UNIT – II

START UPS
MEANING
Small scale Industries or small businesses are the type of industries that produces goods
and services on a small scale.
Small scale industries are those industries in which the manufacturing, production and
rendering of services are done on a small or micro scale. These industries make a one-time
investment in machinery, plants, and industries, but it does not exceed Rs 1 Crore.
A business which functions on a small scale level involves less capital investment, less
number of labour and fewer machines to operate is known as a small business.
Examples and Ideas of Small Scale Industries
 Bakeries  Small toys
 School stationeries  Paper Bags
 Water bottles  Photography
 Leather belt  Beauty parlours
Characteristics/Features of SSI
 Ownership: SSI ’s generally are under single ownership. So it can either be a sole
proprietorship or sometimes a partnership.
 Management: Generally both the management and the control is with the
owner/owners. Hence the owner is actively involved in the day-to-day activities of the
business.
 Labor Intensive: SSI’s dependence on technology is pretty limited. Hence they tend to
use labour and manpower for their production activities.
 Flexibility: SSI’s are more adaptable to their changing business environment. So in case
of amendments or unexpected developments, they are flexible enough to adapt and carry
on, unlike large industries.
 Limited Reach: Small scale industries have a restricted zone of operations. Hence, they
can meet their local and regional demand.
 Resources utilization: They use local and readily available resources which help the
economy fully utilize natural resources with minimum wastage.
Objectives of SSI
The objectives of the small scale industries are:
 To create more employment opportunities.
 To help develop the rural and less developed regions of the economy.
 To reduce regional imbalances.
 To ensure optimum utilization of unexploited resources of the country.
 To improve the standard of living of people.
 To ensure equal distribution of income and wealth.
 To solve the unemployment problem.
 To attain self-reliance.
 To adopt the latest technology aimed at producing better quality products at lower costs.
Role in the Indian economy
 Employment: SSI’s are a major source of employment for developing countries like
India. Because of the limited technology and resource availability, they tend to use labour
and manpower for their production activities.
 Total Production: These enterprises account for almost 40% of the total production of
goods and services in India. They are one of the main reasons for the growth and
strengthening of the economy.
 Make in India: SSI’s are the best examples for the Make in India initiative. They focus
on the mission to manufacture in India and sell the products worldwide. This also helps
create more demands from all over the world.
 Export contribution: India’s export industry majorly relies on these small industries for
their growth and development. Nearly half of the goods that are exported from India are
manufactured or produced by these industries.
 Public Welfare: These industries have an opportunity to earn wealth and create
employment. SSI’s are also important for the social growth and development of our
country.
THE RELATIONSHIP BETWEEN SMALL AND BIG BUSINESS
Small businesses powerfully effected by developments within the big business
Sector this relationship serves the interest of general economic disequilibria.
Small business is less affected by economic disruptions and is more or less self-adjusting. It
 tends to act as cushion for economy. The nature of interlink age between small and medium
business is as under.
1: Job subcontracting: the large business provides materials and components
to small units who process the same into finished goods
2: purchase subcontracting: in this case the material is procured
by small unit who manufactures a specific part or component needed by a
particular large unit
3: Complementary: inthis case the product manufactured by small company is purchased by
accessory like dust covers for video recorders, electronic passive components, packaging
etc.,
4:Merchandising or commercial trading: In this case the small units manufacture the
goods and big units on the strength of their financial power market it with their own brands
like fans, washing machines, refrigerators etc.,
5: Maintenance and repair services: many large enterprises give the operation and
maintenance contract to the small companies due to being more economical and helpful.
6: Social benefits: employment generation, decentralization of industrial benefits etc.,
The rationale behind the development of small scale industries
Lack of finance – This including weak equity base, poor utilization of assets, inefficient
working capital management, an absence of costing & pricing, an absence of planning and
budgeting and inappropriate utilization or diversion of funds.
Bad production Policies – The another important reason for sickness is a wrong selection of
site, which is related to production, inappropriate plant and machinery, bad maintenance of plant,
lack of quality control and so on.
Marketing and sickness – This is another part which always affects the health of any sector as
