Small town governments in USA at least are very strict with their zoning codes and based on things what I have heard, changing the zone sometimes require even putting the change in a ballot! Mostly requires council approval I guess but the process is similarly full of red tape. I remember a very similar article by someone who tried to start a business at their home in some US state and the red tape he had to go through.
Even cities in the US. I live in a "historic District" in cambridge ma in a big ugly brick building with 35 units. 3 of us wanted to change windows, as they're original 1940s and terrible. So we go to get a permit. The permit department sees "exterior change" looks at the address, and sends it to the historical commission. They won't sign off, we have to attend a hearing. They don't like replacement windows, so we fill out the permit and go to the meeting.
We please our case to the four commissioners and no problem. We get the permit, everything was handled professionally, but its a 2 month delay and kind of a pain. I know its encouraging people to do changes without permits. Some of my neighbors (bless their hearts) seem to love to complain about any change, to anything so they're not helping. I can't imagine trying to build something new. (Some renovations were shot down in the meeting and they're invited to work with the commissioners to come up with a compromise.)
I know restaurants that have had to wait a few months for inspections which delay openings. Its a balance, but sometimes it tips too far.
cambridge on windows.
But, in the end we got our double paned windows.
Harvard's HouseZero was at the same historical committee meeting we went to, with a request for "Triple panes". They were approved for everything they asked for..
I wonder how well its working..
To take an example a simple thing like driving license takes couple of months to get if one is planning not to involve an agent, but you can get driving license ( without knowing any driving ) in 1 month if you have an agent.
That's probably why some people would block the application and even refuse bribes; they probably already have exclusive deals with agents who pay them regular bribes and will not even bother to risk accepting bribes through unproven channels. They literally monopolized the regulatory pipelines and have setup an entire supply chain around it.
All they do is - keep silence. If you understand the cues and pay up yourself, your work will be done otherwise you can keep waiting forever.
Of course it’s illegal.
There is now plausible deniability because the agents look like they are actually providing a valuable service.
Just be sure to bribe the police, the judge etc.
"Light industrial", at least in my area is a pretty easy thing to rezone by the local authorities. At least it is in my area in suburbia in the twin cities MN.
Granted that doesn't mean a town couldn't just say 'no'. On the other hand there's plenty of land already potentially rezoned land you can buy and it's no big deal.
Now bigger scale industrial is a whole other story. Nobody wants a smelting plant company to just show up at the city council meeting and announce they bought a bunch of farm land on the edge of the town...
But the problem is that the whole of India is made up of hundreds and thousands of small towns. And there are hardly any land banks zoned as industrial land because almost all of India is fertile land.
I can almost guarantee this land was purchased for significantly less because it is agricultural land as well.
States have plenty of reasonable concerns about re-zoning agricultural land into commercial land. The most obvious being that if there are spills or other environmental issues it could destroy much of the agricultural land around it. Needing to know past owners is to make sure a previous bad actor did not create a new shell company to sell to hide the real owner. The previous owner could have already been banned from commercial development due to the above or other issues.
The fact that the author is intentionally misleading this article shows that they are a dishonest actor and is part of why we ended up needing all this procedure.
The bribery expected in many of the depts, broken website, all the delays , lack of responses, after 9 months he is not more than half way into the process is the problem .
If they denied him with valid reasoning early on and communicated in reasonable time this won’t be a problem .
Ironically both the Forestry Dept. and the Pollution Control Board were the fastest to certify so maybe this isn't the problem, eh?
The author doesn't complain about the necessity. He is complaining that compliance doesn't result in receiving a permit.
Maybe a default-yes approach would be more efficient. You should be required to post notice of your plans to these offices, then they have two months to raise any objections. If they do not, then you can go ahead. If they do, they're required to keep the process moving or you can sue to remove the road block.
Hardly. The colonial system started to evolve from approx 1600  but industrialisation  didn't start in the UK until at least 150 later
So, I agree - an accurate statement would be to say "English involvement in India came out of the prevailing ideology of mercantilism, and it then grew into a colonial state". The colonial state did lead to India's deindustrialization - ex: the flourishing textile industries of the subcontinent were not allowed to modernize. But counterfactuals are hard. (I still think an area of the world at the forefront of textile production for thousands of years would not have gone gently into the good night without a fight.)
It's not exactly a conspiracy.
Besides globalization itself is a relatively a new phenomenon and we did get started on that.
