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INCORPORATING A CEMEN
MANUFACTURING UNITA LEGAL PERSPECTIVEACTS, LAWS AND
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AgendaCement 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/SEZsList of approvals/clearances and departments
Government Involvement(Specific Acts and policies)
List of Applicable Labour Laws in the Sector
Legal Challenges to Cement Industry
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Industry overview
Cement industry
Large cement plants
Mini & White cement
plants
Cement plants: 139
Effective capacity: 234.3 mtpa
Cement plants: 365
Effective capacity: 11.1 mtpa
*Source : Amb
2ndlargest market in theworld , 78 per cent of
global production
Exports to more 30countries generating
employment for 50,000people
Annual production of morethan 1 mn tonnes
Per Capita consumptionaround170kg, world
average 430 kg
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Incorporation: An overviewCOMPANIES ACT 1956
Governs Incorporation of a company in India
Part II of the Act deal with the incorporation of a company and matters related there
* A public company is a private company which is a subsidiary of a company which is not a privat
Private CompanyPublic Company
Minimum Paid-up Capital- 100,000 Minimum Paid-up Capital- 50
Minimum number of members: 2 Minimum number of member
Maximum number of members: 50 Maximum number of membe
Transerferability of shares :
Complete restriction
Transerferability of shares :
No restriction
Issue of Prospectus : Cannot
issue prospectus
Issue of Prospectus : Can
issue prospectus
Number of Directors : < =2 Number of Directors : >=3
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Incorporation of a Cement Com
Getting the appropriate persons to subscribe to the Memorandum(Public compPrivate company: Min. of 2)
Drawing up the Articles of Association (Indian Stamp Act, 1899)
Drawing up the Memorandum of Association (Indian Stamp Act, 18
Obtaining approval for the proposed name of the company from the ROC (Form 1Improper Use, Act-1950)
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Incorporation of a Cement Com
Obtain a certificate of commencement of business from ROCcompany
Receipt of Certificate of incorporation
Payment of registration Fee to the ROC
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Starting Operations in Ind
Starting
operationsin India
As a Indiancompany
Joint VenturesWholly owned
subsidiaries
As a foreigncompany
Liaison Office
Project Office
Branch Office
Taxation
Corporate tax rate f40%. The net tax ra
deductions and exe
the tax laws. Tax ho
Special Economic zo
Sector Projects enjo
treatment/holidays
customs document
Investment Secretariat for Indu
Department of Indu
Promotion, Govern
single window serv
assistance, Investor
monitoring implem
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Joint Ventures
Wholly owned
subsidiaries
By forging strategic alliances with Indian partners foreign companies get following advantages.
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 o
100% FDI is allowed in cement industry
Application to be filed to registrar of companies
Department of Company Affairs under Ministry of Finance is the regulatory authority
Liaison Office
Branch Office
Project Office
Foreign Companies planning to execute specific projects in India can set up temporary project/site of
RBIs 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 manufa
Branch Offices established with the approval of RBI, may remit outside India profit of the branch, ne
applicable Indian taxes and subject to RBI guidelines
A channel of communication between the principal place of business or head office and entities in I
Cannot undertake any commercial activity directly or indirectly and cannot earn any income
Its role is to collect information about market opportunities and providing info about the company a
prospective Indian customers
It can promote export/import from/to India and also facilitate technical/financial collaboration
d l l
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Industrial PolicyReforms
Reduced IndustrialLicensing requirements
Removed restrictions oninvestment and expansion
Facilitatedforeign te
foreign dir
Industrial PolicyIndustrial Licensing
All industrial undertakings
are exempt from obtaining
an industrial license to
Manufacture, except for:
1. Industries reserved for the P
2. Industries retained under co
3. Items of manufacture reserv
scale sector
4. If the proposal attracts locat
Industrial Entrepreneurs Memorandum (IEM)
Industrial undertakings exempt
from obtaining an industrial
license are required to file an
IEM
1. In Part A with Secretariat of Industrial Assi
GOI, and obtain an acknowledgement
2. After commencement of commercial produ
the IEM has to be filled
I d i l li
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Industrial Policy
Industrial undertakings arefree to select the location of
a project
In the case of cities with population of more than
the 1991 census):
The proposed location should be at least 25 KM
Standard Urban Area limits of that city
Located in an area designated as an "industrial a
25thJuly, 1991
The location of industrial units is further regulated by the local zoning, land use reg
also the environmental regulations
Policy Relating to Small Scale Undertakings*
Locational Policy
Get registered with the Directorate of Industries/District Industries Centre in the
State Government
Also free from locational restrictions cited above
(An industrial undertaking is defined as a small scale uin fixed assets in plant and machinery does not exceed
I d i l P li
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Industrial Policy
A Notification issued under The Environment Protection Act 1986 has listed 29 pro
respect of which environmental clearance needs to be obtained from the MinistryEnvironment, GOI: Cement Industry is one of these.
