Doing Business 2017 India Economy Profile 2017 India Doing Business 2017 India 2 © 2017 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 19 18 17 16 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. 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Doing Business 2017 India 3 CONTENTS Introduction .................................................................................................................................. 4 Starting a business ..................................................................................................................... 17 Dealing with construction permits ........................................................................................... 37 Getting electricity ....................................................................................................................... 64 Registering property .................................................................................................................. 77 Getting credit .............................................................................................................................. 93 Protecting minority investors ................................................................................................... 99 Paying taxes .............................................................................................................................. 107 Trading across borders ............................................................................................................ 115 Enforcing contracts .................................................................................................................. 123 Resolving insolvency ................................................................................................................ 133 Labor market regulation ......................................................................................................... 140 Distance to frontier and ease of doing business ranking .................................................... 148 Resources on the Doing Business website ............................................................................ 151 Doing Business 2017 India 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is provides data for other selected economies (comparator for a local entrepreneur to open and run a small to economies) for each indicator. The data in this report are medium-size business when complying with relevant current as of June 1, 2016 (except for the paying taxes regulations. It measures and tracks changes in indicators, which cover the period January–December regulations affecting 11 areas in the life cycle of a 2015). business: starting a business, dealing with construction The Doing Business methodology has limitations. Other permits, getting electricity, registering property, getting areas important to business—such as an economy’s credit, protecting minority investors, paying taxes, proximity to large markets, the quality of its trading across borders, enforcing contracts, resolving infrastructure services (other than those related to insolvency and labor market regulation. Doing Business trading across borders and getting electricity), the 2017 presents the data for the labor market regulation security of property from theft and looting, the indicators in an annex. The report does not present transparency of government procurement, rankings of economies on labor market regulation macroeconomic conditions or the underlying strength of indicators or include the topic in the aggregate distance institutions—are not directly studied by Doing Business. to frontier score or ranking on the ease of doing The indicators refer to a specific type of business, business. generally a local limited liability company operating in In a series of annual reports Doing Business presents the largest business city. Because standard assumptions quantitative indicators on business regulations and the are used in the data collection, comparisons and protection of property rights that can be compared benchmarks are valid across economies. The data not across 190 economies, from Afghanistan to Zimbabwe, only highlight the extent of obstacles to doing business; over time. The data set covers 48 economies in Sub- they also help identify the source of those obstacles, Saharan Africa, 32 in Latin America and the Caribbean, 25 supporting policy makers in designing regulatory reform. in East Asia and the Pacific, 25 in Eastern Europe and More information is available in the full report. Doing Central Asia, 20 in the Middle East and North Africa and Business 2017 presents the indicators, analyzes their 8 in South Asia, as well as 32 OECD high-income relationship with economic outcomes and presents economies. The indicators are used to analyze economic business regulatory reforms. The data, along with outcomes and identify what reforms have worked, where information on ordering Doing Business 2017, are and why. available on the Doing Business website at This economy profile presents the Doing Business http://www.doingbusiness.org. indicators for India. To allow useful comparison, it also Doing Business 2017 India 5 CHANGES IN DOING BUSINESS 2017 As part of a three-year update in methodology, Doing having equal evidentiary weight of women’s testimony in Business 2017 expands further by adding postfiling court. processes to the paying taxes indicator, including a Also for the first time this year Doing Business collects gender component in three of the indicators and data on Somalia, bringing the total number of developing a new pilot indicator on selling to the economies covered to 190. government. Also, for the first time this year Doing Business collects data on Somalia, bringing the total For more details on the changes, see the “”Old and new number of economies covered to 190. factors covered in Doing Business” section in the The paying taxes indicator is expanded this year to Overview chapter starting on page 1 of the Doing include postfiling processes – those processes that occur Business 2017 report. For more details on the data and after a firm complies with its regular tax obligations. methodology, please see the “Data Notes” chapter These include tax refunds, tax audits and tax appeals. In starting on page 114 of the Doing Business 2017 report. particular, Doing Business measures the time it takes to For more details on the distance to frontier metric, get a value added tax (VAT) refund, deal with a simple please see the “Distance to frontier and ease of doing mistake on a corporate tax return that can potentially business ranking” chapter in this profile. trigger an audit and good practices with administrative appeals process. This year’s Doing Business report presents a gender dimension in four of the indicator sets: starting a business, registering property, enforcing contracts and labor market regulation. Three of these areas are included in the distance to frontier score and in the ease of doing business ranking, while the fourth —labor market regulation—is not. Doing Business has traditionally assumed that the entrepreneurs or workers discussed in the case studies were men. This was incomplete by not reflecting correctly the Doing Business processes as applied to women—which in some economies may be different from the processes applied to men. Starting this year, Doing Business measures the starting a business process for two case scenarios: one where all entrepreneurs are men and one where all entrepreneurs are women. In economies where the processes are more onerous if the entrepreneur is a woman, Doing Business now counts the extra procedures applied to roughly half of the population that is female (for example, obtaining a husband’s consent or gender-specific requirements for opening a personal bank account when starting a business). Within the registering property indicators, a gender component has been added to the quality of land administration index. This component measures women’s ability to use, own, and transfer property according to the law. Finally, within the enforcing contracts indicator set, economies will be scored on Doing Business 2017 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 190 by the ease of doing business ranking. Population: 1,311,050,527 Doing Business presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 1,590 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier scores, DB2017 rank: 130 rounded to two decimals. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where DB2016 rank: 131* 0 represents the worst performance and 100 the frontier. Change in rank: 1 (See the chapter on the distance to frontier and ease of doing business). DB 2017 DTF: 55.27 The ease of doing business ranking compares economies with one another; the distance to frontier score DB 2016 DTF: 53.93 benchmarks economies with respect to regulatory best practice, showing the absolute distance to the best Change in DTF: 1.34 performance on each Doing Business indicator. When compared across years, the distance to frontier score * DB2016 ranking shown is not last year’s published shows how much the regulatory environment for local ranking but a comparable ranking for DB2016 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 114 of the Doing Business 2017 changed relative to that in other economies. report for sources and definitions. The 10 topics included in the ranking in Doing Business 2017: 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 the economy profile. Doing Business 2017 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 2017 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 2016 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 2017 India 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - India (Scale: Rank 190 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 2016 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 2017 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 114 of the Doing Business 2017 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2017 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 DB2017 Russian Federation Mumbai DB2017 Mexico DB2017 Indicator China DB2017 Delhi DB2017 India DB2017 India DB2016 DB2017 DB2017 Starting a Business 155 151 -- -- 122 127 93 26 1 (New Zealand) (Rank) Starting a Business (DTF 74.31 73.74 72.41 75.99 81.74 81.02 85.74 93.57 99.96 (New Zealand) Score) Procedure – Men 12.9 12.9 14.0 12.0 9.0 9.0 7.8 3.7 1.0 (New Zealand) (number) Time – Men (days) 26.0 28.0 26.0 26.0 19.5 28.9 8.4 9.8 0.5 (New Zealand) Cost – Men (% of 13.8 14.3 16.5 11.4 13.8 0.7 17.8 1.0 0.0 (Slovenia) income per capita) Procedure – Women 12.9 12.9 14.0 12.0 9.0 9.0 7.8 3.7 1.0 (New Zealand) (number) Time – Women (days) 26.0 28.0 26.0 26.0 19.5 28.9 8.4 9.8 0.5 (New Zealand) Cost – Women (% of 13.8 14.3 16.5 11.4 13.8 0.7 17.8 1.0 0.0 (Slovenia) income per capita) Paid-in min. capital (% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (127 Economies*) of income per capita) Dealing with 185 184 -- -- 138 177 83 115 1 (New Zealand) Construction Permits Doing Business 2017 India 12 Best performer globally Bangladesh DB2017 Russian Federation Mumbai DB2017 Mexico DB2017 Indicator China DB2017 Delhi DB2017 India DB2017 India DB2016 DB2017 DB2017 (Rank) Dealing with Construction Permits 32.83 32.83 35.06 30.86 61.60 48.52 69.79 65.86 87.40 (New Zealand) (DTF Score) Procedures (number) 35.1 35.1 42.0 29.0 14.2 22.0 13.0 13.7 7.0 (4 Economies*) Time (days) 190.0 190.0 164.0 213.0 269.0 244.3 86.4 239.3 28.0 (Korea, Rep.) Cost (% of warehouse 0.1 (Trinidad and 25.9 26.5 25.0 26.7 2.7 7.0 9.8 1.4 value) Tobago) Building quality control 11.5 11.5 12.0 11.0 10.0 9.0 11.7 10.0 15.0 (Luxembourg*) index (0-15) Getting Electricity 26 51 -- -- 187 97 98 30 1 (Korea, Rep.) (Rank) Getting Electricity (DTF 85.09 79.76 85.16 85.03 16.17 68.73 68.32 84.37 99.88 (Korea, Rep.) Score) Procedures (number) 5.0 5.0 5.0 5.0 9.0 5.5 6.8 3.0 3.0 (15 Economies*) Time (days) 45.9 86.2 47.0 45.0 428.9 143.2 100.4 160.5 18.0 (Korea, Rep.*) Cost (% of income per 133.2 442.3 73.0 186.6 2860.9 390.4 336.7 44.1 0.0 (Japan) capita) Reliability of supply and transparency of tariff 7.0 7.0 7.0 7.0 0.0 6.0 6.2 8.0 8.0 (26 Economies*) index (0-8) Registering Property 138 140 -- -- 185 42 101 9 1 (New Zealand) (Rank) Registering Property 50.00 49.97 51.73 48.48 27.58 76.15 61.05 90.55 94.46 (New Zealand) (DTF Score) Procedures (number) 7.0 7.0 7.0 7.0 8.0 4.0 7.7 3.0 1.0 (4 Economies*) Doing Business 2017 India 13 Best performer globally Bangladesh DB2017 Russian Federation Mumbai DB2017 Mexico DB2017 Indicator China DB2017 Delhi DB2017 India DB2017 India DB2016 DB2017 DB2017 Time (days) 46.8 46.8 46.5 47.0 244.0 19.5 42.1 15.0 1.0 (3 Economies*) Cost (% of property 7.7 7.7 6.9 8.4 7.0 3.4 5.2 0.2 0.0 (Saudi Arabia) value) Quality of the land administration index (0- 7.0 7.0 7.5 6.5 4.5 18.3 16.3 26.0 29.0 (Singapore) 30) Getting Credit (Rank) 44 42 -- -- 157 62 5 44 1 (New Zealand) Getting Credit (DTF 65.00 65.00 65.00 65.00 25.00 60.00 90.00 65.00 100.00 (New Zealand) Score) Strength of legal rights 6.0 6.0 6.0 6.0 5.0 4.0 10.0 6.0 12.0 (3 Economies*) index (0-12) Depth of credit 7.0 7.0 7.0 7.0 0.0 8.0 8.0 7.0 8.0 (30 Economies*) information index (0-8) Credit registry coverage 0.0 0.0 0.0 0.0 0.9 91.1 0.0 0.0 100.0 (3 Economies*) (% of adults) Credit bureau coverage 21.4 22.0 21.4 21.4 0.0 21.3 100.0 77.2 100.0 (23 Economies*) (% of adults) Protecting Minority 13 10 -- -- 70 123 53 53 1 (New Zealand*) Investors (Rank) Protecting Minority 73.33 73.33 73.33 73.33 56.67 45.00 60.00 60.00 83.33 (New Zealand*) Investors (DTF Score) Strength of minority investor protection 7.3 7.3 7.3 7.3 5.7 4.5 6.0 6.0 8.3 (New Zealand) 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 9.3 (New Zealand) index (0-10) Extent of shareholder 8.0 8.0 8.0 8.0 5.0 4.0 6.0 7.0 8.3 (Norway) governance index (0- Doing Business 2017 India 14 Best performer globally Bangladesh DB2017 Russian Federation Mumbai DB2017 Mexico DB2017 Indicator China DB2017 Delhi DB2017 India DB2017 India DB2016 DB2017 DB2017 10) 1 (United Arab Paying Taxes (Rank) 172 172 -- -- 151 131 114 45 Emirates) Paying Taxes (DTF 99.44 (United Arab 46.58 43.17 46.58 46.58 55.56 60.46 65.81 82.96 Score) Emirates) Payments (number per 3.0 (Hong Kong SAR, 25.0 33.0 25.0 25.0 33.0 9.0 6.0 7.0 year) China*) Time (hours per year) 241.0 243.0 241.0 241.0 435.0 259.0 286.0 168.0 55.0 (Luxembourg) Total tax rate (% of 60.6 60.6 60.6 60.6 34.4 68.0 52.0 47.4 26.1 (32 Economies*) profit) Postfiling index (0-100) 4.3 4.3 98.5 (Estonia) Trading across Borders 143 144 -- -- 173 96 61 140 1 (10 Economies*) (Rank) Trading across Borders 100.00 (10 57.61 56.45 57.98 57.28 34.86 69.13 82.09 57.96 (DTF Score) Economies*) Time to export: Border 106 109 85 125 100 26 20 96 0 (18 Economies*) compliance (hours) Cost to export: Border 413 413 368 453 408 522 400 765 0 (18 Economies*) compliance (USD) Time to export: Documentary 38 41 58 21 147 21 8 25 1 (25 Economies*) compliance (hours) Cost to export: Documentary 92 102 94 90 225 85 60 92 0 (19 Economies*) compliance (USD) Time to import: Border 283 287 307 262 183 92 44 96 0 (25 Economies*) compliance (hours) Doing Business 2017 India 15 Best performer globally Bangladesh DB2017 Russian Federation Mumbai DB2017 Mexico DB2017 Indicator China DB2017 Delhi DB2017 India DB2017 India DB2016 DB2017 DB2017 Cost to import: Border 574 574 556 590 1294 777 450 1125 0 (28 Economies*) compliance (USD) Time to import: Documentary 61 63 65 58 144 66 18 43 1 (29 Economies*) compliance (hours) Cost to import: Documentary 135 145 129 140 370 171 100 153 0 (30 Economies*) compliance (USD) Enforcing Contracts 172 178 -- -- 189 5 40 12 1 (Korea, Rep.) (Rank) Enforcing Contracts 35.19 32.41 35.19 35.19 22.21 77.98 67.01 74.96 84.15 (Korea, Rep.) (DTF Score) Time (days) 1420.0 1420.0 1420.0 1420.0 1442.0 452.8 340.7 337.0 164.0 (Singapore) Cost (% of claim) 39.6 39.6 39.6 39.6 66.8 16.2 33.0 16.5 9.0 (Iceland) Quality of judicial 9.0 7.5 9.0 9.0 7.5 14.3 10.1 11.0 15.5 (Australia) processes index (0-18) Resolving Insolvency 136 135 -- -- 151 53 30 51 1 (Finland) (Rank) Resolving Insolvency 32.75 32.59 32.75 32.75 27.02 55.82 73.11 56.69 