well as SSI. This including wrong ‘demand forecasting, selection of appropriate product mix, the
absence of product planning, wrong market research method and bad sales promotions.
Inappropriate Personnel Management – Another internal reason for the sickness of SSI is
Inappropriate Personnel Management politics which includes bad wages and salary
administration, bad, labour relation etc.
Ineffective Corporate Management – Another reason is Ineffective Corporate which includes
improper corporate planning, lack of integrity in for management, Lack of coordination and
control etc.
Small scale units are more change vulnerable and highly imprudent and accessible to socio-
economic conditions. They are more flexible to adopt changes like the introduction of new
products, a new method of production, new materials, new markets and the new form of
organization etc
Registration of SSI
SSI registration is a registration provided by the Ministry of MSME. A business should
obtain SSI registration in order to be eligible for a number of schemes, subsidies and other
incentives provided by the Government to such SSI’s. SSI registration can be obtained online
also.
Overview of SSI Registration
SSI registration is provided by the Ministry of Micro, Small and Medium Enterprises
through the Directorate of Industries of the State Government. SSI registration helps the business
to be eligible for a number of subsidies given by the Government.
Eligibility Criteria for SSI Registration
SSI registration can be obtained for:
o Manufacturing enterprise; and
o Service enterprise
For manufacturing enterprise, if the investment in plant and machinery (excluding land &
buildings) is within any of the following levels:
Micro Enterprises: Investment of up to Rs.25 lakhs in plant and machinery
Small Enterprises: Investment of up to Rs.5 crores in plant and machinery
Medium Enterprises: Investment of up to Rs.10 crores in plant and machinery
For service enterprise, if the investment in plant and machinery (excluding land &
buildings) is within any of the following levels:
Micro Enterprises: Investment of up to Rs.10 lakhs in equipment
Small Enterprises: Investment of up to Rs.2 crores in equipment
Medium Enterprises: Investment of up to Rs.5 crores in equipment
If the investment is done within the above-mentioned limits then the SSI registration has to be
obtained.
Benefits of obtaining SSI registration
 There are various tax rebates offered to SSI’s
 A credit for Minimum Alternate Tax (MAT) is allowed to be carried forward for up to 15
years instead of 10 years
 There are many government tenders which are only open to the SSI.
 They get easy access to credit.
 Once registered the cost of acquiring a patent, or the cost of setting up the industry
reduces as many rebates and concessions are available.
 Business registered as SSI are given higher preference for government license and
certification.
Problems of Small Scale Industries
1. Shortage of Funds: Small business entrepreneurs don’t have enough long- term or short-term
funds. These are, therefore, short of both fixed assets as well as working capital. Even the banks
do not come to their help in a big way. Financial institutions like ICICI, IDBI and IFCI help only
large scale industries.
2. Lack of Latest Technology: Small business lacks funds. Latest technology is not used
because it is expensive. Only old methods and techniques are being used. Due to this they earn
less margin of profit.
3. Shortage of Raw Materials: There is shortage of raw material because of less working
capital. They can’t buy in bulk during the season and cannot enjoy the economies of large scale.
4. Shortage of Power: Because of shortage of power, the small business enterprises are not able
to use full capacity of the plant at their disposal. They cannot afford to have their own power
generators.
5. Labour Problem: The labour is mostly unskilled. Small business don’t have resources to
provide good training. Labour are also not paid well. There is no motivation for professional
growth. Small business is incapable to bargain with powerful trade unions.
6. Marketing Problem: Small business cannot face the competition with large scale units in
marketing and selling. They cannot afford to spend much on advertising and proper distribution
of goods. They have to depend on middlemen, who pay low prices and even the recovery from
the middlemen is very slow.
7. Managerial Skills: Only individuals or a small group of people own and operate the small
business units. They don’t possess professional managerial skills required to run a business
successfully.
8. Quality: Small business finds it difficult to come upto global standards of the quality. They
also don’t have funds for research in order to improve upon the quality. The product quality is
their weakest point as compared to the standards of the large scale units.
9. Sickness: It is painful to see most of the small units going sick. There is a lack of planning.
Skilled and trained personnel is another hurdle. They have to sell on credit. Their customers do
not pay them in time. There are large scale bad debts. Thus, they fall short of working capital to
keep the production process going. This leads to sickness.

