4 min read.Updated: 17 Feb 2020, 11:45 PM ISTV. Anantha Nageswaran,Madhuri Saripalle
We must first invest in making all rules and regulations easier for people at large to understand
India has improved substantially in “doing business", but it continues to lag in the “ease of starting business" according to the Economic Survey 2019-2020. Its rank on the latter has only improved marginally, from 169 to 136, in the last decade (2009-2019). The distinction between starting a business and doing it assumes that obtaining licences and permits is the key activity that separates the two. However, several new activities and regulations crop up once a business scales up, and some, such as licence renewals, are recurring. This makes the distinction blurry. While the government has been taking numerous steps to remove bottlenecks and make it easier to start a business, one needs a microscopic understanding of business activities to address contingencies that may arise in the process of entrepreneurship. This article throws light on some of the challenges and suggestions in the regulatory processes underlying food business startups in India, based on a startup experience in Chennai.
Starting a food business, or any, seems easy. One needs to have an idea and passion to back it up. To give it formal shape, a visit to a micro, small and medium enterprises (MSME) institute could help. There are a few basic steps to be taken to set up a business: (1) register the enterprise with Udyog Aadhaar (MSME, government of India); (2) apply for a licence to the Food Safety and Standards Authority of India (FSSAI); (3) open a bank account with State Bank of India; and finally, (4) apply for a bank loan. While (1) and (3) are prerequisites, for (4) and relatively easy, (2) and (4) are not very simple. Doing a business involves key accounting, legal and administrative activities such as registering it, renewing licences, finding manpower and filing taxes. It is somehow assumed that an entrepreneur is well qualified and formally educated (in English) in all of the above.
The FSSAI has evolved a great deal in recent years from manual filing of forms to online submissions and automatic approvals. For instance, until 2018, the registration fee had to be paid through a challan issued by the treasury branch of SBI for ₹100, and this was valid only for a year. But frequent renewals are an additional activity that takes away time from business development. Recently, an option to obtain a registration certificate for up to five years, and to make online payments of the associated fees, has been enabled.
While the FSSAI portal is transparent, the design of the portal should be aimed at facilitating smooth applications, rather than the mere provision of information. There should be options for regional languages as well. The portal displays (in English) details of the application criteria for obtaining a licence vis-à-vis just a registration, which could be confusing to a new entrepreneur. For instance, there is only one key difference (turnover up to ₹12 lakh per annum) in the eligibility criteria for a registration versus a licence, and it is enough to highlight that one difference for an entrepreneur to decide whether she is eligible for registration or if she needs a licence.
The website claims to have a feedback mechanism, but there is much scope for improvement. After registration, there is no feedback through emails or SMS regarding the status of an application. The applicant has to log in every week to check the status or comments, if any, which may or may not get displayed. A licence application may get rejected if queries are not answered within 30 days, and one has to apply for a fresh registration with no option of retaining the old number, treating the ongoing business as a fresh enterprise and imposing additional costs such as re-printing labels. Given our country’s information technology capabilities, there is surely enough scope for a user-friendly portal that can be designed on the lines of the revamped process of applying online for an Indian passport, with details on criteria, eligibility and feedback mechanism in local languages.
The two key needs of a business are working capital and skilled labour. On the former, the government must keep up its relentless focus on getting big businesses to participate in the discounting of trade receivables (TreDS). Information from GST invoices should feed directly into TreDS such that small suppliers can immediately discount the invoices and obtain funds. A mechanism to do so has been outlined in the article “Sitharaman has pulled off a skilful balancing act". Performance evaluations of government departments and enterprises must include their participation in TreDS.
Subsistence enterprises must grow from their nano status into micro and small businesses for the sake of India’s economic growth and social stability. Leaders of state governments must make this their top priority. They should use one of the upcoming GST Council meetings to come up with specific measures that make it easier for entrepreneurs to commence and conduct businesses that draw on the best practices already prevalent in the country. The first thing to do would be to invest in making all rules and regulations easier for ordinary folks to understand. These should be available in local languages. India may have paid a heavy price for relying on English as its language of governance and business.
V. Anantha Nageswaran & Madhuri Saripalle are, respectively, member of the Economic Advisory Council to the Prime Minister and associate professor, IFMR Graduate School of Business, Krea University These are the authors’s personal views
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