INCORPORATING A CEMENT

MANUFACTURING UNIT
A LEGAL PERSPECTIVE ACTS, LAWS AND OFFICES

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
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 : Ambit capital, Aranca research
2
nd
largest market in the
world , 78 per cent of
global production
Exports to more 30
countries generating
employment for 50,000
people
Annual production of more
than 1 mn tonnes
Per Capita consumption
around 170kg, world
average 430 kg
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
* A public company is a private company which is a subsidiary of a company which is not a private company.
Private Company Public 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 :
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
Incorporation of a Cement Company

Getting the appropriate persons to subscribe to the Memorandum(Public company: Min. of 7,
Private company: Min. of 2)
Drawing up the Articles of Association (Indian Stamp Act, 1899)
Drawing up the Memorandum of Association (Indian Stamp Act, 1899)
Obtaining approval for the proposed name of the company from the ROC (Form 1A) (Prevention of
Improper Use, Act-1950)
Incorporation of a Cement Company
Obtain a certificate of commencement of business from ROC in case of a public
company
Receipt of Certificate of incorporation
Payment of registration Fee to the ROC
Starting Operations in India
Starting
operations
in India
As a Indian
company
Joint Ventures
Wholly owned
subsidiaries
As a foreign
company
Liaison Office
Project Office
Branch Office
Taxation
Corporate tax rate for foreign companies is
40%. The net tax rate includes various
deductions and exemptions available under
the tax laws. Tax holidays are available in
Special Economic zones. Infrastructure
Sector Projects enjoy special tax
treatment/holidays. Electronic filing of
customs documents is also there.
Investment Facilitation
Secretariat for Industrial Assistance (SIA) in
Department of Industrial Policy and
Promotion, Government of India provides a
single window service for entrepreneurial
assistance, Investor facilitation and
monitoring implementation of the projects.

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 of operations
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 offices in India with
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 manufacturer.
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
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
Industrial Policy
Reforms
Reduced Industrial
Licensing requirements
Removed restrictions on
investment and expansion
Facilitated easy access to
foreign technology and
foreign direct investment
Industrial Policy
Industrial Licensing
All industrial undertakings
are exempt from obtaining
an industrial license to
Manufacture, except for:
1. Industries reserved for the Public Sector
2. Industries retained under compulsory licensing
3. Items of manufacture reserved for the small
scale sector
4. If the proposal attracts location restriction
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 Assistance (SIA), DIPP,
GOI, and obtain an acknowledgement
2. After commencement of commercial production, Part B of
the IEM has to be filled
Industrial Policy
Industrial undertakings are
free to select the location of
a project
In the case of cities with population of more than a million (as per
the 1991 census):
The proposed location should be at least 25 KM away from the
Standard Urban Area limits of that city
Located in an area designated as an "industrial area" before the
25
th
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*
Locational Policy
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)
Industrial Policy
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
Environmental Clearances
The GOI has allowed FDI up to 100% in the cement and gypsum products industry
FDI can be bought through:
Automatic
Route
New
Ventures
Existing
Companies
Government
Approval
RBI has given permission to Indian Cement
companies to accept investment under this Route
without obtaining prior approval from RBI
Government approvals are accorded on the
recommendation of the Foreign Investment Promotion
Board (FIPB), chaired by the Secretary, DIPP (Ministry of
Commerce and Industry) with the Union Finance
Secretary, Commerce Secretary, and
other key Secretaries of the Government as its members.
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
Industrial Policy
Regulation
Problem:
Cartelizing of cement
firms
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
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
doubling it between 2004 and 2011 so they could make windfall, illegal profits

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
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
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 Pollution Control Board
Registration with Inspector of Factories under Factories Act
Registration under Boilers Act (For Boilers)
Safety Certificate from Chief Electrical Inspector
Rules and Orders, DIPP
NODAL AGENCY
Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce
State Level Statutory Clearance
Government Involvement
Applicable Labour Laws
Promotion of new manpower at skills and improvement/refinement of old
skills
Apprenticeship Advisor
Obligations of employers and apprentice
Offences and punishment
APPRENTICES ACT, 1961
To regulate the employment of contract labor and abolish it in certain cases
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 ACT
1948
Applicable Labour Laws
Applicability of the Act
Registration & Renewal of Factories
Welfare Measures
Employment of Young Persons
FACTORIES ACT, 1948
Provisions for investigation and settlement of industrial disputes and for certain other purposes.
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 provided
PENALTIES

STANDING ORDERS ACT, 1946
Provide for fixing minimum rates of wages in certain employments
Composition of Committee Penalties
Payment of Minimum Rates of Wages
MINIMUM WAGES ACT, 1948
Applicable Labour Laws
To provide for fixing minimum rates of wages in certain employments
Fixing Hours for normal working
Composition of Committee
Maintenance of registers and records
Claims, Penalties, Offence, Punishment
MINIMUM WAGES ACT,
1948
To provide for the registration of Trade Union & define the law relating to
registered 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 and women
workers and for the prevention of discrimination
Advisory Committee to regulate the process
Power of Government for appropriation
Penalties and Offence
EQUAL REMUNERATION
ACT, 1972
Applicable Labour Laws
To regulate the payment of wages of certain classes of employed persons
Applicability and Coverage
Legal deductions
Offences and Penalties
PAYMENT OF WAGES ACT,
1936
To provide workmen and/or their dependents some relief in case of
accidents, arising out of and in the course of employment and causing
either 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 employees
Applicability, Qualification, Nomination
Forfeiture of Gratuity
Protection of gratuity and Penalties
PAYMENT OF GRATUITY
ACT, 1972
Environmental Laws and Acts
Stated in Constitution of
India
Referred by Directive
Principles of State Policy
Guided by Fundamental
Rights structure
The Environment
(Protection) Act -
1986
Hazardous Waste
(Management and
Handling) Rules -
1989
The Public Liability
Insurance Act and
Amendment -1991 &
1992
The National
Environmental
Tribunal Act 1995
The National
Environment
Appellate Authority
Act 1997
The Forest
(Conservation) Act
1981
The Water
(Prevention and
Control of Pollution)
Act 1974
The Water
(Prevention and
Control of Pollution)
Cess Act 1977
The Air (Prevention
and Control of
Pollution) Act 1981
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
tenure
10.7 week salary 21.7 week salary None
Severance pay for redundancy
dismissal of employee with 1 year
tenure
2.1 week salary 4.3 week salary None
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
for 9 person dismissal
Yes No No
Government approval required
for 1 person dismissal
Yes No No
Government approval
for redundancy dismissal granted
Rarely Not applicable Not applicable
Dismissal priority rules regulated Yes Yes No
Dismissal due
to redundancy allowed?
Yes, if approved by government Yes, without approval of government Yes, without approval of government
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
Indias 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 Indias unemployed millions and those trapped in poor quality jobs. Given the
countrys 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..
References
Links
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)