The factory inspection system needs a complete overhaul to bring India among the top 50 countries in terms of ‘ease of doing business’ in the next two years, according to the Confederation of Indian Industries (CII).

India is currently placed at 130 out of 189 countries in the ‘ease of doing business’ rankings.

“The excessive number of inspections in India weighs down on the competitive advantage and the ‘ease of doing business’ of Indian businesses”, CII said in its white paper titled ‘Inspections and Regulatory Enforcements for Micro Small and Medium Enterprises (MSMEs) in India.

Forty inspectors

The white paper noted that a manufacturing company in India has to comply with around 70 laws and regulations. It further said that 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, it said.

“Inspections in India have been found to be excessive, duplicate and complicated, imposing significant costs on businesses, especially MSMEs”, the paper noted. While most inspections are selected locally, “without any objective criteria”, inspectors act “over-zealously” and make “extortionist demands from factories”, according to the document.

CII has also observed 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”, it pointed out.

Rationalise inspections

CII 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”.

It said a portal could be created for automatically updating invoices related to excise, sales tax, customs and the like by SMEs and that 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, it added.

It also urged the central government to encourage the states to pursue a process for simplification of labour laws and compliance.

Source: The Hindu