Also merely blaming these policies for slow growth is wrong. India has a range of socio-religious problems, which just can't go hand in hand with requirements for high growth economies, that is things like high quality public education, equality of access to opportunity, a degree of fairness in society and focus towards larger goals etc. India is just not there yet. Even domestic political goals are just something else.
Basically India is trying to make Biryani out of Idly batter.
When I worked at a young startup in Seattle we went through a stretch of hiring ex-Microsoft PMs who were great at solving all sorts of ten-years-old Microsoft-flavored problems.
I wish I knew this term then.
These consequences are very much intended. The government adds these road blocks precisely so they can maximize the number of government workers who can milk money out of you.
Western developed countries have an order of magnitude more permissions that need to be approved. The difference is that the more sensible ones will consolidate all the requirements from all the different agencies and require you to make a single (or maybe a couple) submissions.
You will likely be required to submit more stuff, but those will be in subsequent problems in response to specific issues that come up.
Generally speaking in developed counties you can't just buy any given farmland and rezone it ... at will, just because you want to. That's not an automatic thing.
Nobody wants a smelting plant to just show up next to their town and pop up because someone wanted to build a smelting plant .... or something with massive truck traffic ... that now goes through small neighborhoods / school zones day and night ...
Having said that, the bureaucracy described is pretty thick. And at least in the US there's plenty of land that is locally zoned in a way that could change from farmland to something like 'light industrial' without that level of bureaucracy.
But you need to seek it out and not just buy rando farm land and announce you want to build a factory too..
I feel like this story both could happen in the US, but also would be fairly avoidable too.
I recall a hilarious story about a cosmetic company who operated exclusively in China but wanted to diversity their manufacturing around a bit and bought a building in a historic district in the US. But they did zero homework and were astonished to find out that nobody wanted trucks coming and going day and night through this small town's city streets and 'staging' in the local school parking lot. The clueless CEO said 'this was never a problem in China'...
Nor a I trying to build a heavy industry like a smelting plant. I am currently planning to build a warehouse shed which could be later converted into very light manufacturing plant for animal feed pellets or something similar.
Also, there are very few areas zoned as Industrial land. Also, this isn't a random piece of farmland. It's almost a barren land where most people grow grape vines or just some dry land crops like cactus.
At least in the US that's a thing where local communities zone areas for future / potential use ... but it isn't that zone at the moment because it is being used for something else. At least in the US those are fairly plentiful.
It's an interesting study in economics, unless you are the takee.
Now, I wonder who exactly were the people involved who lobbied for and paid money for these things to happen.
No, the process is designed to limit fraud and prevent fly-by-night companies from squatting resources for the real businesses.
One can argue that the government must place trust in citizens, but then in India time and again we see even reasonably sized businesses defaulting on loans, and squatting land resources. You also need a lot of regulation and inspection, to ensure people are not drinking fertilizers with Cola. Such situations are actually common than one thinks.
The problem here really isn't law or law maker. The public in India in general is corrupt, and even honest sounding people become corrupt when offered an opportunity. There's only that much you can do when there's that much lies and corruption, you can have laws to limit them, but then these kinds of side effects show up.
Another factor is the laziness of the bureaucracy. Public servants prefer to move paper around than being "permissive by default" and going to the field to verify that things are ok.
Yet another factor is the weak justice/control system. It is difficult to punish bad actors rapidly and effectively after the fact, so the government tries to do as many checks as possible before the fact, which of course doesn't work and makes the life of honest actors hell, but "at least we tried!".
All that said, Brazil is probably much less bureaucratic than India. We Brazilians tend to compare with USA (big country as well, same continent, so natural comparison) but some friends that went to live in EU say bureaucracy is a big thing there too.
The Indian gov't is typically reactive. However, EoBB is a huge priority for the current administration. The Department for Industrial Policy and Promotion (DIPP) [renamed to Department of Promotion for Industry and Internal Trade] is overseeing the EODB project.
Your mileage may be limited now because the party in power in Maharashtra is no longer the same as the party in power at the Centre... There is limited pressure they can apply.
Also they have done wonderful work in Gujarat by making this process completely online.
And land is a stage subject.
Therefore, this write-up is not targeted at the current central government but at the wrong doings of past 70 years and why India still lags.
Does it make a difference if same party is in power in center and state?
The general consensus I see is that it doesn’t make such a big difference (everyone compares to Gujarat which is reaping the benefits of good admin over last 20 years). Current states have a lot of rot to remove and any EoDB efforts won’t be apparent. Is this a correct understanding of the situation?