93.89 (Finland) (DTF Score) Recovery rate (cents on 26.0 25.7 26.0 26.0 27.0 36.9 69.1 38.6 92.9 (Norway) the dollar) Time (years) 4.3 4.3 4.3 4.3 4.0 1.7 1.8 2.0 0.4 (22 Economies*) Cost (% of estate) 9.0 9.0 9.0 9.0 8.0 22.0 18.0 9.0 1.0 (22 Economies*) Strength of insolvency 6.0 6.0 6.0 6.0 4.0 11.5 11.5 11.5 15.0 (6 Economies*) framework index (0-16) Source: Doing Business database. Note: DB2016 rankings shown are not last year’s published rankings but comparable rankings for DB2016 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 Doing Business 2017 India 16 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 2017 India 17 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 city1 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 Obtaining approval from spouse to start a generating more revenue for the government. business, to leave the home to register the company or open a bank account. What do the indicators cover? Obtaining any gender specific document for Doing Business records all procedures officially company registration and operation, national required, or commonly done in practice, for an identification card or opening a bank entrepreneur to start up and formally operate an account. industrial or commercial business, as well as the time and cost to complete these procedures and the paid- Time required to complete each procedure in minimum capital requirement. These procedures (calendar days) include obtaining all necessary licenses and permits Does not include time spent gathering and completing any required notifications, information verifications or inscriptions for the company and employees with relevant authorities. The ranking of Each procedure starts on a separate day (2 economies on the ease of starting a business is procedures cannot start on the same day). determined by sorting their distance to frontier Procedures that can be fully completed scores for starting a business. These scores are the online are recorded as ½ day. simple average of the distance to frontier scores for Procedure completed once final document is each of the component indicators. received To make the data comparable across economies, No prior contact with officials several assumptions about the business and the procedures are used. It is assumed that any required Cost required to complete each procedure information is readily available and that the (% of income per capita) entrepreneur will pay no bribes. Assumptions about Official costs only, no bribes the business: No professional fees unless services required  Is a limited liability company (or its legal by law or commonly used in practice equivalent). If there is more than one type of limited liability company in the economy, the Paid-in minimum capital (% of income limited liability form most common among per capita) domestic firms is chosen. Information on the Deposited in a bank or with a notary before most common form is obtained from registration (or within 3 months) incorporation lawyers or the statistical office.  Operates in the economy’s largest business  The size of the entire office space is city. For 11 economies the data are also approximately 929 square meters (10,000 square collected for the second largest business city. feet).  Is 100% domestically owned and has five Doing Business 2017 India 18 owners, none of whom is a legal entity  Does not qualify for investment incentives or any special benefits.  Has start-up capital of 10 times income per capita  Has at least 10 and up to 50 employees one month after the commencement of operations, all  Performs general commercial or industrial of them domestic nationals. activities, such as the production or sale to the public of products or services. The business  Has a turnover of at least 100 times income per does not perform foreign trade activities and capita. does not handle products subject to a special  Has a company deed 10 pages long. tax regime, for example, liquor or tobacco. It is not using heavily polluting production The owners: processes.  Have reached the legal age of majority and are  Leases the commercial plant or offices and is capable of making decisions as an adult. If there not a proprietor of real estate. is no legal age of majority, they are assumed to be 30 years old.  The amount of the annual lease for the office space is equivalent to 1 times income per  Are sane, competent, in good health and have no capita criminal record.  Are married, the marriage is monogamous and registered with the authorities.  Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Doing Business 2017 India 19 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in India? According refer to a case scenario in the largest business city of an to data collected by Doing Business, starting a business economy, except for 11 economies for which the data there requires 12.9 procedures , takes 26.0 days, costs are a population-weighted average of the 2 largest 13.8% of income per capita for men, and requires 12.9 business cities. See the chapter on distance to frontier procedures , takes 26.0 days, costs 13.8% of income per and ease of doing business ranking at the end of this capita for women. A requirement of paid-in minimum profile for more details. capital of 0.0% of income per capita (figure 2.1) is legally . mandatory for both men and women. Most indicator sets Figure 2.1 What it takes to start a business in India - Mumbai Paid-in minimum capital (% of income per capita): 0.0 Doing Business 2017 India 20 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. Procedures in light blue are for married women only. Doing Business 2017 India 21 STARTING A BUSINESS Globally, India stands at 155 in the ranking of 190 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 2017 India 22 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 DB2017 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 2017 India 23 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 In accordance with the Companies Act, 2013, every private limited company must have at least 2 directors, each obtaining a DIN and DSC. 2 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 months. Doing Business 2017 India 24 Time to No. Procedure Cost to complete complete 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, company secretary or a cost accountant in practice (Practicing 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 Practicing 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 portal for other companies or LLPs having similar names. Alternatively, 2-7 days INR 1,000 3 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"), provided the name is not similar to any existing trademark, any of the Doing Business 2017 India 25 Time to No. Procedure Cost to complete complete 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 Rules 10, 12, 14 and 15 of Companies (Incorporation) Rules, 2014, the following forms are required to be electronically filed on the Ministry of Corporate Affairs website 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 attached to Form INC 22. 4 c) Form- DIR-12 (Particulars of appointment of directors and the key 5 days on average see comments 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: INR 100 - 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) Make a company stamp 1 day (simultaneous with *5 As per the amendment to the Companies Act 2013, making a company INR 350-500 previous seal is no longer a legal requirement. However, making a company procedure) rubber stamp is still commonly used in practice. The stamp is normally Doing Business 2017 India 26 Time to No. Procedure Cost to complete complete required to be affixed by a director upon signing on behalf of the company in order to file several applications relevant to business startup. This includes but is not limited to opening a bank account, application for registration 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. INR 93 plus service 6 7-10 days tax 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 days no charge Agency: Bank Register with Employees' Provident Fund Organization The Employees Provident Fund Organization (EPFO) is a statutory 7 days on average, organization under the Ministry of Labor and Employment. The simultaneous with *8 Employees Provident Funds & Miscellaneous Provisions Act, 1952 no charge previous applies to an establishment, employing 20 or more persons and procedure engaged in any of the 183 Industries and Classes of business establishments, throughout India excluding the State of Jammu and Kashmir. Doing Business 2017 India 27 Time to No. Procedure Cost to complete complete Pursuant to launch of OLRE (online registration of establishment portal) by the Employee Provident Fund department, employers are required to apply online for registering their establishment. For verification purposes, the employer shall send the copies of all the documents mentioned in the application form along with the copy of the application generated at the time of submission after the issuance of PF Code intimation letter to the EPFO office. 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 generate TIN after verification of the documents. Registration certificate INR 500 will be printed and issued to the company on the appointed date. The 10 days, (Registration Fee) + appointment date is usually scheduled in the next 10 days. simultaneous with INR 25 (Stamp *9 previous Duty) for Other accompanying documentation includes: procedure compulsory VAT - Certified true copy of the memorandum and articles of association of registration 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 Register for medical insurance (ESIC) As per the Employees' State Insurance (General), Form 01 is the form 9 days, required to be submitted by Employer for registration. The Employer simultaneous with * 10 Code Number issued will be included in the "intimation letter" which is no charge previous sent by post to the employer. Employers can now submit application procedure online for registration under ESI Act on the ESIC website (www.esic.in). The Employee’s individual insurance is a separate process and occurs Doing Business 2017 India 28 Time to No. Procedure Cost to complete complete after Employer’s registration. The Employer is responsible for submitting the required Declaration Form and employees are responsible for providing correct information to the employer. 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 plus service tax 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) 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 INR 1,200 establishment. Supporting documents must be attached, including a 2 days, (registration fee) + certified true copy of the company's PAN Card, TAN Allotment Letter, simultaneous with 3 times registration * 12 Certificate of Incorporation, Memorandum and Articles of Association, a previous fee for Trade list of company directors, their particulars and copies of their PAN procedure Refuse Charges Cards. (INR 3,600) - Under Section 7(2), after the statement in Form A and the prescribed fees are received and the correctness of the statement is satisfactorily audited, the certificate for the registration of the establishment is issued in Form D, according to the provisions of Rule 6 of the Maharashtra Shops and Establishments Rules of 1961. Since the amendments in the Maharashtra Shops & Establishment (Amendment) Rules, 2010, the Schedule for fees for registration & renewal of registration (as per Rule 5) is as follows: 0 employees: INR 120 Doing Business 2017 India 29 Time to No. Procedure Cost to complete complete 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 Form A, along with the required documents and fees, the application is 2-6 days, assigned to and processed by Department Head (Sr.Inspector) at the simultaneous with * 13 no charge concerned Ward. previous 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 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 2 days, print of the copy of the completed e-application and the employee/ simultaneous with * 14 person applying on behalf of the company should affix his signature at no charge previous relevant places and then submit the printed copy of the filled e- procedure 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, then the registration authority will generate TIN (registration/enrolment number under the Profession Tax Act) after the verification of the documents. Registration certificate will be printed and issued to the 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; Doing Business 2017 India 30 Time to No. Procedure Cost to complete complete - 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. Procedures in light blue are for married women only. 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 authorized by the Ministry of Corporate Affairs (National) 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. INR 700 to INR A Class-II Digital Signature Certificate can be obtained for either a 2,500 per Digital 1 period of 1 year or a period of 2 years, and then needs to be renewed 1-3 days Signature for another 1-2 years upon payment of renewal fees. Each agency has Certificate 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 day INR 500 per DIN 2 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. Doing Business 2017 India 31 Time to No. Procedure Cost to complete complete 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 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, 3 engage a professional (practicing chartered accountant, company 2-7 days INR 1,000 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"), 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 Doing Business 2017 India 32 Time to No. Procedure Cost to complete complete 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 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 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: INR 10 - Stamp duty for Articles of Association: IINR 1,483 - Stamp duty for Memorandum of Association: INR 200 Agency: Registrar of Companies (ROC) Make a company stamp As per the amendment to the Companies Act 2013, making a company 1 day seal is no longer a legal requirement. However, making a company (simultaneous with *5 INR 500-1,000 rubber stamp is still commonly used in practice. The stamp is normally previous required to be affixed by a director upon signing on behalf of the procedure) company in order to file several applications relevant to business startup. This includes but is not limited to opening a bank account, Doing Business 2017 India 33 Time to No. Procedure Cost to complete complete application for registration 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 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. 7-10 days INR 93 6 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 with taxes. 2 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 7 days Employees Provident Funds & Miscellaneous Provisions Act, 1952 (simultaneous with *8 applies to an establishment, employing 20 or more persons and no charge previous engaged in any of the 183 Industries and Classes of business procedure) establishments, throughout India excluding the State of Jammu and Kashmir. Pursuant to launch of OLRE (online registration of establishment portal) Doing Business 2017 India 34 Time to No. Procedure Cost to complete complete by the Employee Provident Fund department, employers are required to apply online for registering their establishment. The application portal of the EPFO Official Website is www.epfindia.gov.in. Employers are required to select ‘For Employers’, under ‘Our Services’ and then select the fourth item, ‘Online Registration of Establishment (OLRE Portal)’ to register their establishments. The OLRE portal was launched and made available with effect from September 28, 2015.The required documents are: • Name of the Company/Establishment • PAN Number • Address • Email Id • Mobile Number • Proof of Address (Bank Statement, Bill or Any License etc.) • Date of Set up of Company • Company Type (Proprietorship/Partnership/Private Limited/Limited etc.) • Each Owner Detail: • Establishment is on Owned/Hired on rent • Bank Details a. IFS Code of the branch b. Bank Name* c. Bank Branch* d. Account Number* e. Account type* • BRANCH DETAILS: IN CASE BRANCHES AT DIFFERENT LOCATIONS • Nature of Business (As per attached list of Primary Business Activity) 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 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). 