2. Agenda
Cement Industry
• Industry Overview
Incorporation of a Cement Company
• Private/Public Entities
• Joint Ventures/Subsidiaries
• Requests to RoC
• Flow-chart view
Industrial Policies
• Industrial Licensing, IEMs , Location Policies
• Procedures for Approval for E0Us/EPZs/FTZs/SEZs
List of approvals/clearances and departments
Government Involvement(Specific Acts and policies)
List of Applicable Labour Laws in the Sector
Legal Challenges to Cement Industry
3. Industry overview
•Cement plants: 139
Large cement plants •Effective capacity: 234.3 mtpa
Cement industry
Mini & White cement •Cement plants: 365
plants •Effective capacity: 11.1 mtpa
Exports to more 30
2nd largest market in the
countries generating
world , 7–8 per cent of
employment for 50,000
global production
people
Per Capita consumption
Annual production of more
around – 170kg, world
than 1 mn tonnes
average 430 kg
*Source : Ambit capital, Aranca research
4. Incorporation: An overview
COMPANIES ACT 1956
• Governs Incorporation of a company in India
• Part II of the Act deal with the incorporation of a company and matters related thereto
Public Company Private Company
Minimum Paid-up Capital - 100,000 Minimum Paid-up Capital - 500,000
Minimum number of members: 2 Minimum number of members: 7
Maximum number of members : 50 Maximum number of members : Unlimited
Transerferability of shares : Transerferability of shares :
Complete restriction No restriction
Issue of Prospectus : Cannot Issue of Prospectus : Can
issue prospectus issue prospectus
Number of Directors : < =2 Number of Directors : >=3
* A public company is a private company which is a subsidiary of a company which is not a private company.
5. Incorporation of a Cement Company
Obtaining approval for the proposed name of the company from the ROC (Form 1A) (Prevention of
Improper Use, Act-1950)
Drawing up the Memorandum of Association (Indian Stamp Act, 1899)
Drawing up the Articles of Association (Indian Stamp Act, 1899)
Getting the appropriate persons to subscribe to the Memorandum(Public company: Min. of 7,
Private company: Min. of 2)
6. Incorporation of a Cement Company
Payment of registration Fee to the ROC
Receipt of Certificate of incorporation
Obtain a certificate of commencement of business from ROC in case of a public
company
7. Starting Operations in India
Starting Taxation
Corporate tax rate for foreign companies is
operations 40%. The net tax rate includes various
deductions and exemptions available under
in India the tax laws. Tax holidays are available in
Special Economic zones. Infrastructure
Sector Projects enjoy special tax
treatment/holidays. Electronic filing of
As a Indian As a foreign customs documents is also there.
company company
Investment Facilitation
Secretariat for Industrial Assistance (SIA) in
Project Office Department of Industrial Policy and
Wholly owned Promotion, Government of India provides a
Joint Ventures Liaison Office single window service for entrepreneurial
subsidiaries
assistance, Investor facilitation and
Branch Office monitoring implementation of the projects.
8. By forging strategic alliances with Indian partners foreign companies get following advantages.
Joint Ventures •Established distribution/ marketing set up of the Indian partner
•Available financial resource of the Indian partners
•Established contacts of the Indian partners which help smoothen the process of setting up of operations
•100% FDI is allowed in cement industry
Wholly owned
•Application to be filed to registrar of companies
subsidiaries •Department of Company Affairs under Ministry of Finance is the regulatory authority
Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India with
Project Office RBI’s permission subject to specified conditions.
• No activity other than the activity relating and incidental to execution of the project
• Project Offices may remit outside India the surplus of the project on its completion
• Not allowed to carry out manufacturing activities on its own ,subcontract these to an Indian manufacturer.
Branch Office • Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of
applicable Indian taxes and subject to RBI guidelines
• A channel of communication between the principal place of business or head office and entities in India
• Cannot undertake any commercial activity directly or indirectly and cannot earn any income
Liaison Office • Its role is to collect information about market opportunities and providing info about the company and its products to
prospective Indian customers
•It can promote export/import from/to India and also facilitate technical/financial collaboration
9. Industrial Policy
All industrial undertakings
Industrial Licensing
are exempt from obtaining
1. Industries reserved for the Public Sector
an industrial license to
2. Industries retained under compulsory licensing
Manufacture, except for: Industrial Policy 3. Items of manufacture reserved for the small
Reforms scale sector
4. If the proposal attracts location restriction
Industrial Entrepreneurs Memorandum (IEM)
Removed restrictions on Facilitated easy access to
Reduced Industrial
investment and expansion foreign technology and
Licensing requirements
foreign direct investment
Industrial undertakings exempt 1. In Part ‘A’ with Secretariat of Industrial Assistance
from obtaining an industrial (SIA), DIPP, GOI, and obtain an acknowledgement
license are required to file an 2. After commencement of commercial production, Part ‘B’ of
IEM the IEM has to be filled
10. Industrial Policy
Locational Policy
In the case of cities with population of more than a million (as per
the 1991 census):
Industrial undertakings are
• The proposed location should be at least 25 KM away from the
free to select the location of
Standard Urban Area limits of that city
a project
• Located in an area designated as an "industrial area" before the
25th July, 1991
The location of industrial units is further regulated by the local zoning, land use regulations &
also the environmental regulations
Policy Relating to Small Scale Undertakings*
• Get registered with the Directorate of Industries/District Industries Centre in the concerned
State Government
• Also free from locational restrictions cited above
(An industrial undertaking is defined as a small scale unit if the investment
in fixed assets in plant and machinery does not exceed Rs 10 million)
11. Industrial Policy
Environmental Clearances
A Notification issued under The Environment Protection Act 1986 has listed 29 projects in
respect of which environmental clearance needs to be obtained from the Ministry of
Environment, GOI: Cement Industry is one of these.
