Confederation of Indian Industries (CII) has
released its white paper titled ‘Inspections and Regulatory Enforcements for
Micro Small and Medium Enterprises (MSMEs) in India.’
What has the CII said?
In its report, the CII notes that the factory
inspection system in India needs a complete overhaul to bring India among the
top 50 countries in terms of ‘ease of doing business’ in the next two years.
Why?
According to the report, the excessive number
of inspections in India weighs down on the competitive advantage and the ‘ease
of doing business’ of Indian businesses.
What are the challenges faced by MSMEs in
India, according to the report?
A manufacturing company in India has to
comply with around 70 laws and regulations.
- Besides, 40 inspectors and government officials
visit factories on an average with the ulterior motive to fleece the
company promoters and owners. Most of the inspections conducted are
related to environment or labour law compliances.
- Apart from multiple inspections, a company has to
file around 100 returns every year.
- Inspections in India have also been found to be
excessive, duplicate and complicated, imposing significant costs on
businesses, especially MSMEs. While most inspections are selected locally,
without any objective criteria, inspectors act over-zealously and make
extortionist demands from factories.
- There are also variations in inspections conducted
on small factories across the country. While inspectors for labour
compliances visit most SMEs once or twice a year, it has been observed
that in Jammu and Kashmir and Uttarakhand, SMEs are visited by labour
inspectors once every month.
What needs to be done?
CII has called for an integrated inspection
system and highlighted the need for inculcating a risk-based approach in the
inspection system which will rationalise the number of inspections and weed out
the redundancy and duplicity.
- A portal could be created for automatically updating
invoices related to excise, sales tax, customs and the like by SMEs and
this could be used by regulators and inspectors in lieu of physically
visiting the factory premises. Audited accounts of SMEs could be used by
inspectors while performing verification.
- CII has also urged the central government to
encourage the states to pursue a process for simplification of labour laws
and compliance.
Background:
India is currently placed at 130 out of 189
countries in the ‘ease of doing business’ rankings.
In its report, the CII notes that the factory
inspection system in India needs a complete overhaul to bring India among the
top 50 countries in terms of ‘ease of doing business’ in the next two years.