Steps to start Small scale Industries

1. Analyzing Strengths, Weakness, Opportunities and Threats
The Potential entrepreneur has to analyze his strengths, weakness, opportunities and
Threats, while deciding to go for entrepreneur career. It is also call SWOT analysis.
2. Scanning of Business Environment
In order to ensure success if his enterprise, entrepreneur should scan the business
opportunities and threats in the environment.
3. Product Selection
The most important steps to start small scale industries is to decide what business to
venture into. The level of activity will help in determining the size of business and thus form of
ownership.
4. Market Survey
Market survey implies systematic collection of data by the entrepreneur about the product
for manufacture, demand-supply lag, extent of competition, pricing, distribution policy etc.
5. From of organization
 A firm can be constituted as proprietorship, partnership, limited company, cooperative
society, etc. This will depend upon the type, purpose and size of entrepreneur’s business.
6. Location
The size of plot, covered and open area and the exact site will have to be decided.
7. Technology
Information on all available technologies should be collected by the entrepreneur and the
most suitable one to be identified

8. Machinery and Equipment

Having chosen the technology, the machinery and equipment required for manufacturing
the chosen products have to be decided.
9. Project Report Preparation
After deciding the form of the ownership, location, technology, machinery, and
equipment, the entrepreneurs should be ready to prepare his project report the feasibility study.
A project report that may now be prepared will be helpful in formulating the production,
marketing, financial and management plans.
10. Project Appraisal
Project appraisal implies the assessment of a project. It is technique for ex-ante analysis
of a scheme or project.
The following appraisals can be performed at the preliminary level :-
 Economical appraisal  Management appraisal
 Financial appraisal  Organizational appraisal
 Technical appraisal  Market appraisal
11. Finance
Finance is the lifeblood of the enterprise. Entrepreneur has to take certain steps and
follow specified norms of the financial institutions and banks to obtain it.
12. Provisional Registration
The entrepreneur has to obtain the prescribed application from the provisional
registration under DIC or Directorate of industries. This will enable the entrepreneur to avail
various government facilities, incentives, and assistance schemes including financial assistance
from NSIC/SFCs/KVIC.
 13. Power and water connection
The sites, where the enterprise will be located, should either have adequate power
connections or this should be arranged. Entrepreneur can calculate the total power requirement
and water connection will have to be obtained.
14. Procurement of Raw materials
Raw materials are the important ingredients for running an enterprise. The labour will
require raw materials to work upon the installed machinery.
15. Production
The unit established should have an organizational setup. To operate optimally, the
organization should employ its manpower, machinery and methods effectively.
There should not be any wastage of manpower, machinery and materials. Production of the
proposed item should be taken up in two stages.
 Trail Production
 Commercial Production
Trail production will help tackling problems confronted in production and test marketing of the
product.
Commercial production should be commenced after the test-marketing of the product.
16. Marketing
Marketing is the most important activity as far as the entrepreneurial development is concerned.
Various aspects like how to reach the customer, distribution channels, commission structure,
pricing, advertising, publicity etc., have to be decided by the entrepreneur.
Marketing is in two stages namely:
 Test stage
 Commercial marketing stage
Test marketing is necessary to save the enterprise from going into disrepute in case the product
launched is not well accepted by the customers.
Commercial marketing can be undertaken. The entrepreneur can contact the small industries
marketing cooperation.
17. Quality assurance
Before marketing, the product quality certification from BIS (Bureau of Indian standards)
or AGMARK/HALLMARK etc.
If there is no quality standards specified for the products, the entrepreneur should evolve his own
quality control parameters.
18. Permanent Registration
After the small scale unit goes into production and marketing, it becomes eligible to get
permanent registration based on its provisional registration from DIC.
19. Market Research
There is strong need for continuous market research to assess needs and areas for
modification, up-gradation and growth.
Market becomes Waterloos for most SSI entrepreneurs as they ignore the vital day-to-day
operation.
Government Policies for Small Scale Enterprises