10 days (simultaneous with *9 no charge The Employee’s individual insurance is a separate process and occurs previous after Employer’s registration. The Employer is responsible for procedure) submitting the required Declaration Form and employees are responsible for providing correct information to the employer. Agency: Employees' State Insurance Corporation, Ministry of Labor and Employment Doing Business 2017 India 35 Time to No. Procedure Cost to complete complete 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 (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. Any authorized franchise or agent appointed by National Securities 7 days Depository Services Limited (NSDL) can accept and process the TAN (simultaneous with INR 55 application * 11 application. TAN applications can be made either online through the previous fee NSDL website www.tin-nsdl.com or offline. The application must be procedure) 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. 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 Less than one day Under the Delhi Shops and Establishments Act 1954, the company shall (online procedure, * 12 send to the Chief Inspector a statement in prescribed form A simultaneous with no charge containing: previous procedure) (a) the name of the employer and the manager Doing Business 2017 India 36 Time to No. Procedure Cost to complete complete (b) the postal address of the establishment (c) the name of the establishment, (d) the category of the establishment, i.e. whether it is a shop/commercial establishment (e) the number of employees working in the establishment; and (f) such other particulars as may be prescribed. 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. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Procedures in light blue are for married women only. Doing Business 2017 India 37 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 city. Quality control during construction (0-3) For 11 economies the data are also collected for Quality control after construction (0-3) the second largest business city.  Is 100% domestically and privately owned. Liability and insurance regimes (0-2)  Has five owners, none of whom is a legal entity. Professional certifications (0-4)  Is fully licensed and insured to carry out construction projects, such as building warehouses. The construction company (BuildCo) (continued):  Has 60 builders and other employees, all of them nationals with the technical expertise and Doing Business 2017 India 38 professional experience necessary to obtain  Will be a new construction (there was no previous construction permits and approvals. construction on the land), with no trees, natural  Has is a licensed architect and a licensed water sources, natural reserves or historical engineer, both registered with the local monuments of any kind on the plot. association of architects or engineers. BuildCo is  Will have complete architectural and technical plans not assumed to have any other employees who prepared by a licensed architect. If preparation of are technical or licensed experts, such as the plans requires such steps as obtaining further geological or topographical experts. documentation or getting prior approvals from  Has paid all taxes and taken out all necessary external agencies, these are counted as procedures. insurance applicable to its general business  Will include all technical equipment required to be activity (for example, accidental insurance for fully operational. construction workers and third-person liability).  Will take 30 weeks to construct (excluding all delays  Owns the land on which the warehouse will be due to administrative and regulatory requirements). built and will sell the warehouse upon its completion. Assumptions about the utility connections  Is valued at 50 times income per capita. The water and sewerage connections:  Will be 150 meters (492 feet) from the existing Assumptions about the warehouse water source and sewer tap. If there is no water delivery infrastructure in the economy, a borehole The warehouse: will be dug. If there is no sewerage infrastructure, a  Will be used for general storage activities, septic tank in the smallest size available will be such as storage of books or stationery. The installed or built. warehouse will not be used for any goods  Will not require water for fire protection reasons; a requiring special conditions, such as food, fire extinguishing system (dry system) will be used chemicals or pharmaceuticals. instead. If a wet fire protection system is required  Will have two stories, both above ground, by law, it is assumed that the water demand with a total constructed area of specified below also covers the water needed for approximately 1,300.6 square meters (14,000 fire protection. square feet). Each floor will be 3 meters (9  Will have an average water use of 662 liters (175 feet, 10 inches) high. gallons) a day and an average wastewater flow of  Will have road access and be located in the 568 liters (150 gallons) a day. Will have a peak periurban area of the economy’s largest water use of 1,325 liters (350 gallons) a day and a business city (that is, on the fringes of the peak wastewater flow of 1,136 liters (300 gallons) a city but still within its official limits). For 11 day. economies the data are also collected for the  Will have a constant level of water demand and second largest business city. wastewater flow throughout the year.  Will not be located in a special economic or  Will be 1 inch in diameter for the water connection industrial zone. Will be located on a land plot and 4 inches in diameter for the sewerage of approximately 929 square meters (10,000 connection. square feet) that is 100% owned by BuildCo and is accurately registered in the cadastre and land registry. Doing Business 2017 India 39 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 35.1 procedures, takes 190.0 days and costs frontier and ease of doing business ranking at the end of 25.9% 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 2017 India 40 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 2017 India 41 dealing with construction permits Globally, India stands at 185 in the ranking of 190 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 2017 India 42 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 DB2017 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 2017 India 43 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, 5114479.2 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 Obtain an extract of the Property Register Card (P.R. Card) from the Revenue Department The Property Register Card (P.R. Card) is a record showing the ownership along with the land area of the Holdings held by the Revenue Department about the Building Land/Plot. This P.R. Card is a mandatory document to be provided to the MCGM 17 days INR 60 1 when applying for a Building Permit. The Application for the P.R. Card is made to the City Survey Officer (An Officer of the Revenue Department) by affixing a Rs.10 Court Fee Stamp. Agency: Revenue Department 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. 1 day INR 85,840 2 Once the fees have been paid, the application file is forwarded to the concerned officer in the Building Proposal Office. Then the 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 Doing Business 2017 India 44 Time to No. Procedure Cost to complete complete 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 3 the inspection takes place. Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai 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 Authority must ascertain what trees (if any) will be cut down as a 1 day no charge 4 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 5 1 day no charge Agency: Storm Water and Drain Department, Municipal Corporation of Greater Mumbai Apply for no-objection certificate (NOC) from Sewerage Department 6 1 day INR 77,306 Agency: Sewerage Department, Municipal Corporation of Greater Mumbai Doing Business 2017 India 45 Time to No. Procedure Cost to complete complete Apply for no-objection certificate (NOC )from the Hydraulic Engineer Department (water supply) 7 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. 8 1 day no charge Agency: Tree Authority, Municipal Corporation of Greater Mumbai Receive inspection from Storm Water and Drain Department 9 1 day no charge Agency: Storm Water and Drain Department, Municipal Corporation of Greater Mumbai Receive inspection from Sewerage Department 10 1 day no charge Agency: Sewerage Department, Municipal Corporation of Greater Mumbai Receive inspection from the Hydraulic Engineer Department (water supply) 11 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 period of 30 days from the receipt of the application. 30 days INR 4,500 12 Agency: Tree Authority, Municipal Corporation of Greater Mumbai Doing Business 2017 India 46 Time to No. Procedure Cost to complete complete Obtain NOC from the Storm Water and Drain Department * 13 Agency: Storm Water and Drain Department, Municipal 7 days no charge Corporation of Greater Mumbai Obtain NOC from Sewerage Department * 14 7 days no charge Agency: Sewerage Department, Municipal Corporation of Greater Mumbai Obtain NOC from Hydraulic Engineer Department (water supply) * 15 7 days no charge Agency: Hydraulic Engineer Department, Municipal Corporation of 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 * 16 required at this stage. 7 days no charge Agency: Brihanmumbai Electric Supply and Transport (BEST) Request and obtain NOC from Roads & Traffic Department * 17 Agency: Roads & Traffic Department, Municipal Corporation of 7 days no charge Greater Mumbai Request and obtain NOC from Chief Fire Office All commercial structures require a fire safety clearance. 7 days INR 13,006 * 18 Agency: Chief Fire Office, Municipal Corporation of Greater Mumbai Doing Business 2017 India 47 Time to No. Procedure Cost to complete complete 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 latter is the office considered for the purposes of this study). 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 the applicant must obtain separately from various departments 19 and government authorities. Final clearance to build will only be 29 days INR 42,000 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. Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai Doing Business 2017 India 48 Time to No. Procedure Cost to complete complete 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 10 days INR 998,512 20 aggregate, but must be renewed before the expiry of one year 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. Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai Submit Notice of commencement and completion to Labour Inspector According to Rule 239 of The Building and other Construction Workers’ (Regulation of Employment and Conditions of Service) Act, 1996, BuildCo must submit a notice of commencement of * 21 building and indicate at the same time the probable end of 1 day no charge construction, at least 30 days prior to the commencement of construction works. Agency: Labour Inspector Request and receive inspection of plinth 22 Agency: Building Proposal Office, Municipal Corporation of 1 day no charge 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 7 days no charge 23 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 the construction and start the superstructure of the warehouse. Doing Business 2017 India 49 Time to No. Procedure Cost to complete complete 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 24 1 day no charge Agency: Storm Water and Drain Department, Municipal Corporation of Greater Mumbai Request completion NOC from the Sewerage Department * 25 1 day no charge Agency: Sewerage Department, Municipal Corporation of Greater Mumbai Apply for 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. * 26 1 day no charge Agency: Hydraulic Engineer Department, Municipal Corporation of Greater Mumbai Request completion NOC from Roads & Traffic Department * 27 1 day no charge Agency: Roads & Traffic Department, Municipal Corporation of Greater Mumbai Request completion NOC from Chief Fire Office * 28 1 day no charge Agency: Chief Fire Office, Municipal Corporation of Greater Mumbai Doing Business 2017 India 50 Time to No. Procedure Cost to complete complete 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 * 29 Municipal Corporation inspects the premises and prepares a 1 day no charge report on the connection. Agency: Storm Water and Drain Department, Municipal Corporation of Greater Mumbai Receive inspection from Sewerage Department * 30 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 31 requirement of the building 3 days INR 51,210 Sewer fees are INR 50,000 Agency: Hydraulic Engineer Department, Municipal Corporation of Greater Mumbai Receive inspection from Roads & Traffic Department * 32 1 day no charge Agency: Roads &Traffic Department, Municipal Corporation of Greater Mumbai Receive inspection from Chief Fire Office * 33 1 day no charge Agency: Chief Fire Office, Municipal Corporation of Greater Mumbai Doing Business 2017 India 51 Time to No. Procedure Cost to complete complete Obtain completion NOC from Storm Water and Drain Department 34 3 days no charge Agency: Storm Water and Drain Department, Municipal Corporation of Greater Mumbai Obtain completion NOC from Sewerage Department * 35 3 days no charge Agency: Sewerage Department, Municipal Corporation of Greater Mumbai Obtain the completion NOC from Roads & Traffic Department * 36 3 days no charge Agency: Roads & Traffic 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 sq. m. * 37 This NOC may be requested and obtained online, but it still takes 3 days INR 6,503 several days to receive. 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 38 The owner, through a licensed plumber, shall furnish a drainage 1 day no charge 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 Doing Business 2017 India 52 Time to No. Procedure Cost to complete complete the Commissioner works to certify that the building has not deviated from the approval plans. This shall be accompanied by 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 39 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 40 forwarded to the Hydraulic Engineer (Water) Department. 14 days no charge Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai Obtain final NOC from Hydraulic Engineer (Water) Department 41 14 days no charge Agency: Hydraulic Engineer Department, Municipal Corporation of Greater Mumbai Obtain completion certificate 42 14 days no charge Agency: Building Proposal Office, Municipal Corporation of Greater Mumbai * Takes place simultaneously with another procedure. Doing Business 2017 India 53 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 Obtain a certified copy of the property record 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 17 days INR 2,000 1 records are different from reality (neighbors encroach on others’ lands, etc.). Agency: Local Revenue Department Request and obtain consent to establish from Delhi Pollution Control Committee Under Section 19 of the Air (Prevention and Control of Pollution) Act, 1981, New Delhi has been declared as the Air Pollution Control area. As per provision of Section 21 of this Act no person shall, without the previous consent of the State Board, establish or operate any industrial plant (any plant used for any industrial or trade purpose) in an air pollution control area. Delhi Pollution Control Committee, delegated by 30 days INR 1,000 2 Central Pollution Control Board of statutory powers and functions, regulates water and air pollution. By regulation, the Delhi Pollution Control Committee has 3 months to approve an application but in practice, a committee meets 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 *3 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 7 days no charge *4 • Key plan • Proposed water lines showing position of UGR/sluice valves • Calculation of water demand • Capacity of UGR This is submitted to DJB in the Executive Engineering and Planning office through the developing agency (Department of Development or Doing Business 2017 India 54 Time to No. Procedure Cost to complete complete 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 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 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 2. Proof of ownership 3. Specifications of the proposed construction 4. Supervision certificate signed by the licensed architect/engineer, 7 supervisor and plumber; 60 days INR 64,151 5. Structural-stability Certificate signed by the licensed architect/engineer along with a copy of registration certificate (annexure A) 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 Doing Business 2017 India 55 Time to No. Procedure Cost to complete complete 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 Obtain no objection certificate from Planning Department within the Municipal Corporation of Delhi *9 14 days no charge Agency: Municipal Corporation of Delhi Doing Business 2017 India 56 Time to No. Procedure Cost to complete complete 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 building plans and Land Ownership Permit are sent to the District 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 7 days no charge * 12 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 Doing Business 2017 India 57 Time to No. Procedure Cost to complete complete 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 to the Municipal Corporation of Delhi BuildCo must notify the MCD 7 days before beginning construction. 