Also, India has a unique federal structure where states can override central laws.
There are some powers in the shared list , where the state can specify its own rules etc.
Over time it’s trending towards union control for example removing VAT and replacing with GST etc
Before the electoral bonds, all political funding happened through cash. Which was more non traceable than the current electoral bonds.
But yes the ideology of the party matters.
Central government is pro business and they have proved it in Gujarat by making it a lot easier to NA land in Gujarat.
State Government (esp. INC) is communist and anti-free-market anti-business party which seeks to create as many hurdles as possible.
Delhi has notably had lot of challenges because of different governments , but Delhi administration is not typical state government, it is like Washington DC , there are special provisions as it is the capital region
- How much would you expect to spend if you were to pay all the bribes? Are you unable to afford them, or is this more of a moral issue?
- Is there any reason why you are effectively purchasing agricultural land and rezoning it to industrial land, rather than buying existing industrial land? What is your plan if you cannot obtain all the necessary NOCs?
- Is there any utility/road/rail access to your land? If not, have you looked into how much it will cost to build the necessary infrastructure?
- Is the area at risk for natural disasters (especially flooding)?
There are agents who provide the "NA service". They quoted me 10,00,000 (10 Lakh or 1 Million Rupees) excluding all the legal payments to government.
All land is Agricultural Land by default. Industrial land banks (created by MIDC are few and far and our land is near a MIDC industrial land bank which is out of stock, meaning completely bought out)
Yes there is road access.
No. the land is almost barren land. Far away from flooding. So no problem with natural disasters.
Maybe Shenzhen? But that's hardly agricultural anymore from what I've heard. I imagine you'll find few, and I suspect the infrastructure will be very poor in those places.
If you want no red tape, you need to go somewhere desperate for your investment enough to waive environmental, social and health protections, like parts of Sub Saharan Africa.
And in fact this is what many Indian and Chinese companies do. Just be ready to line the pocket of the local strongman.
The alternative is to pay public servants well and charge a very large fee for the permits to finance that. Then, deal corruption on top of that without impunity.
However, the culture itself has to support that. The culture of demanding bribes for documents shows that there's a parallel market in play to which the bureaucratic system has been subverted.
Apparently not well enough. When it's a few here and there you can argue that it's a character issue. When it's pervasive, there's a problem with the incentive structure.
I also wouldn't be so quick to condemn the culture, and I'm not so sure you can disentangle the cultural from the economic anyway.
I've found your twitter and I can share my contact with you that way (I don't think HN has private messages). Otherwise, my email is my HN email@example.com
(Although given this account from presumably an Indian citizen, I can't imagine in any way recommending a non-local attempting this)
If you have an official who is refusing to perform their job, or taking inordinately long about doing it, then it's legal to pay them to do it. As long as you're not influencing their actual decision making process, i.e. causing them to overlook actual legal deficiencies in your paperwork, then it is legal.
It's called the facilitation payment exception to FCPA. Obviously one intending to make such a payment would be well advised to discuss with their lawyer to make sure it is indeed within the scope of the exception.
Come on. It's obvious that the "lawyer" (or agent as mentioned in the article) is paying the fees and you aren't even aware of the process unless go to the department directly and notice the lack of willingness to process your permit.
Thanks for laying all of this out. Hopefully some politicians will take notice.
It sounds like it's basically impossible to run a business without paying bribes. I imagine even if you got through the NA certificate process, they would come around later for "inspections."
It would require a total of ~15,000$ USD
I agree that this process should in be a lot simpler but I wonder what the outcome would've been if you were willing to hire a broker and pay some bribes to get it done. Of course for you the actual manufacturing might be a secondary goal with the primary one being changing the process itself, but if someone just wants to start doing business, do you know how much it'd cost in terms of broker fees, bribes etc. to get everything setup?
Is your goal to open a factory, or is it reform? I'm glad if someone's trying to reform all these useless ideas and everything, but it doesn't exactly make sense that you couple basically two fundamentally different problems though. If you honestly want to get into manufacturing in India with any real practical timelines, you better get used to paying bribes as cost of doing business. If your idea cannot work with the extra cost of 10 MBP level bribes, better don't bother at all right?