Foreign Direct Investments Policy
Environmental Clearances
The GOI has allowed FDI up to 100% in the cement and gypsum products industr
FDI can be bought through:
AutomaticRoute
NewVentures
ExistingCompanies
GovernmentApproval
RBI has given permission to Indian Cement
companies to accept investment under this Route
without obtaining prior approval from RBI
Government approvals are accorded
recommendation of the Foreign Inv
Board (FIPB), chaired by the Secreta
Commerce and Industry) with the U
Secretary, Commerce Secretary, and
other key Secretaries of the Govern
I d t i l P li
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Industrial PolicyClearances and Approvals Required
Approvals/Clearances Required Department to be Approached and
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
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 Gove
I d t i l P li
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Industrial PolicyRegulation
Problem:
Cartelizing of cement
firms
The Competition Commission of India says that cement fi
prices, control market share and hold back supply
The Commission claims that cement companies in India h
themselves in a cartel for a while now, colluding, during ind
to fix production levels as well as the price of a bag of cem
doubling it between 2004 and 2011 so they could make
Consequently, the CCI has slapped a fine totaling Rs 6,307
cement companies here and the industry body Cement Ma
Association
Competition Commission of Indiais a body of theIndia responsible for enforcing The Com
2002 throughout India and to prevent activitie
adverse effect on competition in India. It was es
October 2003
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Cement Control Order, 1967
Cement Cess Rule, 1993
Cement (Quality Control) Order,1995
Cement (Quality Control) Order, 2003
Site and Building Plan approval
Health clearance
Fire service clearance
Environmental clearance from State Pollu
Registration with Inspector of Factories u
Registration under Boilers Act (For Boiler
Safety Certificate from Chief Electrical In
Rules and Orders, DIPP
NODAL AGENCYDepartment of Industrial Policy and Promotion (DIPP), Ministry of Commerce
State Level Statutory Clearance
Government Involvemen
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Applicable Labour Laws
Promotion of new manpower at skills and improvement/refiskills
Apprenticeship AdvisorObligations of employers and apprentice
Offences and punishment
APPRENTICES ACT, 1961
To regulate the employment of contract labor and abolish it
Applicability
Revocation and amendment of licenses
Liability of principal employer
CONTRACT LABOUR ACT, 1970
Eligibility
Benefits
Applicability
EMPLOYEES PROVIDENT FUNDS &
MISC. PROVISIONS ACT, 1952
Applicability of the act
Benefits
Penalties
Contribution period
EMPLOYEES STATE INSURANCE ACT1948
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Applicable Labour Laws
Applicability of the Act
Registration & Renewal of Factories
Welfare MeasuresEmployment of Young PersonsFACTORIES ACT, 1948
Provisions for investigation and settlement of industrial disputes and for c
Power of Labour Court to give appropriate Relief
Period of Operation of Settlements and Awards
Prohibition of Strikes & Lock Outs
INDUSTRIAL DISPUTES ACT, 1947
Applicability of the Act
Matters to be providedPENALTIESSTANDING ORDERS ACT, 1946
Provide for fixing minimum rates of wages in certain employments
Composition of Committee Penalties
Payment of Minimum Rates of WagesMINIMUM WAGES ACT, 1948
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Applicable Labour Laws
To provide for fixing minimum rates of wages in certain empl
Fixing Hours for normal working
Composition of CommitteeMaintenance of registers and records
Claims, Penalties, Offence, Punishment
MINIMUM WAGES ACT,1948
To provide for the registration of Trade Union & define the laregistered Trade Unions
Minimum Requirement for membership of Trade Union
Registrations and Cancellation of Trade Unions
Penalties, Offence and Punishment
TRADE UNIONS ACT, 1926
To provide for the payment of equal remuneration to men anworkers and for the prevention of discrimination
Advisory Committee to regulate the process