1 day no charge 16 Agency: Municipal Corporation of Delhi Submit Notice of commencement and completion to Labour Inspector According to Rule 239 of The Building and other Construction Workers’ (Regulation of Employment and Conditions of Service) Act, 1996, BuildCo must submit a notice of commencement of building and 1 day no charge * 17 indicate at the same time the probable end of construction, at least 30 days prior to the commencement of construction works. Agency: Labour Commissioner 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 18 inspects the construction and submits any objections, if necessary. 1 day no charge 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. Doing Business 2017 India 58 Time to No. Procedure Cost to complete complete Agency: Municipal Corporation of Delhi Request and receive inspection at 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 19 at completion. Routine inspections may be carried in between and the 1 day INR 15 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 20 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 21 (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 22 An inspection of the site will be performed by a Survey Officer. 34 days no charge Agency: Delhi Jal Board Doing Business 2017 India 59 Time to No. Procedure Cost to complete complete 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 Fire Service Department in person to with the notice/guideline that it * 23 provided at the time of issuance of the Provisional No Objection 1 day no charge Certificate and request the Fire Service Department to verify the compliance with the guidelines. Agency: Fire Department Receive site inspection from the Fire Department In practice this can take up to 15 days. 24 1 day no charge Agency: Fire Department Receive final no objection certificate from the Fire Department 25 10 days no charge Agency: Fire Department Notarize the affidavit/undertaking to request the occupancy permit * 26 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 27 accompanied by the following documents: 1 day INR 1,301 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) 5. Copy of Water Connection Sanction and Sewerage Connection Doing Business 2017 India 60 Time to No. Procedure Cost to complete complete 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 Agency: Municipal Corporation of Delhi Receive final inspection of the construction In practice this can take up to one week. 28 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 submitted and the inspection is carried out, therefore this waiting 30 days INR 51,145 29 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 2017 India 61 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. 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) 12.0 11.0 Licensed Licensed Which third-party entities are required by law to verify architect; architect; that the building plans are in compliance with existing Licensed Licensed building regulations? (0-1) engineer. engineer. Quality of building regulations index (0-2) 2.0 2.0 Available 1.0 Available How accessible are building laws and regulations in your online; Free online; Free of 1.0 economy? (0-1) of charge. charge. List of 1.0 List of required required documents; Which requirements for obtaining a building permit are documents; Fees to be clearly specified in the building regulations or on any Fees to be 1.0 paid; accessible website, brochure or pamphlet? (0-1) paid; Required Required preapproval preapprovals. s. Quality control before construction index (0-1) 1.0 1.0 Licensed 1.0 Licensed Which third-party entities are required by law to verify architect; architect; that the building plans are in compliance with existing 1.0 Licensed Licensed building regulations? (0-1) engineer. engineer. Quality control during construction index (0-3) 2.0 2.0 Inspections 1.0 Inspections by by in-house in-house engineer; engineer; What types of inspections (if any) are required by law to Inspections Inspections at at various various 1.0 be carried out during construction? (0-2) phases; No phases; No inspections inspections are legally are legally required required Doing Business 2017 India 62 Answer Score Answer (Delhi) Score (Delhi) (Mumbai) (Mumbai) during during constructio construction. n. 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) 3.0 3.0 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) 0.0 0.0 Which parties (if any) are held liable by law for structural . 0.0 No party is flaws or problems in the building once it is in use (Latent held liable 0.0 Defect Liability or Decennial Liability)? (0-1) under the law. No party is 0.0 Which parties (if any) are required by law to obtain an No party is required by insurance policy to cover possible structural flaws or required by law to 0.0 problems in the building once it is in use (Latent Defect law to obtain obtain Liability Insurance or Decennial Insurance)? (0-1) insurance . insurance . Professional certifications index (0-4) 4.0 3.0 Minimum 2.0 Minimum number of number of years of years of What are the qualification requirements for the experience; experience; professional responsible for verifying that the University University degree in degree in 2.0 architectural plans or drawings are in compliance with existing building regulations? (0-2) architecture architecture or or engineering engineering; ; Being a Being a registered registered Doing Business 2017 India 63 Answer Score Answer (Delhi) Score (Delhi) (Mumbai) (Mumbai) architect or architect or engineer. engineer. Minimum 2.0 number of years of experience; Minimum University number of degree in years of engineering experience; What are the qualification requirements for the , University professional who supervises the construction on the constructio degree in 1.0 ground? (0-2) n or engineering, constructio construction n or manageme construction nt; Being a management. registered architect or engineer. Source: Doing Business database. Doing Business 2017 India 64 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, Obtaining external installation works and as well as the time and cost to complete them. These possibly purchasing material for these works procedures include applications and contracts with Concluding any necessary supply contract and electricity utilities, clearances from other agencies obtaining final supply and the external and final connection works. In addition, this year Doing Business adds two new Time required to complete each procedure measures: the reliability of supply and transparency (calendar days) of tariffs index (included in the aggregate distance to Is at least 1 calendar day frontier score and ranking on the ease of doing Each procedure starts on a separate day business) and the price of electricity (omitted from these aggregate measures). The ranking of Does not include time spent gathering economies on the ease of getting electricity is information determined by sorting their distance to frontier Reflects the time spent in practice, with little scores for getting electricity. These scores are the follow-up and no prior contact with officials simple average of the distance to frontier scores for Cost required to complete each procedure (% each of the component indicators. To make the data of income per capita) comparable across economies, several assumptions are used. Official costs only, no bribes Excludes value added tax Assumptions about the warehouse The reliability of supply and transparency of The warehouse: tariffs index  Is owned by a local entrepreneur. Sum of the scores of six component indices:  Is located in the economy’s largest business city. Duration and frequency of outages For 11 economies the data are also collected for Tools to monitor power outages the second largest business city. Tools to restore power supply  Is located in an area where similar warehouses are typically located. In this area a new electricity Regulatory monitoring of utilities’ performance connection is not eligible for a special investment Financial deterrents aimed at limiting outages promotion regime (offering special subsidization Transparency and accessibility of tariffs or faster service, for example). Price of electricity (cents per kilowatt-hour)*  Is located in an area with no physical constraints. For example, the property is not near a railway. Price based on monthly bill for commercial warehouse in case study  Is a new construction and is being connected to electricity for the first time. *Price of electricity is not included in the calculation of distance to frontier nor ease of doing business ranking The warehouse (continued): Doing Business 2017 India 65  Has two stories, both above ground, with a total surface area of approximately 1,300.6 square Assumptions about the monthly consumption meters (14,000 square feet). The plot of land on which it is built is 929 square meters (10,000  It is assumed that the warehouse operates 30 days square feet). a month from 9:00 a.m. to 5:00 p.m. (8 hours a day),  Is used for storage of goods. with equipment utilized at 80% of capacity on average and that there are no electricity cuts Assumptions about the electricity connection (assumed for simplicity reasons).  The monthly energy consumption is 26,880 The electricity connection: kilowatt-hours (kWh); hourly consumption is 112  Is a permanent one. kWh.  Is a three-phase, four-wire Y connection with a  If multiple electricity suppliers exist, the warehouse subscribed capacity of 140-kilo-volt-ampere is served by the cheapest supplier. (kVA) with a power factor of 1, when 1 kVA = 1  Tariffs effective in March of the current year are kilowatt (kW). used for calculation of the price of electricity for the  Has a length of 150 meters. The connection is to warehouse. Although March has 31 days, for either the low- or medium-voltage distribution calculation purposes only 30 days are used. network and is 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.  Does not require work to install the internal wiring of the warehouse. This has already been completed up to and including the customer’s service panel or switchboard and the meter base Doing Business 2017 India 66 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 5.0 procedures, takes 2 largest business cities. See the chapter on distance to 45.9 days and costs 133.2% of income per capita (figure frontier and ease of doing business ranking at the end of 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 Doing Business 2017 India 67 What it takes to obtain an electricity connection in India - Delhi 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 2017 India 68 GETTING ELECTRICITY Globally, India stands at 26 in the ranking of 190 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 2017 India 69 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 DB2017 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. India made getting electricity faster and cheaper by streamlining the process of getting a new commercial electricity connection by providing connection for 140 KVA capacity to low tension (LT) network, thereby eliminating the DB2017 need to install a distribution transformer. This reform impact the city of Delhi. Source: Doing Business database. Doing Business 2017 India 70 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 Doing Business. Data are collected from the distribution utility, then completed and verified by electricity regulatory agencies and independent professionals such Name of utility - TATA Power Delhi as electrical engineers, electrical contractors and Delhi: Distribution Limited construction companies. The electricity distribution utility surveyed is the one serving the area (or areas) in which Name of utility - Bhrihan Mumbai warehouses are located. If there is a choice of Mumbai: Electricity & Transport distribution utilities, the one serving the largest number Undertaking of customers is selected. Price of electricity (US cents per kWh) - 16.0 The procedures are those that apply to a warehouse and Delhi: electricity connection matching the standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the Price of electricity indicators cover). The procedures, along with the (US cents per kWh) - 25.5 associated time and cost, are summarized below. Mumbai: City: Mumbai, Delhi *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 new connection under industrial and commercial categories for applied load of 100 KW and above can be submitted and accepted online. In addition, all statuary fees (including application fee, connection charges and security deposit) is to be paid alongwith 7 calendar days INR 75 1 application submission. Customer then prints out the submitted online application, and attaches all necessary supporting documents (including statement of electrical load; proof of occupancy; layout plan; location plan; undertaking from customer) and submits to customer care office. Doing Business 2017 India 71 Time to No. Procedure Cost to complete complete Agency: Brihan Mumbai Electricity Supply and Transport Undertaking (BEST) External works of meter board conducted by customer's 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 *2 supported and shall provide and maintain adequate protection for the 7 calendar days INR 8,000 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 Receive external site inspection by BEST and await estimate Site inspection includes confirmation of premises, identification of location of terminating service cable, and position of meter cabin. 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 8 calendar days INR 0 3 the premises in consultation with the consumer and/or his Licensed 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) 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 1 calendar day INR 60,000 4 KW. 