneurs may consider the following:
- Is the land proposed for our factory suitable for the intended activity?
- Has the environmental assessment been completed?
- Is CTE or any other pollution-related approvals mandatory?
- What are the factory registration/license requirements?
- Is there a need for FSNOC?
- Are there any PESO approvals applicable?
- Is any boiler or pressure equipment consents mandatory?
- Are there any electrical approvals mandatory?
- Is any hazardous-waste authorization mandatory?
- Are there any consents for the local building and development authority?
- Are there any water or utility consents mandatory?
- Are all consents mapped in the plan schedule and budget?
Final thoughts
Licenses and NOCs must always be considered an integral part of an industrial project. Ideally, approvals must be mapped during the DPR stage before selecting the location, layout, machinery, and plan cost.
The requirements differ from one state to another depending on the industry, capacity, raw material, storage, and process. Hence, there is no standard approval list that applies to all projects.
A project report must encapsulate not only the viability of the project from a market perspective but also technical, statutory, cost, and implementation aspects.
Frequently Asked Questions
1. What is the first approval that is needed for a manufacturing project?
Every project is different, and there is no particular approval that is mandatory for a manufacturing project. The requirements differ based on the plan location, category, and activity. Hence an entrepreneur must evaluate the authorizations based on the given project.
2. Is a pollution NOC mandatory for a factory?
Every project has unique requirements based on the industry category and environmental impact. Further, the requirements are also dictated by the current rules and regulations.
3. When should an entrepreneur identify permissions?
The ideal time to identify permissions is during the feasibility and DPR stage.
4. Is there a mandatory Fire NOC for manufacturing projects?
It depends on the construction, activity, occupancy, fire risk, state, and local rules. Hence an entrepreneur must evaluate the requirements based on the project needs.
5. Is PESO approval mandatory for all chemical plants?
It depends on the materials, storage, quantity, equipment, and rules. Hence an entrepreneur must evaluate the requirements based on the project needs.
