Doing Business 2016 India 100749 Economy Profile 2016 India Doing Business 2016 India 2 © 2016 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 18 17 16 15 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. This work is available under the Creative Commons Attribution 33.0 IGO license (CC BY 3.0 IGO). http://creativecommons.org/licenses/by/3.0/igo. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: World Bank. 2016. Doing Business 2016: Measuring Regulatory Quality and Efficiency. Washington, DC: World Bank Group. DOI: 10.1596/978-1-4648-0667-4. License: Creative Commons Attribution CC BY 3.0 IGO Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. Adaptations—If you create an adaptation of this work, please add the following disclaimer along with the attribution: This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by The World Bank. Third-party content—The World Bank does not necessarily own each component of the content contained within the work. The World Bank therefore does not warrant that the use of any third-party- owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the work, it is your responsibility to determine whether permission is needed for that re-use and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures or images. All queries on rights and licenses should be addressed to the Publishing and Knowledge Division, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. ISBN (paper): 978-1-4648-0667-4 ISBN (electronic): 978-1-4648-0668-1 DOI: 10.1596/978-1-4648-0667-4 ISSN: 1729-2638 Cover design: Corporate Visions, Inc. Doing Business 2016 India 3 CONTENTS Introduction .................................................................................................................................. 4 Starting a business ..................................................................................................................... 16 Dealing with construction permits ........................................................................................... 35 Getting electricity ....................................................................................................................... 61 Registering property .................................................................................................................. 74 Getting credit .............................................................................................................................. 89 Protecting minority investors ................................................................................................... 95 Paying taxes .............................................................................................................................. 102 Trading across borders ............................................................................................................ 109 Enforcing contracts .................................................................................................................. 116 Resolving insolvency ................................................................................................................ 124 Labor market regulation ......................................................................................................... 131 Distance to frontier and ease of doing business ranking .................................................... 137 Resources on the Doing Business website ............................................................................ 140 Doing Business 2016 India 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is economies) for each indicator. The data in this report are for a local entrepreneur to open and run a small to current as of June 1, 2015 (except for the paying taxes medium-size business when complying with relevant indicators, which cover the period January–December regulations. It measures and tracks changes in 2014). regulations affecting 11 areas in the life cycle of a The Doing Business methodology has limitations. Other business: starting a business, dealing with construction areas important to business—such as an economy’s permits, getting electricity, registering property, getting proximity to large markets, the quality of its credit, protecting minority investors, paying taxes, infrastructure services (other than those related to trading across borders, enforcing contracts, resolving trading across borders and getting electricity), the insolvency and labor market regulation. Doing Business security of property from theft and looting, the 2016 does not present rankings of economies on labor transparency of government procurement, market regulation indicators or include the topic in the macroeconomic conditions or the underlying strength of aggregate distance to frontier score or ranking on the institutions—are not directly studied by Doing Business. ease of doing business. The indicators refer to a specific type of business, In a series of annual reports Doing Business presents generally a local limited liability company operating in quantitative indicators on business regulations and the the largest business city. Because standard assumptions protection of property rights that can be compared are used in the data collection, comparisons and across 189 economies, from Afghanistan to Zimbabwe, benchmarks are valid across economies. The data not over time. The data set covers 47 economies in Sub- only highlight the extent of obstacles to doing business; Saharan Africa, 32 in Latin America and the Caribbean, 25 they also help identify the source of those obstacles, in East Asia and the Pacific, 25 in Eastern Europe and supporting policy makers in designing regulatory reform. Central Asia, 20 in the Middle East and North Africa and More information is available in the full report. Doing 8 in South Asia, as well as 32 OECD high-income Business 2016 presents the indicators, analyzes their economies. The indicators are used to analyze economic relationship with economic outcomes and presents outcomes and identify what reforms have worked, where business regulatory reforms. The data, along with and why. information on ordering Doing Business 2016, are This economy profile presents the Doing Business available on the Doing Business website at indicators for India. To allow useful comparison, it also http://www.doingbusiness.org. provides data for other selected economies (comparator Doing Business 2016 India 5 CHANGES IN DOING BUSINESS 2016 As part of a two-year update in methodology, Doing The case study underlying the trading across borders Business 2016 expands the focus of five indicator sets indicators has been changed to increase its relevance. (dealing with construction permits, getting electricity, For each economy the export product and partner are registering property, enforcing contracts and labor now determined on the basis of the economy’s market regulation), substantially revises the comparative advantage, the import product is auto parts, methodology for one indicator set (trading across and the import partner is selected on the basis of which borders) and implements small updates to the economy has the highest trade value in that product. The methodology for another (protecting minority investors). indicators continue to measure the time and cost to export and import. The indicators on dealing with construction permits now include an index of the quality of building regulation and Beyond these changes there is one other update in its implementation. The getting electricity indicators now methodology, for the protecting minority investors include a measure of the price of electricity consumption indicators. A few points for the extent of shareholder and an index of the reliability of electricity supply and governance index have been fine-tuned, and the index transparency of tariffs. Starting this year, the registering now also measures aspects of the regulations applicable property indicators include an index of the quality of the to limited companies rather than privately held joint land administration system in each economy in addition stock companies. to the indicators on the number of procedures and the For more details on the changes, see the “What is time and cost to transfer property. And for enforcing changing in Doing Business?” chapter starting on page contracts an index of the quality and efficiency of judicial 27 of the Doing Business 2016 report. For more details processes has been added while the indicator on the on the data and methodology, please see the “Data number of procedures to enforce a contract has been Notes” chapter starting on page 119 of the Doing dropped. Business 2016 report. For more details on the distance to The scope of the labor market regulation indicator set frontier metric, please see the “Distance to frontier and has also been expanded, to include more areas capturing ease of doing business ranking” chapter in this profile. aspects of job quality. The labor market regulation indicators continue to be excluded from the aggregate distance to frontier score and ranking on the ease of doing business. Doing Business 2016 India 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to start ECONOMY OVERVIEW is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing business Region: South Asia based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size Income category: Lower middle income businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of doing business ranking. Population: 1,267,401,849 Doing Business presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 1,610 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier scores, DB2016 rank: 130 rounded to two decimals. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where DB2015 rank: 134* 0 represents the worst performance and 100 the frontier. Change in rank: 4 (See the chapter on the distance to frontier and ease of doing business). DB 2016 DTF: 54.68 The ease of doing business ranking compares economies with one another; the distance to frontier score DB 2015 DTF: 52.67 benchmarks economies with respect to regulatory best practice, showing the absolute distance to the best Change in DTF: 2.01 performance on each Doing Business indicator. When compared across years, the distance to frontier score * DB2015 ranking shown is not last year’s published shows how much the regulatory environment for local ranking but a comparable ranking for DB2015 that entrepreneurs in an economy has changed over time in captures the effects of such factors as data revisions absolute terms, while the ease of doing business ranking and the changes in methodology. See the data notes can show only how much the regulatory environment has starting on page 119 of the Doing Business 2016 changed relative to that in other economies. report for sources and definitions. The 10 topics included in the ranking in Doing Business 2016: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The labor market regulation indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented in this year’s economy profile. Doing Business 2016 India THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2016 India THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy regional average (figure 1.2). The economy’s rankings stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4) business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business relative to comparator economies and relative to the ranking provide another perspective. Figure 1.2 How India and comparator economies rank on the ease of doing business Note: The rankings are benchmarked to June 2015 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2016 India 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - India (Scale: Rank 189 center, Rank 1 outer edge) Figure 1.4 Distance to frontier scores on Doing Business topics - India (Scale: Score 0 center, Score 100 outer edge) Source: Doing Business database. Note: The rankings are benchmarked to June 2015 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Doing Business 2016 India 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier score. tells only part of the story, so do changes in that ranking. This measure shows how far on average an economy is Yearly movements in rankings can provide some indication from the best performance achieved by any economy on of changes in an economy’s regulatory environment for each Doing Business indicator. firms, but they are always relative. Comparing the measure for an economy at 2 points in time Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economy’s regulatory not reflect how the business regulatory environment in an environment as measured by Doing Business has changed economy has changed over time—or how it has changed over time—how far it has moved toward (or away from) in different areas. To aid in assessing such changes, the most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.5). Figure 1.5 How far has India come in the areas measured by Doing Business? Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator. Starting a business is comparable to 2010. Getting credit, protecting minority investors, paying taxes and resolving insolvency had methodology changes in 2014 and thus are only comparable to 2013. Dealing with construction permits, registering property, trading across borders, enforcing contracts and getting electricity had methodology changes in 2015 and thus are only comparable to 2014. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 119 of the Doing Business 2016 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2016 India 11 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part of regulation—such as a regulatory process that can be the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few comparison with the indicators of a good practice days and at a low cost. Comparison of the economy’s economy or those of comparator economies in the indicators today with those in the previous year may region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persist—and where of procedures, long delays or high costs. Or they may they are diminishing. reveal unexpected strengths in an area of business Table 1.1 Summary of Doing Business indicators for India Best performer globally Bangladesh DB2016 Russian Federation Mumbai DB2016 Mexico DB2016 Indicator China DB2016 Delhi DB2016 India DB2016 India DB2015 DB2016 DB2016 Starting a Business 155 164 -- -- 117 136 65 41 New Zealand (1) (rank) Starting a Business (DTF 73.59 63.69 71.59 75.36 81.72 77.46 88.94 92.35 New Zealand (99.96) Score) Procedures (number) 12.9 13.9 14.0 12.0 9.0 11.0 6.0 4.4 New Zealand (1.00)* Time (days) 29.0 34.0 29.0 29.0 19.5 31.4 6.3 10.5 New Zealand (0.50) Cost (% of income per 13.5 15.3 17.0 10.4 13.9 0.7 17.9 1.1 Slovenia (0.00) capita) Paid-in min. capital (% 0.0 111.2 0.0 0.0 0.0 0.0 0.0 0.0 105 Economies (0.00)* of income per capita) Dealing with Construction Permits 183 184 -- -- 118 176 67 119 Singapore (1) (rank) Dealing with Construction Permits 32.47 32.47 34.62 30.56 65.27 48.29 71.76 65.23 Singapore (92.97) (DTF Score) Procedures (number) 33.6 33.6 40.0 28.0 13.4 22.0 10.5 19.0 5 Economies (7.00)* Doing Business 2016 India 12 Best performer globally Bangladesh DB2016 Russian Federation Mumbai DB2016 Mexico DB2016 Indicator China DB2016 Delhi DB2016 India DB2016 India DB2015 DB2016 DB2016 Time (days) 191.5 191.5 147.0 231.0 269.0 244.3 86.4 263.5 Singapore (26.00) Cost (% of warehouse 26.0 28.5 25.3 26.6 1.7 7.2 10.2 1.6 Qatar (0.00) value) Building quality control 11.0 11.0 11.0 11.0 11.0 9.0 11.7 14.0 New Zealand (15.00) index (0-15) Getting Electricity 70 99 -- -- 189 92 72 29 Korea, Rep. (1) (rank) Getting Electricity (DTF 74.56 64.39 81.38 68.51 15.31 68.66 73.27 84.22 Korea, Rep. (99.88) Score) Procedures (number) 5.0 7.0 5.0 5.0 9.0 5.5 6.8 3.0 14 Economies (3.00)* Time (days) 90.1 105.7 53.0 123.0 428.9 143.2 78.9 160.5 Korea, Rep. (18.00)* Cost (% of income per 442.3 487.7 76.5 766.7 3,140.5 413.3 332.9 93.1 Japan (0.00) capita) Reliability of supply and transparency of tariff 5.5 5.5 6.0 5.0 0.0 6.0 7.0 8.0 18 Economies (8.00)* index (0-8) Registering Property 138 138 -- -- 185 43 106 8 New Zealand (1) (rank) Registering Property 50.29 50.22 51.62 49.11 27.48 75.02 58.74 90.51 New Zealand (94.46) (DTF Score) Procedures (number) 7.0 7.0 7.0 7.0 8.0 4.0 6.8 3.0 4 Economies (1.00)* Time (days) 47.0 47.0 47.0 47.0 244.0 19.5 63.7 15.0 3 Economies (1.00)* Cost (% of property 7.5 7.5 7.0 8.0 7.0 3.4 5.1 0.2 Saudi Arabia (0.00) value) Quality of the land administration index (0- 7.0 7.0 7.5 6.5 4.5 17.0 14.3 26.0 3 Economies (28.50)* 30) Doing Business 2016 India 13 Best performer globally Bangladesh DB2016 Russian Federation Mumbai DB2016 Mexico DB2016 Indicator China DB2016 Delhi DB2016 India DB2016 India DB2015 DB2016 DB2016 Getting Credit (rank) 42 36 -- -- 133 79 5 42 New Zealand (1) Getting Credit (DTF 65 65 65 65 30 50 90 65 New Zealand (100) Score) Strength of legal rights 6.0 6.0 6.0 6.0 6.0 4.0 10.0 6.0 3 Economies (12.00)* index (0-12) Depth of credit 7.0 7.0 7.0 7.0 0.0 6.0 8.0 7.0 26 Economies (8.00)* information index (0-8) Credit registry coverage 0.0 0.0 0.0 0.0 0.9 89.5 0.0 0.0 Portugal (100.00) (% of adults) Credit bureau coverage 22 Economies 22.0 22.4 22.0 22.0 0.0 0.0 100.0 70.2 (% of adults) (100.00)* Protecting Minority 8 8 -- -- 88 134 57 66 Singapore (1)* Investors (rank) Protecting Minority 73.33 73.33 73.33 73.33 53.33 43.33 58.33 56.67 Singapore (83.33)* Investors (DTF Score) Strength of minority investor protection 7.3 7.3 7.3 7.3 5.3 4.3 5.8 5.7 3 Economies (8.30)* index (0-10) Extent of conflict of interest regulation 6.7 6.7 6.7 6.7 6.3 5.0 6.0 5.0 Singapore (9.30)* index (0-10) Extent of shareholder governance index (0- 8.0 8.0 8.0 8.0 4.3 3.7 5.7 6.3 4 Economies (8.00)* 10) United Arab Emirates Paying Taxes (rank) 157 156 -- -- 86 132 92 47 (1)* Paying Taxes (DTF United Arab Emirates 56.14 56.14 56.14 56.14 74.42 64.46 73.67 81.6 Score) (99.44)* Payments (number per 33.0 33.0 33.0 33.0 21.0 9.0 6.0 7.0 Hong Kong SAR, Doing Business 2016 India 14 Best performer globally Bangladesh DB2016 Russian Federation Mumbai DB2016 Mexico DB2016 Indicator China DB2016 Delhi DB2016 India DB2016 India DB2015 DB2016 DB2016 year) China (3.00)* Time (hours per year) 243.0 243.0 243.0 243.0 302.0 261.0 286.0 168.0 Luxembourg (55.00) Total tax rate (% of 60.6 60.6 60.6 60.6 31.6 67.8 51.7 47.0 Ireland (25.90) profit) Trading Across Borders 133 133 -- -- 172 96 59 170 Denmark (1)* (rank) Trading Across Borders 56.45 56.45 56.9 56.05 34.86 69.13 82.09 37.39 Denmark (100)* (DTF Score) Time to export: Border 109 109 88 128 100 26 20 96 15 Economies (0.00)* compliance (hours) Cost to export: Border 413 413 368 453 408 522 400 1,125 18 Economies (0.00)* compliance (USD) Time to export: Documentary 41 41 61 24 147 21 8 43 Jordan (0.00) compliance (hours) Cost to export: Documentary 102 102 104 100 225 85 60 500 20 Economies (0.00)* compliance (USD) Time to import: Border 287 287 311 266 183 92 44 96 19 Economies (0.00)* compliance (hours) Cost to import: Border 574 574 556 590 1,294 777 450 1,125 28 Economies (0.00)* compliance (USD) Time to import: Documentary 63 63 67 60 144 66 18 43 21 Economies (1.00)* compliance (hours) Cost to import: Documentary 145 145 139 150 370 171 100 500 30 Economies (0.00)* compliance (USD) Enforcing Contracts 178 178 -- -- 188 7 41 5 Singapore (1) Doing Business 2016 India 15 Best performer globally Bangladesh DB2016 Russian Federation Mumbai DB2016 Mexico DB2016 Indicator China DB2016 Delhi DB2016 India DB2016 India DB2015 DB2016 DB2016 (rank) Enforcing Contracts 32.41 32.41 32.41 32.41 22.21 77.56 67.39 78.56 Singapore (84.91) (DTF Score) Time (days) 1,420.0 1,420.0 1,420.0 1,420.0 1,442.0 452.8 389.0 307.0 Singapore (150.00) Cost (% of claim) 39.6 39.6 39.6 39.6 66.8 16.2 30.9 16.5 Iceland (9.00) Quality of judicial 7.5 7.5 7.5 7.5 7.5 14.1 10.6 12.5 3 Economies (15.50)* processes index (0-18) Resolving Insolvency 136 136 -- -- 155 55 28 51 Finland (1) (rank) Resolving Insolvency 32.59 32.6 32.59 32.59 26.36 55.43 73.03 58.39 Finland (93.81) (DTF Score) Recovery rate (cents on 25.7 25.7 25.7 25.7 25.8 36.2 68.9 41.7 Japan (92.90) the dollar) Time (years) 4.3 4.3 4.3 4.3 4.0 1.7 1.8 2.0 Ireland (0.40) Cost (% of estate) 9.0 9.0 9.0 9.0 8.0 22.0 18.0 9.0 Norway (1.00) Outcome (0 as piecemeal sale and 1 as 0 0 0 0 0 0 1 0 going concern) Strength of insolvency 6.0 6.0 6.0 6.0 4.0 11.5 11.5 11.5 4 Economies (15.00)* framework index (0-16) Source: Doing Business database. Note: DB2015 rankings shown are not last year’s published rankings but comparable rankings for DB2015 that capture the effects of such factors as data revisions and changes to the methodology. The global best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2016 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Doing Business 2016 India 16 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as well Preregistration (for example, name as to new markets. And their employees can benefit verification or reservation, notarization) from protections provided by the law. An additional benefit comes with limited liability companies. These Registration in the economy’s largest limit the financial liability of company owners to their business city 1 investments, so personal assets of the owners are not Postregistration (for example, social security put at risk. Where governments make registration registration, company seal) easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and Time required to complete each procedure generating more revenue for the government. (calendar days) What do the indicators cover? Does not include time spent gathering information Doing Business records all procedures officially required, or commonly done in practice, for an Each procedure starts on a separate day (2 entrepreneur to start up and formally operate an procedures cannot start on the same day). industrial or commercial business, as well as the time Procedures that can be fully completed and cost to complete these procedures and the paid- online are recorded as ½ day. in minimum capital requirement. These procedures Procedure completed once final document is include obtaining all necessary licenses and permits received and completing any required notifications, verifications or inscriptions for the company and No prior contact with officials employees with relevant authorities. The ranking of Cost required to complete each procedure economies on the ease of starting a business is (% of income per capita) determined by sorting their distance to frontier scores for starting a business. These scores are the Official costs only, no bribes simple average of the distance to frontier scores for No professional fees unless services required each of the component indicators. by law or commonly used in practice To make the data comparable across economies, Paid-in minimum capital (% of income several assumptions about the business and the per capita) procedures are used. It is assumed that any required information is readily available and that the Deposited in a bank or with a notary before entrepreneur will pay no bribes. Assumptions about registration (or within 3 months) the business:  Is a limited liability company (or its legal  Has a start-up capital of 10 times income per equivalent), located in the largest business city capita and a turnover of at least 100 times 1 and is 100% domestically owned with five income per capita. owners, none of whom is a legal entity.  Has a company deed 10 pages long.  Has at least 10 and up to 50 employees, all of  Does not qualify for any special benefits. them domestic nationals.  Leases the commercial plant or offices and is not  Performs general commercial or industrial a proprietor of real estate. activities. 1 For 11 economies the data are also collected for the second largest business city. Doing Business 2016 India 17 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in India? According largest business city of an economy, except for 11 to data collected by Doing Business, starting a business economies for which the data are a population-weighted there requires 12.90 procedures, takes 29.00 days, costs average of the 2 largest business cities. See the chapter 13.50% of income per capita and requires paid-in on distance to frontier and ease of doing business minimum capital of 0.00% of income per capita (figure ranking at the end of this profile for more details. 2.1). Most indicator sets refer to a case scenario in the Figure 2.1 What it takes to start a business in India - Mumbai Paid-in minimum capital (% of income per capita): 0.00 Doing Business 2016 India 18 What it takes to start a business in India - Delhi Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2016 India 19 STARTING A BUSINESS Globally, India stands at 155 in the ranking of 189 average ranking provide other useful information for economies on the ease of starting a business (figure 2.2). assessing how easy it is for an entrepreneur in India to The rankings for comparator economies and the regional start a business. Figure 2.2 How India and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2016 India 20 STARTING A BUSINESS Economies around the world have taken steps making it they often are part of a larger regulatory reform easier to start a business—streamlining procedures by program. Among the benefits have been greater firm setting up a one-stop shop, making procedures simpler satisfaction and savings and more registered businesses, or faster by introducing technology and reducing or financial resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in India (table 2.1)? Table 2.1 How has India made starting a business easier—or not? By Doing Business report year from DB2011 to DB2016 DB year Reform India eased business start-up by establishing an online VAT DB2011 registration system and replacing the physical stamp previously required with an online version. India made starting a business easier by considerably reducing the registration fees, but also made it more difficult by DB2015 introducing a requirement to file a declaration before the commencement of business operations. These changes apply to both Delhi and Mumbai. India made starting a business easier by eliminating the minimum capital requirement and the need to obtain a DB2016 certificate to commence business operations. This reform applies to both Delhi and Mumbai. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2016 India 21 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY India is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new firm. These are Legal form: Private Limited Company identified by Doing Business through collaboration with relevant local professionals and the study of Paid-in minimum capital requirement: INR 0 laws, regulations and publicly available information City: Mumbai, Delhi on business entry in that economy. Following is a detailed summary of those procedures, along with Start-up Capital: 10 times GNI per capita the associated time and cost. These procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Table 2.2 Summary of time, cost and procedures for starting a business in India - Mumbai Time to No. Procedure Cost to complete complete Obtain a digital signature certificate The applicant must obtain a Class-II Digital Signature Certificate from a certification agency authorized by the Controller of Certification Agencies. These include private agencies like NIC, E-Mudhra, MTNL Trust line, to which company directors submit the prescribed application form along with notarized proof of identity and address. A Class-II Digital Signature Certificate can be obtained for either a INR 700 to INR period of 1 year or a period of 2 years, and then needs to be renewed 2,500 per Digital 1 for another 1 or 2 years upon payment of renewal fees. Each agency has 1-3 days Signature its own fee structure, ranging from INR 700 to INR 2500. The cost will Certificate vary in accordance with the duration of the Digital Signature Certificate. Once the Digital Signature Certificate is obtained, the authorized personnel (directors/manager/secretary) are required to register the same with MCA for statutory e-filing. Agency: Authorized private agency (Federal) Obtain director identification number (DIN) online As per Companies Act, 2013, the current procedure for obtaining DIN is as detailed below. Every private limited company must have at least 2 2 directors, each obtaining a DIN and DSC. 1 day INR 500 per DIN 1) Form DIR 3 has to be filed online with the Ministry of Corporate Affairs (MCA) along with a photograph and scanned copy of supporting documents i.e. proof of identity and proof of residence not older than 2 Doing Business 2016 India 22 Time to No. Procedure Cost to complete complete months. 