Power of Government for appropriation
Penalties and Offence
EQUAL REMUNERATIONACT, 1972
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Applicable Labour Laws
To regulate the payment of wages of certain classes of empl
Applicability and Coverage
Legal deductions
Offences and Penalties
PAYMENT OF WAGES ACT,1936
To provide workmen and/or their dependents some relief inaccidents, arising out of and in the course of employment aneither death or disablement of workmen
Applicability, Coverage and Employers Liability
Amount of Compensation
Report of Incidents and Penalties
WORKMENS
COMPENSATION ACT,
1923
To provide for a scheme for the payment of gratuity to emp
Applicability, Qualification, Nomination
Forfeiture of Gratuity
Protection of gratuity and Penalties
PAYMENT OF GRATUITYACT, 1972
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Environmental Laws and Ac
Stated in Constitution of
India
Referred by Directive
Principles of State Policy
Guided by F
Rights s
The Environment(Protection) Act -
1986
Hazardous Waste(Management andHandling) Rules -
1989
The Public LiabilityInsurance Act and
Amendment -1991 &
1992
The NationalEnvironmental
Tribunal Act1995
ThEn
Appe
A
The Forest(Conservation) Act
1981
The Water(Prevention and
Control of Pollution)Act1974
The Water(Prevention and
Control of Pollution)Cess Act1977
The Air (Preventioand Control of
Pollution) Act19
Practice required by law India China
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Standard work day 9 hours 8 hours
Severance pay for redundancy
dismissal of employee with 5 year
tenure
10.7 week salary 21.7 week salary
Severance pay for redundancy
dismissal of employee with 1 year
tenure
2.1 week salary 4.3 week salary
Premium pay for overtime 100% 50%
Minimum Wage (US$/month) 29.9 182.5
Minimum rest while at work 30 minutes per 5 hour None
Maximum overtime limit 200 hours per year 1 hour per day
Government approval required
for 9 person dismissalYes No
Government approval required
for 1 person dismissalYes No
Government approvalRarel Not a licable
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Legal Challenges to Cement Ind
Competition Act2002 ( Amendment in 2007)
Competition Commission of India
Competition Appellate Tribunal6300 Crore Rs Penalty on Cement Companies for cartelization
Orders for CMA
Obsolete Labor Laws World Bank Report on Indian Labor Laws- 2008Indias labor regulations - among the most restrictive and complex in the world- have constrained the groformal manufacturing sector where these laws have their widest application. Better designed labor regulations calabor- intensive investment and createjobs for Indias unemployed millions and those trapped in poor quality jocountrys momentum of growth, the window of opportunity must not be lost for improving thejob prospects fornew entrants who are expected to join the work force over the next decade..
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ReferencesLinks
http://www.cmaindia.org/Cement Manufacturers association
www.mhupa.gov.in- Ministry of Housing and Urban Poverty Alleviation
www.cidc.inConstruction Industry Development Council , set up by Planning Commission
www.ncbindia.comNational Council for Cement and Building Materials
www.dipp.nic.inDepartment of Industrial Policy and Promotion under Ministry of Commerce and Industry, Go
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 C
Govt of India
The Labour Laws Manual
Indian Cement IndustryCII
The Competition (Amendment) Act, 2007Competition Commission of India
Equal Remuneration Act, 1976
Ninety fifth report on performance of cement industryParliament Report ( Presented to Rajya Sabha & lok sab
http://www.cmaindia.org/http://www.mhupa.gov.in/http://www.cidc.in/http://www.ncbindia.com/http://www.dipp.nic.in/http://www.fipbindia.com/http://www.mca.gov.in/http://finmin.nic.in/http://moia.gov.in/http://envfor.nic.in/http://www.investindia.gov.in/http://www.investindia.gov.in/http://envfor.nic.in/http://moia.gov.in/http://finmin.nic.in/http://www.mca.gov.in/http://www.fipbindia.com/http://www.dipp.nic.in/http://www.ncbindia.com/http://www.cidc.in/http://www.mhupa.gov.in/http://www.cmaindia.org/