Karnataka’s New Approval System: Ease of Doing Business Reforms in India
- Starting a business in Karnataka has become easier as investors will not require multiple clearances in the first three years.
- Land reforms in the state will also simplify the land acquisition process for new setups.
The corporate establishment process in the south western Indian state of Karnataka has just become easier with new reforms introduced following the amendment of the Karnataka Industrial (Facilitation) Act earlier this year.
Businesses planning to relocate to India or planning fresh investment into the country, should note Karnataka’s recent spate of business reforms. These reforms include land reforms, labor reforms, auto-renewal of various licenses and clearances, and a central inspection system.
Easing compliance during the initial establishment period
The state government launched an affidavit-based approval system (ABAS) on December 21, 2020, which will allow investors to set up a business in Karnataka without requiring multiple clearances for the first three years of establishment.
This will definitely ease doing business in the state, a renowned hub for IT, IT-enabled services, and manufacturing. It also eases the compliance process during the critical investment period.
On June 25, the Karnataka State Cabinet decided to amend the Karnataka Industrial (Facilitation) Act, 2002, to enable entrepreneurs to establish industries in allocated land areas in specific districts – without waiting for multiple clearances and approvals from multiple state departments and regulatory agencies. The amendment would allow investors fast-track their project execution, reduce costs involved, install necessary machinery without delays, and commence production activity.
The reform applies to all types of private business operations – small, medium, and large-scale units.
However, to be eligible, investors need to secure clearance from the State High Level Clearance Committee (SHLCC) headed by the Chief Minister or the State Single Window Clearance Committee (SSWCC).
Land reforms enable direct purchase of agricultural land for industrial purposes
Also, in June, the Karnataka government amended Section 109 of the Karnataka Land Reforms Act. This relates to the acquisition of agricultural land for industrial purposes.
The Land Reforms Act thus paves the way for private businesses and industrial setups to purchase agricultural land directly from farmers. Previously, all agricultural land purchases allowed only via the Karnataka Industrial Areas Development Board and this was subject to strict conditions.
Land acquisition is notoriously difficult in India for this precise reason, which makes this a landmark reform in Karnataka and immediately boosts its prospects for investors.
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