2) Form DIR 3 has to be signed and submitted electronically by the applicant using his or her own Digital Signature Certificate (DSC). 3) Form DIR 3 has to be verified digitally by: (i) a chartered accountant in practice or a company secretary in practice or a cost accountant in practice (Practising Professional); or (ii) a company secretary in full time employment of the company or a director of the company in which the applicant is to be appointed as director. 4) In case the Form DIR 3 is certified by a Practising Professional and is not identified by the system as a potential duplicate, the DIN will be approved and generated by the system immediately. In all other cases, a DIN application number is generated. The DIN application is then reviewed by MCA officials. In case the MCA officials are satisfied with the application based on the information provided, the DIN will be generated within a month of the date of application. If the eForm is not approved, then status of provisional DIN will appear as ‘Lapsed’. Legal basis: Companies (Appointment and Qualifications of Directors) Rules, 2014 and FAQs published by Ministry of Corporate Affairs. The fee for obtaining a DIN number is specified in the Companies (Registration Offices and Fees) Rules, 2014. Agency: Ministry of Corporate Affairs (Federal) Reserve the company name with the Registrar of Companies (ROC) online In order to reserve a unique company name, a name search is conducted on the website of MCA and eForm INC-1 is required to be filed pursuant to Section 4(4) of the Companies Act, 2013 and Rule 8 & 9 of Companies (Incorporation) Rules, 2014. The name reservation fee is provided under the Companies (Registration offices and fees) Rules, 2014. The process is as follows: 1. Check availability of the proposed name by checking on the MCA21 3 portal for other companies or LLPs having similar names. Alternatively, 2-7 days INR 1,000 engage a professional (practicing chartered accountant, company secretary or cost accountant) to perform the check on the MCA 21 portal and provide a search report which can be attached to the application. 2. Prepare the application in eForm INC-1 with all relevant details and declarations. If a professional has been engaged to check availability of name, have the professional certify and digitally sign the eForm. 3. Upload the eForm INC-1 to the MCA 21 portal and pay fees of INR 1,000 electronically (net banking or credit card). 4. If the e-Form has been certified by a professional (as described above), the proposed name shall be approved by the Registrar of Companies on a priority basis via the Straight Through Process ("STP"), Doing Business 2016 India 23 Time to No. Procedure Cost to complete complete provided the name is not similar to any existing trademark, any of the words proposed in the company's name does not exactly match any existing company's name and the name does not consist of a single word (other than private limited). 5. The name, if made available to the applicant, will be reserved for the applicant to use for 60 days from the date of application. If the proposed company is not incorporated during this 60-day period, the approval will lapse and the name will be available to other applicants. Agency: Registrar of Companies, Ministry of Corporate Affairs (Federal) Pay stamp duties online, file all incorporation forms and documents online and obtain the certificate of incorporation Pursuant to Section 7 (1) of the Companies Act, 2013 and pursuant to Rule 10, 12, 14 and 15 of Companies (Incorporation) Rules, 2014, the following forms are required to be electronically filed on the website of the Ministry of Corporate Affairs for incorporation purposes: a) Form-INC-7 (Application for Incorporation of Company). Scanned copies of the signed Memorandum and Articles of Association of the company, have to be attached to Form-INC-7. b) Form-INC-22 (Notice of situation or change of address of the registered office of the company). Proof of registered office address such as conveyance/ lease deed/ rent agreement etc. along with the rent receipts as well as copies of the utility bills (proof of evidence of any utility service like telephone, gas, electricity etc.) depicting the address of the premises not older than two months is required to be 4 attached to Form INC 22. 5 days on average see comments c) Form- DIR-12 (Particulars of appointment of directors and the key managerial personnel and the changes among them). Fee schedule for a small company of paid-up share capital between INR 500,000 and INR 1,000,000: - Filing of the Memorandum of Association: INR 2,000 - Filing fee for filing the Articles of association: INR 400 - Filing fee for Form INC-7: INR 400 - Filing fee for Form INC-22: INR 400 - Filing fee for Form DIR-12: INR 400 - Stamp duty for Articles of Association: IINR 2,000 (INR 1,000 on every INR 5 Lakhs of authorized capital or part thereof subject to a maximum of 50 Lakhs of Stamp Duty) - Stamp duty for Memorandum of Association: INR 200 Agency: Registrar of Companies, Ministry of Corporate Affairs (Federal) Doing Business 2016 India 24 Time to No. Procedure Cost to complete complete * Make a company seal and stamp As per the amendment to the Companies Act 2013, making a company seal is no longer a legal requirement. However, it is still commonly used in practice. In addition, the new company also makes a stamp. While the common seal is used as the signature of the company upon issuing share certificates or to execute other key documents, the stamp is 1 day normally required to be affixed by a director upon signing on behalf of (simultaneous with INR 350-500 5 the company in order to file several applications relevant to business previous startup. This includes but is not limited to applications for registration procedure) with the Employee State Insurance Corporation (ESIC) and application for a company Permanent Account Numbers (PAN). Agency: Authorized vendor (Private) Obtain a Permanent Account Number (PAN) from an authorized franchise or agent appointed by National Securities Depository Services Limited (NSDL) or Unit Trust of India (UTI) Under the Income Tax Act 1961, each person must quote his or her permanent account number (PAN) for tax payment purposes and the tax deduction and collection account number (TAN) for depositing tax deducted at source. The PAN is a 10-digit alphanumeric number issued on a laminated card by an assessing officer of the Income Tax Department. Since 2003/04, UTI and NSDL have become the authorized agencies that process PAN registration applications on behalf of the Income Tax department. 6 7-10 days INR 93 The applicant completes Form 49A (statutory form for applying for PAN), pays the due fees of INR 93 (plus applicable taxes currently at 12.36%) either online or otherwise and submits the application form together with proof of identity, proof of address and 2 recent photographs to the authorized agent/designated service centers for verification. After being allotted a PAN number, UTIISL or NSDL will print the PAN card and deliver it to the applicant. Agency: Private agencies authorized by UTI or NSDL, as outsourced by the Income Tax Department (Federal) Open a bank account The company must open a bank account. The bank account details must be provided by the company in various post-registration 7 applications, such as registrations for taxes. 2-4 days no charge Agency: Bank Doing Business 2016 India 25 Time to No. Procedure Cost to complete complete * Register with Employees' Provident Fund Organization The Employees Provident Fund Organization (EPFO) is a statutory organization under the Ministry of Labor and Employment. The Employees Provident Funds & Miscellaneous Provisions Act, 1952 applies to an establishment, employing 20 or more persons and engaged in any of the 183 Industries and Classes of business establishments, throughout India excluding the State of Jammu and Kashmir. 12 days, For verification purposes, the employer shall send the copies of all the simultaneous with 8 no charge documents mentioned in the application form along with the copy of previous the application generated at the time of submission after the issuance procedure of PF Code intimation letter to the EPFO office. Applications submitted for allotment of Provident Fund Code Number shall be verified by the EPFO official at the time of post coverage inspection. The employer shall keep all the original documents ready for verification by the EPFO authorities. Agency: Employees Provident Fund Organization (Federal) * Register for VAT online VAT online registration is conducted via the website www.mahavat.gov.in. After the completed application form is submitted online, an acknowledgment containing the date and time for attending before the registering authority along with code/designation and address of registering authority is generated. The company should print a copy of the completed e-application and submit it along with the acknowledgement to the registration authority for verification and photo attestation on a given date and time along with relevant documents. If the application is correct and complete in all respect along with relevant documents, then the registering authority will INR 500 generate TIN after verification of the documents. Registration certificate 10 days, (Registration Fee) + will be printed and issued to the company on the appointed date. The simultaneous with INR 25 (Stamp 9 appointment date is usually scheduled in the next 10 days. previous Duty) for procedure compulsory VAT Other accompanying documentation includes: registration - Certified true copy of the memorandum and articles of association of the company. - Proof of permanent residential address. - Proof of place of business (lease agreement) - One recent passport size photograph of the applicant - Copy of Income Tax Assessment Order having PAN or copy of PAN card - Chalan in Form No. 210 (original) showing payment of registration fee at INR 5000/in case of voluntary RC and INR 500/in other cases Agency: Department of Sales Tax Doing Business 2016 India 26 Time to No. Procedure Cost to complete complete * Register for medical insurance (ESIC) As per the Employees' State Insurance (General), Form 01 is the form required to be submitted by Employer for registration. The Employer Code Number issued will be included in the "intimation letter" which is sent by post to the employer. Employers can now submit application online for registration under ESI Act on the ESIC website (www.esic.in). The Employee’s individual insurance is a separate process and occurs 9 days, after Employer’s registration. The Employer is responsible for simultaneous with 10 submitting the required Declaration Form and employees are no charge previous responsible for providing correct information to the employer. The procedure employee temporary cards (ESI Cards) are issued on the spot by the local offices in many places. The temporary cards are valid for 13 weeks from the date of appointment of the employees. It takes a few weeks to get a permanent ESI card. Inspectors may visit the business premises to ensure compliance under the ESI Act. Agency: Employees' State Insurance Corporation (Federal) * Obtain a tax account number for income taxes deducted at source from the Assessing Office in the Mumbai Income Tax Department The tax deduction and collection account number (TAN) is a 10-digit alphanumeric number required by all persons responsible for deducting or collecting tax, as per Section 203A of the Income Tax Act. Any authorized franchise or agent appointed by National Securities Depository Services Limited (NSDL) can accept and process the TAN 7 days, application. TAN applications can be made either online through the simultaneous with INR 55 application 11 NSDL website www.tin-nsdl.com or offline. The application must be previous fee filed using Form 49B and submitted at any TIN Facilitation Center procedure authorized to receive e-TDS returns. The processing fee is INR 55 (plus applicable taxes). After verification of the application, it is sent to Income Tax Department which issues the TAN to the applicant. The national government levies the income tax. Agency: Private agencies authorized by NSDL, as outsourced by the Income Tax Department (Federal) Doing Business 2016 India 27 Time to No. Procedure Cost to complete complete * Register with Office of Inspector, Mumbai Shops and Establishment Act According to Section 7 of the Bombay Shops and Establishments Act, 1948, the establishment must be registered as follows: - Under Section 7(4), the employer must register the establishment in the prescribed manner within 30 days of the date on which the establishment commences its work. - Under Section 7(1), the establishment must submit to the local shop inspector Form A and the prescribed fees for registering the establishment. Supporting documents must be attached, including a certified true copy of the company's PAN Card, TAN Allotment Letter, Certificate of Incorporation, Memorandum and Articles of Association, a list of company directors, their particulars and copies of their PAN Cards. - Under Section 7(2), after the statement in Form A and the prescribed fees are received and the correctness of the statement is satisfactorily INR 1,200 audited, the certificate for the registration of the establishment is issued 2 days, (registration fee) + in Form D, according to the provisions of Rule 6 of the Maharashtra simultaneous with 3 times registration 12 Shops and Establishments Rules of 1961. previous fee for Trade procedure Refuse Charges Since the amendments in the Maharashtra Shops & Establishment (INR 3,600) (Amendment) Rules, 2010, the Schedule for fees for registration & renewal of registration (as per Rule 5) is as follows: 0 employees: INR 120 1 to 5 employees: INR 360 6 to 10 employees: INR 720 11 to 20 employees: INR 1,200 21 to 50 employees: INR 2,400 51 to 100 employees: INR 4,200 101 or more: INR 5,400. In addition, an annual fee (three times the registration and renewal fees) is charged as trade refuse charges (TRC), under the Mumbai Municipal Corporation Act, 1888. Agency: Municipal Corporation of Greater Mumbai * Receive inspection and obtain the Shops and Establishments registration certificate After applying for registration under the Shops and Establishments Act by visiting the nearest Citizen Facilitation Center (CFC) of the Municipal Corporation of Greater Mumbai to file the duly completed and signed 2-6 days, Form A, along with the required documents and fees, the application is simultaneous with 13 no charge assigned to and processed by Department Head (Sr.Inspector) at the previous concerned Ward. procedure After site inspection and approval of the application the Registration Certificate is issued to the applicant. Agency: Office of Inspector, Municipal Corporation of Greater Mumbai Doing Business 2016 India 28 Time to No. Procedure Cost to complete complete * Register for profession tax According to section 5 of the Profession Tax Act, every employer (not being an officer of the government) is liable to pay tax and shall obtain a certificate of registration from the prescribed authority. The application form, duly completed can be submitted online. An acknowledgment containing the date and time for attending before the registration authority along with the code/ designation and address of the registration authority will be generated. The company should take a print of the copy of the completed e-application and the employee/ person applying on behalf of the company should affix his signature at relevant places and then submit the printed copy of the filled e- application form along with the acknowledgment to the registration authority for verification on the given date and time along with relevant documents. If the application is correct and complete in all respects, 2 days, then the registration authority will generate TIN (registration/enrolment simultaneous with no charge 14 number under the Profession Tax Act) after the verification of the previous documents. Registration certificate will be printed and issued to the procedure company on the appointed date. Documents required to be provided with the application form include: - copy of the memorandum and articles of association of the company; - proof of place of business: Proof of ownership of the premises namely, copy of the property card or ownership deed or agreement with the builder or any other relevant documents; - copy of the PAN and/ or TAN; - proof of residence of the signatory to the application; - bank account number, bank and branch name, and blank cancelled cheque leaf of the bank account. Agency: Commissioner of Profession Tax, Department of Sales Tax * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Summary of time, cost and procedures for starting a business in India - Delhi Time to No. Procedure Cost to complete complete Obtain digital signature certificate online from private agency INR 700 to INR authorized by the Ministry of Corporate Affairs (National) 2,500 per Digital 1 1-3 days Signature The applicant must obtain a Class-II Digital Signature Certificate from a Certificate certification agency authorized by the Controller of Certification Doing Business 2016 India 29 Time to No. Procedure Cost to complete complete Agencies. These include private agencies like NIC, E-Mudhra, MTNL Trust line, to which company directors submit the prescribed application form along with notarized proof of identity and address. A Class-II Digital Signature Certificate can be obtained for either a period of 1 year or a period of 2 years, and then needs to be renewed for another 1-2 years upon payment of renewal fees. Each agency has its own fee structure, starting from INR 700. The cost will vary in accordance with the duration of the Digital Signature Certificate. Once the Digital Signature Certificate is obtained, the authorized personnel (directors/manager/secretary) are required to register the same with MCA for statutory e-filing. Agency: Certified private agencies Obtain director identification number (DIN) online from the Ministry of Corporate Affairs portal As per Companies Act, 2013, the current procedure for obtaining DIN is as detailed below. Every private limited company must have at least 2 directors, each would obtain a DIN number. 1) Form DIR 3 has to be filed online with the Ministry of Corporate Affairs (MCA) along with a photograph and scanned copy of supporting documents i.e. proof of identity and proof of residence not older than 2 months. 2) Form DIR 3 has to be signed and submitted electronically by the applicant using his or her own Digital Signature Certificate (DSC). 3) Form DIR 3 has to be verified digitally by: (i) a chartered accountant in practice or a company secretary in practice or a cost accountant in practice (Practising Professional); or (ii) a company secretary in full time 2 employment of the company or a director of the company in which the 1 day INR 500 per DIN applicant is to be appointed as director. 4) In case the Form DIR 3 is certified by a Practising Professional and is not identified by the system as a potential duplicate, the DIN will be approved and generated by the system immediately. In all other cases, a DIN application number is generated. The DIN application is then reviewed by MCA officials. In case the MCA officials are satisfied with the application based on the information provided, the DIN will be generated within a month of the date of application. If the eForm is not approved, then status of provisional DIN will appear as ‘Lapsed’. Legal basis: Companies (Appointment and Qualifications of Directors) Rules, 2014 and FAQs published by Ministry of Corporate Affairs. The fee for obtaining a DIN number is specified in the Companies (Registration Offices and Fees) Rules, 2014. Agency: Ministry of Corporate Affairs Doing Business 2016 India 30 Time to No. Procedure Cost to complete complete Reserve the company name online with the Registrar of Companies (ROC) In order to reserve a unique company name, a name search is conducted on the website of MCA and eForm INC-1 is required to be filed pursuant to Section 4(4) of the Companies Act, 2013 and Rule 8 & 9 of Companies (Incorporation) Rules, 2014. The name reservation fee is provided under the Companies (Registration offices and fees) Rules, 2014. The process is as follows: 1. Check availability of the proposed name by checking on the MCA21 portal for other companies or LLPs having similar names. Alternatively, engage a professional (practicing chartered accountant, company secretary or cost accountant) to perform the check on the MCA 21 portal and provide a search report which can be attached to the application. 2. Prepare the application in eForm INC-1 with all relevant details and 3 declarations. If a professional has been engaged to check availability of 2-7 days INR 1,000 name, have the professional certify and digitally sign the eForm. 3. Upload the eForm INC-1 to the MCA 21 portal and pay fees of INR 1,000 electronically (net banking or credit card). 4. If the e-Form has been certified by a professional (as described above), the proposed name shall be approved by the Registrar of Companies on a priority basis via the Straight Through Process ("STP"), provided the name is not similar to any existing trademark, any of the words proposed in the company's name does not exactly match any existing company's name and the name does not consist of a single word (other than private limited). 5. The name, if made available to the applicant, will be reserved for the applicant to use for 60 days from the date of application. If the proposed company is not incorporated during this 60-day period, the approval will lapse and the name will be available to other applicants. Agency: Registrar of Companies (ROC) Pay stamp duties online, file all incorporation forms and documents online and obtain the Certificate of Incorporation Pursuant to Section 7 (1) of the Companies Act, 2013 and pursuant to Rule 10, 12, 14 and 15 of Companies (Incorporation) Rules, 2014, the 4 following forms are required to be electronically filed on the website of 5 days on average see comments the Ministry of Corporate Affairs for incorporation purposes: a) Form-INC-7 (Application for Incorporation of Company). Scanned copies of the signed Memorandum and Articles of Association of the company, have to be attached to Form-INC-7. Doing Business 2016 India 31 Time to No. Procedure Cost to complete complete b) Form-INC-22 (Notice of situation or change of address of the registered office of the company). Proof of registered office address such as conveyance/ lease deed/ rent agreement etc. along with the rent receipts as well as copies of the utility bills (proof of evidence of any utility service like telephone, gas, electricity etc.) depicting the address of the premises not older than two months is required to be attached to Form INC 22. c) Form- DIR-12 (Particulars of appointment of directors and the key managerial personnel and the changes among them). Fee schedule for a small company of paid-up share capital between INR 500,000 and INR 1,000,000: - Filing of the Memorandum of Association: INR 2,000 - Filing fee for filing the Articles of association: INR 400 - Filing fee for Form INC-7: INR 400 - Filing fee for Form INC-22: INR 400 - Filing fee for Form DIR-12: INR 400 - Stamp duty for Articles of Association: INR 150 - Stamp duty for Memorandum of Association: INR 200 Agency: Registrar of Companies (ROC) * Make a company seal and stamp As per the amendment to the Companies Act 2013, making a company seal is no longer a legal requirement. However, it is still commonly used in practice. In addition, the new company also makes a stamp. While the common seal is used as the signature of the company upon issuing share certificates or to execute other key documents, the stamp is 1 day normally required to be affixed by a director upon signing on behalf of (simultaneous with 5 INR 500-1,000 the company in order to file several applications relevant to business previous startup. This includes but is not limited to applications for registration procedure) with the Employee State Insurance Corporation (ESIC) and application for a company Permanent Account Numbers (PAN). Agency: Authorized vendor (Private) Obtain a Permanent Account Number (PAN) from an authorized franchise or agent appointed by the National Securities Depository Ltd. (NSDL) or the Unit Trust of India (UTI) Investors Services Ltd., as outsourced by the Income Tax Department Under the Income Tax Act 1961, each person must quote his or her permanent account number (PAN) for tax payment purposes and the tax deduction and collection account number (TAN) for depositing tax 7-10 days INR 93 6 deducted at source. The PAN is a 10-digit alphanumeric number issued on a laminated card by an assessing officer of the Income Tax Department. Since 2003/04, UTI and NSDL have become the authorized agencies that process PAN registration applications on behalf of the Income Tax department. The applicant completes Form 49A (statutory form for applying for PAN), pays the due fees of INR 93 (plus applicable taxes currently at Doing Business 2016 India 32 Time to No. Procedure Cost to complete complete 12.36%) either online or otherwise and submits the application form together with proof of identity, proof of address and 2 recent photographs to the authorized agent/designated service centers for verification. After being allotted a PAN number, UTIISL or NSDL will print the PAN card and deliver it to the applicant. Agency: Private agencies authorized by UTI or NSDL, as outsourced by the Income Tax Department (Federal) Open a bank account The company must open a bank account. The bank account details must be provided by the company in various post-registration 7 applications, such as registrations with taxes. 2-4 days no charge Agency: Bank * Register with the Employees' Provident Fund Organization The Employees Provident Fund Organization (EPFO) is a statutory organization under the Ministry of Labor and Employment. The Employees Provident Funds & Miscellaneous Provisions Act, 1952 applies to an establishment, employing 20 or more persons and engaged in any of the 183 Industries and Classes of business establishments, throughout India excluding the State of Jammu and Kashmir. 