Executive Summary:
This document is a response to a parliamentary question regarding industrial licenses for tobacco and cigarette manufacturing in India. It clarifies the mandatory licensing requirements post-1991, detailing the roles of the DPIIT and the Department of Commerce in issuing licenses, including those for SEZs and EOUs. No fresh licenses or Letters of Intent have been issued for the manufacture of cigars and cigarettes of tobacco and manufactured tobacco substitutes since 1999.
Key Points / Main Content:
Licensing Requirements:
* Manufacturing of cigars, cigarettes, and manufactured tobacco substitutes requires compulsory licensing.
* Licenses are issued under Section 11 and 11A of The Industries Development Regulation Act, 1951, and according to The Registration and Licensing of Industrial Undertaking Rules, 1952.
Licensing Authorities:
* DPIIT is the licensing authority for units outside SEZs and EOUs.
* The Department of Commerce is the licensing authority for units within SEZs and EOUs.
* The Board of Approval (BoA) in the Department of Commerce can grant licenses under the IDR Act, 1951, for tobacco and cigarette units in SEZs, as per Section 92e of the SEZ Act, 2005.
* For EOUs requiring industrial licenses, the Development Commissioner may grant approval after clearance from the BoA and DPIIT, as per the Foreign Trade Policy (FTP) and Handbook of Procedure (HBP), 2023.
Letters of Intent (LOI):
* Until 1999, DPIIT issued 20 industrial licenses and 25 LOIs for this sector.
* LOIs were issued when further clearances (e.g., foreign collaboration, capital goods imports) were needed.
* The initial validity period for an LOI was 12 months, with possible extensions.
* Since 1999, no new licenses/LOIs have been issued for manufacturing cigars and cigarettes due to health reasons.
* Three LOIs were converted into industrial licenses.
* Remaining LOIs that were not converted within the prescribed time are no longer valid.
* No LOI applications are currently pending with DPIIT.
SEZ Licenses:
* Two industrial licenses have been granted for units in Special Economic Zones.
* The last Industrial License was issued by the Department of Commerce in May 2022.
* No applications are pending in the Department of Commerce.
Impact Analysis:
Manufacturing Units:
* Impact: Must adhere to licensing requirements if manufacturing cigars, cigarettes, or tobacco substitutes.
* Action Required: Ensure compliance with the IDR Act, 1951, and related regulations for setting up or expanding manufacturing units.
DPIIT:
* Impact: Responsible for issuing industrial licenses to units outside SEZs and EOUs.
* Action Required: Process licensing applications in consultation with stakeholders and the Licensing Committee.
Department of Commerce:
* Impact: Responsible for issuing industrial licenses to units within SEZs and EOUs.
* Action Required: Process licensing applications for SEZs through the Board of Approval and ensure compliance with the SEZ Act and Rules.
Export Oriented Units (EOUs):
* Impact: Must obtain necessary clearances for setting up EOUs requiring industrial licenses.
* Action Required: Seek approval from the Development Commissioner, BoA, and DPIIT, and comply with the Foreign Trade Policy and Handbook of Procedure.
Key Entities Referenced
Tobacco and Cigarette: Refers to the industry of manufacturing tobacco and cigarette products, which is the subject of the policy document.
Industrial Policy Resolution 1991: A significant economic policy reform in India that liberalized the industrial sector. The document refers to amendments made to the policy as a result of this resolution.
The Industries Development Regulation Act, 1951: An act governing the regulation of industries in India, particularly concerning licensing. Referred to as IDR Act, 1951 in the document.
Department for Promotion of Industry and Internal Trade (DPIIT): The primary licensing authority for granting Industrial Licenses under the IDR Act, 1951, for units established outside of Special Economic Zones and Export Oriented Units.
Special Economic Zones (SEZs): Designated areas within a country that have different economic regulations than other areas. Licensing for units within SEZs is handled differently.
Export Oriented Units (EOUs): Enterprises focused on exporting goods and services. Their licensing is covered by the Foreign Trade Policy.
Foreign Trade Policy (FTP): A set of guidelines and regulations governing India's import and export activities. It is referenced in relation to licensing for Export Oriented Units.
The SEZ Act, 2005: The act governing the establishment, development, and management of Special Economic Zones in India. Licenses for units within SEZs are issued under this act.
GOVERNMENT OF INDIA
MINISTRY OF COMMERCE & INDUSTRY
DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE
LOK SABHA
UNSTARRED QUESTION NO. 4202.
TO BE ANSWERED ON TUESDAY, THE 19TH AUGUST, 2025.