Small scale enterprises have been given an important place in the framework of Indian
planning for both ideological and economic reasons. Development of small scale enterprises has
imbued with a multiplicity of objectives. Important among these are
 The generation of immediate employment opportunity with relatively low
 investment The promotion of more equitable distribution of national income
 Effective mobilization of untapped capital and human skills
 Dispersal of manufacturing activities all over the country, leading to growth of villages,
small towns and economically lagging regions
So, the government of India has started various programmes for the development of small
scale sector in India. The government’s objectives and intentions towards industry including SSI
were announced through industrial policy resolutions (IPR).
Industrial policy resolution (IPR)1948
 The IPR 1948 for the First time, accepted the importance of small scale industries in the
overall industrial development in the country.
 It was well realized that small scale industries are utilized most of the local resources and
create employment opportunities.
 Moreover, they have to face problems of raw materials, capital, skilled labour, marketing
etc. since a long period of time.
  Therefore, emphasis was laid in the IPR 1948 that these problems of small scale
enterprises should be solved by the central government with cooperation of the state
governments.
 The main thrust of IPR 1948 as far as possible small scale enterprises were concerned
was 'Protection'.

Industrial policy resolution (IPR) 1956

 The IPR 1948 set in the nature and pattern of industrial developments taken place in the
country.
 Industries development and Regulation Act (IDR Act), 1951 was also introduced to
regulate and control industries in the country.
 The Parliament had also accepted 'the socialist pattern of society' as the basic aim of
social and economic policy during this period.
 128 items were reserved for exclusive production in the small sector.
 In the third five year plan period, 'Rural Industrial Projects' and 'Industrial Estates
Projects' were started to strengthen the small sector.
 It aimed at 'Protection + Development'. The IPR 1956 initiated the modern SSI in India.
Industrial policy resolution (IPR) 1977
 The IPR 1977 classified small sector into three categories
 (i) Cottage and household industries which provides self-employment on a large scale.
 (ii) Tiny sector incorporating investment in industrial unit in plant machinery up to Rs.1
lakh and situated in towns with a population of less than 50,000 according to 1971
census.
 (iii) Small Scale Industries comprising of industrial unit with an investment of up to
Rs.10 lakhs and in case of ancillary units with an investment of up to Rs.15 lakhs.
Industrial policy resolution (IPR) 1980
 The government of India adopted a new industrial policy resolution (IPR) on July 23,
1980.
 Its main objectives were facilitating an increase of industrial production through optimum
utilization of installed capacity and expansion of industries.
  Introduction of the concept of core plants to replace the earlier scheme of the District
Industry Centre (DIC), in each industrially background district to promote the maximum
small scale industries there.
 Promotion of village and rural industries to generate economic viability in the villages
well compatible with the environment.
Industrial policy resolution (IPR) 1990
 The IPR 1990 was announced during June 1990.
 The investment ceiling in plant and machinery for small scale industries was ( in 1985)
raised from Rs.35 lakshs to Rs.60 lakshs and correspondingly for ancillary units from
Rs.45 lakhs to Rs.75 lakhs.
 Investment ceiling for tiny units has been increased from Rs.2 lakhs to Rs.5 lakhs
provided the unit is located in the area having a population of 50,000 as per 1981 causes.
 836 items was reserved for exclusive manufacture in small scale sector.
 A new scheme of initial investment subsidy exclusively for small scale sector in rural and
backward areas were introduced.
 To improve the competitiveness of the products manufactured in the small scale sector,
programmes of technology up graduation will be implemented under the head of
Technology development centre in Small Industries Development Organization (SIDO).
 Greater emphasis on training of women and youth under Entrepreneurships Development
Programme.