12 days on average For verification purposes, the employer shall send the copies of all the (simultaneous with no charge 8 documents mentioned in the application form along with the copy of previous the application generated at the time of submission after the issuance procedure) of PF Code intimation letter to the EPFO office. Applications submitted for allotment of Provident Fund Code Number shall be verified by the EPFO official at the time of post coverage inspection. The employer shall keep all the original documents ready for verification by the EPFO authorities. Agency: Employees Provident Fund Organization (Federal) * Register for medical insurance at the regional office of the Employees' State Insurance Corporation As per the Employees' State Insurance (General), Form 01 is the form required to be submitted by Employer for registration. The Employer 10 days Code Number issued will be included in the "intimation letter" which is (simultaneous with no charge 9 sent by post to the employer. Employers can now submit application previous online for registration under ESI Act on the ESIC website (www.esic.in). procedure) The Employee’s individual insurance is a separate process and occurs after Employer’s registration. The Employer is responsible for submitting the required Declaration Form and employees are Doing Business 2016 India 33 Time to No. Procedure Cost to complete complete responsible for providing correct information to the employer. The employee temporary cards (ESI Cards) are issued on the spot by the local offices in many places. The temporary cards are valid for 13 weeks from the date of appointment of the employees. It takes a few weeks to get a permanent ESI card. Inspectors may visit the business premises to ensure compliance under the ESI Act. Agency: Employees' State Insurance Corporation, Ministry of Labor and Employment * Register for Value-Added Tax (VAT) at the Department of Trade and Taxes, Government of NCT of Delhi (State) Form DVAT 04: Application for Registration under Delhi Value Added Tax Act, 2004 must be filed with Department of Trade and Taxes, Government of NCT of Delhi. Online registration for VAT has been introduced on April 30, 2015. The following documents are required to be submitted along with the application: INR 500 registration 9 days on average (i) Parts A, B, C & D of the Form-DVAT-04 duly filled in fee + INR 25 stamp (simultaneous with 10 (ii) Proof of incorporation of the applicant dealer i.e. in case of a private duty for previous company, incorporation certificate and constitutional documents compulsory VAT procedure) (iii) Proof of identity of authorised signatory signing the Registration registration Application Form (iv) Two self addressed envelopes (without stamps) (v) In case of a dealer applying for registration and simultaneously opting for payment of tax under composition scheme, an application in Form DVAT 01 is to be attached along with this application Agency: Department of Trade and Taxes, Government of NCT of Delhi * Obtain a Tax Account Number (TAN) for income taxes deducted at the source from an authorized franchise or agent appointed by the National Securities Depository Ltd. (NSDL), as outsourced by the Income Tax Department The tax deduction and collection account number (TAN) is a 10-digit alphanumeric number required by all persons responsible for deducting or collecting tax, as per Section 203A of the Income Tax Act. 7 days (simultaneous with INR 55 application 11 Any authorized franchise or agent appointed by National Securities previous fee Depository Services Limited (NSDL) can accept and process the TAN procedure) application. TAN applications can be made either online through the NSDL website www.tin-nsdl.com or offline. The application must be filed using Form 49B and submitted at any TIN Facilitation Center authorized to receive e-TDS returns. The processing fee is INR 55 (plus applicable taxes). After verification of the application, it is sent to Income Tax Department which issues the TAN to the applicant. The national government levies the income tax. Doing Business 2016 India 34 Time to No. Procedure Cost to complete complete Agency: Private agencies authorized by UTI or NSDL, as outsourced by the Income Tax Department (Federal) * Register online under the Delhi Shops and Establishments Act Under the Delhi Shops and Establishments Act 1954, the company shall send to the Chief Inspector a statement in prescribed form A containing: (a) the name of the employer and the manager (b) the postal address of the establishment (c) the name of the establishment, Less than one day (d) the category of the establishment, i.e. whether it is a (online procedure, 12 shop/commercial establishment simultaneous with no charge (e) the number of employees working in the establishment; and previous (f) such other particulars as may be prescribed. procedure) Upon receipt of the statement, a registration certificate will be generated online instantly. Agency: Department of Labor - Government of NCT of Delhi * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2016 India 35 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse many builders opt out. They may pay bribes to pass (number) inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and What do the indicators cover? receiving all necessary inspections Doing Business records all procedures required for a Obtaining utility connections for water and business in the construction industry to build a sewerage warehouse along with the time and cost to complete Registering and selling the warehouse after its each procedure. In addition, this year Doing Business completion introduces a new measure, the building quality Time required to complete each procedure control index, evaluating the quality of building (calendar days) regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and Does not include time spent gathering professional certification requirements. information The ranking of economies on the ease of dealing with Each procedure starts on a separate day. Procedures that can be fully completed online construction permits is determined by sorting their are recorded as ½ day distance to frontier scores for dealing with construction permits. These scores are the simple Procedure considered completed once final average of the distance to frontier scores for each of document is received the component indicators. No prior contact with officials To make the data comparable across economies, Cost required to complete each procedure (% several assumptions about the construction of warehouse value) company, the warehouse project and the utility Official costs only, no bribes connections are used. Building quality control index (0-15) Assumptions about the construction company Sum of the scores of six component indices: The construction company (BuildCo): Quality of building regulations (0-2)  Is a limited liability company (or its legal equivalent). Quality control before construction (0-1)  Operates in the economy’s largest business Quality control during construction (0-3) city. For 11 economies the data are also Quality control after construction (0-3) collected for the second largest business Liability and insurance regimes (0-2) city. Professional certifications (0-4)  Is 100% domestically and privately owned.  Has five owners, none of whom is a legal entity.  Is fully licensed and insured to carry out construction projects, such as building warehouses. Doing Business 2016 India 36 The construction company (BuildCo) (continued):  Will be a new construction (there was no previous construction on the land), with no  Has 60 builders and other employees, all of trees, natural water sources, natural reserves them nationals with the technical expertise or historical monuments of any kind on the and professional experience necessary to plot. obtain construction permits and approvals.  Will have complete architectural and  Has at least one employee who is a technical plans prepared by a licensed licensed architect or engineer and architect. If preparation of the plans requires registered with the local association of such steps as obtaining further architects or engineers. BuildCo is not documentation or getting prior approvals assumed to have any other employees who from external agencies, these are counted as are technical or licensed experts, such as procedures. geological or topographical experts.  Will include all technical equipment required  Has paid all taxes and taken out all to be fully operational. necessary insurance applicable to its general business activity (for example,  Will take 30 weeks to construct (excluding all accidental insurance for construction delays due to administrative and regulatory workers and third-person liability). requirements).  Owns the land on which the warehouse will be built and will sell the warehouse upon Assumptions about the utility connections its completion. The water and sewerage connections:  Is valued at 50 times income per capita.  Will be 150 meters (492 feet) from the Assumptions about the warehouse existing water source and sewer tap. If there The warehouse: is no water delivery infrastructure in the economy, a borehole will be dug. If there is  Will be used for general storage activities, no sewerage infrastructure, a septic tank in such as storage of books or stationery. The the smallest size available will be installed or warehouse will not be used for any goods built. requiring special conditions, such as food, chemicals or pharmaceuticals.  Will not require water for fire protection reasons; a fire extinguishing system (dry  Will have two stories, both above ground, system) will be used instead. If a wet fire with a total constructed area of protection system is required by law, it is approximately 1,300.6 square meters assumed that the water demand specified (14,000 square feet). Each floor will be 3 below also covers the water needed for fire meters (9 feet, 10 inches) high. protection.  Will have road access and be located in the  Will have an average water use of 662 liters periurban area of the economy’s largest (175 gallons) a day and an average business city (that is, on the fringes of the wastewater flow of 568 liters (150 gallons) a city but still within its official limits). For 11 day. Will have a peak water use of 1,325 liters economies the data are also collected for (350 gallons) a day and a peak wastewater the second largest business city. flow of 1,136 liters (300 gallons) a day.  Will not be located in a special economic  Will have a constant level of water demand or industrial zone. Will be located on a land and wastewater flow throughout the year. plot of approximately 929 square meters (10,000 square feet) that is 100% owned by  Will be 1 inch in diameter for the water BuildCo and is accurately registered in the connection and 4 inches in diameter for the cadastre and land registry. sewerage connection. Doing Business 2016 India 37 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to build business city of an economy, except for 11 economies for a warehouse in India? According to data collected by which the data are a population-weighted average of the Doing Business, dealing with construction permits there 2 largest business cities. See the chapter on distance to requires 33.60 procedures, takes 191.50 days and costs frontier and ease of doing business ranking at the end of 26.00% of the warehouse value (figure 3.1). Most this profile for more details. indicator sets refer to a case scenario in the largest Figure 3.1 What it takes to comply with formalities to build a warehouse in India - Mumbai Doing Business 2016 India 38 What it takes to comply with formalities to build a warehouse in India - Delhi Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. . Doing Business 2016 India 39 DEALING WITH CONSTRUCTION PERMITS Globally, India stands at 183 in the ranking of 189 economies and the regional average ranking provide economies on the ease of dealing with construction other useful information for assessing how easy it is for permits (figure 3.2). The rankings for comparator an entrepreneur in India to legally build a warehouse. Figure 3.2 How India and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2016 India 40 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while an effort to ensure building safety while keeping making compliance easy and accessible to all. Coherent compliance costs reasonable, governments around the and transparent rules, efficient processes and adequate world have worked on consolidating permitting allocation of resources are especially important in sectors requirements. What construction permitting reforms has where safety is at stake. Construction is one of them. In Doing Business recorded in India (table 3.1)? Table 3.1 How has India made dealing with construction permits easier—or not? By Doing Business report year from DB2011 to DB2016 DB year Reform India reduced the time required to obtain a building permit by DB2013 establishing strict time limits for preconstruction approvals. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2016 India 41 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for India are based on a BUILDING A WAREHOUSE set of specific procedures—the steps that a company must complete to legally build a warehouse— identified by Doing Business through information Estimated value of collected from experts in construction licensing, INR 4,942,035 warehouse : including architects, civil engineers, construction lawyers, construction firms, utility service providers City : Mumbai, Delhi and public officials who deal with building regulations. These procedures are those that apply to a company and structure matching the standard The procedures, along with the associated time and cost, assumptions used by Doing Business in collecting the are summarized below. data (see the section in this chapter on what the indicators cover). Table 3.2 Summary of time, cost and procedures for dealing with construction permits in India - Mumbai Time to No. Procedure Cost to complete complete Submit application and design plans and pay scrutiny fee BuildCo submits application form with plans and all required documents, as prescribed by Section 337 of the BMC Act, at the sub-engineer of the concerned locality within the Eastern suburbs of Mumbai The sub-engineer reviews the plans and makes sure that the property card is mutated in the name of th owner of the land and signs on the plans. If all documents are in order and the file is complete, BuildCo can proceed to pay the scrutiny fees in the same building by cash or bank draft. Once the fees have been paid, the application file is forwarded to the concerned officer in the Building Proposal Office. Then the 1 day INR 85,840 1 file is forwarded to the Survey Office, which will remark on the application file and check the remarks from the Development Plan Office (obtained during the design stage of the project). If the Survey Office is satisfied with their review, they will send back the application file to the Building Proposal Office within one week. Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai Receive site inspection from Building Proposal Office A sub-engineer from the Building Proposal Office will conduct a site inspection within 3 -- 4 days of receiving the file from the survey office. The date and time of the site inspection are arranged by BuildCo’s architect. BuildCo must be on-site when 1 day no charge 2 the inspection takes place. Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai Doing Business 2016 India 42 Time to No. Procedure Cost to complete complete * Apply for no-objection certificate (NOC) from Tree Authority Due to stringent environmental regulations, BuildCo must receive clearance from the Tree Authority (set up under the Maharashtra (urban areas) Preservation of Trees Act, 1975). The Tree Authority commission only meets once a month. The Tree 3 Authority must ascertain what trees (if any) will be cut down as a 1 day no charge result of construction. If trees are to be cut down, BuildCo will have to plant trees to replace them. Agency: Tree Authority, Municipal Corporation of Greater Mumbai * Apply for no-objection certificate (NOC) from Storm Water and Drain Department 4 1 day no charge Agency: Storm Water and Drain Department, Municipal Corporation of Greater Mumbai * Apply for no-objection certificate (NOC) from Sewerage Department 5 1 day INR 77,306 Agency: Sewerage Department, Municipal Corporation of Greater Mumbai * Apply for no-objection certificate (NOC )from the Hydraulic Engineer Department (water supply) 6 1 day no charge Agency: Hydraulic Engineer Department, Municipal Corporation of Greater Mumbai * Receive inspection from Tree Authority Inspectors from the Tree Authority visit the site to check if there are any trees located on the premises. 1 day no charge 7 Agency: Tree Authority, Municipal Corporation of Greater Mumbai * Receive inspection from Storm Water and Drain Department 8 1 day no charge Agency: Storm Water and Drain Department, Municipal Doing Business 2016 India 43 Time to No. Procedure Cost to complete complete Corporation of Greater Mumbai * Receive inspection from Sewerage Department 9 1 day no charge Agency: Sewerage Department, Municipal Corporation of Greater Mumbai * Receive inspection from the Hydraulic Engineer Department (water supply) 10 1 day no charge Agency: Hydraulic Engineer Department, Municipal Corporation of Greater Mumbai * Obtain NOC from Tree Authority Upon receipt of application for NOC, the Tree Authority will send a Tree Officer to personally inspect the trees on the premise. The Tree Officer then submits a report to the Tree Authority within a 11 period of 30 days from the receipt of the application. 30 days INR 4,500 Agency: Tree Authority, Municipal Corporation of Greater Mumbai * Obtain NOC from the Storm Water and Drain Department 12 7 days no charge Agency: Storm Water and Drain Department, Municipal Corporation of Greater Mumbai * Obtain NOC from Sewerage Department 13 7 days no charge Agency: Sewerage Department, Municipal Corporation of Greater Mumbai * Obtain NOC from Hydraulic Engineer Department (water supply) 14 7 days no charge Agency: Hydraulic Engineer Department, Municipal Corporation of Doing Business 2016 India 44 Time to No. Procedure Cost to complete complete Greater Mumbai * Request and obtain NOC from Electric Department BuildCo has to inform Brihanmumbai Electric Supply and Transport (BEST) of the project's power requirements along with a copy of the application submitted for building plan approval. BEST will assess whether an electrical substation upgrade is 7 days no charge 15 required at this stage. Agency: Brihanmumbai Electric Supply and Transport (BEST) * Request and obtain NOC from Traffic & Coordination Department 16 7 days no charge Agency: Traffic & Coordination Department, Municipal Corporation of Greater Mumbai * Request and obtain NOC from Chief Fire Office All commercial structures require a fire safety clearance. 17 7 days INR 13,006 Agency: Chief Fire Office, Municipal Corporation of Greater Mumbai Obtain Intimation of Disapproval and pay fees After the site inspection, the application file returns to the Building Proposal Office to receive an intimation of disapproval (authorization). The concerned Sub Engineer reviews the proposal and forwards the report to the Assistant Engineer and Executive Engineer. The proposal is approved at the Executive Engineer’s level if no concessions are involved. There are 3 executive engineers in the main Municipal Corporation of Greater Mumbai (MCGM) office and 2 in the Andhuri office (the 18 latter is the office considered for the purposes of this study). 29 days INR 42,000 Complete applications that do not require concessions (i.e. claiming of areas free of FSI as per provision in DCR 1991, deficiency in open spaces etc.) can be approved within a week. However, the majority of applications require some concessions and further scrutiny so they must be forwarded to the competent authorities. This latter process may take 30 -- 90 days to complete. The intimation of disapproval is issued with a list of NOC’s which Doing Business 2016 India 45 Time to No. Procedure Cost to complete complete the applicant must obtain separately from various departments and government authorities. Final clearance to build will only be given once BuildCo obtains all NOC’s. The NOC’s assigned to the intimation of disapproval are case specific. For the purpose of this study, Doing Business has determined 7 basic NOC’s that are required of almost all projects: • Tree Authority • Storm Water and Drain Department • Sewerage Department • Hydraulic Department • Environmental Department (concerned with debris management) • Traffic and Coordination Department • CFO (fire clearance) BuildCo’s architect must take the Intimation of Disapproval and the design plans to each clearance office separately. NOCs can be applied for simultaneously, but NOC offices are spread out so the submission for these 7 NOC’s is likely to take some time. The cost for this procedure is INR 66 per square meter for commercial buildings + development charges of INR 700 per square meter for commercial buildings. Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai Obtain plinth commencement certificate from sub-engineer and pay development charges Upon submission of all required NOCs mentioned in the IOD and on compliance of the IOD conditions, the applicant may submit a request for the commencement certificate. The documents and NOC submitted by the applicants are verified by the staff and the necessary commencement certificate is approved. After payment of development charges and other applicable premium the commencement certificate is issued within 7 to 15 days. The commencement certificate is valid for four years in the aggregate, but must be renewed before the expiry of one year 10 days INR 969,249 19 from the date it was issued if the work has not yet commenced. Such renewal shall be for three consecutive terms of one year each, after which the proposal would need to re-obtain development permission. The cost for the commencement certificate is INR 200.00 per sq. m. of land + INR 500.00 per sq. m. of building area. Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai Doing Business 2016 India 46 Time to No. Procedure Cost to complete complete Request and receive inspection of plinth 20 1 day no charge Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai Request and obtain further commencement certificate The building permit is done in 2 steps. First, BuildCo must obtain the permit up to the plinth level. Once the plinth level has been completed, there is an inspection to verify that is in compliance with approved plans. It is only after this inspection has been done and approval obtained that the BuildCo can move on with 21 the construction and start the superstructure of the warehouse. 7 days no charge But in order to do so, it is necessary to obtain a permit to start building the superstructure. Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai Request completion NOC from the Storm Water and Drain Department 22 1 day no charge Agency: Storm Water and Drain Department, Municipal Corporation of Greater Mumbai * Request completion NOC from the Sewerage Department 23 1 day no charge Agency: Sewerage Department, Municipal Corporation of Greater Mumbai * Apply for provisional water connection from Hydraulic Engineer BuildCo must visit the ward office and submit a written request for a water and sewerage connection. The connection request must be submitted along with a copy of the building plans. 1 day no charge 24 Agency: Hydraulic Engineer Department, Municipal Corporation of Greater Mumbai Doing Business 2016 India 47 Time to No. Procedure Cost to complete complete * Request completion NOC from Traffic & Coordination Department 25 1 day no charge Agency: Traffic & Coordination Department, Municipal Corporation of Greater Mumbai * Request completion NOC from Chief Fire Office 26 1 day no charge Agency: Chief Fire Office, Municipal Corporation of Greater Mumbai * Receive inspection from Storm Water and Drain Department The Assistant Engineer of the Municipal Corporation makes the inspection. There are two inspections: one before the connections are completed and another after completion. The inspection would not take more than a day. An officer of the 1 day no charge 27 Municipal Corporation inspects the premises and prepares a report on the connection. Agency: Storm Water and Drain Department, Municipal Corporation of Greater Mumbai * Receive inspection from Sewerage Department 28 1 day no charge Agency: Sewerage Department, Municipal Corporation of Greater Mumbai * Obtain water connection from Hydraulic Engineer Fees for water connection include: • Water connection charges: INR 1,060.00 • Water meter: INR 150.00 • Refundable security deposit towards water charges bills at INR 25.00 per 1,000 liter + 60% of sewerage charges for the 29 requirement of the building 3 days INR 51,210 Sewer fees are INR 50,000 Agency: Hydraulic Engineer Department, Municipal Corporation of Greater Mumbai Doing Business 2016 India 48 Time to No. Procedure Cost to complete complete * Receive inspection from Traffic & Coordination Department 30 1 day no charge Agency: Traffic & Coordination Department, Municipal Corporation of Greater Mumbai * Receive inspection from Chief Fire Office 31 1 day no charge Agency: Chief Fire Office, Municipal Corporation of Greater Mumbai * Obtain completion NOC from Storm Water and Drain Department 32 3 days no charge Agency: Storm Water and Drain Department, Municipal Corporation of Greater Mumbai * Obtain completion NOC from Sewerage Department 33 3 days no charge Agency: Sewerage Department, Municipal Corporation of Greater Mumbai * Obtain the completion NOC from Traffic & Coordination Department 34 3 days no charge Agency: Traffic & Coordination Department, Municipal Corporation of Greater Mumbai * Obtain the completion NOC from Chief Fire Office All commercial structures require fire safety clearance according to fire and safety rules and regulations stipulated in Development Control Rules 1991 and the National Building Code. The fee for low-rise commercial buildings is INR 5.00 per 35 sq. m. 3 days INR 6,503 This NOC may be requested and obtained online, but it still takes several days to receive. Doing Business 2016 India 49 Time to No. Procedure Cost to complete complete Agency: Chief Fire Office, Municipal Corporation of Greater Mumbai Submit letter stating completion of building works to obtain an occupancy certificate and certificate of completion The owner, through a licensed plumber, shall furnish a drainage completion certificate to the Commissioner to certify that the works were completed according to approved drainage plans. The licensed surveyor, engineer, or architect who has supervised the construction shall furnish a building completion certificate to the Commissioner works to certify that the building has not deviated from the approval plans. This shall be accompanied by 1 day no charge 36 three sets of plans of the completed development. Following the reception of both certificates of completion the Commissioner shall inspect the work, and after satisfying himself that there is no deviation from the approved plans, issue a certificate of acceptance of the completion of the work. Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai Receive final inspection from Building Proposal Office 37 1 day no charge Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai Obtain occupancy certificate from Building Proposal Office (sub-engineer) Once the occupancy certificate has been issued, the final plans are stamped by the Building Proposal Office, the final plans are stamped by the Building Proposal Office and one copy is 14 days no charge 38 forwarded to the Hydraulic Engineer (Water) Department. Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai Obtain final NOC from Hydraulic Engineer (Water) Department 39 14 days no charge Agency: Hydraulic Engineer Department, Municipal Corporation of Greater Mumbai Doing Business 2016 India 50 Time to No. Procedure Cost to complete complete Obtain completion certificate 40 14 days no charge Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Summary of time, cost and procedures for dealing with construction permits in India - Delhi Time to No. Procedure Cost to complete complete Request and obtain consent to establish from Delhi Pollution Control Committee Delhi Pollution Control Committee, delegated by Central Pollution Control Board of statutory powers and functions, regulates water and air pollution. By regulation, the Delhi Pollution Control Committee has 1 3 months to approve an application but in practice, a committee meets 30 days INR 1,000 monthly to discuss application received and the Consent to Establish is generally issued within 1 month. Agency: Delhi Pollution Control Committee * Obtain no objection certificate regarding land use per the zoning plan 2 30 days INR 25,000 Agency: Town Planning Department of Municipal Corporation of Delhi * Request and obtain approval of the water and sewer connection plans A complete water and sewer supply schemes must be submitted, including: • Six sets of layout plans, one should be cloth mounted • Hydraulic calculations • Key plan • Proposed water lines showing position of UGR/sluice valves • Calculation of water demand 7 days no charge 3 • Capacity of UGR This is submitted to DJB in the Executive Engineering and Planning office through the developing agency (Department of Development or Muncipal Corporation of Delhi). A feasibility report is developed. If the water can be spared for the project then a connection and ferrule size is designed by the planning office as per the feasibility report. If there is not enough water, then plans will be approved through other sources of water such as through a tube well. The plans are then approved by the DJB. Once the fees for the Infrastructure Fund are paid, the DDA Doing Business 2016 India 51 Time to No. Procedure Cost to complete complete may begin construction on the water and sewer lines. The fees for the Infrastructure Fund are only paid by large agencies, group housing, hospitals, schools, and commercial complexes and institutions. Agency: Delhi Jal Board * Obtain proof of ownership BuildCo must identify the Authenticity of the Land Ownership by going to the local Revenue Department (state government) and checking land records. In some cases, a survey of the land is done by a private Land Surveyor to verify that the property exists, as it can be the case that the 21 days INR 2,000 4 records are different from reality (neighbors encroach on others’ lands, etc.). Agency: Local Revenue Department * Obtain certificate of no tax due Starting July 2012, property tax can be paid online at www.mcdonline.gov.in. With the property tax receipt, the building company must obtain an up-to-date Certificate of No Tax Due from the 5 Property Tax Department of Municipal Corporation of Delhi and submit 2 days no charge it when applying for the Building Permit. Agency: Property Tax Department of Municipal Corporation of Delhi * Notarize the affidavit/undertaking The building company must submit an Affidavit/Undertaking on non judicial paper of INR 10, duly attested by the Oath Commissioner when applying for the Building Permit. In the affidavit, the building company 6 acknowledges that during the course of construction, no building 1 day INR 100 material will be stacked on public land. Agency: Notary Public Request building permit BuildCo applies for the building permit by giving a notice in writing in the prescribed Form No. I along with the following documents: 1. Six copies of building plans and statements 7 2. Proof of ownership 60 days INR 13,006 3. Specifications of the proposed construction 4. Supervision certificate signed by the licensed architect/engineer, supervisor and plumber; 5. Structural-stability Certificate signed by the licensed architect/engineer along with a copy of registration certificate (annexure A) Doing Business 2016 India 52 Time to No. Procedure Cost to complete complete 6. Rain Water-Harvesting Certificate in case of plot size more than 100 square meters signed by the licensed architect and owner (annexure B) 7. No Nuisance/Construction Debris Certificate signed by the owner (annexure C) 8. Declarations in the Form of Affidavits (annexure E-I) 9. Certificate of No Tax Due from the Property Tax Department All the plans must be signed by the licensed architect/engineer and owner registered with the Council of Architects/Institution of Engineers and shall indicate their names, addresses, license and enrollment numbers. Upon receiving the application of industrial, institutional, and multi- storey buildings, the Municipal Corporation of Delhi will forwards 2 copies of the building plans and 2 copies of the layout plans to the Fire Service Department of Government NCT of Delhi. The Fire Service Department reviews the drawings and checks the fire and safety arrangement on the plans against the National Building Code of India 2005. It takes 3 weeks to issue a Provisional No Objection Certificate (no site inspection at the time of sanctioning the building plans). The drawings can only be approved by Municipal Corporation of Delhi and Building Permit issued after receiving the Provisional No Objection Certificate. As of December 2013, the cost for building permits are INR 5 per square meter for buildings less than 50 square meters, and INR 10 per square meter for buildings greater than 50 square meters. BuildCo must also pay cess charges of 1% of the cost of construction. Cess charges are paid to the Municipal Corporation of Delhi, who will transfer the charges to the Labor Welfare Department of Government of NCT Delhi. The Municipal Corporation of Delhi santions building plans without site inspection but randomly selects about 20% of the buildings and inspects them after the issuance of Building Permits. A single window concept has been introduced for approval of building- plan applications. Online approval is available for residential plots and sanction is generally given within 1 week if all documents are complete. The Engineering Department of the Municipal Corporation of Delhi has also issued a detailed guide, "Build Your House With a Valid Building Permit" which is available online (MCD website at no charge) or in print (INR 200). Agency: Municipal Corporation of Delhi * Request no objection certificate from Electricity Department 8 1 day no charge Agency: Electric Department, Municipal Corporation of Delhi Doing Business 2016 India 53 Time to No. Procedure Cost to complete complete * Obtain no objection certificate from Planning Department within the Municipal Corporation of Delhi 9 14 days no charge Agency: Municipal Corporation of Delhi * Receive inspection from the Electricity Department 10 1 day no charge Agency: Electric Department, Municipal Corporation of Delhi * Request and obtain building plans approval from the Director of Factories of Labor Department As per statutory provisions of rule 3A of the Delhi Factories Rules, 1950, no site shall be used for location of a factory or no building in a factory shall be constructed, re-constructed, extended or taken into use as a factory or part of a factory, unless previous permission in writing is obtained from the Director of Factories. The builder must complete Form No.1 as prescribed under the Delhi Factories Rules (1950) and send it to the Director of Factories with the following documents: - 3 Plans in duplicate drawn to scale showing: (a) The site of the factory and immediate surroundings including adjacent buildings and other structure, roads, drains etc. (b) The plan and elevations and necessary cross-sections of the various 14 days no charge 11 buildings indicating all relevant details relating to natural lighting, ventilation and means of escape in case of fire. The plans shall also clearly indicate the plants and machinery, aisles and passage ways; and, (c) Such other particulars, as Chief Inspector of Factories, may require - Proof for ownership, of plot/premises such as copy of the Lease-deed etc. - In case of permission for construction on a vacant plot, an Affidavit is required to be given by the owner of the plot that the plot is vacant. The affidavit should also state as to whether any previous Approval of the Director of Factories for construction/extension have been obtained or not. Agency: Labor Department * Obtain no objection certificate from Electricity Department When the building company applies for the Building Permit, the 12 building plans and Land Ownership Permit are sent to the District 7 days no charge Forest Office from Forest Department of Government NCT of Delhi. Permission to fell trees is regulated under provisions of Delhi Tree Preservation Act 1994, which stipulates that 10 trees must be replanted Doing Business 2016 India 54 Time to No. Procedure Cost to complete complete for every 1 tree cut. The Act gives the District Forest Office 60 days to issue the No Objection Certificate but it is generally cleared in 1 week. Assuming the building company does not have to cut trees, it will not require the No Objection Certificate from District Forest Office after construction. Agency: Electric Department, Municipal Corporation of Delhi * Request and obtain no objection certificate from Fire Department 13 14 days no charge Agency: Fire Department * Receive inspection by building section 14 1 day no charge Agency: Municipal Corporation of Delhi Obtain sanctioned plans 15 1 day no charge Agency: Municipal Corporation of Delhi Submit commencement notice BuildCo must notify the MCD 7 days before beginning construction. 16 1 day no charge Agency: Municipal Corporation of Delhi Submit notice of completion up to the plinth level BuildCo must notify the MCD of the completion of the plinth level, including a copy of a valid certificate of the building plans. MCD inspects the construction and submits any objections, if necessary. Mandatory inspections are carried out at two stages: at plinth level and 17 at completion. Routine inspections may be carried in between and the 1 day no charge Municipal Corporation of Delhi reserves the right to inspect the premises before, during and after the construction. Agency: Municipal Corporation of Delhi Request and receive inspection at the plinth level 18 BuildCo must notify the MCD of the completion of the plinth level, 1 day INR 15 including a copy of a valid certificate of the building plans. MCD inspects the construction and submits any objections, if necessary. Doing Business 2016 India 55 Time to No. Procedure Cost to complete complete Mandatory inspections are carried out at two stages: at plinth level and at completion. Routine inspections may be carried in between and the Municipal Corporation of Delhi reserves the right to inspect the premises before, during and after the construction. Agency: Municipal Corporation of Delhi Obtain C-form approval of the plinth completion This certificate certifies that the construction has reached the plinth level and that it has been inspected and the construction can continue 19 with the superstructure. 22 days no charge Agency: Municipal Corporation of Delhi Request water and sewer connection approval The building company must submit water and sewer connection application forms. Documents to be attached: (1) Proof of identity document: photocopy of voter ID card, ration card, PAN card, driving license or post card (2) Property ownership document: photocopy of GPA, allotment letter, government allotment letter, sale deed or NOC from landlord (3) Proof of residence: photocopy of driving license, passport, election I card 20 (4) Sanction of Water Supply Scheme 1 day INR 1,220,680 It is compulsory to provide the document number of the attached documents. Delhi Ja Board has integrated the process of obtaining an Excavation Permit from Municipal Corporation of Delhi by charging a road restoration charges for water and sewer connections on behalf of MCD. Agency: Delhi Jal Board Receive on-site inspection for water and sewer connection and receive approval An inspection of the site will be performed by a Survey Officer. 34 days no charge 21 Agency: Delhi Jal Board * Request final no objection certificate from the Fire Department The Municipal Corporation of Delhi will forward 2 copies of the completion plans to the Fire Service Department of Government NCT of Delhi for the Final No Objection Certificate, or the owners will visit the 1 day no charge 22 Fire Service Department in person to with the notice/guideline that it provided at the time of issuance of the Provisional No Objection Certificate and request the Fire Service Department to verify the compliance with the guidelines. Doing Business 2016 India 56 Time to No. Procedure Cost to complete complete Agency: Fire Department Receive site inspection from the Fire Department In practice this can take up to 15 days. 23 1 day no charge Agency: Fire Department Receive final no objection certificate from the Fire Department 24 10 days no charge Agency: Fire Department * Notarize the affidavit/undertaking to request the occupancy permit 25 1 day INR 100 Agency: Notary Public Submit notice of completion The building company must submit a notice of completion in the pro forma given in the Building Bylaws (1983) along with a completion application and fee of INR 1 per square meter of built-up area. It has to submit the notice of completion through the licensed architect/engineer or supervisor who has supervised the construction accompanied by the following documents: 1. Copy of lease-deed/sale deed 2. Three copies of the completion plan 3. Three copies of photographs taken from different angles so as to show the overall view of the building 4. Original sanctioned building plan (to be returned to the building company along with the Occupancy Certificate) 1 day INR 1,301 26 5. Copy of Water Connection Sanction and Sewerage Connection Sanction from Delhi Jal Board 6. Structural-stability Certificate signed by the licensed architect/engineer along with the structural drawings 7. Certificate of licensed architect/engineer or supervisor 8. Extension of time from the lessor if required 9. Rain Water-Harvesting Certificate in case of plot size more than 100 square meters signed by the licensed architect and owner 10. Affidavit/Undertaking of licensed architect/engineer or supervisor (as the case may be) 11. Affidavit of owner 12. A statement indicating deviations that are carried out and compounding fee payable Doing Business 2016 India 57 Time to No. Procedure Cost to complete complete Agency: Municipal Corporation of Delhi Receive final inspection of the construction In practice this can take up to one week. 27 1 day no charge Agency: Municipal Corporation of Delhi Obtain completion/occupancy permit By regulation, Municipal Council of Delhi must grant or refuse the Occupancy Permit within 7 days. However, since there is a waiting period of 2 months from the time the Notice of completion is 28 submitted and the inspection is carried out, therefore this waiting 66 days INR 49,420 period is added to the time needed to obtain the Occupancy Permit. Agency: Municipal Corporation of Delhi * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. . Doing Business 2016 India 58 DEALING WITH CONSTRUCTION PERMITS Building Quality Control Index The building quality control index is the sum of the The index ranges from 0 to 15, with higher values scores on the quality of building regulations, quality indicating better quality control and safety mechanisms in control before construction, quality control during the construction permitting system. construction, quality control after construction, The indicator is based on the same case study liability and insurance regimes, and professional assumptions as the measures of efficiency. certifications indices. Source: Doing Business database. Table 3.3 Summary of time quality control and safety mechanisms in India Answer Score Answer (Delhi) Score (Delhi) (Mumbai) (Mumbai) Building quality control index (0-15) 11.00 11.00 Quality of building regulations index (0-2) 0.50 2.00 In what way are the building regulations (including the Free of 0.5 Available building code) or any regulations dealing with charge. 1.0 online. construction permits made available? (0-1) List of 0.0 List of required required Which requirements for obtaining a building permit are documents. documents; clearly specified by the building regulations or by any Fees to be 1.0 accessible website, brochure or pamphlet? (0-1) paid; Required preapprovals. Quality control before construction index (0-1) 1.00 1.00 Licensed 1.0 Licensed Who is part of the committee or team that reviews and architect; architect; approves building permit applications in the relevant 1.0 Licensed Licensed permit-issuing agency? (0-1) engineer. engineer. Quality control during construction index (0-3) 2.00 2.00 Inspections 1.0 Inspections by by in-house in-house What types of inspections (if any) are required by law to engineer; engineer; 1.0 be carried out during construction? (0-2) Inspections Inspections at at various various phases. phases. Mandatory 1.0 Mandatory inspections inspections Do legally mandated inspections occur in practice during are always are always 1.0 construction? (0-1) done in done in practice. practice. Quality control after construction index (0-3) 3.00 3.00 Doing Business 2016 India 59 Answer Score Answer (Delhi) Score (Delhi) (Mumbai) (Mumbai) Yes, final 2.0 Yes, final inspection inspection is is done by done by government government Is there a final inspection required by law to verify that agency; Yes, agency; Yes, the building was built in accordance with the approved in-house in-house 2.0 plans and regulations? (0-2) engineer engineer submits submits report for report for final final inspection. inspection. Final 1.0 Final inspection Do legally mandated final inspections occur in practice? inspection always 1.0 (0-1) always occurs occurs in in practice. practice. Liability and insurance regimes index (0-2) 0.50 0.00 Architect or 0.5 No party is Which parties (if any) are held liable by law for structural engineer. held liable 0.0 flaws or problems in the building once it is in use? (0-1) under the law. No party is 0.0 No party is Which parties (if any) are required by law to obtain an required by required by insurance policy to cover possible structural flaws or law to 0.0 law to obtain problems in the building once it is in use? (0-1) obtain insurance . insurance . Professional certifications index (0-4) 4.00 3.00 Minimum 2.0 Minimum number of number of years of years of experience; experience; University University What are the qualification requirements for the degree in degree in professional responsible for verifying that the architecture architecture 2.0 architectural plans or drawings are in compliance with or or existing building regulations? (0-2) engineering engineering; ; Being a Being a registered registered architect or architect or engineer. engineer. Minimum 2.0 Minimum number of number of What are the qualification requirements for the years of years of professional who supervises the construction on the experience; experience; 1.0 ground? (0-2) University University degree in degree in engineering engineering, , construction Doing Business 2016 India 60 Answer Score Answer (Delhi) Score (Delhi) (Mumbai) (Mumbai) constructio or n or construction constructio management. n manageme nt; Being a registered architect or engineer. Source: Doing Business database. Doing Business 2016 India 61 GETTING ELECTRICITY Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY businesses. To counter weak electricity supply, many firms in developing economies have to rely on self- INDICATORS MEASURE supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for Procedures to obtain an electricity connection a customer is always to gain access by obtaining a (number) connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to complete them. These Obtaining external installation works and procedures include applications and contracts with possibly purchasing material for these works electricity utilities, clearances from other agencies Concluding any necessary supply contract and and the external and final connection works. In obtaining final supply addition, this year Doing Business adds two new measures: the reliability of supply and transparency Time required to complete each procedure of tariffs index (included in the aggregate distance to (calendar days) frontier score and ranking on the ease of doing Is at least 1 calendar day business) and the price of electricity (omitted from these aggregate measures). The ranking of Each procedure starts on a separate day economies on the ease of getting electricity is Does not include time spent gathering determined by sorting their distance to frontier information scores for getting electricity. These scores are the Reflects the time spent in practice, with little simple average of the distance to frontier scores for follow-up and no prior contact with officials each of the component indicators. To make the data comparable across economies, several assumptions Cost required to complete each procedure (% are used. of income per capita) Assumptions about the warehouse Official costs only, no bribes The warehouse: Excludes value added tax  Is owned by a local entrepreneur. The reliability of supply and transparency of tariffs index  Is located in the economy’s largest business city. For 11 economies the data Sum of the scores of six component indices: are also collected for the second largest Duration and frequency of outages business city. Tools to monitor power outages  Is located in an area where similar warehouses are typically located. In this Tools to restore power supply area a new electricity connection is not Regulatory monitoring of utilities’ performance eligible for a special investment promotion Financial deterrents aimed at limiting outages regime (offering special subsidization or faster service, for example). Transparency and accessibility of tariffs  Is located in an area with no physical Price of electricity (cents per kilowatt-hour)* constraints. For example, the property is Price based on monthly bill for commercial not near a railway. warehouse in case study  Is a new construction and is being *Price of electricity is not included in the calculation of connected to electricity for the first time. distance to frontier nor ease of doing business ranking Doing Business 2016 India 62 The warehouse (continued): Assumptions about the monthly consumption  Has two stories, both above ground, with a  It is assumed that the warehouse operates 8 total surface area of approximately 1,300.6 hours a day for 30 days a month, with square meters (14,000 square feet). The equipment utilized at 80% of capacity on plot of land on which it is built is 929 average, and that there are no electricity cuts square meters (10,000 square feet). (assumed for simplicity). The subscribed capacity of the warehouse is 140 kVA, with a  Is used for storage of goods. power factor of 1 (1 kVA = 1 kW). The monthly energy consumption is therefore Assumptions about the electricity connection 26,880 kWh, and the hourly consumption 112 kWh (26,880 kWh/30 days/8 hours). The electricity connection:  If multiple electricity suppliers exist, the  Is a permanent one. warehouse is served by the cheapest supplier.  Is a three-phase, four-wire Y, 140-kilovolt-  Tariffs effective in March of the current year ampere (kVA) (subscribed capacity) are used for calculation of the price of connection (where the voltage is 120/208 electricity for the warehouse. V, the current would be 400 amperes; where it is 230/400 B, the current would be nearly 200 amperes).  Is 150 meters long. The connection is to either the low-voltage or the medium- voltage distribution network and either overhead or underground, whichever is more common in the area where the warehouse is located.  Requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.  Includes only a negligible length in the customer’s private domain.  Will supply monthly electricity consumption of 26,880 kilowatt-hours (kWh).  Does not involve work to install the internal electrical wiring. This has already been completed, up to and including the customer’s service panel or switchboard and installation of the meter base. Doing Business 2016 India 63 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection business city of an economy, except for 11 economies for in India? According to data collected by Doing Business, which the data are a population-weighted average of the getting electricity there requires 5.00 procedures, takes 2 largest business cities. See the chapter on distance to 90.10 days and costs 442.30% of income per capita frontier and ease of doing business ranking at the end of (figure 4.1). this profile for more details. Most indicator sets refer to a case scenario in the largest Figure 4.1 What it takes to obtain an electricity connection in India - Mumbai What it takes to obtain an electricity connection in India - Delhi Doing Business 2016 India 64 Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2016 India 65 GETTING ELECTRICITY Globally, India stands at 70 in the ranking of 189 average ranking provide another perspective in assessing economies on the ease of getting electricity (figure 4.2). how easy it is for an entrepreneur in India to connect a The rankings for comparator economies and the regional warehouse to electricity. Figure 4.2 How India and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2016 India 66 GETTING ELECTRICITY Obtaining an electricity connection is essential to enable ensure safety in the connection process while keeping a business to conduct its most basic operations. In many connection costs reasonable, governments around the economies the connection process is complicated by the world have worked to consolidate requirements for multiple laws and regulations involved—covering service obtaining an electricity connection. What reforms in quality, general safety, technical standards, procurement getting electricity has Doing Business recorded in India practices and internal wiring installations. In an effort to (table 4.1)? Table 4.1 How has India made getting electricity easier—or not? By Doing Business report year from DB2011 to DB2016 DB year Reform In India the utility in Mumbai made getting electricity less DB2015 costly by reducing the security deposit for a new connection. The utility in Delhi made the process for getting an electricity connection simpler and faster by eliminating the internal wiring inspection by the Electrical Inspectorate. The utility in DB2016 Mumbai reduced the procedures and time required to connect to electricity by improving internal work processes and coordination. Source: Doing Business database. Doing Business 2016 India 67 GETTING ELECTRICITY What are the details? The indicators reported here for India are based on a set OBTAINING AN ELECTRICITY CONNECTION* of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution utility—identified by Name of utility - TATA Power Delhi Doing Business. Data are collected from the distribution Delhi: Distribution Limited utility, then completed and verified by electricity regulatory agencies and independent professionals such Name of utility - Bhrihan Mumbai as electrical engineers, electrical contractors and Mumbai: Electricity & Transport construction companies. The electricity distribution utility Undertaking surveyed is the one serving the area (or areas) in which warehouses are located. If there is a choice of Price of electricity distribution utilities, the one serving the largest number (US cents per kWh) - 20 of customers is selected. Delhi: The procedures are those that apply to a warehouse and Price of electricity electricity connection matching the standard (US cents per kWh) - 25 assumptions used by Doing Business in collecting the Mumbai: data (see the section in this chapter on what the indicators cover). The procedures, along with the City: Mumbai, Delhi associated time and cost, are summarized below. *Price is calculated as a monthly consumption of 26,880 kWh for business customers, based on a standardized case study adopted by the Getting Electricity methodology. Doing Business measures the price of electricity but does not include these data when calculating the distance to frontier score for getting electricity or the ranking on the ease of getting electricity. Table 4.2 Summary of time, cost and procedures for getting electricity in India Time to No. Procedure Cost to complete complete Submit application to utility (BEST) and await site inspection An application for supply, addition or reduction in supply of electrical energy, shifting of service, extension of service, change of name or restoration of supply shall be made to BEST, copies of which are obtainable from the relevant ward offices or relevant consumer center of the Undertaking as well as downloadable from BEST’s website. The 1 application duly filled in and signed by the owner or occupier of the 7 calendar days INR 75 premises in respect of which the supply or additional supply is required shall be accepted after preliminary scrutiny at the relevant Ward Office on payment of processing fee in accordance with Annex 1 of Schedule of Charges approved by the Commission. Documents needed to be submitted – completed application form; proof of occupancy; details of load requirement; purpose for which electric connection is required. Site inspection includes confirmation of premises, identification of location of Doing Business 2016 India 68 Time to No. Procedure Cost to complete complete terminating service cable, and position of meter cabin. Agency: Brihan Mumbai Electricity Supply and Transport Undertaking (BEST) Receive external site inspection by BEST and await estimate Appointment can be made over the phone giving reference of application no; electrical contractor should be licensed, registration with BEST of electrician not necessary. The Authorized Representative of the Undertaking on receipt of the application, with prior intimation, shall inspect the premises to confirm its eligibility and study the technical requirements of giving supply to the consumer and fix the position of main cut outs or circuit breakers and meters and sanction the load for the premises in consultation with the consumer and/or his Licensed 8 calendar days INR 0 2 Electrical contractor. Subsequently, BEST shall intimate the applicant of the details of any works that are required to be undertaken, the charges to be borne by the applicant thereon in accordance with Annex 2 of Schedule of Charges approved by the Maharashtra Electricity Regulatory Commission. Agency: Brihan Mumbai Electricity Supply and Transport Undertaking (BEST) Await completion