Foreign Direct Investments Policy
• The GOI has allowed FDI up to 100% in the cement and gypsum products industry
• FDI can be bought through:
Automatic Government
Route Approval
New Existing Government approvals are accorded on the
Ventures Companies recommendation of the Foreign Investment Promotion
Board (FIPB), chaired by the Secretary, DIPP (Ministry of
RBI has given permission to Indian Cement Commerce and Industry) with the Union Finance
companies to accept investment under this Route Secretary, Commerce Secretary, and
without obtaining prior approval from RBI other key Secretaries of the Government as its members.
12. Industrial Policy
Clearances and Approvals Required
Approvals/Clearances Required Department to be Approached and Consulted
Incorporation of Company Registrar of Companies
Registration/IEM/Industrial license DIC for SSI/SIA for large and medium
industries
Allotment of land State DI/SIDC/Infrastructure Corporation /SSIDC
Permission for land use a. State DI
b. Dept. of Town and Country
Planning
NOC and consent under Water and Air Pollution Control Acts State Pollution Control Board
Approval of construction activity and building plan a. Town and country planning
b. Municipal and local authorities
c. Chief Inspector of Factories
d. Pollution Control Board
Weights and Measures Inspector of Weights and Measures
Quality Marking Certificate Quality Marking Center of the State Government
13. Industrial Policy
Regulation
Competition Commission of India is a body of the Government of
India responsible for enforcing The Competition Act,
2002 throughout India and to prevent activities that have an
adverse effect on competition in India. It was established on 14
October 2003
•The Competition Commission of India says that cement firms met regularly to fix
prices, control market share and hold back supply
• The Commission claims that cement companies in India had been organizing
Problem: themselves in a cartel for a while now, colluding, during industry body meetings,
to fix production levels as well as the price of a bag of cement — in this case
Cartelizing of cement doubling it between 2004 and 2011 — so they could make windfall, illegal profits
firms
• Consequently, the CCI has slapped a fine totaling Rs 6,307.32 crore on the top-10
cement companies here and the industry body Cement Manufacturers’
Association
14. Government Involvement
NODAL AGENCY
Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce
Rules and Orders, DIPP State Level Statutory Clearance
Site and Building Plan approval
Cement Control Order, 1967
Health clearance
Cement Cess Rule, 1993 Fire service clearance
Environmental clearance from State Pollution Control Board
Cement (Quality Control) Order,1995 Registration with Inspector of Factories under Factories Act
Registration under Boilers Act (For Boilers)
Cement (Quality Control) Order, 2003
Safety Certificate from Chief Electrical Inspector
15. Applicable Labour Laws
•Promotion of new manpower at skills and improvement/refinement of old
skills
APPRENTICES ACT, 1961 •Apprenticeship Advisor
•Obligations of employers and apprentice
•Offences and punishment
•To regulate the employment of contract labor and abolish it in certain cases
•Applicability
CONTRACT LABOUR ACT, 1970 •Revocation and amendment of licenses
•Liability of principal employer
•Eligibility
EMPLOYEES’ PROVIDENT FUNDS & •Benefits
MISC. PROVISIONS ACT, 1952 •Applicability
•Applicability of the act
EMPLOYEES’ STATE INSURANCE ACT •Benefits
1948 •Penalties
•Contribution period
16. Applicable Labour Laws
•Applicability of the Act
•Registration & Renewal of Factories
FACTORIES ACT, 1948 •Welfare Measures
•Employment of Young Persons
•Provisions for investigation and settlement of industrial disputes and for certain other purposes.