An anecdote I have of relevance: I used to draft letters for my father in the 90s for his company. Once I mistyped 1997 as 1979 in a letter. The licensing authority fined his company Rs. 3,00,000 for that mistake. That was 10% of his annual revenue back then. That's because he had negotiated with the person a month back to not increase his bribe. And hence the agency used this as leverage to get a higher bribe.
Point is, you are trying to fight such a fundamental force and way of life in India, I will not bet money that you will succeed in this route, though I sincerely wish you would. Even if you do everything right, they will invent a problem because now you've hurt their ego on top of their pocket. Hell, if you actually start succeeding you should probably start worrying about personal safety as well (I would if I were you), because I doubt India is actually developed enough to ignore the worst case scenarios you can imagine in a corrupt society like this.
I’m curious if India has special zones created the way China did for Shenzhen, for example, and if so the process of applying there would be any easier/more efficient?
And as far I can see the central government is really committed to making a difference on the ground as they have done in states administered by them.
There are special zones in India but lot lot less than China or the USA. And all the land in that land bank is sold out where I want to start the unit. (Sangli Niraj Kupwad MIDC)
this is the problem in india. Should one know someone influential to get things done honestly and ethically?
It makes sense right? Why invest capital when you risk losing the value of your investment due to arbitrary bureaucratic hurdles like the ones faced by OP? This is the strategy Relience used in the past.
My point was that an individual should be able to conduct his business without someone handholding ( who is not stakeholder or partner or employee )
Will let you know.
I wish you best of luck for your endeavor, and following you on twitter.
- forcing their hand with public shaming
- forcing their hand with legal measures (looks like you're doing that)
- changing things by getting officials into office that _want_ to change things
P.S respect for hanging there this long already!
But the problem is everyone knows about this and majority of people think of this is good because they have been brainwashed by communistic ideology and they think that business people are bad and evil and hence they should be controlled and suppressed by all possible means.
Did you think of setting up the same in Gujarat since you had to runaround so much in Sangli?
But the whole point of me starting this unit is because I "want" to make it happen in India and not import from China. There is a lot of unemployment in India and hopefully, I want to help a bit.
This doesn't seem to have anything to do with 'starting a manufacturing unit', but everything to do with completely legitimate government land-use planning / zoning rules, etc, albeit a seemingly inefficient process.
The author should have performed due diligence on that process before embarking.
You can't just construct a steel mill next to a conservation beauty spot, simply because you 'bought' the land. Ideally.
But you will deal with one or two departments, and the requirements will be clear. You will not be sent on a wild goose chase across the region, sprinkling money and bribes as you go. Each department you visit will also not result in a further 3 you must visit, like some kind of bureaucratic ponzi scheme. And you will not be asked to submit forms at a website that doesn't work for weeks at a time.
The outcome, however, may still very well depend on 'special' factors.
Let it be known that today OP delivered
Also, are they looking at streamlining some of these processes?
I don't have a problem with few of the questions that OP complained about. For example, the health certificate looks like something, they might ask to check for health safety in the workplace and also probably to see natural resources outside are not being polluted.
India has lagged a lot in terms of its peer economies in other parts of Asia which almost started at the same place in the last century. I know they did liberalisation later than most, but they haven't catched up well even after that.
Afaik, most of the manufacturing that happens here is assembly.
Unless your product is one of those mass market, multi million dollar revenue makers you'll be eaten alive by adminstrative costs.
Biggest winners from recent Amazon and Flipkart sales were OnePlus, Oppo, Xiaomi etc.
HOWEVER my friend, if there is a will there is a way. ;)
Is “bribe” the only way? It is one, but not the only one. Maybe you can rent space, maybe you can buy a land already classified as “NA”. Maybe apply under several “Special Economic Zones”.
I still would have preferred if I could start on my own land.
Do you think this process would've been (significantly?) simpler if it wasn't agricultural land involved?
So yes, the whole point of this NA document is to convert the agricultural land into non-agricultural land on paper.
You'd apply for a plot of land in a commercial district for a project like this. Else, you'd need to get in touch with the county so that they vote on changing the destination plan.
I'm fairly sure the county itself will handle a lot of the infrastructure hurdles mentioned in this post, e.g. power lines, irrigation, etc.
I respect your refusal to pay bribes, but I believe you would have already received your approval if you were willing to pay a bribe. Not sure much those delays cost you in regards of your time invested and lost opportunities.
I'd go to the first person you talked to, ask how much needs to be gifted to him personally so he/she can take care of this. Then pay half of it at the beginning and the second half once you have received your approvals.