of external works by electrical contractor Consumers supplied with low and medium voltage electrical energy shall provide and maintain an enclosure with a dry masonry wall not less than 250 millimeters thick or such other structure as may be approved by the Utility on which the utility's meter boards and service cutouts shall be supported and shall provide and maintain adequate protection for the 7 calendar days INR 8,000 3 meter board from ingress of water, tampering and mechanical damage. The consumer's mains shall in all cases, be brought to the Utility's point of supply. Agency: Customer Submit electrical contractor's wiring and test report and make payment of connection cost estimate to BEST The connection cost is standard for connections between 100 KW - 150 KW. As required by Rule 45 of the Indian Electricity Rules, 1956, no 4 electrical installation work (including additions, alterations, repairs and 1 calendar day INR 60,000 adjustment to existing installation) except such replacements of lamps, fans, fuses, switches and other component parts of the installation, as in no way alters the capacity and character of the installation, shall be carried out upon the premises on behalf of any consumer or owner for the purposes of supply of energy to such consumer or owner, except by Doing Business 2016 India 69 Time to No. Procedure Cost to complete complete an Electrical Contractor Licensed by Government in this behalf and under the direct supervision of a person holding a certificate of competency, issued by Government. As soon as the consumer's installation is completed in all respects and tested by the consumer’s contractor, the consumer must submit to BEST a wiring contractor's work Terms & Conditions of Supply completion and test report. Agency: Brihan Mumbai Electricity Supply and Transport Undertaking (BEST) Pay security deposit and receive external connection and electricity flow Security deposit - A consumer with a consumption of electricity of not less than one lac (1,00,000) kilo-watt hours per month and with no undisputed sums payable to the Undertaking may, at the option of such consumer, deposit security, by way of cash (including cheque and demand draft), irrevocable letter of credit or unconditional bank guarantee issued by a scheduled commercial bank. In case a consumer who has deposited security subsequently opts to receive supply through a prepaid meter, the amount of such security deposit shall, after 30 calendar days INR 7,523.04 5 deduction of all monies owing from such consumer, be either refunded to such consumer or treated as a part of the value of the prepaid credit to the account of such consumer, from which the value of his future consumption is to be deducted. The Undertaking shall apply any security so deposited, towards satisfaction of any amount which is due or owing from the consumer. Agency: Brihan Mumbai Electricity Supply and Transport Undertaking (BEST) * Takes place simultaneously with another procedure. Source: Doing Business database. Summary of time, cost and procedures for getting electricity in India - Delhi Time to No. Procedure Cost to complete complete Submit application to Tata Power and await site inspection To apply for a new connection, customer must fill in the basic details in the Form at http://www.ndpl.com to generate a New Connection Request Notification Number. After customer fills the form and submits it, customer will receive a call from Sampark Kendra within 48 hour, who 3 calendar days INR 10,000 1 will provide customer the details of the documents to be submitted and information regarding nearest location for submission of documents. The list of documents is as follows: (1) Inland Revenue: Permanent Account No. of Income Tax; (2) Registrar of Companies: Certificate of Incorporation; Doing Business 2016 India 70 Time to No. Procedure Cost to complete complete (3) Municipal Authority: Trade License; (4) Electrical Inspector from Office of Electrical Inspectorate of Delhi: Firefighting/Lift Safety Certificate, where applicable; (5) Produced by customer themselves: a Certificate by the Electrical Contractor for Internal Wiring (6) Proof of Ownership or Occupancy. Customer can also call TPDDL on the 24 hour Sampark Kendra 66404040, for initiating the new connection process. However, customers are mandated to visit one Document Submission Centers along with the necessary documents to initiate the new connection process. New Connection Request Notification will be cancelled if the documents are not submitted within 3 working days. Agency: Tata Power Delhi Distribution Ltd. Receive external site inspection by Tata Power and await estimate Customer makes appointment over the phone by providing application number as reference. TPDDL contacts the customer through e-mail, SMS or phone to make an inspection appointment at customer’s convenience. Representative of TPDDL will inspect the premises to confirm its eligibility and study the technical requirements of giving supply to the consumer and fix the position of main cut outs or circuit breakers and 7 calendar days INR 0 2 meters and sanction the load for the premises in consultation with the consumer and/or his Licensed Electrical Contractor. Customer and/or his Licensed Electrical Contractor must be present during external site inspection. Agency: Tata Power Delhi Distribution Ltd. Await completion of external works by electrical contractor Consumers supplied with low and medium voltage electrical energy shall provide and maintain an enclosure with a dry masonry wall not less than 250 millimeters thick or such other structure as may be approved by TPDDL on which TPDDL’s meter boards and service cutouts shall be supported and shall provide and maintain adequate protection for the 7 calendar days INR 400,000 3 meter board from ingress of water, tampering and mechanical damage. The consumer's mains shall in all cases, be brought to TPDDL's point of supply. Agency: Customer's contractor Doing Business 2016 India 71 Time to No. Procedure Cost to complete complete Receive internal wiring inspection by utility As required by Rule 45 of the Indian Electricity Rules, 1956, no electrical installation work (including additions, alterations, repairs and adjustment to existing installation) except such replacements of lamps, fans, fuses, switches and other component parts of the installation, as in no way alters the capacity and character of the installation, shall be carried out upon the premises on behalf of any consumer or owner for the purposes 1 calendar day INR 0 4 of supply of energy to such consumer or owner, except by an Electrical Contractor Licensed by Government on this behalf and under the direct supervision of a person holding a certificate of competency, issued by Government. Agency: Tata Power Delhi Distribution Ltd. Receive external connection, meter installation and electricity flow TPDDL will conduct external connection works, including the fixing of meters and coupling them with the customer’s installation preparatory to the inspection and testing of the installation and connection of supply. 5 105 calendar days INR 347,790.07 Agency: Tata Power Delhi Distribution Ltd. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2016 India 72 GETTING ELECTRICITY Reliability of supply and transparency of tariffs index The reliability of supply and transparency of tariffs Doing Business uses the system average interruption index encompasses quantitative data on the duration duration index (SAIDI) and the system average and frequency of power outages as well as interruption frequency index (SAIFI) to measure the qualitative information on the mechanisms put in duration and frequency of power outages in the largest place by the utility for monitoring power outages business city of each economy (for 11 economies the data and restoring power supply, the reporting are also collected for the second largest business city). relationship between the utility and the regulator for SAIDI is the average total duration of outages over the power outages, the transparency and accessibility of course of a year for each customer served, while SAIFI is tariffs and whether the utility faces a financial the average number of service interruptions experienced deterrent aimed at limiting outages (such as a by a customer in a year. Annual data (covering the requirement to compensate customers or pay fines calendar year) are collected from distribution utility when outages exceed a certain cap). companies and national regulators on SAIDI and SAIFI. Both SAIDI and SAIFI estimates include load shedding. The index ranges from 0 to 8, with higher values indicating greater reliability of electricity supply and greater transparency of tariffs. Table 4.3 Reliability of Supply and Transparency of Tariff Index in India Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) Reliability of supply and transparency of tariff index 6.00 5.00 (0-8) Total duration and frequency of outages per customer 2.00 0.00 a year (0-3) System average interruption duration index (SAIDI) 2.2 34.8 System average interruption frequency index (SAIFI) 4.0 9.0 Mechanisms for monitoring outages (0-1) 0.0 1.0 Does the distribution utility use automated tools to No Yes monitor outages? Mechanisms for restoring service (0-1) 1.0 1.0 Does the distribution utility use automated tools to Yes Yes restore service? Regulatory monitoring (0-1) 1.00 1.00 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability Yes Yes of supply? Doing Business 2016 India 73 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) Financial deterrents aimed at limiting outages (0-1) 1.00 1.00 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages Yes Yes exceed a certain cap? Communication of tariffs and tariff changes (0-1) 1.00 1.00 Are effective tariffs available online? Yes Yes www.bestund ertaking.com -electric www.tatap supply- ower- Link to the website, if available online regulatory ddl.com ; matters- www.derc.g electricity ov.in tariff schedule Are customers notified of a change in tariff ahead of Yes Yes the billing cycle? Source: Doing Business database. Note: If data on power outages is not collected or if the SAIFI index or SAIDI index are above the threshold of 100, the economy is not eligible to obtain a score in the Reliability of Supply and Transparency of Tariff Index. If SAIDI and SAIFI are 12 (equivalent to an outage of one hour each month) or below, a score of 1 is assigned. If SAIDI and SAIFI are 4 (equivalent to an outage of one hour each quarter) or below, 1 additional point is assigned. Finally, if SAIDI and SAIFI are 1 (equivalent to an outage of one hour per year) or below, 1 more point is assigned. Doing Business measures the price of electricity but does not include these data when calculating the distance to frontier score for getting electricity or the ranking on the ease of getting electricity. The price of electricity is measured in cents per kilowatt-hour. On the basis of the assumptions about monthly consumption, a monthly bill for a commercial warehouse in the largest business city of the economy is computed for the month of March (for 11 economies the data are also collected for the second largest business city). As noted, the warehouse uses electricity 30 days a month, from 9:00 a.m. to 5:00 p.m., so different tariff schedules may apply if a time-of- use tariff is available. Doing Business 2016 India 74 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city 2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. In (calendar days) addition, this year Doing Business adds a new Does not include time spent gathering measure to the set of registering property information indicators, an index of the quality of the land administration system in each economy. The Each procedure starts on a separate day. ranking of economies on the ease of registering Procedures that can be fully completed online are recorded as ½ day. property is determined by sorting their distance to frontier scores for registering property. These scores Procedure considered completed once final are the simple average of the distance to frontier document is received scores for each of the component indicators. To No prior contact with officials make the data comparable across economies, several assumptions about the parties to the Cost required to complete each procedure transaction, the property and the procedures are (% of property value) used. Official costs only, no bribes The parties (buyer and seller): No value added or capital gains taxes included  Are limited liability companies, 100% Quality of land administration index (0-30) domestically and privately owned and  Is located in a periurban commercial zone, and perform general commercial activities and no rezoning is required. are located in the economy’s largest business city .  Has no mortgages attached, has been under 2 the same ownership for the past 10 years.  Have 50 employees each, all of whom are nationals.  Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000  Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value and entire condition and complies with all safety property will be transferred. standards, building codes and legal  Is registered in the land registry or cada- requirements. There is no heating system. stre, or both, and is free of title disputes. 2 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2016 India 75 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in Most indicator sets refer to a case scenario in the largest India? According to data collected by Doing Business, business city of an economy, except for 11 economies for registering property there requires 7.00 procedures, which the data are a population-weighted average of the takes 47.00 days and costs 7.50% of the property value 2 largest business cities. See the chapter on distance to (figure 5.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 5.1 What it takes to register property in India - Mumbai What it takes to register property in India - Delhi Doing Business 2016 India 76 Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2016 India 77 REGISTERING PROPERTY Globally, India stands at 138 in the ranking of 189 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in India to transfer property. Figure 5.2 How India and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2016 India 78 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business through information collected from local property lawyers, Property value: INR 4,942,035 notaries and property registries. These procedures are those that apply to a transaction matching the City: Mumbai, Delhi standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). The procedures, along with the associated time and cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in India Mumbai Time to No. Procedure Cost to complete complete Conduct a title search at the office of Sub-Registrar of Assurance The purchaser should conduct a search of the property in the Registry and the Revenue Office, noting the location details of the property and the time period to be checked. While investigating the title it should be verified (1) that the legal ownership document is in the name of the owner, issued by the Revenue Record Department under the seal of the Tahsildar, (2) that on the date of purchase the title of the owner for the preceding 30 years (preferably) shows no mortgage or other encumbrance as still existing on the date of purchase, (3) the property is transferable and heritable, (4) the transferor is competent and/or authorized to transfer the 7 days property, (simultaneous 1 (5) the transferee is qualified to be a transferee, INR 15,000-20,000 with procedures 2 (6) the object or consideration for the transfer is lawful, and 3) (7) the transfer has been made and completed in the manner prescribed by law. Also, all papers with regard to payment of taxes, the electricity bills and water bills need to be checked. If the seller is a Company incorporated under the provisions of the Companies Act, 1956 then it is prudent to take search in the office of the Registrar of Companies to verify whether there is any charge on the property registered under the provisions of Section 125 of the Companies Act, 1956. Agency: Sub-Registrar of Assurance Doing Business 2016 India 79 Time to No. Procedure Cost to complete complete * Ensure that property is clear of all local tax dues Non-payment of local property tax can result in the property being attached and sold by the local body. The last local tax bill will show the 7 days previous dues if any and the receipt of payment will indicate the date on (simultaneous 2 which the payment was made. The receipt is issued by the local body No charge with procedures 1 upon receipt of payment. and 3) Agency: Local authorities * Conduct charges search at the Registrar of Companies This enables the buyer to know if any charge has been created against 1-2 days the property. (simultaneous 3 INR 100 with procedures 1 Agency: Registrar of Companies and 2) Prepare the final sale deed with the purchaser’s lawyer The lawyer prepares the final sale deed and then engrosses the document on green paper leaving the date and place blank. This About 1% of the document is then submitted for stamping. The fee for the lawyer varies 7 days property value 4 from transaction to transaction. (About INR 45,000) Agency: Lawyer Pay Stamp Duty on the final Sale Deed through franking at the designated bank. Deposits the said fees in the designated bank or authorised collection center of the Stock Holding Corporation of India for stamping of the Sale Deed. The designated bank issues a receipt and marks the first page of the printed sale deed with the stamp duty received. This printed sale 5% of property 5 1 day deed with stamp duty details will then be executed. The True Market value Value is computed on the basis of rates of property published in the Ready Reckoner issued by the Government every year. Agency: Bank Execute final sale deed and submit documents to the local office of 1% of market the Sub-Registrar of Assurances value of the property 6 The execution of the sale deed in front of the 2 witnesses is commonly 1 day (Maximum INR done at the same time and place where the buyer submits documents to 30,000) + INR 20 the Sub-Registrar. per page of final The documents are submitted to the office of the Sub Registrar of sale deed for Doing Business 2016 India 80 Time to No. Procedure Cost to complete complete Assurances within whose jurisdiction the property is located. The scanning charges authorized signatories of the seller and purchaser are required to be (paid in cash) present along with two witnesses. Once the document is registered, a distinct document number is assigned to that document. The record of registration is kept in the office of sub registrar of assurance. The documents are submitted to the Reader of the Sub-Registrar of Assurances for scrutiny. After scrutiny, the Reader indicates the registration fee required, which is 1% of the transaction value or Rs. 30,000/- whichever is less on the document itself. The due registration fee is to be deposited with the cashier against a receipt. After depositing the fees, the documents are presented before the Sub-Registrar in accordance with Section 32 of the Registration Act, 1908. Normally, the Seller hands over the peaceful vacant and physical possession of the property to the buyer simultaneous to the deed being presented for registration. Upon payment of the required registration fees and computer service charges in cash, as per the receipt, the document is returned within 30 minutes of getting the receipt. The documentation shall include: (1) Document required to be registered (in duplicate) (2) Two passport-size photographs of the authorized signatories of both parties. (3) Photo identification of each party and witnesses i.e. voters' identity card, passport, identity card issued by Govt. of India, Semi Govt. and Autonomous bodies or identification by a Gazette Officer. (4) Certified true copies of certificate of incorporation of both seller and purchaser. (5) Copy of the latest property register card (to be obtained from the City Survey Department) to indicate that the property does not belong to the government (6) Copy of the Municipal Tax bill to indicate the year in which the building was constructed (7) Copy of PAN Card of Income Tax of the Seller and the Buyer annexed along with the Sale Deed. Agency: Sub Registrar of Assurances Apply to the Land & Survey Office for mutation of the tile of the property INR 450 (Application fee of An application for mutation of the title of the property will have to be INR 100; stamp made to the City Survey and Land Records office for seeking mutation of duty on the the title of the property in the name of the purchaser. The authorised 30 days Indemnity Bond of 7 signatory has to submit the duly signed application along with the INR 200, stamp affidavit, indemnity bond and a notarised copy of the registered Sale duty of INR 100 on Deed. After the assessment of the request for mutation, the City Survey the Affidavit in the and Land Records office decides the value of the tax on the property and prescribed form issues a letter of mutation in favour of the purchaser. Cost included and notary fees of application fee of INR 100; stamp duty on the Indemnity Bond of INR Doing Business 2016 India 81 Time to No. Procedure Cost to complete complete 200, stamp duty of INR 100 on the Affidavit in the prescribed form and INR 50) notary fees of INR 50. Agency: Land & Survey Office * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Summary of time, cost and procedures for registering property in India Delhi Time to No. Procedure Cost to complete complete Conduct title search at the sub-registrar office The purchaser should conduct a search of the property in the Registry office, noting the location details of the property and the time period to be checked. While investigating the title it should be verified (1) that the legal ownership document is in the name of the owner, issued by the Revenue Record Department under the seal of the Tahsildar, (2) that on the date of purchase the title of the owner for the preceding 40 years 7 days (preferably) shows no mortgage or other encumbrance as still existing (simultaneous 1 INR 15,000-20,000 on the date of purchase, (3) the property is transferable and heritable, with procedures 2 (4) the transferor is competent and/or authorized to transfer the and 3) property, (5) the transferee is qualified to be a transferee, (6) the object or consideration for the transfer is lawful, (7) the transfer has been made and completed in the manner prescribed by law. Agency: Sub-Registrar Office * Ensure that property is clear of all local tax dues Request all records regarding payment of local property taxes and any other possible municipal dues, for pick-up a week later, to ensure that 7 days the owner of the property is in good standing with municipal authorities (simultaneous 2 INR 200 with procedures 1 Agency: North Delhi Municipal Corporation, South Delhi Municipal and 3) Corporation, East Delhi Municipal Corporation (depending on the location of the property) * Conduct charges search at the Registrar of Companies If the seller is a Company incorporated under the provisions of the 1-2 days Companies Act, 2013, the purchaser should conduct a search in the (simultaneous 3 INR 100 office of the Registrar of Companies to verify whether there is any charge with procedures 1 (mortgage, encumbrance, etc.) on the property registered under Section and 2) 125 of the Companies Act, 2013. Note that if the Seller is not able to produce title deed, then Buyer must also check any potential creditors Doing Business 2016 India 82 Time to No. Procedure Cost to complete complete for mortgages by deposit of title deed, which are not recorded anywhere. Agency: Registrar of Companies Prepare the final sale deed with the purchaser’s lawyer The lawyer prepares the final sale deed and then engrosses the document on green paper leaving the date and place blank. This 1% of the property document is then submitted for stamping. The fee for the lawyer varies 7 days value (About INR 4 from transaction to transaction. 45,000) Agency: Lawyer Pay Stamp Duty on the final Sale Deed through franking at the designated bank. 6% of property 5 1 day value Agency: Bank Execute final sale deed and submit documents to the local office of the Sub-Registrar of Assurances The documents are submitted to the office of the Sub-Registrar within whose jurisdiction the property is located. The authorized signatories of the seller and purchaser are required to be present along with two witnesses. Once the document is registered, a distinct document number is assigned to that document. The record of registration is kept in the office of sub registrar of assurance. The documents are presented 1% of market before the Sub-Registrar in accordance with Section 32 of the Registration Act, 1908. Normally, the Seller hands over the peaceful value of the vacant and physical possession of the property to the buyer property simultaneous to the deed being presented for registration. Upon (Maximum INR 6 payment of the required registration fees and computer service charges 1 day 30,000) + INR 20 in cash, as per the receipt, the document is returned within 30 minutes of per page of final getting the receipt. The documentation shall include: (1) Document sale deed for required to be registered (in duplicate) (2) Two passport-size scanning charges photographs of the authorized signatories of both parties. (3) Photo (paid in cash) identification of each party and witnesses i.e. voters' identity card, passport, identity card issued by Govt. of India, Semi Govt. and Autonomous bodies or identification by a Gazette Officer. (4) Certified true copies of certificate of incorporation of both seller and purchaser. (5) Copy of the latest property register card (to be obtained from the City Survey Department) to indicate that the property does not belong to the government (6) Copy of the Municipal Tax bill to indicate the year in which the building was constructed (7) Copy of PAN Card of Income Tax of the Seller and the Buyer annexed along with the Sale Deed. Doing Business 2016 India 83 Time to No. Procedure Cost to complete complete Agency: Sub-Registrar of Assurances Apply to the Land & Survey Office for mutation of the tile of the property INR 450 An application for mutation of the title of the property will have to be (Application fee of made to the Sub-Registrar office office for seeking mutation of the title of the property in the name of the purchaser. The authorised signatory INR 100; stamp has to submit the duly signed application along with the affidavit, duty on the indemnity bond and a notarised copy of the registered Sale Deed. After Indemnity Bond of 7 the assessment of the request for mutation, the Sub-Registrar office 30 days INR 200, stamp decides the value of the tax on the property and issues a letter of duty of INR 100 on mutation in favour of the purchaser. Cost included application fee of INR the Affidavit in the 100; stamp duty on the Indemnity Bond of INR 200, stamp duty of INR prescribed form 100 on the Affidavit in the prescribed form and notary fees of INR 50. and notary fees of INR 50) Agency: Land & Survey Office * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2016 India 84 REGISTERING PROPERTY Quality of land administration The quality of land administration index is the sum of If private sector entities were unable to register property the scores on the reliability of infrastructure, transfers in an economy between June 2014 and June transparency of information, geographic coverage 2015, the economy receives a “no practice” mark on the and land dispute resolution indices. procedures, time and cost indicators. A “no practice” economy receives a score of 0 on the quality of land The index ranges from 0 to 30, with higher values administration index even if its legal framework includes indicating better quality of the land administration provisions related to land administration. system. Table 5.3 Summary of quality of land administration in India Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) Quality of the land administration index (0-30) 7.50 6.50 Reliability of infrastructure index (0-8) 2.00 2.00 Office of What is the institution in charge of immovable Sub-Registrar Sub- property registration? office Registrar In what format are the majority of title or deed records Computer/Sc Computer/ kept in the largest business city—in a paper format or in 1.0 1.0 anned Scanned a computerized format (scanned or fully digital)? Is there an electronic database for checking for encumbrances (liens, mortgages, restrictions and the No 0.0 No 0.0 like)? Delhi Developme Institution in charge of the plans showing legal Land Records nt boundaries in the largest business city: Department Authority (DDA) In what format are the majority of maps of land plots kept in the largest business city—in a paper format or in Paper 0.0 Paper 0.0 a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral No 0.0 No 0.0 information (geographic information system)? Is the information recorded by the immovable property Separate Separate registration agency and the cadastral or mapping 0.0 0.0 databases databases agency kept in a single database, in different but linked Doing Business 2016 India 85 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) databases or in separate databases? Do the immovable property registration agency and cadastral or mapping agency use the same Yes 1.0 Yes 1.0 identification number for properties? Transparency of information index (0–6) 3.00 2.00 Anyone Who is able to obtain information on land ownership at Anyone who who pays the agency in charge of immovable property pays the 1.0 1.0 the official registration in the largest business city? official fee fee Is the list of documents that are required to complete any type of property transaction made publicly Yes, online 0.5 Yes, online 0.5 available–and if so, how? www.igrmaha http://www. rashtra.gov.in delhi.gov.in under the /wps/wcm/ heading connect/Do 'Activities' IT_Revenue Link for online access: and sub /revenue/h heading ome/faq/re 'Document gistration+ Registration' of+docume nts Is the applicable fee schedule for any property transaction at the agency in charge of immovable Yes, online 0.5 Yes, online 0.5 property registration in the largest business city made publicly available–and if so, how? http://www. www.igrmaha delhi.gov.in rashtra.gov.in /wps/wcm/ under the connect/do heading it_revenue/ Link for online access: 'Publications' Revenue/H and sub ome/Servic heading 'Fee es/Property Structure' +Registrati on Does the agency in charge of immovable property registration commit to delivering a legally binding Yes, in Yes, online 0.5 0.0 document that proves property ownership within a person specific time frame–and if so, how does it communicate Doing Business 2016 India 86 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) the service standard? www.igrmaha rashtra.gov.in under the Link for online access: heading Citizen's Charter Is there a specific and separate mechanism for filing complaints about a problem that occurred at the No 0.0 No 0.0 agency in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the immovable property No 0.0 No 0.0 registration agency? Number of property transfers in the largest business city in 2014: Only Only intermediarie intermediar Who is able to consult maps of land plots in the largest s and 0.0 ies and 0.0 business city? interested interested parties parties Is the applicable fee schedule for accessing maps of Yes, on public 0.5 No 0.0 land plots made publicly available—and if so, how? boards Link for online access: Does the cadastral or mapping agency commit to delivering an updated map within a specific time No 0.0 No 0.0 frame—and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that occurred at the No 0.0 No 0.0 cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 0.00 0.00 Are all privately held land plots in the economy No 0.0 No 0.0 formally registered at the immovable property registry? Doing Business 2016 India 87 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) Are all privately held land plots in the largest business city formally registered at the immovable property No 0.0 No 0.0 registry? Are all privately held land plots in the economy No 0.0 No 0.0 mapped? Are all privately held land plots in the largest business No 0.0 No 0.0 city mapped? Land dispute resolution index (0–8) 2.50 2.50 Does the law require that all property sale transactions be registered at the immovable property registry to Yes 1.5 Yes 1.5 make them opposable to third parties? Is the system of immovable property registration No 0.0 No 0.0 subject to a state or private guarantee? Is there a specific compensation mechanism to cover for losses incurred by parties who engaged in good faith in a property transaction based on erroneous No 0.0 No 0.0 information certified by the immovable property registry? Does the legal system require a control of legality of the documents necessary for a property transaction Yes 0.5 Yes 0.5 (e.g., checking the compliance of contracts with requirements of the law)? Lawyer; Lawyer; If yes, who is responsible for checking the legality of Interested Interested the documents? parties. parties. Does the legal system require verification of the Yes 0.5 Yes 0.5 identity of the parties to a property transaction? If yes, who is responsible for verifying the identity of Registrar. Registrar. the parties? Is there a national database to verify the accuracy of No 0.0 No 0.0 identity documents? For a standard land dispute between two local businesses over tenure rights of a property worth 50 Delhi High times gross national income (GNI) per capita and Civil Court Court located in the largest business city, what court would be in charge of the case in the first instance? How long does it take on average to obtain a decision More than 3 More than 0.0 0.0 from the first-instance court for such a case (without years 3 years Doing Business 2016 India 88 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) appeal)? Are there any statistics on the number of land disputes No 0.0 No 0.0 in the first instance? Number of land disputes in the largest business city in 2014: Source: Doing Business database. Doing Business 2016 India 89 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders’ rights to view a potential borrower’s financial Strength of legal rights index (0–12) history (positive or negative)—valuable information to Rights of borrowers and lenders through consider when assessing risk. And they permit collateral laws borrowers to establish a good credit history that will Protection of secured creditors’ rights through allow easier access to credit. Sound collateral laws bankruptcy laws enable businesses to use their assets, especially movable property, as security to generate capital— Depth of credit information index (0–8) while strong creditors’ rights have been associated Scope and accessibility of credit information with higher ratios of private sector credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable collateral (for more details on each case, see the Data The ranking of economies on the ease of getting Notes section of the Doing Business 2016 report). credit is determined by sorting their distance to These scenarios assume that the borrower: frontier scores for getting credit. These scores are the distance to frontier score for the strength of legal  Is a private limited liability company. rights index and the depth of credit information  Has its headquarters and only base of index. operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2016 India 90 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, India stands at 42 in the ranking of 189 and bankruptcy laws in India facilitate access to credit? economies on the ease of getting credit (figure 6.1). The The economy has a score of 7.00 on the depth of credit rankings for comparator economies provide useful information index and a score of 6.00 on the strength of information for assessing how well regulations and legal rights index (see the summary of scoring at the end institutions in India support lending and borrowing. of this chapter for details). Higher scores indicate more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How India and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2016 India 91 GETTING CREDIT One way to put an economy’s score on the getting credit rights index for India and shows the scores for indicators into context is to see where the economy comparator economies as well as the regional average stands in the distribution of scores across economies. score. Figure 6.3 shows the same for the depth of credit Figure 6.2 highlights the score on the strength of legal information index. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared — and lenders? and how widely? Economy scores on strength of legal rights index Economy scores on depth of credit information index Source: Doing Business database. Source: Doing Business database. Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Doing Business 2016 India 92 GETTING CREDIT What are the details? The getting credit indicators reported here for India are The data on the legal rights of borrowers and lenders are based on detailed information collected in that economy. gathered through a survey of financial lawyers and The data on credit information sharing are collected verified through analysis of laws and regulations as well through a survey of a credit registry and/or credit bureau as public sources of information on collateral and (if one exists). To construct the depth of credit bankruptcy laws. For the strength of legal rights index, a information index, a score of 1 is assigned for each of 8 score of 1 is assigned for each of 10 aspects related to features of the credit registry or credit bureau (see legal rights in collateral law and 2 aspects in bankruptcy summary of scoring below). law. Mumbai Delhi Strength of legal rights index (0–12) Index score: 6.00 Index score: 6.00 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional No No equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description Yes Yes of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of Yes Yes collateral? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, proceeds or replacements of the Yes Yes original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between Yes Yes parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non- incorporated entities, that is unified geographically and by asset type, with No No an electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional No No equivalents can be registered? Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any Yes Yes interested third party? Are secured creditors paid first (i.e. before tax claims and employee No No claims) when a debtor defaults outside an insolvency procedure? Doing Business 2016 India 93 Mumbai Delhi Strength of legal rights index (0–12) Index score: 6.00 Index score: 6.00 Are secured creditors paid first (i.e. before tax claims and employee No No claims) when a business is liquidated? Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No No protect secured creditors’ rights by providing clear grounds for relief from the stay and/or sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor Yes Yes to sell the collateral through public auction and private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Depth of credit information index (0–8) Credit bureau Credit registry Index score: 7.00 Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and financial institutions - No No 0 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years of negative data or erase data on Yes No 1 defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per Yes No 1 capita distributed? By law, do borrowers have the right to access their Yes No 1 data in the credit bureau or credit registry? Can banks and financial institutions access borrowers’ credit information online (for example, through an Yes No 1 online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value- added service to help banks and financial institutions Yes No 1 assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Doing Business 2016 India 94 Coverage Credit bureau Credit registry Number of firms 7,224,478 0 Number of individuals 176,859,706 0 Total 184,084,184 0 Total percentage of adult population 22.00 0.00 Source: Doing Business database. Doing Business 2016 India 95 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of companies to raise the capital they need to grow, WHAT THE PROTECTING MINORITY innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE define related-party transactions precisely, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the Extent of disclosure index (0–10) company and set detailed standards of accountability Review and approval requirements for related-party for company insiders. transactions; Disclosure requirements for related- What do the indicators cover? party transactions Doing Business measures the protection of minority Extent of director liability index (0–10) investors from conflicts of interest through one set of Ability of minority shareholders to sue and hold indicators and shareholders’ rights in corporate interested directors liable for prejudicial related- governance through another. The ranking of economies party transactions; Available legal remedies on the strength of minority investor protections is (damages, disgorgement of profits, fines, determined by sorting their distance to frontier scores imprisonment, rescission of the transaction) for protecting minority investors. These scores are the Ease of shareholder suits index (0–10) simple average of the distance to frontier scores for the extent of conflict of interest regulation index and the Access to internal corporate documents; Evidence extent of shareholder governance index. To make the obtainable during trial and allocation of legal data comparable across economies, a case study uses expenses several assumptions about the business and the Extent of conflict of interest regulation index transaction. (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of shareholder indices  Is a publicly traded corporation listed on the economy’s most important stock exchange Extent of shareholder rights index (0-10) (or at least a large private company with Shareholders’ rights and role in major corporate multiple shareholders). decisions  Has a board of directors and a chief executive Extent of ownership and control index (0-10) officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Governance safeguards protecting shareholders from undue board control and entrenchment specifically required by law. Extent of corporate transparency index (0-10) The transaction involves the following details: Corporate transparency on ownership stakes,  Mr. James, a director and the majority compensation, audits and financial prospects shareholder of the company, proposes that the company purchase used trucks from Extent of shareholder governance index another company he owns. (0–10)  The price is higher than the going price for Simple average of the extent of shareholders rights, used trucks, but the transaction goes forward. extent of ownership and control and extent of corporate transparency indices  All required approvals are obtained, and all required disclosures made, though the Strength of investor protection index (0–10) transaction is prejudicial to Buyer. Simple average of the extent of conflict of interest regulation and extent of shareholder governance  Shareholders sue the interested parties and indices the members of the board of directors. Doing Business 2016 India 96 PROTECTING MINORITY INVESTORS Where does the economy stand today? How strong are minority investor protections against protection index (figure 7.1). While the indicator does self-dealing in India? The economy has a score of 7.30 on not measure all aspects related to the protection of the strength of minority investor protection index, with a minority investors, a higher ranking does indicate that an higher score indicating stronger protections. economy’s regulations offer stronger minority investor protections against self-dealing in the areas measured. Globally, India stands at 8 in the ranking of 189 economies on the strength of minority investor Figure 7.1 How India and comparator economies perform on the strength of minority investor protection index Source: Doing Business database. Doing Business 2016 India 97 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the A summary of scoring for the protecting minority investors protecting minority investors indicators into context indicators at the end of this chapter provides details on is to see where the economy stands in the how the indices were calculated. distribution of scores across comparator economies. Figure 7.2 highlights the scores on the various minority investor protection indices for India. Figure 7.2 Summary of the various minority investor protection indices for India and comparator economies. Source: Doing Business database. Doing Business 2016 India 98 PROTECTING MINORITY INVESTORS Economies with the strongest protections of minority result, reforms to strengthen minority investor investors from self-dealing require detailed disclosure protections may move ahead on different fronts—such and define clear duties for directors. They also have well- as through new or amended company laws, securities functioning courts and up-to-date procedural rules that regulations or civil procedure rules. What minority give minority shareholders the means to prove their case investor protection reforms has Doing Business recorded and obtain a judgment within a reasonable time. As a in India (table 7.1)? Table 7.1 How has India strengthened minority investor protections—or not? By Doing Business report year from DB2011 to DB2016 DB year Reform India strengthened minority investor protections by requiring greater disclosure of conflicts of interest by board members, increasing the remedies available in case of prejudicial related- DB2015 party transactions and introducing additional safeguards for shareholders of privately held companies. This reform applies to both Delhi and Mumbai. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2016 India 99 PROTECTING MINORITY INVESTORS What are the details? The protecting minority investors indicators reported to disclosure, director liability, shareholder suits, here for India are based on detailed information shareholder rights, ownership and control and corporate collected through a survey of corporate and securities transparency in a standard case study (for more details, lawyers about securities regulations, company laws and see the Data Notes section of the Doing Business 2016 court rules of evidence and procedure. To construct the report). The summary below shows the details underlying six indicators on minority investor protection, scores are the scores for India. assigned to each based on a range of conditions relating Table 7.2 Summary of scoring for the protecting minority investors indicators in India Answer Score Answer Score (Delhi) (Mumbai) (Mumbai) (Delhi) Strength of minority investor protection index (0-10) 7.30 7.30 Extent of conflict of interest regulation index (0-10) 6.70 6.70 Extent of disclosure index (0-10) 7.00 7.00 Board of Board of directors directors Which corporate body can provide legally sufficient approval excluding 2.0 excluding 2.0 for the Buyer-Seller transaction? (0-3) interested interested members members Full disclosure Is disclosure by the interested director to the board of Full disclosure of 2.0 of all material 2.0 directors required? (0-2) all material facts facts Disclosure on Disclosure on the the transaction Is disclosure of the transaction in published periodic filings transaction and 2.0 and on the 2.0 (annual reports) required? (0-2) on the conflict of conflict of interest interest Is immediate disclosure of the transaction to the public No disclosure No disclosure 0.0 0.0 and/or shareholders required? (0-2) obligation obligation Must an external body review the terms of the transaction Yes 1.0 Yes 1.0 before it takes place? (0-1) Extent of director liability index (0-10) 6.00 6.00 Can shareholders sue directly or derivatively for the damage Yes 1.0 Yes 1.0 caused by the Buyer-Seller transaction to the company? (0-1) Can shareholders hold the interested director liable for the Not liable 0.0 Not liable 0.0 damage caused by the transaction to the company? (0-2) Can shareholders hold members of the approving body Liable if unfair or Liable if unfair liable for the damage cause by the transaction to the 2.0 2.0 prejudicial or prejudicial company? (0-2) Must the interested director pay damages for the harm caused to the company upon a successful claim by a Yes 1.0 Yes 1.0 shareholder plaintiff? (0-1) Must the interested director repay profits made from the transaction upon a successful claim by a shareholder Yes 1.0 Yes 1.0 plaintiff? (0-1) Doing Business 2016 India 100 Is the interested director fined and imprisoned or disqualified upon a successful claim by the shareholder No 0.0 No 0.0 plaintiff? (0-1) Voidable if Voidable if Can a court void the transaction upon a successful claim by a negligently 1.0 negligently 1.0 shareholder plaintiff? (0-2) concluded concluded Ease of shareholder suits index (0-10) 7.00 7.00 Before filing suit, can shareholders owning 10% of the company’s share capital inspect the transaction documents? Yes 1.0 Yes 1.0 (0-1) Can the plaintiff obtain any documents from the defendant No 3.0 No 3.0 and witnesses during trial? (0-3) Can the plaintiff request categories of documents from the No 0.0 No 0.0 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and Yes 2.0 Yes 2.0 witnesses during trial? (0-2) Is the level of proof required for civil suits lower than that of Yes 1.0 Yes 1.0 criminal cases? (0-1) At the Can shareholder plaintiffs recover their legal expenses from At the discretion 0.0 discretion of 0.0 the company? (0-2) of the court the court Extent of shareholder governance index (0-10) 8.00 8.00 Extent of shareholder rights index (0-10) 10.00 10.00 Does the sale of 51% of Buyer’s assets require shareholder Yes 1.0 Yes 1.0 approval? Can shareholders representing 10% of Buyer’s share capital Yes 1.0 Yes 1.0 call for an extraordinary meeting of shareholders? Must Buyer obtain its shareholders’ approval every time it Yes 1.0 Yes 1.0 issues new shares? Do shareholders automatically receive preemption rights Yes 1.0 Yes 1.0 every time Buyer issues new shares? Must shareholders approve the election and dismissal of the Yes 1.0 Yes 1.0 external auditor? Must changes to the voting rights of a class of shares be Yes 1.0 Yes 1.0 approved only by the holders of the affected shares? Assuming that Buyer is a limited company, does the sale of Yes 1.0 Yes 1.0 51% of Buyer’s assets requires shareholder approval? Assuming that Buyer is a limited company, can shareholders representing 10% of Buyer’s share capital call for an Yes 1.0 Yes 1.0 extraordinary meeting of shareholders? Assuming that Buyer is a limited company, must Buyer obtain its shareholders’ approval every time it issues new Yes 1.0 Yes 1.0 shares? Assuming that Buyer is a limited company, do shareholders automatically receive preemption rights every time Buyer Yes 1.0 Yes 1.0 issues new shares? Extent of ownership and control index (0-10) 8.00 8.00 Is the CEO prohibited from also being chair of the board of No 0.0 No 0.0 directors? Must the board of directors include independent and Yes 1.0 Yes 1.0 nonexecutive board members? Can shareholders remove members of Buyer’s board of Yes 1.0 Yes 1.0 Doing Business 2016 India 101 directors without cause before the end of their term? Must Buyer’s board of directors include a separate audit Yes 1.0 Yes 1.0 committee? Must a potential acquirer make a tender offer to all Yes 1.0 Yes 1.0 shareholders upon acquiring 50% of Buyer? Must Buyer pay dividends within a maximum period set by Yes 1.0 Yes 1.0 law after the declaration date? Is a subsidiary prohibited from acquiring shares issued by its Yes 1.0 Yes 1.0 parent company? Assuming that Buyer is a limited company, can shareholders remove members of Buyer’s board of directors without cause Yes 1.0 Yes 1.0 before the end of their term? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to all shareholders upon No 0.0 No 0.0 acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer pay dividends within a maximum period set by law after the Yes 1.0 Yes 1.0 declaration date? Extent of corporate transparency index (0-10) 6.00 6.00 Must Buyer disclose direct and indirect beneficial ownership Yes 1.0 Yes 1.0 stakes representing 5%? Must Buyer disclose information about board members’ other directorships as well as basic information on their Yes 1.0 Yes 1.0 primary employment? Must Buyer disclose the compensation of individual Yes 1.0 Yes 1.0 managers? Must a detailed notice of general meeting be sent 30 days No 0.0 No 0.0 before the meeting? Can shareholders representing 5% of Buyer’s share capital No 0.0 No 0.0 put items on the agenda for the general meeting? Must Buyer's annual financial statements be audited by an Yes 1.0 Yes 1.0 external auditor? Must Buyer disclose its audit reports to the public. Yes 1.0 Yes 1.0 Assuming that Buyer is a limited company, must a detailed notice of general meeting be sent 30 days before the No 0.0 No 0.0 meeting? Assuming that Buyer is a limited company, can shareholders representing 5% of Buyer’s share capital put items on the No 0.0 No 0.0 agenda for the general meeting? Assuming that Buyer is a limited company, must Buyer's annual financial statements be audited by an external Yes 1.0 Yes 1.0 auditor? Source: Doing Business database. Doing Business 2016 India 102 PAYING TAXES Taxes are essential. The level of tax rates needs to be carefully chosen—and needless complexity in tax WHAT THE PAYING TAXES INDICATORS rules avoided. Firms in economies that rank better MEASURE on the ease of paying taxes in the Doing Business study tend to perceive both tax rates and tax Tax payments for a manufacturing company administration as less of an obstacle to business in 2014 (number per year adjusted for according to the World Bank Enterprise Survey electronic and joint filing and payment) research. Total number of taxes and contributions paid, What do the indicators cover? including consumption taxes (value added tax, Using a case scenario, Doing Business records the sales tax or goods and service tax) taxes and mandatory contributions that a medium- Method and frequency of filing and payment size company must pay in a given year as well as Time required to comply with 3 major taxes measures of the administrative burden of paying (hours per year) taxes and contributions. This case scenario uses a set of financial statements and assumptions about Collecting information and computing the tax transactions made over the year. Information is also payable compiled on the frequency of filing and payments as Completing tax return forms, filing with well as time taken to comply with tax laws. The proper agencies ranking of economies on the ease of paying taxes is Arranging payment or withholding determined by sorting their distance to frontier scores on the ease of paying taxes. These scores are Preparing separate tax accounting books, if the simple average of the distance to frontier scores required for each of the component indicators, with a Total tax rate (% of profit before all taxes) threshold and a nonlinear transformation applied to one of the component indicators, the total tax rate . 3 Profit or corporate income tax All financial statement variables are proportional to Social contributions and labor taxes paid by 2012 income per capita. To make the data the employer comparable across economies, several assumptions Property and property transfer taxes are used. Dividend, capital gains and financial  TaxpayerCo is a medium-size business that transactions taxes started operations on January 1, 2013. Waste collection, vehicle, road and other taxes  The business starts from the same financial  Taxes and mandatory contributions include position in each economy. All the taxes corporate income tax, turnover tax and all and mandatory contributions paid during labor taxes and contributions paid by the the second year of operation are recorded. company.  Taxes and mandatory contributions are  A range of standard deductions and measured at all levels of government. exemptions are also recorded. The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8. 3 The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. Doing Business 2016 India 103 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with 2 largest business cities. See the chapter on distance to taxes in India—and how much do firms pay in taxes? On frontier and ease of doing business ranking at the end of average, firms make 33.00 tax payments a year, spend this profile for more details. 