Factory Licence in India: When You Need One, Plan Approval and Renewal

If you run a manufacturing unit, you may need a factory licence before you start production. It's issued by the state's factories department, and it comes with obligations on safety, health and working conditions that apply every day the factory runs. This guide explains when a unit counts as a factory, how the approval and licence work, and how to keep it valid.

When a Unit Counts as a Factory

Under the Factories Act, 1948, premises where a manufacturing process is carried on were treated as a factory if they had:

• 10 or more workers, where the process uses power, or
• 20 or more workers, where it doesn't.

The Occupational Safety, Health and Working Conditions Code, 2020, one of the four labour codes that replace older labour laws including the Factories Act, raises these thresholds to 20 workers with power and 40 without. How and when the new thresholds apply depends on the rules each state notifies, so check the current position in your state before deciding whether you need a licence.

Workers include people engaged through contractors, so count them too.

Plan Approval

Before building or extending a factory, most states require the building plans to be approved by the factories department. The application usually includes:

• Site and building plans, showing the layout of machinery, exits, ventilation and lighting.
• Details of the manufacturing process and the materials used.
• Information on power, the number of workers, and hazardous processes, if any.

Getting plan approval first avoids expensive changes later, especially for hazardous processes, which face closer scrutiny.

The Factory Licence

Once the factory is ready, the occupier applies for registration and a licence before starting production. The application usually needs:

• The approved plans.
• Details of the occupier, who is legally responsible for the factory, and the manager.
• The number of workers and the installed power.
• Proof of ownership or tenancy of the premises.
• Other approvals, such as a fire safety certificate and pollution control consents, where applicable.
• The prescribed fee, which in most states depends on workers and power.

Most states now take applications online, often through their single-window system.

Keeping It Valid

• Renewal: in many states the licence is renewed periodically, and some allow longer validity periods. Renew before it expires.
• Amendments: apply for an amendment when the number of workers, the power, the process or the occupier changes.
• Returns: factories file returns with the factories department, such as annual returns, on the state's schedule.
• Registers: maintain the registers the law requires, such as attendance, wages, accidents and leave.
• Inspections: factory inspectors can inspect the premises, so keep records ready.

Safety, Health and Welfare

The licence comes with continuing duties: safe machinery, fencing and guarding, safe handling of hazardous substances, clean premises, drinking water, toilets, first aid, and, above certain sizes, canteens, creches and welfare officers. Factories with hazardous processes have further obligations, such as safety committees and medical examinations.

Common Mistakes

• Starting production before the licence is granted.
• Not counting contract workers when checking the threshold.
• Expanding capacity or headcount without amending the licence.
• Letting the licence lapse.

Getting Help

Think Filing handles plan approvals, factory licences, renewals and returns, alongside the other licences a manufacturing unit needs.

Sources

• Factories Act, 1948.
• Occupational Safety, Health and Working Conditions Code, 2020.
• State factory rules.