•Power of Labour Court to give appropriate Relief
INDUSTRIAL DISPUTES ACT, 1947 •Period of Operation of Settlements and Awards
•Prohibition of Strikes & Lock Outs
•Applicability of the Act
•Matters to be provided
STANDING ORDERS ACT, 1946 •PENALTIES
•Provide for fixing minimum rates of wages in certain employments
•Composition of Committee Penalties
MINIMUM WAGES ACT, 1948 •Payment of Minimum Rates of Wages
17. Applicable Labour Laws
•To provide for fixing minimum rates of wages in certain employments
MINIMUM WAGES ACT, •Fixing Hours for normal working
•Composition of Committee
1948 •Maintenance of registers and records
•Claims, Penalties, Offence, Punishment
•To provide for the registration of Trade Union & define the law relating to
registered Trade Unions
TRADE UNIONS ACT, 1926 •Minimum Requirement for membership of Trade Union
•Registrations and Cancellation of Trade Unions
•Penalties, Offence and Punishment
•To provide for the payment of equal remuneration to men and women
EQUAL REMUNERATION workers and for the prevention of discrimination
•Advisory Committee to regulate the process
ACT, 1972 •Power of Government for appropriation
•Penalties and Offence
18. Applicable Labour Laws
•To regulate the payment of wages of certain classes of employed persons
PAYMENT OF WAGES ACT, •Applicability and Coverage
1936 •Legal deductions
•Offences and Penalties
•To provide workmen and/or their dependents some relief in case of
WORKMEN’S accidents, arising out of and in the course of employment and causing
either death or disablement of workmen
COMPENSATION ACT, •Applicability, Coverage and Employer’s Liability
•Amount of Compensation
1923 •Report of Incidents and Penalties
•To provide for a scheme for the payment of gratuity to employees
PAYMENT OF GRATUITY •Applicability, Qualification, Nomination
ACT, 1972 •Forfeiture of Gratuity
•Protection of gratuity and Penalties
19. Environmental Laws and Acts
Stated in Constitution of Referred by Directive Guided by Fundamental
India Principles of State Policy Rights structure
Hazardous Waste The Public Liability The National
The Environment The National
(Management and Insurance Act and Environment
(Protection) Act - Environmental
Handling) Rules - Amendment -1991 & Appellate Authority
1986 Tribunal Act – 1995
1989 1992 Act – 1997
The Water The Water
The Forest The Air (Prevention
(Prevention and (Prevention and
(Conservation) Act – and Control of
Control of Pollution) Control of Pollution)
1981 Pollution) Act – 1981
Act – 1974 Cess Act – 1977
20. Practice required by law India China United States
Standard work day 9 hours 8 hours 8 hours
Severance pay for redundancy
dismissal of employee with 5 year 10.7 week salary 21.7 week salary None
tenure
Severance pay for redundancy
dismissal of employee with 1 year 2.1 week salary 4.3 week salary None
tenure
Premium pay for overtime 100% 50% 50%
Minimum Wage (US$/month) 29.9 182.5 1242.6
Minimum rest while at work 30 minutes per 5 hour None None
Maximum overtime limit 200 hours per year 1 hour per day None
Government approval required
Yes No No
for 9 person dismissal
Government approval required
Yes No No
for 1 person dismissal
Government approval
21. Legal Challenges to Cement Industry
Competition Act – 2002 ( Amendment in 2007)
• Competition Commission of India
• Competition Appellate Tribunal
•6300 Crore Rs Penalty on Cement Companies for cartelization
•Orders for CMA
Obsolete Labor Laws
• World Bank Report on Indian Labor Laws- 2008
•“………India’s labor regulations - among the most restrictive and complex in the world - have constrained the growth of the
formal manufacturing sector where these laws have their widest application. Better designed labor regulations can attract more
labor- intensive investment and create jobs for India’s unemployed millions and those trapped in poor quality jobs. Given the
country’s momentum of growth, the window of opportunity must not be lost for improving the job prospects for the 80 million
new entrants who are expected to join the work force over the next decade”…..
22.
23. Links
References
•http://www.cmaindia.org/– Cement Manufacturers’ association
•www.mhupa.gov.in - Ministry of Housing and Urban Poverty Alleviation
•www.cidc.in – Construction Industry Development Council , set up by Planning Commission
•www.ncbindia.com – National Council for Cement and Building Materials
•www.dipp.nic.in – Department of Industrial Policy and Promotion under Ministry of Commerce and Industry, Govt of India
•http://www.fipbindia.com/ - Foreign Investment Promotion Board
•http://www.mca.gov.in/ - Ministry of Corporate Affairs
•http://finmin.nic.in/ - Ministry of Financial Affairs
•http://moia.gov.in/ - Ministry of Overseas Indian Affairs
•http://envfor.nic.in/ - Ministry of Environment and Forests
•http://www.investindia.gov.in
Articles, Papers and Reports
•FDI Circular for consolidated FDI policy 2012- Department of Industrial Policy and Promotion under Ministry of Commerce and Industry,
Govt of India
•The Labour Laws Manual
•Indian Cement Industry – CII
•The Competition (Amendment) Act, 2007 – Competition Commission of India
•Equal Remuneration Act, 1976
•Ninety fifth report on performance of cement industry – Parliament Report ( Presented to Rajya Sabha & lok sabha in 2011)