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 Doing Business 2017 India 72 Time to No. Procedure Cost to complete complete 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 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 6,624.74 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 previous 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 Delhi Distribution Ltd. and await site inspection To apply for a new connection, customer must fill in the basic details in 1 the Form at http://www.ndpl.com to generate a New Connection 3 calendar days INR 53,400 Request Notification Number. After customer fills the form and submits it, customer will receive a call from Sampark Kendra within 48 hour, who will provide customer the details of the documents to be submitted and information regarding nearest location for submission of documents. Doing Business 2017 India 73 Time to No. Procedure Cost to complete complete The list of documents is as follows: (1) Inland Revenue: Permanent Account No. of Income Tax; (2) Registrar of Companies: Certificate of Incorporation; (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. External works of meter board conducted by customer's 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 *2 supported and shall provide and maintain adequate protection for the 7 calendar days INR 100,000 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 Receive external site inspection from 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 7 calendar days INR 0 3 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 Electrical Contractor. Customer and/or his Licensed Electrical Contractor must be present during external site inspection. Agency: Tata Power Delhi Distribution Ltd. Doing Business 2017 India 74 Time to No. Procedure Cost to complete complete Receive internal wiring inspection by utility Utility will appoint consultant to inspect the premises of the warehouse to ensure that the load applied for by the consultant is being adhered to. The team that conducts this internal load verification/internal wiring inspection is different from the team of the utility that conducts site 4 inspection. 1 calendar day INR 0 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 29 calendar days INR 37,464.44 Agency: Tata Power Delhi Distribution Ltd. * Takes place simultaneously with previous procedure. Source: Doing Business database. Doing Business 2017 India 75 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 7.0 7.0 (0-8) Total duration and frequency of outages per customer 2.0 2.0 a year (0-3) System average interruption duration index (SAIDI) 1.72 2.42 System average interruption frequency index (SAIFI) 3.26 2.41 Mechanisms for monitoring outages (0-1) 1.0 1.0 Does the distribution utility use automated tools to Yes 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) 1.0 1.0 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability Yes Yes of supply? Financial deterrents aimed at limiting outages (0-1) 1.0 1.0 Doing Business 2017 India 76 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) 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) 1.0 1.0 Are effective tariffs available online? Yes Yes www.bestund http://tatap ertaking.com ower- -Electric ddl.com/U supply- ploadedFile Link to the website, if available online Regulatory s/Tariff%20 Matters- Ad%20Engl Electricity ish%20201 tariff 5.pdf schedule Are customers notified of a change in tariff ahead of Yes Yes the billing cycle? Price of electricity (US cents per kWh) 25.5 16.0 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 2017 India 77 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 city2 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 perform . The parties (buyer and seller): general commercial activities in the economy’s largest business city.  Are limited liability companies, 100% domestically and privately owned and perform general  Have 50 employees each, all of whom are commercial activities in the economy’s largest nationals. business city. The property (fully owned by the seller):  Have 50 employees each, all of whom are nationals.  Has a value of 50 times income per capita. The The property (fully owned by the seller): sale price equals the value and entire property will be transferred.  Has a value of 50 times income per capita. The sale price equals the value and entire property will be  Is registered in the land registry or cadastre, or transferred. both, and is free of title disputes.  Is registered in the land registry or cadastre, or both, Is located in a periurban commercial zone, and no and is free of title disputes. rezoning is required. Doing Business 2017 India 78 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 7.0 procedures, takes which the data are a population-weighted average of the 46.8 days and costs 7.7% of the property value (figure 2 largest business cities. See the chapter on distance to 5.1). The score on the quality of land administration frontier and ease of doing business ranking at the end of index is 7.0 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 2017 India 79 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 2017 India 80 REGISTERING PROPERTY Globally, India stands at 138 in the ranking of 190 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 2017 India 81 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: 5114479.2 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) the legal ownership document (i.e. the title document) is in the name of the owner and is duly stamped and registered before the concerned sub-registrar of assurances. (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 INR 15,000-20,000 (5) the transferee is qualified to be a transferee, 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, 2013 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 81 of the Companies Act, 2013. Agency: Sub-Registrar of Assurance Doing Business 2017 India 82 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 In case of companies formed under the provisions of Companies Act, 2013 and/or under the provisions of Companies Act, 1956 as also in case of any Limited Liability Partnership firms, all charges, modification of 1-2 days charges and satisfaction of charges are required to be compulsorily (simultaneous *3 registered with the Registrar of Companies. Searches on the website of INR 100 with procedures 1 the Ministry of Company Affairs can be taken to peruse the charges and 2) created. 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 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. Since December 2013 stamp duty and registration fees through Less than a day electronic secured bank treasury receipt (eSBTR)—an online payment 5% of property 5 (online service available round-the-clock has been implemented in Mumbai and value procedure) entire Maharashtra.Under this system, a customer can log onto the website of the authorized bank, click the link for payment of stamp duty/registration fees, enter the necessary details and pay the duty through the internet banking account. With the printout as proof of the Doing Business 2017 India 83 Time to No. Procedure Cost to complete complete online payment, the customer can walk into the nominated branches of the bank to get the eSBTR. The eSBTR is a receipt with security features, which has been designed by India Security Press, Nashik. “Alternatively, there is also a facility to make the data entry online and make the payment in bank branches. The sub-registrar then has to register the documents attached with the receipt. Payment could be made 1) Online- through credit card, debit card, internet banking for online payment mode. For this purpose various banks have also been authorised authorizing their internet banking facility 2) through the process of Simple receipt (receipt printed on A-4 size paper). Payment is made to Banks,stamp vendors and post offices also who issue these receipts. Payments can be made through Cash, Cheque, Bank Draft or through electronic payment 3) ESBTR (Electronic Bank and Treasury Receipt) - Few banks have been authorised to issue ESBTR. Banks accept payment by various modes and then issue these ESBTRs. Payment through GRAS system- details at https://gras.mahakosh.gov.in/igr/ Agency: Designated and authorised Banks and Government Revenue Accounting Department for online payment Execute final sale deed and submit documents to the local office of the Sub-Registrar of Assurances The execution of the sale deed in front of the 2 witnesses is commonly done at the same time and place where the buyer submits documents to the Sub-Registrar. The documents are submitted to the office of the Sub Registrar of 1% of market Assurances within whose jurisdiction the property is located. The authorized signatories of the seller and purchaser are required to be value of the present along with two witnesses. Once the document is registered, a property distinct document number is assigned to that document. The record of (Maximum INR 6 registration is kept in the office of sub registrar of assurance. 1 day 30,000) + INR 20 per page of final The documents are submitted to the Reader of the Sub-Registrar of sale deed for Assurances for scrutiny. After scrutiny, the Reader indicates the scanning charges registration fee required, which is 1% of the transaction value or Rs. (paid in cash) 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 Doing Business 2017 India 84 Time to No. Procedure Cost to complete complete 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. The registration fees can be paid e-Challan on GRAS or e-SBTR through the websites of the authorised participatory banks. Agency: Sub Registrar of Assurances Apply to the Land & Survey Office for mutation of the tile of the property INR 750 (Application fee of An application for mutation of the title of the property will have to be made to the City Survey and Land Records office for seeking mutation of INR 100; stamp the title of the property in the name of the purchaser. The authorised duty on the signatory has to submit the duly signed application along with the Indemnity Bond of 7 affidavit, indemnity bond and a notarised copy of the registered Sale 30 days INR 500, stamp Deed. After the assessment of the request for mutation, the City Survey duty of INR 100 on and Land Records office decides the value of the tax on the property and the Affidavit in the issues a letter of mutation in favour of the purchaser. prescribed form and notary fees of Agency: Land & Survey Office INR 50) * 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 Doing Business 2017 India 85 Time to No. Procedure Cost to complete complete Conduct title search at the sub-registrar office The purchaser should conduct search of the property in the Registry Office. During investigation it should be verified that (1) the legal ownership document is in the name of the owner, issued by the Revenue Record Department under the seal of Tehsildar, (2) the title deeds, mutation entries for the preceding 40 years (preferably) must be checked 7 days to confirm no mortgage or other encumbrances exist on the date of (simultaneous 1 purchase, (3) the property is transferable and heritable, (4) the transferor INR 15,000-20,000 with procedures 2 is competent and/or authorized to transfer the property, (5) the and 3) transferee is qualified to be a transferee, (6) the consideration 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 Companies Act, 2013, the purchaser should conduct a search in the office of the Registrar of Companies to verify whether there is any charge (mortgage, encumbrance, etc.) on the property registered under Section 1-2 days 125 of the Companies Act, 2013. Note that if the Seller is not able to (simultaneous *3 INR 100 produce title deed, then Buyer must also check any potential creditors with procedures 1 for mortgages by deposit of title deed, which are not recorded and 2) 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 4 document is then submitted for stamping. The fee for the lawyer varies 7 days value from transaction to transaction. Agency: Lawyer Doing Business 2017 India 86 Time to No. Procedure Cost to complete complete Pay Stamp Duty on the final Sale Deed through e-stamp paper at the designated bank. The amount of stamp duty is calculated based on the sale consideration or circle rate, whichever is higher, and deposited by the party purchasing the e-stamp paper, in the designated account of the Stock Holding Corporation of India at Corporation Bank by RTGS/NEFT. Thereafter, the UTR no. or other relevant details of the payment along with the details of 6% of property 5 the property, parties, nature of instruments, Permanent Account Number 1 day value (PAN) card details of parties, authority letter to the representative of the party to collect the e-stamp paper and ID proof of the party in whose name stamp duty has been purchased, are required to be submitted at the bank and thereafter, the stamp paper is issued. Agency: Bank Execute final sale deed and submit documents to the local office of the Sub-Registrar of Assurances Initially an appointment is taken for registration, from the concerned Sub-Registrar's office or online, as the case may be. On date of the appointment, the documents are submitted to the designated official for screening. The designated official verifies the particulars of the 1% of market purchaser(s), seller(s) and witnesses and also verifies the property details value of the and title documents of the seller with respect to the property. Thereafter, property the photographs of the seller, purchaser and witnesses are taken which + INR100 pasting are also printed on the back page of the registered sale deed. Further, the registration fees is paid in favour of the office of the Sub-Registrar charge has to be and receipt for the same is issued. Thereafter, the sale deed is registered deposited at Sub- and a registration receipt is issued. The registered sale deed can be Registrar office at 6 1 day collected from the office of Sub-Registrar after approximately 1 week the time of from the date of registration, upon production of the registration receipt. registration +INR 20 per page The following documents are required to be carried to the office of the of final sale deed Sub-Registrar for registration of a sale deed: for scanning (i) two photographs, each of the authorized representatives/directors of charges (paid in the seller and purchaser, alongwith their ID proof, in original; cash) (ii) PAN cards of seller and purchaser; (iii) the board resolutions in favour of the authorized representative or director executing the sale deed on behalf of the companies; (iii) In case the sale consideration is more than INR 50,00,000/-, proof of payment of 1% deduction as TDS; (iv) ID proof of the witnesses, in original; and (v) previous title documents of the property. Doing Business 2017 India 87 Time to No. Procedure Cost to complete complete The authorized representatives/directors of both parties as well as witnesses are required to be present at the office of the Sub-Registrar, in person, for the registration of the sale deed. 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 2017 India 88 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) 7.5 6.5 Reliability of infrastructure index (0-8) 2.0 2.0 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)? 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 registration agency and the cadastral or mapping Separate Separate 0.0 0.0 agency kept in a single database, in different but linked databases databases 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) 3.0 2.0 Doing Business 2017 India 89 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) 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 rashtra.gov.in under the http://www. heading delhi.gov.in 'Activities' /wps/wcm/ and sub connect/Do heading IT_DCNORT 'Document Link for online access: H/dcnorth/ Registration' publicservic http://www.ig esslinks/reg rmaharashtra. istration+of gov.in/SB_AC +document TIVITES/activi s tes_DocRegis tration.aspx 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? www.igrmaha rashtra.gov.in under the http://www. heading delhi.gov.in 'Publications' /wps/wcm/ and sub connect/do heading 'Fee it_revenue/ Link for online access: Structure' Revenue/H http://www.ig ome/Servic rmaharashtra. es/Property gov.in/SB_PU +Registrati BLICATION/D on ATA/Registrat ion%20fee%2 0table.pdf Does the agency in charge of immovable property Yes, online 0.5 Yes, in 0.0 Doing Business 2017 India 90 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) registration commit to delivering a legally binding person document that proves property ownership within a specific time frame–and if so, how does it communicate the service standard? www.igrmaha rashtra.gov.in under the heading Citizen's Charter Link for online access: http://www.ig rmaharashtra. gov.in/SB_CIT IZENAREA/citi zenArea_CC_ pdf.aspx 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 2015: 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: Doing Business 2017 India 91 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) 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? Geographic coverage index (0–8) 0.0 0.0 Are all privately held land plots in the economy No 0.0 No 0.0 formally registered at the immovable property registry? 