New Small Enterprise Policy 1991

The government of India, for the first time, tabulated the new small enterprise policy titled
'Policy measures for promoting and strengthening small, tiny and village enterprises' in the
parliament on August 6, 1991. The main thrust of New small enterprise policy is to impact more
vitality and growth impetus to the sector
Salient features of the new small enterprise policy
 The investment limit has been increased in plant and machinery of tiny enterprises from
Rs.2 lakh to Rs.5 lakh based on their location.
 inclusion of industry related service and business enterprises, based on their location as
SSI.
  To limit the financial liability of the new entrepreneurs to the capital investment. A new
partnership act has been introduced.
 Introduction of a scheme of integrated infrastructural development including
technological backup services for small scale industries.
 An factoring services have to be introduced to solve the problems of delayed payment to
small sector.
 Market promotion of small scale industries products through cooperative/ public sector
institutions, order specialized professional and the consortium approach.
 In the small industries development organization (SIDO) an export development centre
(EDC) has to be set up.
 To widen the scope of National Enquiry Fund (NEF) to enlarge the single window
scheme and also to associate commercial banks with provision of composite loans.

Significance of New small enterprise policy ;

 The new policy is founded the fundamental problems of small sector and the measures
proposed to solve it.
 The new policy provides for continuous support to the tiny sector like easier access to
institutional finance, preference in government purchase and relaxation of certain labour
laws.
 Introduction of new legal form of organization of business, namely restricted (or) limited
partnership.
Plan proposal (1992-1999)
 The main function of the eighth five year plan has been employment generation
 This plan has realized that timely and adequate availability of credit is of more
importance than concessional credit.
 Establishment of SIDBI, sanction of composite loans under 'Single Window Concept'
concessional loan to state corporations for infrastructure development and provision of
factory services have been introduced.
 It proposes to establish appropriate tool rooms and training institution to upgrade
technology.
New policy initiative in 1997-2000 for the small scale sector
 Announcement of a new credit insurance scheme in the year (1999-2000), particularly
exported oriented & tiny units.
 The working capital limit for SSI unit is determined by the bank on the basis of 20
percent of their annual turnover.
 Exemption from excise duty, as given to SSI units, will be extended to goods bearing a
brand name of another manufacturer in rural area.

