Ajay Shankar Committee recommendations on Prior Permission and Regulatory Mechanisms

Recently an expert committee constituted by DIPP to examine the possibility of replacing multiple prior permissions with a pre-existing regulatory mechanism with adequate safeguards submitted its report.


Presently rigid rules and regulations, multiple prior permission, system of government certification or clearance on various areas increases the transaction cost for companies which makes it difficult more a company to start a business in India. No wonder India is ranked 130th in the ease of doing business. This committee was constituted to improve the above mentioned situation.

Key Recommendations of the committee.

3rd party certification

• It recommended that India needs to move towards a system of 3rd party certification in most areas of regulation with accredited certifying agencies working jointly with sectoral  regulators. The expert committee observed that third party certification is the practical way forward, with other economies such as the EU also moving towards unbundling of regulatory function.

• For better compliance and credibility of the process, it recommended that some percentage of the 3rd party certification would need to be subject to random concurrent audit with stiff penalties cumulatively leading to even withdrawal of accreditation for laxity,

Start ups

• For start-ups, the committee had suggested that steps like earmarking of mixed land use redevelopment or Greenfield development; exempting them from the requirement of seeking building plan approvals would give a boost to the ecosystem.

• Start-ups may be given the special dispensation of complying with labour laws on their own without being subject to inspection and/or enforcement for a period of 3 years, or, till their workforce exceeds 100, whichever is earlier.


• India should seek to adopt Global Best Practices in setting up standards and norms for emissions, effluents and solid waste for different categories of Industries.

• Promoters of Industrial Parks, Zones and Areas should be allowed to obtain Environment Approval for their whole area for setting up of identified environmentally homogenous or similar industries with a specified level of final gross annual production and environmental load.

• For globally mature industries such as steel, cement, power etc. for which international environment standards exist, environmental appraisal need not go into the internal processes by which prescribed norms would be complied with.

Other recommendations

• It suggested that the website of the department of industrial policy and promotion should have a comprehensive list of clearances needed for any economic activity anywhere in the country, and this should include clearances at the central, state as well as municipal authority level.

• It has suggested the ministries of environmentally sensitive sectors such as power; petrochemicals, pharma and steel should join with the ministry of environment & forest and prepare a 20 year perspective geographical plan indicating preferred locations in prioritized categories for their anticipated projects, so that the negative impact of environment is minimized.

• It was recommended that the listing of clearances at the level of the Union Government and State Governments should be evolved in an open source Wikipedia type of process in which all concerned stakeholders can participate.

Significance of this report

• These recommendations if implemented can bring down the transaction cost and time for Indian manufacturers significantly and improve the ease of doing business in India.

• Implementation of these recommendations could also boost start ups in India and thus could create the jobs which India needs desperately.