243.00 hours a year filing, preparing and paying taxes Globally, India stands at 157 in the ranking of 189 and pay total taxes amounting to 60.60% of profit (see economies on the ease of paying taxes (figure 8.1). The the summary at the end of this chapter for details). Most rankings for comparator economies and the regional indicator sets refer to a case scenario in the largest average ranking provide other useful information for business city of an economy, except for 11 economies for assessing the tax compliance burden for businesses in which the data are a population-weighted average of the India. Figure 8.1 How India and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2016 India 104 PAYING TAXES Economies around the world have made paying taxes and exemptions. Many have lowered tax rates. Changes faster, easier and less costly for businesses—such as by have brought concrete results. Some economies consolidating payments and filings of taxes, offering simplifying tax payment and reducing rates have seen electronic systems for filing and payment, establishing tax revenue rise. What tax reforms has Doing Business taxpayer service centers or allowing for more deductions recorded in India (table 8.1)? Table 8.1 How has India made paying taxes easier—or not? By Doing Business report year from DB2011 to DB2016 DB year Reform India reduced the administrative burden of paying taxes by DB2011 abolishing the fringe benefit tax and improving electronic payment. India eased the administrative burden of paying taxes for firms DB2012 by introducing mandatory electronic filing and payment for value added tax. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2016 India 105 PAYING TAXES What are the details? The indicators reported here for India are based on LOCATION OF STANDARDIZED COMPANY the taxes and contributions that would be paid by a standardized case study company used by Doing Business in collecting the data (see the section in this City: Mumbai, Delhi chapter on what the indicators cover). Tax practitioners are asked to review a set of financial statements as well as a standardized list of The taxes and contributions paid are listed in the assumptions and transactions that the company summary below, along with the associated number of completed during its 2nd year of operation. payments, time and tax rate. Respondents are asked how much taxes and mandatory contributions the business must pay and how these taxes are filed and paid. Table 8.2 Summary of tax rates and administration Total tax Notes on Mumbai: Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate taxable Corporate income tax 1 online 45 0.3 20.93 profit gross Social security contributions 12 93 0.1361 15.35 salaries purchase Central Sales Tax 1 online 105 0.02 14.14 price Employee's state insurance gross 12 0.0475 4.64 contribution salaries dividend Dividend tax 1 0.16995 distributio 3.98 ns assessed Property tax 1 0.1 1.32 value Doing Business 2016 India 106 Total tax Notes on Mumbai: Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate 12% * (1+ 2% Education cess + 1% insurance Tax on insurance contracts 1 0.26 Secondary premium & High education cess) fixed fee Vehicle tax (pollution tax) 1 INR 200 0.01 per vehicle interest included in Tax on interest 0 withheld 0.1 0 income other taxes fuel small Fuel tax 1 consumpti 0 amount on value not State VAT 1 online 0.125 0 added included 12% * (1+ 2% Education cess + 1% value not CENVAT (Excise Duty) 1 online 0 Secondary added included & High education cess) on applicable included in Income surcharge 0 jointly 0.1 0 federal other taxes taxes all federal taxes included in Education cess 0 jointly 0.02 including 0 other taxes the surcharge all federal taxes Secondary & Higher included in 0 jointly 0.01 including 0 education cess other taxes the surcharge Employee paid - Social 12% + gross 0 jointly 0 withheld security contributions 1.75% salaries Totals 33.00 243.00 60.60 Doing Business 2016 India 107 Total tax Notes on Delhi: Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate taxable Corporate income tax 1 online 45 0.3 20.93 profit gross Social security contributions 12 93 0.1361 15.35 salaries purchase Central Sales Tax 1 online 105 0.02 14.14 price Employee's state insurance gross 12 0.0475 4.64 contribution salaries dividend Dividend tax 1 0.16995 distributio 3.98 ns assessed Property tax 1 0.1 1.32 value 12% * (1+ 2% Education cess + 1% insurance Tax on insurance contracts 1 0.26 Secondary premium & High education cess) fixed fee Vehicle tax (pollution tax) 1 INR 200 0.01 per vehicle interest included in Tax on interest 0 withheld 0.1 0 income other taxes fuel small Fuel tax 1 consumpti 0 amount on value not State VAT 1 online 0.125 0 added included 12% * (1+ 2% Education cess + 1% value not CENVAT (Excise Duty) 1 online 0 Secondary added included & High education cess) Doing Business 2016 India 108 Total tax Notes on Delhi: Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate on applicable included in Income surcharge 0 jointly 0.1 0 federal other taxes taxes all federal taxes included in Education cess 0 jointly 0.02 including 0 other taxes the surcharge all federal taxes Secondary & Higher included in 0 jointly 0.01 including 0 education cess other taxes the surcharge Employee paid - Social 12% + gross 0 jointly 0 withheld security contributions 1.75% salaries Totals 33.00 243.00 60.60 Source: Doing Business database. Doing Business 2016 India 109 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE FOR IMPORT & EXPORT business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead Documentary compliance – cost (USD) & time to extra costs and delays for exporters and (hours) importers, stifling trade potential. Obtain, prepare and submit documents: What do the indicators cover? -During transport, clearance, inspections and port or border handling in origin economy Doing Business records the time and cost associated with the logistical process of exporting -Required by origin, destination and transit and importing goods. Under the new methodology economies introduced this year, Doing Business measures the Covers all documents by law and in practice time and cost (excluding tariffs) associated with Border compliance – cost (USD) & time (hours) three sets of procedures—documentary compliance, border compliance and domestic Customs clearance and inspections transport—within the overall process of exporting Inspections by other agencies or importing a shipment of goods. The ranking of Port or border handling economies on the ease of trading across borders is determined by sorting their distance to frontier Obtaining, preparing and submitting documents scores for trading across borders. These scores are during clearance, inspections and port or border the simple average of the distance to frontier handling scores for the time and cost for documentary Domestic transport* compliance and border compliance to export and Loading and unloading of shipment import. Transport between warehouse and terminal/port To make the data comparable across economies, a Transport between terminal/port and border few assumptions are made about the traded goods Obtaining, preparing and submitting documents and the transactions: during domestic transport Time Traffic delays and road police checks while shipment is en route  Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as * Although Doing Business collects and publishes data on the 22 × 24 = 528 hours). If customs clearance time and cost for domestic transport, it does not use these takes 7.5 hours, the data are recorded as is. data in calculating the distance to frontier score for trading Alternatively, suppose that documents are across borders or the ranking on the ease of trading across submitted to a customs agency at 8:00 a.m., borders. are processed overnight and can be picked up Cost at 8:00 a.m. the next day. In this case the time  Insurance cost and informal payments for which no for customs clearance would be recorded as receipt is issued are excluded from the costs 24 hours because the actual procedure took recorded. Costs are reported in U.S. dollars. 24 hours. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Doing Business 2016 India 110 Assumptions of the case study  Shipping cost based on weight is assumed to be  For each of the 189 economies covered by greater than shipping cost based on volume. Doing Business, it is assumed that a shipment travels from a warehouse in the largest business city of the exporting economy to a  If government fees are determined by the value of warehouse in the largest business city of the the shipment, the value is assumed to be $50,000. importing economy. For 11 economies the data are also collected, under the same case  The product is new, not secondhand or used study assumptions, for the second largest merchandise. business city.  The exporting firm is responsible for hiring and  The import and export case studies assume paying for a freight forwarder or customs broker (or different traded products. It is assumed that both) and pays for all costs related to international each economy imports a standardized shipping, domestic transport, clearance and shipment of 15 metric tons of containerized mandatory inspections by customs and other auto parts (HS 8708) from its natural import government agencies, port or border handling, partner—the economy from which it imports documentary compliance fees and the like for the largest value (price times quantity) of auto exports. The importing firm is responsible for the parts. It is assumed that each economy above costs for imports. exports the product of its comparative advantage (defined by the largest export  The mode of transport is the one most widely used value) to its natural export partner—the for the chosen export or import product and the economy that is the largest purchaser of this trading partner, as is the seaport, airport or land product. Precious metal and gems, live border crossing. animals and pharmaceuticals are excluded from the list of possible export products,  All electronic submissions of information requested however, and the second largest product by any government agency in connection with the category is considered as needed. shipment are considered to be documents obtained, prepared and submitted during the export or import  To identify the trading partners and export process. product for each economy, Doing Business collected data on trade flows for the most  A port or border is defined as a place (seaport, recent four-year period from international airport or land border crossing) where merchandise databases such as the United Nations can enter or leave an economy. Commodity Trade Statistics Database (UN Comtrade). For economies for which trade  Government agencies considered relevant are flow data were not available, data from agencies such as customs, port authorities, road ancillary government sources (various police, border guards, standardization agencies, ministries and departments) and World Bank ministries or departments of agriculture or industry, Group country offices were used to identify national security agencies and any other government the export product and natural trading authorities. partners.  A shipment is a unit of trade. Export shipments do not necessarily need to be containerized, while import shipments of auto parts are assumed to be containerized. Doing Business 2016 India 111 TRADING ACROSS BORDERS Where does the economy stand today? The Trading across Border indicator refers to a case Globally, India stands at 133 in the ranking of 189 study scenario of a warehouse in the largest business city economies on the ease of trading across borders (figure of an economy (except for 11 economies for which the 9.1). For more information on distance to frontier and data are a population-weighted average of the 2 largest ease of doing business ranking, please see the Distance business cities) trading with the main import and export to frontier and ease of doing business ranking chapter. partner through the economy’s main border crossing. Figure 9.1 How India and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2016 India 112 TRADING ACROSS BORDERS What are the details? The indicators reported here for India are based on a LOCATION OF STANDARDIZED COMPANY set of specific predefined procedures for trading a shipment of goods by the most widely used mode of transport (whether sea, land, air or some combination City: Mumbai, Delhi of these). The information on the time and cost to complete export and import is collected from local The details on the predefined set of procedures, and the freight forwarders, customs brokers and traders. associated time and cost, for exporting and importing a shipment of goods are listed in the summary bellow, along with the required documents. Table 9.2 Summary of export and import time and cost for trading across borders in India Mumbai Delhi South Asia Time to export: Border compliance 88 128 61 (hours) Cost to export: Border compliance 368 453 376 (USD) Time to export: Documentary 61 24 80 compliance (hours) Cost to export: Documentary 104 100 184 compliance (USD) Time to import: Border compliance 311 266 114 (hours) Cost to import: Border compliance 556 590 653 (USD) Time to import: Documentary 67 60 108 compliance (hours) Cost to import: Documentary 139 150 349 compliance (USD) Source: Doing Business database. Doing Business 2016 India 113 Table 9.3 Summary of trading details, transport time and documents for trading across borders in India Mumbai Delhi Export Import Export Import HS 85 : Electrical HS 85 : Electrical machinery and machinery and equipment and equipment and parts thereof; sound parts thereof; sound recorders and recorders and reproducers, HS 8708: Parts and reproducers, HS 8708: Parts and Product television image accessories of television image accessories of and sound motor vehicles and sound motor vehicles recorders and recorders and reproducers, and reproducers, and parts and parts and accessories of such accessories of such articles articles Trade partner United States Korea, Rep. United States Korea, Rep. Domestic transport time (hours) 7 9 46 97 Domestic transport cost (USD) 158 165 681 864 Border Nhava Sheva port Nhava Sheva port Mundra port Mundra port Distance (km) 46 46 1241 1241 Domestic transport speed 6.4 5.1 26.9 12.8 (km/hour) Domestic transport cost per 3.4 3.6 0.5 0.7 distance (USD/km) Source: Doing Business database. Documents to export Bill of lading (3 copies) Certificate of origin Commercial invoice Customs Export Declaration Insurance certificate Packing list Technical standards certificate Terminal handling receipt Documents to import Doing Business 2016 India 114 Bill of Entry Bill of lading Cargo Release Order Catalogs Certificate of origin Commercial invoice Import General Manifest Inspection report Insurance Certificate Packing list Source: Doing Business database. Note: Doing Business continues to collect data on the number of documents needed to trade internationally. Unlike in previous years, however, these data are excluded from the calculation of the distance to frontier score and ranking. The time and cost for documentary compliance serve as better measures of the overall cost and complexity of compliance with documentary requirements than does the number of documents required. Doing Business 2016 India 115 Figure 9.2 Summary of India on the ease of trading across borders Export (Mumbai) Import (Mumbai) Export (Delhi) Import (Delhi) Source: Doing Business database. Doing Business 2016 India 116 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent courts encourage new business relationships because Time required to enforce a contract through businesses know they can rely on the courts if a new the courts (calendar days) customer fails to pay. Speedy trials are essential for Time to file and serve the case small enterprises, which may lack the resources to Time for trial and to obtain the judgment stay in business while awaiting the outcome of a long court dispute. Time to enforce the judgment What do the indicators cover? Cost required to enforce a contract through the courts (% of claim) Doing Business measures the time and cost for resolving a standardized commercial dispute through Attorney fees a local first-instance court. In addition, this year it Court fees introduces a new measure, the quality of judicial Enforcement fees processes index, evaluating whether each economy has adopted a series of good practices that promote Quality of judicial processes index (0-18) quality and efficiency in the court system. This new Court structure and proceedings (0-5) index replaces the indicator on procedures, which was eliminated this year. The ranking of economies Case management (0-6) on the ease of enforcing contracts is determined by Court automation (0-4) sorting their distance to frontier scores. These scores Alternative dispute resolution (0-3) are the simple average of the distance to frontier scores for each of the component indicators. The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. The  The value of the dispute is 200% of the case study assumes that the court hears an expert on income per capita or the equivalent in local the quality of the goods in dispute. This distinguishes currency of USD 5,000, whichever is greater. the case from simple debt enforcement. To make the  The seller sues the buyer before the court data comparable across economies, Doing Business with jurisdiction over commercial cases worth uses several assumptions about the case: 200% of income per capita or $5,000.  The dispute concerns a lawful transaction  The seller requests a pretrial attachment to between two businesses (Seller and Buyer), secure the claim. both located in the economy’s largest  The dispute on the quality of the goods business city. For 11 economies the data requires an expert opinion. are also collected for the second largest business city.  The judge decides in favor of the seller; there is no appeal.  The buyer orders custom-made goods, then fails to pay.  The seller enforces the judgment through a public sale of the buyer’s movable assets. Doing Business 2016 India 117 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial and ease of doing business ranking at the end of this dispute through the courts in India? According to data profile for more details. collected by Doing Business, contract enforcement takes Globally, India stands at 178 in the ranking of 189 1420.00 days and costs 39.60% of the value of the claim. economies on the ease of enforcing contracts (figure Most indicator sets refer to the largest business city of an 10.1). The rankings for comparator economies and the economy, except for 11 economies for which the data regional average ranking provide other useful are a population-weighted average of the 2 largest benchmarks for assessing the efficiency of contract business cities. See the chapter on distance to frontier enforcement in India. Figure 10.1 How India and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2016 India 118 ENFORCING CONTRACTS What are the details? The data on time and cost reported here for India ECONOMY DETAILS are built by following the step-by-step evolution of a commercial sale dispute within the court, under the Court name - Delhi: Delhi District Court assumptions about the case described above (figure 10.2). The time and cost of resolving the Court name - standardized dispute are identified through study of Bombay City Civil Court Mumbai: the codes of civil procedure and other court regulations, as well as through questionnaires City: Mumbai, Delhi completed by local litigation lawyers (and, in a quarter of the economies covered by Doing Business, by judges as well). Figure 10.2 Time and cost of contract enforcement in India and comparator economies Source: Doing Business database. Doing Business 2016 India 119 Table 10.2 Details on time and cost for enforcing contracts in India South Asia Indicator Mumbai Delhi average Time (days) 1420.00 1420.00 1,077 Filing and service 20.0 20.0 Trial and judgment 1095.0 1095.0 Enforcement of judgment 305.0 305.0 Cost (% of claim) 39.60 39.60 30.5 Attorney fees (% of claim) 30.6 30.6 Court fees (% of claim) 8.5 8.5 Enforcement fees (% of claim) 0.5 0.5 Source: Doing Business database. Doing Business 2016 India 120 ENFORCING CONTRACTS Quality of judicial processes index The quality of judicial processes index measures The scores reported here show which of these good whether each economy has adopted a series of good practices are available in India. practices in its court system in four areas: court This methodology was initially developed by Djankov and structure and proceedings, case management, court others (2003) and is adopted here with several changes. automation and alternative dispute resolution. The The quality of judicial processes index was introduced in score on the quality of judicial processes index is the Doing Business 2016. The good practices tested in this sum of the scores on these 4 sub-components. The index were developed on the basis of internationally index ranges from 0 to 18, with higher values recognized good practices promoting judicial efficiency. indicating better, more efficient judicial processes. Figure 10.3 Quality of judicial processes index in India and comparator economies Source: Doing Business database. Doing Business 2016 India 121 Table 10.3 Details of the quality of judicial processes index in «dsGetData.Economy_Name» Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) Quality of judicial processes index (0-18) 7.50 7.50 Court structure and proceedings (0-5) 3.0 3.0 1. Is there a court or division of a court dedicated No 0.0 No 0.0 solely to hearing commercial cases? 2. Small claims court 1.5 1.5 2.a. Is there a small claims court or a fast-track Yes Yes procedure for small claims? 2.b. If yes, is self-representation allowed? Yes Yes 3. Is pretrial attachment available? Yes 1.0 Yes 1.0 4. Are new cases assigned randomly to judges? Yes 0.5 Yes 0.5 Case management (0-6) 0.5 0.5 1. Time standards 0.5 0.5 1.a. Are there laws setting overall time standards for Yes Yes key court events in a civil case? 1.b. If yes, are the time standards set for at least Yes Yes three court events? 1.c. Are these time standards respected in more than No No 50% of cases? 2. Adjournments 0.0 0.0 2.a. Does the law regulate the maximum number of Yes Yes adjournments that can be granted? 2.b. Are adjournments limited to unforeseen and No No exceptional circumstances? 2.c. If rules on adjournments exist, are they respected No No in more than 50% of cases? 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) clearance rate report; (iii) age of No 0.0 No 0.0 pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the competent No 0.0 No 0.0 court? 5. Are there any electronic case management tools in No 0.0 No 0.0 place within the competent court for use by judges? Doing Business 2016 India 122 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) 6. Are there any electronic case management tools in No 0.0 No 0.0 place within the competent court for use by lawyers? Court automation (0-4) 2.0 2.0 1. Can the initial complaint be filed electronically through a dedicated platform within the competent No 0.0 No 0.0 court? 2. Is it possible to carry out service of process electronically for claims filed before the competent No 0.0 No 0.0 court? 3. Can court fees be paid electronically within the Yes 1.0 Yes 1.0 competent court? 4. Publication of judgments 1.0 1.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public Yes Yes through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made available to the general public through publication in official Yes Yes gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.0 2.0 1. Arbitration 1.0 1.0 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or section Yes Yes of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— Yes Yes that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements Yes Yes usually enforced by the courts? 2. Mediation/Conciliation 1.0 1.0 2.a. Is voluntary mediation or conciliation available? Yes Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or section Yes Yes of the applicable code of civil procedure encompassing substantially all their aspects? Doing Business 2016 India 123 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or No No conciliation is successful, a refund of court filing fees, income tax credits or the like)? Source: Doing Business database. Doing Business 2016 India 124 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses Time required to recover debt (years) to normal operation and increase returns to Measured in calendar years creditors. By clarifying the expectations of creditors and debtors about the outcome of insolvency Appeals and requests for extension are proceedings, well-functioning insolvency systems can included facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and sustainably grow the economy. estate) What do the indicators cover? Measured as percentage of estate value Doing Business studies the time, cost and outcome of Court fees insolvency proceedings involving domestic legal Fees of insolvency administrators entities. These variables are used to calculate the recovery rate, which is recorded as cents on the Lawyers’ fees dollar recovered by secured creditors through Assessors’ and auctioneers’ fees reorganization, liquidation or debt enforcement Other related fees (foreclosure or receivership) proceedings. To determine the present value of the amount Outcome recovered by creditors, Doing Business uses the Whether business continues operating as a lending rates from the International Monetary Fund, going concern or business assets are sold supplemented with data from central banks and the piecemeal Economist Intelligence Unit. Recovery rate for creditors In addition, Doing Business evaluates the adequacy Measures the cents on the dollar recovered and integrity of the existing legal framework by secured creditors applicable to liquidation and reorganization proceedings through the strength of insolvency Outcome for the business (survival or not) framework index. The index tests whether economies determines the maximum value that can be adopted internationally accepted good practices in recovered four areas: commencement of proceedings, Official costs of the insolvency proceedings management of debtor’s assets, reorganization are deducted proceedings and creditor participation. Depreciation of furniture is taken into The ranking of economies on the ease of resolving account insolvency is determined by sorting their distance to Present value of debt recovered frontier scores for resolving insolvency. These scores are the simple average of the distance to frontier Strength of insolvency framework index (0- scores for the recovery rate and the strength of 16) insolvency framework index. The Resolving Sum of the scores of four component indices: Insolvency indicator does not measure insolvency Commencement of proceedings index (0-3) proceedings of individuals and financial institutions. The data are derived from questionnaire responses Management of debtor’s assets index (0-6) by local insolvency practitioners and verified through Reorganization proceedings index (0-3) a study of laws and regulations as well as public information on bankruptcy systems. Creditor participation index (0-4) Doing Business 2016 India 125 RESOLVING INSOLVENCY Where does the economy stand today? According to data collected by Doing Business, resolving 11.1). The resolving insolvency indicators are based on insolvency takes 4.30 years on average and costs 9.00% detailed information collected through questionnaires of the debtor’s estate. The average recovery rate is 25.70 completed by insolvency experts, including lawyers, cents on the dollar. Most indicator sets refer to a case practitioners (administrators, trustees), accountants and scenario in the largest business city of an economy, judges. Data on the time, cost and outcome refer to the except for 11 economies for which the data are a most likely in-court insolvency procedure applicable population-weighted average of the 2 largest business under specific case study assumptions. Data on cities. provisions applicable to judicial liquidation and reorganization is based on the current law governing Globally, India stands at 136 in the ranking of 189 insolvency proceedings in each economy. economies on the ease of resolving insolvency (figure Figure 11.1 How India and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2016 India 126 Figure 11.2 Efficiency of proceedings - time, cost and recovery rate in India and comparator economies. Source: Doing Business database. Note: The recovery rate is calculated based on the time, cost and outcome of insolvency proceedings involving domestic legal entities and is recorded as cents on the dollar recovered by secured creditors. The calculation takes into account the outcome: whether the business emerges from the proceedings as a going concern or the assets are sold piecemeal. Then the costs of the proceedings are deducted. Finally, the value lost as a result of the time the money remains tied up in insolvency proceedings is taken into account. The recovery rate is the present value of the remaining proceeds, based on end-2014 lending rates. Doing Business 2016 India 127 Table 11.1 Summary of data for the strength of insolvency framework index India Answer Explanation To enforce its security interest, Bizbank would file a petition to the Mumbai, Proceeding foreclosure Debt Recovery Tribunal. The debtor or other creditors will object Delhi before the High Court. The reason why BizBank initiates the insolvency process is that the Mumbai, hotel is unable to pay its debts and the hotel expects operating losses Outcome piecemeal sale Delhi in 2015 as well as 2016. Hence, in order to pay the debts, the hotel assets will be sold piecemeal and the hotel will stop operating. Bizbank will apply to the Debt Recovery Tribunal to enforce its security. This will take a couple of months. But other creditors (including tax authorities) and Mirage itself will file objections in front of the High Time (in Mumbai, 4.3 Court, which will delay the proceedings substantially. Given the high years) Delhi backlog of cases in India's High Courts, the foreclosure procedure until BizBank is repaid some or all of the money owed to it takes about 4.3 years. The costs associated with the case would amount to approximately 9% of the value of the debtor's estate. Costs incurred during the entire foreclosure process mainly include court or government agency fees (INR 300,000, according to Mumbai Court fees Act, 1959), attorney Cost (% of Mumbai, 9.0 fees (INR 100,000), costs of notification and publication (INR 25,000), estate) Delhi fees of accountants, assessors, inspectors and other professionals (INR 100,000), fees of auctioneers (INR 50,000), fees of service providers and/or government levies (INR 100,000-200,000), and other fees (INR 100,000). Recovery rate: 25.70 Source: Doing Business database. Doing Business 2016 India 128 RESOLVING INSOLVENCY Strength of resolving insolvency index The strength of insolvency framework index is the with higher values indicating insolvency legislation that is sum of the scores on the commencement of better designed for rehabilitating viable firms and proceedings index, management of debtor’s assets liquidating nonviable ones. India scores 6.00 out of 16 on index, reorganization proceedings index and creditor the strength of resolving insolvency index. participation index. The index ranges from 0 to 16, Figure 11.3 Strength of insolvency framework index (0-16) in India and comparator economies Source: Doing Business database. Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice”. Doing Business 2016 India 129 Table 11.3 Summary of data for the strength of insolvency framework index India Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) Strength of insolvency framework index (0-16) 6.00 6.00 Commencement of proceedings index (0-3) 2.00 2.00 (b) Debtor (b) Debtor What procedures are available to a DEBTOR when may file for may file for 0.5 0.5 commencing insolvency proceedings? liquidation liquidation only only (b) Yes, but a (b) Yes, but creditor may a creditor Does the insolvency framework allow a CREDITOR to file for 0.5 may file for 0.5 file for insolvency of the debtor? liquidation liquidation only only (a) Debtor (a) Debtor is is generally What basis for commencement of the insolvency generally unable to proceedings is allowed under the insolvency unable to pay 1.0 pay its 1.0 framework? its debts as debts as they mature they mature Management of debtor's assets index (0-6) 3.00 3.00 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to No 0.0 No 0.0 the debtor? Does the insolvency framework allow the rejection by Yes 1.0 Yes 1.0 the debtor of overly burdensome contracts? Does the insolvency framework allow avoidance of Yes 1.0 Yes 1.0 preferential transactions? Does the insolvency framework allow avoidance of Yes 1.0 Yes 1.0 undervalued transactions? Does the insolvency framework provide for the possibility of the debtor obtaining credit after No 0.0 No 0.0 commencement of insolvency proceedings? (c) No priority (c) No is assigned to priority is Does the insolvency framework assign priority to post- assigned to post- 0.0 0.0 commencement credit? post- commencem ent creditors commence ment Doing Business 2016 India 130 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) creditors Reorganization proceedings index (0-3) 0.00 0.00 Which creditors vote on the proposed reorganization N/A 0.0 N/A 0.0 plan? Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as No 0.0 No 0.0 what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class No 0.0 No 0.0 vote separately and are creditors in the same class treated equally? Creditor participation index (0-4) 1.00 1.00 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency No 0.0 No 0.0 representative? Does the insolvency framework require approval by the No 0.0 No 0.0 creditors for sale of substantial assets of the debtor? Does the insolvency framework provide that a creditor has the right to request information from the insolvency Yes 1.0 Yes 1.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or No 0.0 No 0.0 rejecting creditors' claims? Source: Doing Business database. Doing Business 2016 India 131 LABOR MARKET REGULATION Doing Business has historically studied the flexibility of regulations as well as secondary sources are reviewed to regulation of employment, specifically as it relates to the ensure accuracy. areas of hiring, working hours and redundancy. This year Doing Business has expanded the scope of the labor To make the data comparable across economies, several market regulation indicators by adding 16 new assumptions about the worker and the business are questions, most of which focus on measuring job quality. used. Over the period from 2007 to 2011 improvements were The worker: made to align the methodology for the labor market  Is a cashier in a supermarket or grocery store, regulation indicators (formerly the employing workers age 19, with one year of work experience. indicators) with the letter and spirit of the International  Is a full-time employee. Labour Organization (ILO) conventions. Ten of the 189  Is not a member of the labor union, unless ILO conventions cover areas now measured by Doing membership is mandatory. Business (up from four previously): employee The business: termination, weekend work, holiday with pay, night work,  Is a limited liability company (or the equivalent protection against unemployment, sickness benefits, in the economy). maternity protection, working hours, equal remuneration  Operates a supermarket or grocery store in the and labor inspections. economy’s largest business city. For 11 economies the data are also collected for the Between 2009 and 2011 the World Bank Group worked second largest business city. with a consultative group—including labor lawyers,  Has 60 employees. employer and employee representatives, and experts  Is subject to collective bargaining agreements if from the ILO, the Organisation for Economic Co- such agreements cover more than 50% of the operation and Development (OECD), civil society and the food retail sector and they apply even to firms private sector—to review the methodology for the labor that are not party to them. market regulation indicators and explore future areas of  Abides by every law and regulation but does not research. grant workers more benefits than those mandated by law, regulation or (if applicable) A full report with the conclusions of the consultative collective bargaining agreements. group, along with the methodology it proposed, is available on the Doing Business website at: http://www.doingbusiness.org/methodology/labor- market-regulation. Doing Business 2016 presents the data for the labor market regulation indicators in an annex. The report does not present rankings of economies on these indicators or include the topic in the aggregate distance to frontier score or ranking on the ease of doing business. Detailed data collected on labor market regulation are available on the Doing Business website (http://www.doingbusiness.org). The data on labor market regulation are based on a detailed questionnaire on employment regulations that is completed by local lawyers and public officials. Employment laws and Doing Business 2016 India 132 LABOR MARKET REGULATION What are the details? The data reported here for India are based on a detailed regulations as well as secondary sources are reviewed to survey of labor market regulation that is completed by ensure accuracy. local lawyers and public officials. Employment laws and Hiring Data on hiring cover five areas: (i) whether fixed-term wage to the average value added per worker (the ratio of contracts are prohibited for permanent tasks; (ii) the an economy’s GNI per capita to the working-age maximum cumulative duration of fixed-term contracts; population as a percentage of the total population), and (iii) the minimum wage for a cashier, age 19, with one (v) the availability of incentives for employers to hire year of work experience; (iv) the ratio of the minimum employees under the age of 25*. Mumbai Delhi Hiring Data Data Fixed-term contracts prohibited for permanent tasks? No No Maximum length of a single fixed-term contract (months) No limit No limit Maximum length of fixed-term contracts, including renewals (months) No limit No limit Minimum wage applicable to the worker assumed in the case study 135.4 179.1 (US$/month) Ratio of minimum wage to value added per worker 0.7 0.9 Incentives for employing workers under age 25? No No Source: Doing Business database. *A new question introduced in the Doing Business 2016 report for the first time. Doing Business 2016 India 133 LABOR MARKET REGULATION Working hours Data on working hours cover nine areas: i) the maximum and nonnursing women can work the same night hours number of working days allowed per week; (ii) the as men*; (vii) whether there are restrictions on weekly premium for night work (as a percentage of hourly pay); holiday work; (viii) whether there are restrictions on (iii) the premium for work on a weekly rest day (as a overtime work*; and (ix) the average paid annual leave percentage of hourly pay); (iv) the premium for overtime for workers with 1 year of tenure, 5 years of tenure, and work (as a percentage of hourly pay)*; (v) whether there 10 years of tenure. are restrictions on night work; (vi) whether nonpregnant Mumbai Delhi Working Hours Data Data Maximum number of working days per week 6.0 6.0 Premium for night work (% of hourly pay) 0.0 0.0 Premium for work on weekly rest day (% of hourly pay) 0.0 0.0 Premium for overtime work (% of hourly pay) 100.0 100.0 Restrictions on night work? 1.0 1.0 Whether nonpregnant and nonnursing women can work the same Yes Yes night hours as men Restrictions on weekly holiday? 1.0 1.0 Restrictions on overtime work? Yes Yes Paid annual leave for a worker with 1 year of tenure (working days) 21.0 15.0 Paid annual leave for a worker with 5 years of tenure (working days) 21.0 15.0 Paid annual leave for a worker with 10 years of tenure (working days) 21.0 15.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, 21.0 15.0 in working days) Source: Doing Business database. *A new question introduced in the Doing Business 2016 report for the first time. Doing Business 2016 India 134 LABOR MARKET REGULATION Redundancy rules Data on redundancy cover nine areas: (i) the length of whether the employer needs approval from a third party the maximum probationary period (in months) for to terminate one redundant worker; (vi) whether the permanent employees; (ii) whether redundancy is employer needs approval from a third party to terminate allowed as a basis for terminating workers; (iii) whether a group of nine redundant workers; (vii) whether the law the employer needs to notify a third party (such as a requires the employer to reassign or retrain a worker government agency) to terminate one redundant worker; before making the worker redundant; (viii) whether (iv) whether the employer needs to notify a third party to priority rules apply for redundancies; and (ix) whether terminate a group of nine redundant workers; (v) priority rules apply for reemployment. Mumbai Delhi Difficulty of redundancy index Data Data Maximum length of probationary period (months) 3.0 3.0 Dismissal due to redundancy allowed by law? Yes Yes Third-party notification if one worker is dismissed? Yes Yes Third-party approval if one worker is dismissed? No No Third-party notification if nine workers are dismissed? Yes Yes Third-party approval if nine workers are dismissed? No No Retraining or reassignment obligation before redundancy? No No Priority rules for redundancies? Yes Yes Priority rules for reemployment? Yes Yes Source: Doing Business database. Doing Business 2016 India 135 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice severance payments applicable to a worker with 1 year requirements and severance payments due when of tenure, a worker with 5 years and a worker with 10 terminating a redundant worker, expressed in weeks of years is considered. One month is recorded as 4 and salary. The average value of notice requirements and 1/3 weeks. Mumbai Delhi Redundancy cost indicator (in salary weeks) Data Data Notice period for redundancy dismissal for a worker with 1 year of 4.3 4.3 tenure Notice period for redundancy dismissal for a worker with 5 years of 4.3 4.3 tenure Notice period for redundancy dismissal for a worker with 10 years of 4.3 4.3 tenure Notice period for redundancy dismissal (average for workers with 1, 5 4.3 4.3 and 10 years of tenure) Severance pay for redundancy dismissal for a worker with 1 year of 2.1 2.1 tenure Severance pay for redundancy dismissal for a worker with 5 years of 10.7 10.7 tenure Severance pay for redundancy dismissal for a worker with 10 years of 21.4 21.4 tenure Severance pay for redundancy dismissal (average for workers with 1, 5 11.4 11.4 and 10 years of tenure) Source: Doing Business database. Doing Business 2016 India 136 LABOR MARKET REGULATION Job quality Doing Business 2016 report presents, for the first time, on-the-job training at no cost to the employee; (viii) data on 12 job quality areas: (i) whether the law whether a worker is eligible for an unemployment mandates equal remuneration for work of equal value; protection scheme after one year of service; (ix) the (ii) whether the law mandates nondiscrimination based minimum duration of the contribution period (in months) on gender in hiring, (iii) whether the law mandates paid required for unemployment protection; (x) whether an or unpaid maternity leave; (iv) the minimum length of employee can create or join a union; (xi) the availability maternity leave in calendar days (minimum number of of administrative or judicial relief in case of infringement days that legally have to be paid by the government, the of employees’ rights; and (xii) the availability of a labor employer or both); (v) whether employees on maternity inspection system. If no maternity leave is mandated by leave receive 100 % of wages; (vi) the availability of five law, parental leave is measured if applicable. fully paid days of sick leave a year; (vii) the availability of Mumbai Delhi Job Quality Data Data Equal remuneration for work of equal value? No No Gender nondiscrimination in hiring? Yes Yes Paid or unpaid maternity leave mandated by law? Yes Yes Minimum length of maternity leave (calendar days)? 84.0 84.0 Receive 100% of wages on maternity leave? Yes Yes Five fully paid days of sick leave a year? No No On-the-job training? No No Unemployment protection after one year of employment? No No Minimum contribution period for unemployment protection (months)? n.a. n.a. Can employee create or join union? Yes Yes Administrative or judicial relief for infringement of employees' rights? Yes Yes Labor inspection system? Yes Yes Source: Doing Business database. Doing Business 2016 India 137 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING Doing Business presents results for two aggregate even though it is no longer at the frontier in a measures: the distance to frontier score and the ease of subsequent year. doing business ranking, which is based on the distance For scores such as those on the strength of legal rights to frontier score. The ease of doing business ranking index or the quality of land administration index, the compares economies with one another; the distance to frontier is set at the highest possible value. For the total frontier score benchmarks economies with respect to tax rate, consistent with the use of a threshold in regulatory best practice, showing the absolute distance calculating the rankings on this indicator, the frontier is to the best performance on each Doing Business defined as the total tax rate at the 15th percentile of the indicator. When compared across years, the distance to overall distribution for all years included in the analysis frontier score shows how much the regulatory up to and including Doing Business 2015. For the time to environment for local entrepreneurs in an economy has pay taxes the frontier is defined as the lowest time changed over time in absolute terms, while the ease of recorded among all economies that levy the three major doing business ranking can show only how much the taxes: profit tax, labor taxes and mandatory regulatory environment has changed relative to that in contributions, and value added tax (VAT) or sales tax. For other economies. the different times to trade across borders, the frontier is Distance to Frontier defined as 1 hour even though in many economies the time is less than that. The distance to frontier score captures the gap between an economy’s performance and a measure of best In the same formulation, to mitigate the effects of practice across the entire sample of 36 indicators for 10 extreme outliers in the distributions of the rescaled data Doing Business topics (the labor market regulation for most component indicators (very few economies indicators are excluded). For starting a business, for need 700 days to complete the procedures to start a example, the former Yugoslav Republic of Macedonia business, but many need 9 days), the worst performance and New Zealand have the smallest number of is calculated after the removal of outliers. The definition procedures required (1), and New Zealand the shortest of outliers is based on the distribution for each time to fulfill them (0.5 days). Slovenia has the lowest component indicator. To simplify the process two rules cost (0.0), and Australia, Colombia and 103 other were defined: the 95th percentile is used for the economies have no paid-in minimum capital indicators with the most dispersed distributions requirement (table 14.1 in the Doing Business 2016 (including minimum capital, number of payments to pay report). taxes, and the time and cost indicators), and the 99th percentile is used for number of procedures. No outlier is Calculation of the distance to frontier score removed for component indicators bound by definition Calculating the distance to frontier score for each or construction, including legal index scores (such as the economy involves two main steps. In the first step depth of credit information index, extent of conflict of individual component indicators are normalized to a interest regulation index and strength of insolvency common unit where each of the 36 component framework index) and the recovery rate. indicators y (except for the total tax rate) is rescaled In the second step for calculating the distance to frontier using the linear transformation (worst − y)/(worst − score, the scores obtained for individual indicators for frontier). In this formulation the frontier represents the each economy are aggregated through simple averaging best performance on the indicator across all economies into one distance to frontier score, first for each topic since 2005 or the third year in which data for the and then across all 10 topics: starting a business, dealing indicator were collected. Both the best performance and with construction permits, getting electricity, registering the worst performance are established every five years property, getting credit, protecting minority investors, based on the Doing Business data for the year in which paying taxes, trading across borders, enforcing contracts they are established, and remain at that level for the five and resolving insolvency. More complex aggregation years regardless of any changes in data in interim years. methods—such as principal components and Thus an economy may set the frontier for an indicator unobserved components—yield a ranking nearly Doing Business 2016 India 138 identical to the simple average used by Doing Business . The nonlinear transformation is not based on any 4 Thus Doing Business uses the simplest method: economic theory of an “optimal tax rate” that minimizes weighting all topics equally and, within each topic, giving distortions or maximizes efficiency in an economy’s equal weight to each of the topic components . overall tax system. Instead, it is mainly empirical in 5 nature. The nonlinear transformation along with the An economy’s distance to frontier score is indicated on a threshold reduces the bias in the indicator toward scale from 0 to 100, where 0 represents the worst economies that do not need to levy significant taxes on performance and 100 the frontier. All distance to frontier companies like the Doing Business standardized case calculations are based on a maximum of five decimals. study company because they raise public revenue in However, indicator ranking calculations and the ease of other ways—for example, through taxes on foreign doing business ranking calculations are based on two companies, through taxes on sectors other than decimals. manufacturing or from natural resources (all of which are The difference between an economy’s distance to outside the scope of the methodology). In addition, it frontier score in any previous year and its score in 2015 acknowledges the need of economies to collect taxes illustrates the extent to which the economy has closed from firms. the gap to the regulatory frontier over time. And in any Calculation of scores for economies with 2 cities given year the score measures how far an economy is covered from the best performance at that time. For each of the 11 economies in which Doing Business Treatment of the total tax rate collects data for the second largest business city as well The total tax rate component of the paying taxes as the largest one, the distance to frontier score is indicator set enters the distance to frontier calculation in calculated as the population-weighted average of the a different way than any other indicator. The distance to distance to frontier scores for these two cities (table frontier score obtained for the total tax rate is 13.1). This is done for the aggregate score, the scores for transformed in a nonlinear fashion before it enters the each topic and the scores for all the component distance to frontier score for paying taxes. As a result of indicators for each topic. the nonlinear transformation, an increase in the total tax rate has a smaller impact on the distance to frontier score for the total tax rate—and therefore on the distance to frontier score for paying taxes—for economies with a below-average total tax rate than it would have had before this approach was adopted in Doing Business 2015 (line B is smaller than line A in figure 14.2 in the Doing Business 2016 report). And for economies with an extreme total tax rate (a rate that is very high relative to the average), an increase has a greater impact on both these distance to frontier scores than it would have had before (line D is bigger than line C in figure 14.2 in the Doing Business 2016 report). 4 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less importance in the context of a specific economy. 5 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned to the strength of legal rights index and 40% to the depth of credit information index. Indicators for all other topics are assigned equal weights Doing Business 2016 India 139 Table 13.1 Weights used in calculating the distance to implemented regulatory reforms making it easier to do frontier scores for economies with 2 cities covered business in 3 or more of the 10 topics included in this year’s aggregate distance to frontier score. Changes Economy City Weight (%) making it more difficult to do business are subtracted Dhaka 78 Bangladesh from the total number of those making it easier to do Chittagong 22 São Paulo 61 business. Twenty-four economies meet this criterion: Brazil Armenia; Azerbaijan; Benin; Costa Rica; Côte d’Ivoire; Rio de Janeiro 39 Shanghai 55 Cyprus; Hong Kong SAR, China; Indonesia; Jamaica; China Beijing 45 Kazakhstan; Kenya; Lithuania; Madagascar; Mauritania; Mumbai 47 Morocco; Romania; the Russian Federation; Rwanda; India Delhi 53 Senegal; Togo; Uganda; the United Arab Emirates; Jakarta 78 Uzbekistan; and Vietnam. Second, Doing Business sorts Indonesia Surabaya 22 these economies on the increase in their distance to Tokyo 65 Japan frontier score from the previous year using comparable Osaka 35 data. Mexico City 83 Mexico Monterrey 17 Selecting the economies that implemented regulatory Lagos 77 reforms in at least three topics and had the biggest Nigeria Kano 23 improvements in their distance to frontier scores is Karachi 65 intended to highlight economies with ongoing, broad- Pakistan Lahore 35 based reform programs. The improvement in the Moscow 70 Russian Federation distance to frontier score is used to identify the top St. Petersburg 30 New York 60 improvers because this allows a focus on the absolute United States improvement—in contrast with the relative improvement Los Angeles 40 Source: United Nations, Department of Economic and Social shown by a change in rankings—that economies have Affairs, Population Division, World Urbanization Prospects, made in their regulatory environment for business. 2014 Revision. http://esa.un.org/unpd/wup/CD- ROM/Default.aspx. Ease of Doing Business ranking Economies that improved the most across 3 or more Doing Business topics in 2014/15 The ease of doing business ranking ranges from 1 to 189. The ranking of economies is determined by sorting the Doing Business 2016 uses a simple method to calculate aggregate distance to frontier scores, rounded to 2 which economies improved the ease of doing business decimals. the most. First, it selects the economies that in 2014/15 Doing Business 2016 India 140 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 189 Contributors http://www.doingbusiness.org/rankings More than 11,400 specialists in 189 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 189 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 136 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, case studies and repreneurship customized economy and regional profiles http://www.doingbusiness.org/reports Distance to frontier Data benchmarking 189 economies to the frontier Methodology in regulatory practice and a distance to frontier The methodologies and research papers underlying calculator Doing Business http://www.doingbusiness.org/data/distance-to- http://www.doingbusiness.org/methodology frontier Research Information on good practices Abstracts of papers on Doing Business topics and Showing where the many good practices identified related policy issues by Doing Business have been adopted http://www.doingbusiness.org/research http://www.doingbusiness.org/data/good-practice Doing Business reforms Short summaries of DB2016 business regulation reforms and lists of reforms since DB2008 http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2016 India 141