 A national programme for rural industrialization has been announced, with a mission to
setup 100 rural clusters per year, to give a boost to rural industrialization.
 Cotton yarn has been introduced in the general exercise exemption scheme for SSIs.
 The investment limit for small scale and ancillary undertakings has been reduced from
Rs.3 Crores to Rs.1 Crore.
 Small job workers, engaged in printing of glazed titles, have been exempted from excise
duty.
Policies and Schemes for Promotion of small scale industries Implemented By State
Governments
All the State Governments provide technical and other support services to small units
through their Directorates of Industries, and District Industries Centres. Although the details of
the scheme vary from state to state, the following are the common areas of support.
1. Development and management of industrial estates
2. Suspension/deferment of Sales Tax
3. Power subsidies
4. Capital investment subsidies for new units set up in a particular district
5. Seed Capital/Margin Money Assistance Scheme
6. Priority in allotment of power connection, water connection.
7. Consultancy and technical support
Government of India runs a scheme for giving National Awards to micro, small and medium
scale entrepreneurs providing quality products in 11 selected industry groups of consumer
interest. The winners are given trophy, certificate and a cash price of Rs. 25000/- each.
 Tax Benefits available to Small-Scale Industries in India
1. Tax Holiday:
 Under section 80J of the Income Tax Act 1961, new industrial undertakings, including
small-scale industries, are exempted from the payment of income- tax on their profits
subject to a maximum of 6% per annum of their capital employed.
 This exemption in tax is allowed for a period of five years from the commencement of
production.
2. Depreciation:
 Under Section 32 of the Income Tax Act, 1961, a small-scale industry is entitled to a
deduction on depreciation account on block of assets at the prescribed rate.
 Small enterprise is allowed subject to a maximum of Rs. 20 lakh deduction for
depreciation on plant and machinery on the diminishing balance method.
 For plant and machinery that are used in manufacturing in double or triple shift, an
additional allowance called ‘Extra Shift Allowance’ is also available.
3. Rehabilitation allowance:
 A rehabilitation allowance is granted to small-scale industries under Section 33-B of the
Income Tax Act, 1961 whose business is discontinued on account of the following
reasons:
1. Flood, typhoon, hurricane, cyclone, earthquake, or other natural upheavals;
2. Riot or civil disturbance;
3. Accidental fire or explosion; and
4. Action by an enemy or action taken in combating an enemy.
 The rehabilitation allowance is allowed to the unit equivalent of 60 per cent of the
amount of the deduction allowable to the unit.
4. Investment Allowance:
 The investment allowance under Section 31 A of the Income Tax Act, 1961 is allowed at
the rate of 25 per cent of the cost of acquisition of new plant or machinery installed.
 A small-scale industry can avail of investment allowance provided it has put to use
machinery or plant either in the year of installation or in the immediate following year
failing which the benefit will be forfeited.
5. Expenditure on Scientific Research:
 Under Section 35 of the Income Tax Act, 1961, the following deductions in respect of
expenditure on scientific research are allowed:
1. Any revenue expenditure incurred on scientific research related to the business of the
assessee in the previous year.
2. Any sum paid to a scientific research association or a university, college, institution or
to a public company which has its object, the undertaking of a scientific research.
3. Any capital expenditure incurred on scientific research related to the business of the
assessee subject to the provision of Section 35(2) of the Income Tax Act, 1961.
6. Amortization of Certain Preliminary Expenses:
 The Indian companies and resident persons, under Section 35D of the Income Tax Act
1961, are allowed to write off the preliminary and developmental expenses
 A small-scale unit established in a backward area, under Section 80-HH, is allowed a
deduction of 20 per cent on its profits and gains provided.
7. Tax Concession to Small-Scale Industries in Rural Areas:
 The tax payers, under this Section 80-HHA, are entitled to a deduction of 20 % of the
profits and gains derived by running small-scale industries in the rural areas.
 The deduction is allowed for a period of 10 years from the year of commencement of
manufacturing activity.
 This tax deduction benefit is not allowed to the small-scale units engaged in mining
activity.
8. Tax Concessions to Small-Scale Industries in Backward Areas:
 The newly established small-scale industries in the areas specified in the Eighth Schedule
to the Income Tax Act, 1961 are entitled to a deduction of 20% of their profits and gains
from their gross total income.
 This deduction is allowed for a period of 10 years beginning with the year of
commencement of manufacture or production.
 However, if a small-scale industry has already been established in a non-backward area
and later shifted to backward area, the unit will be allowed this deduction on the profits
earned from the undertaking after shifting in the backward area for a period of 10 years.
  A small-scale industry established in backward area but engaged in mining activity is not
entitled to such deduction benefit.
9. Expenditure on Acquisition of Patents and Copyrights:
 Under Section 35-A of the Income Tax Act, 1961, any expenditure of capital nature
incurred after 28th February 1966 in acquiring a patent and copyright by a small-scale
industry is deductible from its income.
 The expenditure can be deducted in 14 equal installments beginning with the previous
year in which the expenditure was incurred in acquiring patents and copyrights for the
unit.
10. Profits from Business of Publication of Books:
 Under Section 80-1A of the Income Tax Act, 20% of the profits earned by a small- scale
industry from the business of publication of books is deductible from its gross total
income.
 The deduction benefit is available for total period of five years beginning with the
assessment year 1992-93.
In addition, deductions are also available in respect of:
1. Royalties from any company in India (Under Section 80 M)
2. Royalties from any certain foreign companies (Under Section 800)
3. Inter-corporate Dividends (Under Section 80 M)
4. Income of Co-operative Societies (Under Section SOP)
5. Carry forward and set -off business losses (Under Section 72)
Environmental Clearance Process
The process consists of following steps:
 Project proponent identifies the location of proposed plant after ensuring compliance with
existing siting guidelines.
 The proponent conducts an EIA study either directly or through a consultant.
 For environmental clearance the projects are classified into Category “A- Large Scale
industries” and Category “B – Small Scale Industries”.
 If the project falls in “A” category, the project goes to Central government for clearance
and the Proponent must apply to Ministry of Environment and forest (MOEF).
 If the project falls in B category, the project goes to state government for clearance and
the Proponent must apply to State Environment Impact Assessment Authority (SEIAA).
 After the preparation of EIA report, the investor approaches the concerned State Pollution
Control Board (SPCB) and the State Forest Department (if the location involves use of
forestland).
 The SPCB evaluates and assesses the quantity and quality of effluents to meet the
prescribed standards.
 If the SPCB is satisfied that the proposed unit will meet all the prescribed effluent and
emissions standards, it issues consent to establish (popularly known as NOC), which is
valid for 15 years.
 The public hearing is a mandatory step, it provides a legal space for people of an area to
come face-to-face with the project proponent and the government and express their
concerns.