There is a law that prohibits American citizens from bribing foreign officials:
> (b)Exception for routine governmental action
Subsections (a) and (g) shall not apply to any facilitating or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official.
My father would have and has always done what you mentioned. Just pay it up and continue. And I agree totally with it.
But anyway due to Covid-19, the construction activity isn't going to start anytime soon. So I ave decided to play it out completely and see how far and deep this mess is.
I think during our life time we'll see India massively improve in this area. They've already made so much progress over the past 20 years, it's a really exciting country to watch.
They need more coverage in Western media like this though. Similar with China. An effective form of change is shaming the department or process, and if it's covered in Western media - at least this is true of India, it often makes local news. (See Hassan Minaj's coverage on Modi.)
It's surprising (or didnt mentioned) that every official doesnt point you to a "professional consultant with lots of experience that will help you navigate through process for a fee".
Although changing land purpose definitely should be involved process: I may have missed it, but it isn't mentioned what kind of manufacturing is going to be there. It might require lot of water, it might be very environmentally unfriendly
But there are a few visiting cards stuck with glue on the table. Visiting cards of such agents.
Where I live, industrial lands run at 5-10 times the price of an agricultural land. So someone might justify going through the lengthy process (and bribe officials along the way) because he is going to profit at the end of it. At the detriment of people living or running their farms nearby.
My guess is that many people here are sympathetic because they didn't have their lives ruined by someone opening up a manufacturing unit next to their homes.
There's very little industrial land. And all of that is used.
 Why Capitalism Triumphs in the West and fails everywhere else
 Mystery of Capital Video:
I often visit sites with potential clients and I have to tell them sorry, I can try, but you will pay a lot of fees to me and the local government and you will likely never get permission to build here.
Off the top of my head, here are some permissions / consultations you could need to build a private house in a UK, most sites wont require all of these at the same time but many sites will have a least one need for a specialist site survey of some kind:
Planning permission (Regulation of the impact of your build on the community):
- Roads department consultation
- Water supplier consultation
- Wastewater consultation with water authority and EPA
- Archaeological service consultation
- Natural heritage / ecology.
- Historic environment consultation.
- Coal authority (abandoned mines)
- Contaminated land check
- Landscape capacity study
- Full set of plans, sections and elevations and report to show:
- Relation to existing buildings
- Effect on landscape
- Land use
- Room use
- Placement of windows / doors in relation to existing buildings
Building control / Building warrant (Safety of the finished building):
- Radon assessment
- Structural engineers certificate.
- SAP (energy use) calculation
- Full set of plans, sections and elevations showing compliance with all building regulations
- Consultation with Fire Authority
CDM regulations require the client to appoint a competent builder / architect / engineer etc
Party wall agreement
....and some more I can't be bothered to type out here....
This whole process typically takes a minimum of 6 months before you get permission to break ground. Some of the consultations are a one line response saying 'no objection' or they can require you to get specialist surveys done, this can drag things out longer.
For a factory the process will have several more levels of detail for each of the points above. E.g each point under planning permission might require a specialist consultant to visit the site, make tests or surveys and perform desk studies and then the submission of, I don't know, say, a 20 page written report with their findings.
And I agree that these things need to be done. And I am not against it if the people there follow the procedure and do the things that are needed to be done.
But what if one of the people from the government doing the survey/inspection just refuses to sign the paper! It's just crap. You can't complain to anyone nor can you do anything else. You're just stuck.
That's where my problem lies.
Even in the age of computers, some departments are printing forms using ink from the middle ages on paper from the egyptians. You require a prime lens attached to your eyes to decipher the 7point font on the form.
There are very few and most of them are bought out.
I can hire an lawyer or agent to this work, but the cost is very very high. I decided to do it myself to understand the depth of this mess.
1) They charge so high because there are few players with so many internal contacts. So this is a monopoly or oligopoly market just taking advantage of the system. I mean it is hard because of these people. These people lobby to keep such systems in place.
2) It is unreasonable for any government, especially in a developing country to make so many demands of the illiterate and poor population. If such a situation continues, poor people will never be able to manufacture anything.
This creates a social division almost alike slaves and masters. Alike the Soviet System of the Elite Aristocrats, Their friends in rich, non-competition businesses and the government and the serfs and peasants.
However, there is one difference. A small factory can employ many people. If you succeed, you won't be the only one who benefits.