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) 2.5 2.5 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? Doing Business 2017 India 92 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) For a standard land dispute between two local businesses over tenure rights of a property worth 50 Delhi City Civil times gross national income (GNI) per capita and District Court located in the largest business city, what court would be Court 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 from the first-instance court for such a case (without 0.0 0.0 years 3 years 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 2015: Equal access to property rights index (-2–0) 0.0 0.0 Do unmarried men and unmarried women have equal Yes 0.0 Yes 0.0 ownership rights to property? Do married men and married women have equal Yes 0.0 Yes 0.0 ownership rights to property? Source: Doing Business database. Doing Business 2017 India 93 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 to view and consider a potential borrower’s Strength of legal rights index (0–12) financial history (positive or negative) when assessing Rights of borrowers and lenders through risk and they allow borrowers to establish a good collateral laws credit history that will facilitate their access to credit. Protection of secured creditors’ rights through Sound collateral laws enable businesses to use their bankruptcy laws assets, especially movable property, as security to generate capital—while strong creditors’ rights have Depth of credit information index (0–8) been associated with higher ratios of private sector Scope and accessibility of credit information 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 credit Notes section of the Doing Business 2017 report). is determined by sorting their distance to frontier These scenarios assume that the borrower: scores for getting credit. These scores are the distance to frontier score for the strength of legal rights index  Is a domestic limited liability company. and the depth of credit information index.  Has its headquarters and only base of 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 2017 India 94 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, India stands at 44 in the ranking of 190 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 7.0 on the depth of credit rankings for comparator economies provide useful information index and a score of 6.0 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 2017 India 95 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 2017 India 96 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: 6.0 Index score: 6.0 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional 0 0 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 1 1 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 1 1 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 1 1 original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between 1 1 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 0 0 an electronic database indexed by debtor's name? Can banks and financial institutions access borrowers’ credit information online (for example, through a web interface, a system-to-system 0 0 connection or both)? Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any 1 1 interested third party? Are secured creditors paid first (i.e. before tax claims and employee 0 0 claims) when a debtor defaults outside an insolvency procedure? Doing Business 2017 India 97 Mumbai Delhi Strength of legal rights index (0–12) Index score: 6.0 Index score: 6.0 Are secured creditors paid first (i.e. before tax claims and employee 0 0 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 0 0 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 1 1 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: 7.0 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 2017 India 98 Coverage Credit bureau Credit registry Number of individuals 176,859,706 0 Number of firms 7,224,478 0 Total 184,084,184 0 Total percentage of adult population 21.4 0.0 Source: Doing Business database. Doing Business 2017 India 99 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 If the Extent of shareholder rights index (0-10) number of publicly traded companies listed on that Shareholders’ rights and role in major corporate exchange is less than 10, or if there is no stock decisions exchange in the economy, it is assumed that Buyer is a large private company with multiple Extent of ownership and control index (0-10) shareholders. Governance safeguards protecting shareholders  Has a board of directors and a chief executive from undue board control and entrenchment officer (CEO) who may legally act on behalf of Buyer Extent of corporate transparency index (0-10) where permitted, even if this is not specifically required by law. Corporate transparency on ownership stakes,  Has a supervisory board (applicable to economies compensation, audits and financial prospects with a two-tier board system) on which 60% of the Extent of shareholder governance index shareholder-elected members have been appointed (0–10) by Mr. James, who is Buyer’s controlling Simple average of the extent of shareholders rights, shareholder and a member of Buyer’s board of extent of ownership and control and extent of directors. corporate transparency indices  Has not adopted any bylaws or articles of Strength of minority investor protection association that differ from default minimum index (0–10) standards and does not follow any nonmandatory codes, principles, recommendations or guidelines Simple average of the extent of conflict of interest regulation and extent of shareholder governance relating to corporate governance. indices Doing Business 2017 India 100  Is a manufacturing company with its own distribution network. The transaction involves the following details:  Mr. James owns 60% of Buyer and elected two directors to Buyer’s five-member board.  Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of Buyer’s assets and is higher than the market value.  The proposed transaction is part of the company’s ordinary course of business and is not outside the authority of the company.  Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made (that is, the transaction is not fraudulent).  The transaction causes damages to Buyer. Shareholders sue Mr. James and the other parties that approved the transaction. Doing Business 2017 India 101 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 7.3 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 13 in the ranking of 190 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 2017 India 102 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 2017 India 103 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 DB2017 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 2017 India 104 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 2017 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) 7.3 7.3 Extent of conflict of interest regulation index (0-10) 6.7 6.7 Extent of disclosure index (0-10) 7.0 7.0 Board of Board of directors directors Which corporate body is legally sufficient to approve the excluding 2.0 excluding 2.0 Buyer-Seller transaction? (0-3) interested interested members members Full disclosure Must Mr. James disclose his conflict of interest to the board Full disclosure of 2.0 of all material 2.0 of directors? (0-2) all material facts facts Disclosure on Disclosure on the the transaction Must Buyer disclose the transaction in published periodic transaction and 2.0 and on the 2.0 filings (annual reports)? (0-2) on the conflict of conflict of interest interest Must Buyer immediately disclose the transaction to the No disclosure No disclosure 0.0 0.0 public and/or shareholders? (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) 6.0 6.0 Can shareholders representing 10% of Buyer's share capital sue directly or derivatively for the damage the transaction Yes 1.0 Yes 1.0 caused to Buyer? (0-1) Can shareholders hold the interested director liable for the Not liable 0.0 Not liable 0.0 damage the transaction caused to Buyer? (0-2) Can shareholders hold the other directors liable for the Liable if unfair or Liable if unfair 2.0 2.0 damage the transaction caused to Buyer (0-2) prejudicial or prejudicial Must Mr. James pay damages for the harm caused to Buyer Yes 1.0 Yes 1.0 upon a successful claim by shareholders? (0-1) Must Mr. James repay profits made from the transaction Yes 1.0 Yes 1.0 upon a successful claim by shareholders? (0-1) Is Mr. James disqualifed or fined and imprisoned upon a No 0.0 No 0.0 successful claim by shareholders? (0-1) Doing Business 2017 India 105 Voidable if Voidable if Can a court void the transaction upon a successful claim by negligently 1.0 negligently 1.0 shareholders? (0-2) concluded concluded Ease of shareholder suits index (0-10) 7.0 7.0 Before suing can shareholders representing 10% of Buyer's Yes 1.0 Yes 1.0 share capital inspect the transaction documents? (0-1) Can the plaintiff obtain any documents from the defendant Any relevant Any relevant 3.0 3.0 and witnesses at trial? (0-3) document document 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 at 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) 8.0 8.0 Extent of shareholder rights index (0-10) 10.0 10.0 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? Are changes to the rights of a class of shares only possible if Yes 1.0 Yes 1.0 the holders of the affected shares approve? Assuming that Buyer is a limited company, does the sale of Yes 1.0 Yes 1.0 51% of its assets require member approval? Assuming that Buyer is a limited company, can members representing 10% call for an extraordinary meeting of Yes 1.0 Yes 1.0 members? Assuming that Buyer is a limited company, must all members Yes 1.0 Yes 1.0 consent to add a new member? Assuming that Buyer is a limited company, must a member first offer to sell his interest to the existing members before Yes 1.0 Yes 1.0 selling to a non-member? Extent of ownership and control index (0-10) 8.0 8.0 Is it forbidden to appoint the same individual as CEO and No 0.0 No 0.0 chair of the board of directors? Must the board of directors include independent and Yes 1.0 Yes 1.0 nonexecutive board members? Can shareholders remove members of the board of directors Yes 1.0 Yes 1.0 without cause before the end of their term? Must the board of directors include a separate audit Yes 1.0 Yes 1.0 committee exclusively comprising board members? Must a potential acquirer make a tender offer to all Yes 1.0 Yes 1.0 shareholders upon acquiring 50% of Buyer? Doing Business 2017 India 106 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, is there a Yes 1.0 Yes 1.0 management deadlock breaking mechanism? 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 distribute profits within a maximum period set by law after Yes 1.0 Yes 1.0 the declaration date? Extent of corporate transparency index (0-10) 6.0 6.0 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 21 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 members No 0.0 No 0.0 meet at least once a year? Assuming that Buyer is a limited company, can members No 0.0 No 0.0 representing 5% put items on the meeting agenda? 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 2017 India 107 PAYING TAXES Taxes are essential. The level of tax rates needs to be WHAT THE PAYING TAXES INDICATORS carefully chosen—and needless complexity in tax 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, sales tax or goods and service tax) Using a case scenario, Doing Business records the Method and frequency of filing and payment taxes and mandatory contributions that a medium- 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 and dealing with postfiling Collecting information and computing the tax processes. This case scenario uses a set of financial payable statements and assumptions about transactions made over the year. Information is also compiled on Completing tax return forms, filing with the frequency of filing and payments, time taken to proper agencies comply with tax laws, time taken to comply with the Arranging payment or withholding requirements of postfiling processes and time Preparing separate tax accounting books, if waiting for these processes to be completed. The required ranking of economies on the ease of paying taxes is determined by sorting their distance to frontier Total tax rate (% of profit before all taxes) scores on the ease of paying taxes. These scores are Profit or corporate income tax the simple average of the distance to frontier scores Social contributions and labor taxes paid by for each of the four component indicators – number the employer of tax payments. time, total tax rate and postfiling index – with a threshold and a nonlinear Property and property transfer taxes transformation applied to one of the component Dividend, capital gains and financial indicators, the total tax rate1. If both VAT (or GST) transactions taxes and corporate income tax apply, the postfiling index Waste collection, vehicle, road and other taxes is the simple average of the distance to frontier scores for each of the four components: the time to Postfiling Index comply with a VAT or GST refund, the time to obtain The time to comply with a VAT or GST refund a VAT or GST refund, the time to comply with a corporate income tax audit and the time to complete The time to receive a VAT or GST refund a corporate income tax audit. If only VAT (or GST) or The time to comply with a corporate income corporate income tax applies, the postfiling index is tax audit the simple average of the scores for only the two The time to complete a corporate income tax components pertaining to the applicable tax. If audit neither VAT (or GST) nor corporate income tax 1 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. 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 2017 India 108 applies, the postfiling index is not included in the Assumptions about the corporate income tax ranking of the ease of paying taxes. audit process: Taxes and mandatory contributions include  An error in the calculation of the income tax corporate income tax, turnover tax and all labor liability (for example, use of incorrect tax taxes and contributions paid by the company. A depreciation rates, or incorrectly treating an range of standard deductions and exemptions are expense as tax deductible) leads to an also recorded. incorrect income tax return and consequently All financial statement variables are proportional to an underpayment of corporate income tax. 2012 income per capita. To make the data  TaxpayerCo. discovered the error and comparable across economies, several assumptions voluntarily notified the tax authority of the are used. error in the corporate income tax return. TaxpayerCo is a medium-size business that started operations on January 1, 2014. The business starts from the same financial position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded. Taxes and mandatory contributions are measured at all levels of government. Assumptions about the VAT refund process:  In June 2015, TaxpayerCo. makes a large capital purchase: one additional machine for manufacturing pots.  The value of the machine is 65 times income per capita of the economy.  Sales are equally spread per month (that is, 1,050 times income per capita divided by 12).  Cost of goods sold are equally expensed per month (that is, 875 times income per capita divided by 12).  The seller of the machinery is registered for VAT or general sales tax (GST).  