The process of public hearing is conducted prior to the issue of NOC from SPCB.
 The District Collector is the chairperson of the public hearing committee and other
members of the committee include the official from the district development body,
SPCB, Department of Environment and Forest, Taluka and Gram Panchayat
representative, and senior citizen of the district, etc.
 The hearing committee hears the objections/suggestions from the public and after
inserting certain clauses it is passed on to the next stage of approval.

The project proponent submits an application for environmental clearance with the MoEF
if it falls under Project A category or the state government if it falls under project B
category.
 The application form is submitted with EIA report, EMP, details of public hearing and
NOC granted by the state regulators.
 Environmental appraisal: The documents submitted by an investor are first scrutinized by
a multi-disciplinary staff functioning in the Ministry of Environment and Forests who
may also undertake site-visits wherever required, interact with the investors and hold
consultations with experts on specific issues as and when necessary.
 After this preliminary scrutiny, the proposals are placed before specially constituted
committees of experts whose composition is specified in the EIA Notification. Such
committees, known as Environmental Appraisal Committees. It constituted for each
sector such as River Valley, Industries, Mining etc. and these committees meet regularly
to appraise the proposals received in the Ministry.
 In case of certain very special/controversial projects, which have aroused considerable
public interest, the committee may also decide to arrange for public hearings on those
projects to ensure public participation in developmental decisions.
 Announcements for such public hearing shall be made atleast 30 days before through
newspapers.
 The Appraisal Committees make their recommendations for approval or rejection of
particular projects.
 The recommendations of the Committees are then processed in the Ministry of
Environment and Forests for approval or rejection.
 Issues of clearance or rejection letter: When a project requires both environmental
clearance as well as approval under the Forest (Conservation) Act, 1980. Proposals for
both are required to be given simultaneously to the concerned divisions of the ministry.
 The processing is done simultaneously for clearance/rejection, although separate letters
may be issued.
 If the project does not involve diversion of forest land, the case is processed only for
environmental clearance.
 Assessment and evaluation of the project from the environment angle is completed within
90 days and the decision of the ministry shall be conveyed within 30 days thereafter.
 The clearance granted shall be valid for a period of five years for commencements of the
construction or operation of the project.