LICENCE FOR TOBACCO AND CIGARETTE MANUFACTURING
4202. SHRI BABU SINGH KUSHWAHA:
Will the Minister of COMMERCE AND INDUSTRY be pleased to state:
वाणिज्य एवं उद्योग मंत्री
(a) whether obtaining industrial licence is mandatory for tobacco and cigarette
manufacturing units in the country;
(b) if so, the details thereof along with the procedure and rules prescribed;
(c) the number of industrial licenses and Letters of Intent (LoI) issued for this sector
in the country so far along with the procedure and rules for issuing Letter of
Intent;
(d) last instance when industrial license was issued by the Ministry and the number
of such applications pending at present along with the current status of such
pending applications;
(e) the time-limit and rules for converting Letter of Intent into Industrial Licence;
and
(f) whether there is any Letter of Intent which has not yet been converted into
Industrial Licence and if so, the reasons therefor?
ANSWER
वाणिज्य एवं उद्योग मंत्रालय में राज्य मंत्री (श्री णिणिन प्रसाद)
THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE & INDUSTRY
(SHRI JITIN PRASADA)
(a) & (b): After the Industrial Policy Resolution 1991, and considering various
amendments made to Notification No. 477(E) dated 25th July, 1991, industries
manufacturing Cigars and Cigarettes of tobacco and manufactured tobacco
substitutes are covered under compulsory licensing. Licences are issued to
companies for the manufacture of items that are compulsorily licensable under
Section 11 and Section 11(A) of The Industries (Development & Regulation)
Act, 1951 and as per the procedure mentioned in The Registration and
Licensing of Industrial Undertaking Rules, 1952.
Department for Promotion of Industry and Internal Trade (DPIIT) is the
licensing authority for granting Industrial License (lL) under IDR Act, l95l to the
units established in the area other than Special Economic Zones (SEZs) and
Export Oriented Units (EoUs).Licences are issued by DPIIT in consultation with the various stakeholders
and on the basis of recommendations made by the Licensing Committee
chaired by Secretary, DPIIT.
Department of Commerce is the designated licensing authority for issuing
Industrial License (lL) under IDR Act, l95l to units established in Special
Economic Zones (SEZs) and Export Oriented Units (EoUs). For Tobacco and
Cigarette manufacturing units set up in SEZs , the Board of Approval (BoA) in
Department of Commerce is empowered to grant the license under IDR Act,
1951 as per Section 9(2)(e) of the SEZ Act, 2005. For Export Oriented Units
(EOUs), grant of license for setting up EOUs requiring IL is covered by the
Foreign Trade Policy (FTP) read with Handbook of Procedure (HBP), 2023 (as
amended from time to time). Para 6.01(d) of HBP, 2023 provides that
a proposal for setting up an EOU requiring IL may be granted approval
by Development Commissioner after clearance of proposal by the aforesaid
BoA and DPIIT. Para 6.32 (b)(i) of HBP, 2023 provides that "ltems of
manufacture requiring industrial licence under Industrial (Development &
Regulation) Act, l95l shall be considered by the BoA".
(c) to (f): A total of 20 industrial licences and 25 Letters of Intent (LOI) have been issued
by DPIIT for this sector in the country till 1999. For the tobacco and cigarette
manufacturing units, for applications not requiring further clearances such as
foreign collaboration and capital goods imports, Industrial Licenses were
issued. In cases where further clearances were warranted, a letter of intent was
issued. The initial validity period for a letter of intent was 12 months. In cases
where only one further clearance viz. foreign collaboration or capital goods
clearance was found necessary, one further extension of 6 months to the initial
validity could be considered. In cases where both foreign collaboration and
capital goods clearance were involved, two extensions of 6 months each
beyond the initial validity period of 12 months could be considered. Once the
conditions incorporated in the Letter of Intent were fulfilled, it would be
converted into an Industrial Licence.
Fresh licenses/Letter of Intents have not been issued for the manufacture of
Cigars and Cigarettes of tobacco and manufactured tobacco substitutes on
health grounds since 1999 by DPIIT.
As per records 3 LOI have been converted into industrial licences. The
remaining Letters of Intent that could not be converted into licences during the
prescribed time limits, are not valid at present. No such application is pending
with DPIIT.
Only two Industrial Licenses have been granted so far for setting up of units
for this sector in a Special Economic Zone. The rules and procedures are
governed by the SEZ Act and Rules, as amended. The last time the Industrial
License as mentioned above was issued by the Department of Commerce
was in May, 2022. No such applications are pending in the Department of
Commerce as on date.
*******