Excess input VAT incurred in June will be fully recovered after four consecutive months if the VAT or GST rate is the same for inputs, sales and the machine and the tax reporting period is every month. . Doing Business 2017 India 109 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with tax the end of this chapter for details). Most indicator sets obligations and postfiling processes in India—and how refer to a case scenario in the largest business city of an much do firms pay in taxes? Globally, India stands at in economy, except for 11 economies for which the data the ranking of 190 economies on the ease of paying are a population-weighted average of the 2 largest taxes (figure 8.1). The rankings for comparator business cities. See the chapter on distance to frontier economies and the regional average ranking provide and ease of doing business ranking at the end of this other useful information for assessing the tax compliance profile for more details. burden for businesses in (see table 8.2 and table 8.3 at . Figure 8.1 How India and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2017 India 110 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 DB2017 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. India made paying taxes easier by introducing an electronic DB2017 system for paying employee state insurance contributions. This reform applies to both Mumbai and Delhi. 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 2017 India 111 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 table 8.2 assumptions and transactions that the company below, along with the associated number of payments, completed during its 2nd year of operation. time and tax rate. Respondents are asked how much taxes and mandatory contributions the business must pay how The postfiling index is based on four components—the these taxes are filed and paid, how much time time to comply with a VAT or GST refund, the time to taxpayers spend preparing, filing and paying three obtain a VAT or GST refund, the time to comply with a major taxes (profit taxes, labor taxes including corporate income tax audit and the time to complete a mandatory contributions and consumption taxes) and corporate income tax audit. These components are how much time taxpayers spend complying with based on expanded case study assumptions. If only VAT postfiling processes and waiting for these processes (or GST) or corporate income tax applies for an to be completed. economy, the postfiling index is the simple average of the scores for only the two components pertaining to the applicable tax. If neither VAT (or GST) nor corporate income tax applies, the postfiling index is not included in the ranking of the ease of paying taxes. 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 Employee's state insurance gross 4 online 4.75% 4.64 contribution salaries dividend Dividend tax 1 16.995% distributio 3.98 ns taxable Corporate income tax 1 online 45 30% 20.93 profit gross Social security contributions 12 91 13.61% 15.35 salaries purchase Central Sales Tax 1 online 105 2% 14.14 price Doing Business 2017 India 112 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 assessed Property tax 1 10% 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 10% 0.00 income other taxes fuel small Fuel tax 1 consumpti 0.00 amount on value not State VAT 1 online 12.5% 0.00 added included value not CENVAT (Excise Duty) 1 online 12.5% 0.00 added included on applicable included in Income surcharge 0 jointly 10% 0.00 federal other taxes taxes all federal taxes included in Education cess 0 jointly 2% including 0.00 other taxes the surcharge all federal taxes Secondary & Higher included in 0 jointly 1% including 0.00 education cess other taxes the surcharge Employee paid - Social 12% + gross 0 jointly 0.00 withheld security contributions 1.75% salaries Totals 25.0 241.0 60.6 Doing Business 2017 India 113 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 Employee's state insurance gross 4 online 4.75% 4.64 contribution salaries dividend Dividend tax 1 16.995% distributio 3.98 ns taxable Corporate income tax 1 online 45 30% 20.93 profit gross Social security contributions 12 91 13.61% 15.35 salaries purchase Central Sales Tax 1 online 105 2% 14.14 price assessed Property tax 1 10% 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 10% 0.00 income other taxes fuel small Fuel tax 1 consumpti 0.00 amount on value not State VAT 1 online 12.5% 0.00 added included value not CENVAT (Excise Duty) 1 online 12.5% 0.00 added included on applicable included in Income surcharge 0 jointly 10% 0.00 federal other taxes taxes Doing Business 2017 India 114 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 all federal taxes included in Education cess 0 jointly 2% including 0.00 other taxes the surcharge all federal taxes Secondary & Higher included in 0 jointly 1% including 0.00 education cess other taxes the surcharge Employee paid - Social 12% + gross 0 jointly 0.00 withheld security contributions 1.75% salaries Totals 25.0 241.0 60.6 Source: Doing Business database. Doing Business 2017 India 115 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 use of paper documents, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead Documentary compliance – cost & time to extra costs and delays for exporters and Obtain, prepare and submit documents: importers, stifling trade potential. -During transport, clearance, inspections and port What do the indicators cover? or border handling in origin economy Doing Business records the time and cost -Required by origin, destination and transit associated with the logistical process of exporting economies and importing goods. Under the new Covers all documents by law and in practice methodology introduced this year, Doing Business Border compliance – cost & time measures the time and cost (excluding tariffs) associated with three sets of procedures — Customs clearance and inspections documentary compliance, border compliance and Inspections by other agencies if applied to more domestic transport—within the overall process of than 10% of shipments) exporting or importing a shipment of goods. The Port or border handling ranking of economies on the ease of trading across borders is determined by sorting their Processing documents during clearance, distance to frontier scores for trading across inspections and port or border handling borders. These scores are the simple average of Domestic transport* the distance to frontier scores for the time and Loading and unloading of shipment cost for documentary compliance and border compliance to export and import (domestic Transport between warehouse and terminal/port transport is not used for calculating the ranking). Transport between terminal/port and border Traffic delays and road police checks while To make the data comparable across economies, a shipment is en route few assumptions are made about the traded goods and the transactions: * Although Doing Business collects and publishes data on the time and cost for domestic transport, it does not use these Time data in calculating the distance to frontier score for trading  Time is measured in hours, and 1 day is 24 across borders or the ranking on the ease of trading across hours (for example, 22 days are recorded as 22 borders. × 24 = 528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Cost Alternatively, suppose that documents are  Insurance cost and informal payments for which no submitted to a customs agency at 8:00 a.m., are receipt is issued are excluded from the costs recorded. processed overnight and can be picked up at Costs are reported in U.S. dollars. Contributors are 8:00 a.m. the next day. In this case the time for asked to convert local currency into U.S. dollars based customs clearance would be recorded as 24 on the exchange rate prevailing on the day they answer hours because the actual procedure took 24 the questionnaire. hours. Doing Business 2017 India 116 Assumptions of the case study  If government fees are determined by the value of the shipment, the value is assumed to be $50,000.  For each of the 190 economies covered by Doing Business, it is assumed that a shipment  The product is new, not secondhand or used travels from a warehouse in the largest business merchandise. city of the exporting economy to a warehouse in the largest business city of the importing  The exporting firm is responsible for hiring and paying economy. For 11 economies the data are also for a freight forwarder or customs broker (or both) and collected, under the same case study pays for all costs related to international shipping, assumptions, for the second largest business domestic transport, clearance and mandatory city. inspections by customs and other government agencies, port or border handling, documentary  The import and export case studies assume compliance fees and the like for exports. The importing different traded products. It is assumed that firm is responsible for the above costs for imports. each economy imports a standardized shipment of 15 metric tons of containerized  The mode of transport is the one most widely used for auto parts (HS 8708) from its natural import the chosen export or import product and the trading partner—the economy from which it imports partner, as is the seaport, airport or land border the largest value (price times quantity) of auto crossing. parts. It is assumed that each economy exports the product of its comparative advantage  All electronic submissions of information requested by (defined by the largest export value) to its any government agency in connection with the natural export partner—the economy that is the shipment are considered to be documents obtained, largest purchaser of this product. Special prepared and submitted during the export or import products such as precious metal and gems, live process. animals and pharmaceuticals are excluded from the list of possible export products. However,  A port or border is defined as a place (seaport, airport the second largest product category is or land border crossing) where merchandise can enter considered as needed. or leave an economy.  A shipment is a unit of trade. Export shipments  Government agencies considered relevant are agencies do not necessarily need to be containerized, such as customs, port authorities, road police, border while import shipments of auto parts are guards, standardization agencies, ministries or assumed to be containerized. departments of agriculture or industry, national security agencies and any other government authorities. Doing Business 2017 India 117 TRADING ACROSS BORDERS Where does the economy stand today? The Trading across Borders indicator refers to a case Globally, India stands at 143 in the ranking of 190 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). data are a population-weighted average of the 2 largest While not included in the distance to frontier or ease of business cities) trading with the main import and export doing business ranking, data on domestic transportation partner through the economy’s main border crossing. is also recorded for all economies and provided in Table 9.3. Figure 9.1 How India and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2017 India 118 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing Business tools to facilitate trade—including single windows, risk- recorded in India (table 9.1)? based inspections and electronic data interchange Table 9.1 How has India made trading across borders easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform India made exporting and importing easier by launching Customs Electronic Commerce Interchange Gateway portal DB2017 and simplifying border and documentary compliance procedures. This reform applies to both New 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 2017 India 119 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 or land). The information on City: Mumbai, Delhi the time and cost to complete export and import is collected from local freight forwarders, customs The details on the predefined set of procedures, and the 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 85 125 59 (hours) Cost to export: Border compliance 368 453 376 (USD) Time to export: Documentary 58 21 78 compliance (hours) Cost to export: Documentary 94 90 183 compliance (USD) Time to import: Border compliance 307 262 116 (hours) Cost to import: Border compliance 556 590 645 (USD) Time to import: Documentary 65 58 106 compliance (hours) Cost to import: Documentary 129 140 348 compliance (USD) Source: Doing Business database. 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 8708: Parts and HS 85 : Electrical HS 8708: Parts and Product machinery and accessories of machinery and accessories of equipment and motor vehicles equipment and motor vehicles Doing Business 2017 India 120 Mumbai Delhi Export Import Export Import parts thereof; sound parts thereof; sound recorders and recorders and reproducers, reproducers, television image television image and sound and sound 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. Border Nhava Sheva port Nhava Sheva port Mundra port Mundra port Distance (km) 46 46 1241 1241 Domestic transport time (hours) 7 9 46 97 Domestic transport cost (USD) 158 165 681 864 Source: Doing Business database. Documents used to export Bill of lading Commercial invoice Packing list Customs export declaration Terminal handling receipts Documents used to import Invoice Packing List Import General Manifest Bill of Entry Certificate of Origin Bill of lading Cargo Release Order 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 Doing Business 2017 India 121 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 2017 India 122 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 2017 India 123 ENFORCING CONTRACTS WHAT THE ENFORCING CONTRACTS Effective commercial dispute resolution has many benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent Time required to enforce a contract through courts encourage new business relationships because the courts (calendar days) businesses know they can rely on the courts if a new 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 Time to enforce the judgment court dispute. Cost required to enforce a contract through What do the indicators cover? the courts (% of claim) Doing Business measures the time and cost for Attorney fees resolving a standardized commercial dispute through 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 Quality of judicial processes index (0-18) has adopted a series of good practices that promote quality and efficiency in the court system. This new Court structure and proceedings (0-6) index replaces the indicator on procedures, which Case management (0-6) was eliminated this year. The ranking of economies 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  The seller requests a pretrial attachment to secure sales contract between 2 domestic businesses. The the claim. case study assumes that the court hears an expert on  The dispute on the quality of the goods requires an the quality of the goods in dispute. This distinguishes expert opinion. the case from simple debt enforcement. To make the  The judge decides in favor of the seller; there is no data comparable across economies, Doing Business appeal. uses several assumptions about the case:  The seller enforces the judgment through a public  The dispute concerns a lawful transaction sale of the buyer’s movable assets. between two businesses (Seller and Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.  The buyer orders custom-made goods, then fails to pay.  The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater.  The seller sues the buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000. Doing Business 2017 India 124 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 172 in the ranking of 190 1420.0 days and costs 39.6% 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 2017 India 125 ENFORCING CONTRACTS Economies in all regions have improved contract reducing backlogs by introducing periodic reviews to enforcement in recent years. A judiciary can be improved clear inactive cases from the docket and by making in different ways. Higher-income economies tend to look contract enforcement faster. What reforms making it for ways to enhance efficiency by introducing new easier (or more difficult) to enforce contracts has Doing technology. Lower-income economies often work on Business recorded in India (table 10.1)? Table 10.1 How has India made enforcing contracts easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform India made enforcing contracts easier by creating dedicated DB2017 courts and divisions to resolve commercial cases. 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 2017 India 126 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 Claim value - Delhi: INR 306,959 assumptions about the case described above (figure 10.2). The time and cost of resolving the Claim value - standardized dispute are identified through study of INR 306,959 Mumbai: the codes of civil procedure and other court regulations, as well as through questionnaires Court name - Delhi: Delhi District Court completed by local litigation lawyers (and, in a quarter of the economies covered by Doing Business, by judges as well). Court name - Bombay City Civil Court Mumbai: City: Mumbai, Delhi Doing Business 2017 India 127 Figure 10.2 Time and cost of contract enforcement in India and comparator economies Source: Doing Business database. Doing Business 2017 India 128 Table 10.2 Details on time and cost for enforcing contracts in India South Asia Indicator Mumbai Delhi average Time (days) 1420.0 1420.0 1,099 Filing and service 20 20 Trial and judgment 1095 1095 Enforcement of judgment 305 305 Cost (% of claim) 39.6 39.6 30.6 Attorney fees 30.6 30.6 Court fees 8.5 8.5 Enforcement fees 0.5 0.5 Source: Doing Business database. Doing Business 2017 India 129 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 (figure 10.3). 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 2017 India 130 Table 10.3 Details of the quality of judicial processes index in India Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) Quality of judicial processes index (0-18) 9.0 9.0 Court structure and proceedings (0-5) 4.5 4.5 1. Is there a court or division of a court dedicated Yes 1.5 Yes 1.5 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 Yes, but Yes, but 4. Are new cases assigned randomly to judges? 0.5 0.5 manual manual 5. Does a woman's testimony carry the same Yes 0.0 Yes 0.0 evidentiary weight in court as a man's? 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 No 0.0 No 0.0 management techniques used before the competent Doing Business 2017 India 131 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) 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? 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 Doing Business 2017 India 132 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) 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? 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 2017 India 133 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 To make the data on the time, cost and outcome Measures the cents on the dollar recovered comparable across economies, several assumptions by secured creditors about the business and the case are used: Outcome for the business (survival or not)  A hotel located in the largest city (or cities) has determines the maximum value that can be 201 employees and 50 suppliers. The hotel recovered experiences financial difficulties. Official costs of the insolvency proceedings  The value of the hotel is 100% of the income per are deducted capita or the equivalent in local currency of USD Depreciation of furniture is taken into 200,000, whichever is greater. account  The hotel has a loan from a domestic bank, Present value of debt recovered secured by a mortgage over the hotel’s real estate. The hotel cannot pay back the loan, but Strength of insolvency framework index (0- makes enough money to operate otherwise. 16) In addition, Doing Business evaluates the adequacy Sum of the scores of four component indices: and integrity of the existing legal framework Commencement of proceedings index (0-3) applicable to liquidation and reorganization Management of debtor’s assets index (0-6) proceedings through the strength of insolvency framework index. The index tests whether economies Reorganization proceedings index (0-3) adopted internationally accepted good practices in Creditor participation index (0-4) four areas: commencement of proceedings, management of debtor’s assets, reorganization proceedings and creditor participation. Doing Business 2017 India 134 RESOLVING INSOLVENCY Where does the economy stand today? Globally, India stands at 136 in the ranking of 190 framework index. The Resolving Insolvency indicator economies on the ease of resolving insolvency (figure does not measure insolvency proceedings of individuals 11.1). The ranking of economies on the ease of resolving and financial institutions. The data are derived from insolvency is determined by sorting their distance to questionnaire responses by local insolvency practitioners frontier scores for resolving insolvency. These scores are and verified through a study of laws and regulations as the simple average of the distance to frontier scores for well as public information on bankruptcy systems. the recovery rate and the strength of insolvency Figure 11.1 How India and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2017 India 135 RESOLVING INSOLVENCY Recovery of debt in insolvency Data on the time, cost and outcome refer to the most scenario in the largest business city of an economy, likely in-court insolvency procedure applicable under except for 11 economies for which the data are a specific case study assumptions. population-weighted average of the 2 largest business cities. According to data collected by Doing Business, resolving insolvency takes 4.3 years on average and costs 9.0% of the debtor’s estate. The average recovery rate is 26.0 cents on the dollar. Most indicator sets refer to a case 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-2015 lending rates. Doing Business 2017 India 136 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, Debt Recovery Tribunal, governed by The Recovery of Debts Due to Proceeding foreclosure Delhi Banks and Financial Institutions Act, 1993. The debtor or other creditors will object 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 Outcome piecemeal sale Delhi losses in 2016 as well as 2017. 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 Mumbai, Time (in years) 4.3 front of the High Court, which will delay the proceedings Delhi substantially. Given the high 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, Cost (% of Mumbai, 9.0 1959), attorney fees (INR 100,000), costs of notification and estate) Delhi publication (INR 25,000), 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: 26.0 Source: Doing Business database. Doing Business 2017 India 137 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 6.0 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 2017 India 138 Table 11.2 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) 6.0 6.0 Commencement of proceedings index (0-3) 2.0 2.0 (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) 3.0 3.0 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 2017 India 139 Answer Score Answer Score (Mumbai) (Mumbai) (Delhi) (Delhi) creditors Reorganization proceedings index (0-3) 0.0 0.0 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 devided 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) 1.0 1.0 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 2017 India 140 LABOR MARKET REGULATION Doing Business studies the flexibility of regulation of  Operates a supermarket or grocery store in the employment, specifically as it relates to the areas of economy’s largest business city. For 11 hiring, working hours and redundancy. Doing Business economies the data are also collected for the also measures several aspects of job quality such as the second largest business city. availability of maternity leave, paid sick leave and the  Has 60 employees. equal treatment of men and women at the workplace.  Is subject to collective bargaining agreements if such agreements cover more than 50% of the Doing Business 2017 presents the data for the labor food retail sector and they apply even to firms market regulation indicators in an annex. The report that are not party to them. does not present rankings of economies on these  Abides by every law and regulation but does not indicators or include the topic in the aggregate distance grant workers more benefits than those to frontier score or ranking on the ease of doing mandated by law, regulation or (if applicable) business. Detailed data collected on labor market collective bargaining agreements. 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 regulations as well as secondary sources are reviewed to ensure accuracy. To make the data comparable across economies, several assumptions about the worker and the business are used. The worker:  Is a cashier in a supermarket or grocery store, age 19, with one year of work experience.  Is a full-time employee.  Is not a member of the labor union, unless membership is mandatory. The business:  Is a limited liability company (or the equivalent in the economy). Doing Business 2017 India 141 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 minimum wage to the average value added per worker contracts are prohibited for permanent tasks; (ii) the (the ratio of an economy’s GNI per capita to the maximum cumulative duration of fixed-term contracts; working-age population as a percentage of the total (iii) the minimum wage for a cashier, age 19, with one population). year of work experience; and (iv) the ratio of the 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 136.1 180.7 (US$/month) Ratio of minimum wage to value added per worker 0.7 0.9 Source: Doing Business database. Doing Business 2017 India 142 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 for percentage of hourly pay); (iv) the premium for overtime workers with 1 year of tenure, 5 years of tenure, and 10 work (as a percentage of hourly pay); (v) whether there 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? Yes Yes Doing Business 2017 India 143 Mumbai Delhi Working Hours Data Data No. Under the Maharashtra Shops and Establishments Act, 1948, Section 33: No such woman shall be required or allowed to work in any establishment after 9.30 p.m. Daily and Weekly Hours of Work (Section – 14 of the the Maharashtra Shops and Establishments Act, No. The Delhi shops 1948): & Establishment Act • No prohibits the employee shall be employment of allowed to work in women at night. The any shop or statute stipulates: commercial “No young person, or establishment for woman shall be more than 9 hrs in allowed or required Whether nonpregnant and nonnursing women can work the same any day & 48 hrs in to work whether as night hours as men a week. an employee or • Any otherwise in any employee may be establishment allowed to work for between 9 p.m. and 7 any period in excess a.m. during the of the time limit summer season and fixed but such between 8 p.m. to 8 period shall not a.m. during the exceed 6 hrs in any winter season. week. • On not more than 6 days in a year which the State Govt. may fix by rules for the purpose of making of accounts, stock taking settlements or other prescribed occasions, any employee may be required to work in Doing Business 2017 India 144 Mumbai Delhi Working Hours Data Data Restrictions on weekly holiday? Yes Yes 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. Doing Business 2017 India 145 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 2017 India 146 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 2017 India 147 LABOR MARKET REGULATION Job quality Doing Business introduced new data on job quality in 2015. Doing Business 2017 covers eight questions on job quality (i) whether the law mandates equal remuneration for work of equal value; (ii) whether the law mandates nondiscrimination based on gender in hiring; (iii) whether the law mandates paid or unpaid maternity leave; (iv) the minimum length of paid maternity leave (in calendar days); (v) whether employees on maternity leave receive 100% of wages; (vi) the availability of five fully paid days of sick leave a year; (vii) whether a worker is eligible for an unemployment protection scheme after one year of service; and (viii) the minimum duration of the contribution period (in months) required for unemployment. 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 Unemployment protection after one year of employment? No No Minimum contribution period for unemployment protection (months)? n.a. n.a. Source: Doing Business database. Doing Business 2017 India 148 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 defined as 1 hour even though in many economies the Distance to Frontier time is less than that. The distance to frontier score captures the gap between In the same formulation, to mitigate the effects of an economy’s performance and a measure of best extreme outliers in the distributions of the rescaled data practice across the entire sample of 36 indicators for 10 for most component indicators (very few economies Doing Business topics (the labor market regulation need 700 days to complete the procedures to start a indicators are excluded). For starting a business, for business, but many need 9 days), the worst performance example, the former Yugoslav Republic of Macedonia is calculated after the removal of outliers. The definition and New Zealand have the smallest number of of outliers is based on the distribution for each procedures required (1), and New Zealand the shortest component indicator. To simplify the process two rules time to fulfill them (0.5 days). Slovenia has the lowest were defined: the 95th percentile is used for the cost (0.0), and Australia, Colombia and 103 other indicators with the most dispersed distributions economies have no paid-in minimum capital (including minimum capital, number of payments to pay requirement (table 14.1 in the Doing Business 2016 taxes, and the time and cost indicators), and the 99th report). percentile is used for number of procedures. No outlier is removed for component indicators bound by definition Calculation of the distance to frontier score or construction, including legal index scores (such as the Calculating the distance to frontier score for each depth of credit information index, extent of conflict of economy involves two main steps. In the first step interest regulation index and strength of insolvency individual component indicators are normalized to a framework index) and the recovery rate. common unit where each of the 36 component In the second step for calculating the distance to frontier indicators y (except for the total tax rate) is rescaled score, the scores obtained for individual indicators for using the linear transformation (worst − y)/(worst − each economy are aggregated through simple averaging frontier). In this formulation the frontier represents the into one distance to frontier score, first for each topic best performance on the indicator across all economies and then across all 10 topics: starting a business, dealing since 2005 or the third year in which data for the with construction permits, getting electricity, registering indicator were collected. Both the best performance and property, getting credit, protecting minority investors, the worst performance are established every five years paying taxes, trading across borders, enforcing contracts based on the Doing Business data for the year in which and resolving insolvency. More complex aggregation they are established, and remain at that level for the five methods—such as principal components and years regardless of any changes in data in interim years. unobserved components—yield a ranking nearly Thus an economy may set the frontier for an indicator Doing Business 2017 India 149 identical to the simple average used by Doing Business2. The nonlinear transformation is not based on any 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 3. overall tax system. Instead, it is mainly empirical in 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). 2 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. 3 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 2017 India 150 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 190. 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 2017 India 151 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 190 Contributors http://www.doingbusiness.org/rankings More than 11,400 specialists in 190 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 190 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 190 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 DB2017 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 2017 India 152