Investment Climate Improvement in East Coast Economic Corridor of India:

• Micro, small, and medium enterprises (MSMEs) are among the key players driving the economic development of Tamil Nadu. • The study identified policy, institutional, and process reforms to improve the Single Window Clearance Mechanism for MSMEs. • The study resulted in the implementation of an online single window mechanism for the MSME Department that ensures simplified, fasttrack processes as well as transparent and time-bound clearances to investors, supported by an enabling legislation (Tamil Nadu Business Facilitation Act, 2018). SETTINg ThE CONTExT: ThE ImPOrTaNCE Of mICrO, Small, aNd mEdIum ENTErPrISES IN ThE TamIl Nadu ECONOmY


ExECuTINg ThE BuSINESS rEfOrmS aCTION PlaN 2017 IN TamIl Nadu
To improve the "Ease of Doing Business" across India, the Department of Industrial Policy and Promotion, Government of India, published the Business Reforms Action Plan (BRAP) 2017. The BRAP 2017 focuses on 12 thematic areas covering 372 reform action points to be achieved by states.
One of the primary objectives of BRAP 2017 is the facilitation of time-bound and transparent approvals and clearances (both onetime and recurring) from state and local government departments and agencies without the need for any physical touch-points for investors. Significant, therefore, is a single window mechanism of interface between investors and the state government for the receipt of applications, monitoring, and tracking of application status, and resolution of grievances, etc.
To meet the objectives of BRAP 2017, the Tamil Nadu Industrial Guidance and Export Promotion Bureau and a study team from the Asian Development Bank (ADB) reviewed the incentives provided and the list of clearances required at various stages of setting up and running a large enterprise in Tamil Nadu. Further, the ADB team assisted Tamil Nadu in reform implementation and operationalization of the Online Single Window System for large industries which was launched on 2 November 2017 by the Chief Minister of Tamil Nadu. Given its success with large enterprises, the Government of Tamil Nadu decided to customize the online single window portal for the MSMEs. An assessment of the additional MSME-specific clearances and incentive disbursement mechanisms was then conducted by the ADB study team.

fINdINgS frOm ThE QuICK aSSESSmENT STudY fOr INvESTOrS IN mICrO, Small, aNd mEdIum ENTErPrISES
During the quick assessment study conducted by ADB to better understand the existing single window mechanism followed at the District Industries Centers (DICs), the study team visited the DIC in Kanchipuram. 3 It was observed that the DICs as the single window agency were facilitating only the select clearances and approvals required at the time of establishment of the enterprise, i.e. preestablishment clearances (Table 1).

2.
The application, along with supporting enclosures, is dispatched by the DIC to the various competent authorities through post. 4 The competent authorities process the application, following their internal workflows.

3.
After processing the application, each competent authority communicates its decision (of approval or rejection) along with necessary comments, using an offline mode. The approval or rejection certificate is sent directly to the applicant with a copy to the GM-DIC.
In addition to visiting the MSME Department and DICs, the study team also secured feedback from industry associations through stakeholder consultation workshops held in Chennai, Madurai, Trichy, and Coimbatore (Table 2).
Taking inputs from all stakeholders on board, the ADB study team proceeded to customize the online single window interface for MSMEs. Among the 11 clearances and incentives for MSMEs (mentioned in Table 1), 5 clearances were integrated by the ADB study team with the single window portal developed earlier for large industries. The remainder, currently being administered by DICs for the MSMEs manually, was identified for automation and integration with the single window portal (Table 3).  • Since only a limited number of preestablishment clearances are offered through the single window mechanism, the applicant is compelled to deal with multiple departments for securing other clearances and approvals.
• Preoperation clearances and approvals are not served through the existing single window mechanism; as a result, the applicant has to deal with multiple departments for securing these clearances and approvals before starting operations.
• Competent authorities repeatedly seek additional information.
• Grievance redress mechanisms are absent.

Processes
• There are delays in application processing because the procedures for application acceptance, verification of supporting documents, and dispatching are manual.
• There is lack of clarity on the supporting documents required and modes of fee payment.
• There is no mechanism for the applicant to track the status of the application.
• Online systems for incentives disbursement are absent.
• Multiple interactions with competent authorities are often needed to secure approvals and clearances.

Institutional framework
• Single Window Committee meetings are infrequent.
• Well-defined mechanisms to monitor and expedite approvals and clearances are absent. The list of preoperation clearances and the processes involved in obtaining them are identical for MSMEs and large enterprises. Therefore, the single window clearances portal for large enterprises is being replicated for MSMEs. Accordingly, functional inputs for preoperation clearances were not required. 5

KEY rEfOrmS ImPlEmENTEd BY ThE gOvErNmENT Of TamIl Nadu
Certain process and institutional reforms needed to precede the desired automation and integration of clearances and incentives with the single window portal. The ADB study team identified these reforms for the MSME Department and subsequently supported their implementation.

Process Interventions
For those MSME clearances and services which were still being processed offline, an in-depth process study was undertaken by ADB. As a result of this study, functional inputs were prepared for simplifying the procedure and automating these clearances through the single window portal, post reengineering.
Key features of the new online application process for each clearance are listed below: 1. Building permit from the village Panchayat i) facility to automatically populate certain fields in the application form by linking it with the Combined Application Form (CAF) filled by an applicant on the single window portal; ii) automated flow of documents submitted by an investor through the single window portal to the Directorate of Town and Country Planning (DTCP), and Village Panchayat for the purpose of obtaining the building permit post approval from DTCP (eliminating multiple document submissions); iii) online fee calculation and communication of the same to the applicant through the single window system; iv) provision for online payment of fee by the applicant; and v) reduction in time required to obtain building permit from 30 days to 14 days.

No
Objection Certificate from directorate of Public health and Preventive medicine i) process simplification and elimination of redundancies in terms of multiple reviews of an application without much value addition at each level; ii) building accountability for key process owners, for example, accountability of the block health supervisor for the receipt of the application and supporting documents, conducting site inspection and raising queries, if any, in a time bound manner; iii) issue of NOC to an applicant through the online single window portal; iv) provision for downloading and printing of the legally valid NOC; and v) ensuring that an NOC is issued within 15 days of application (as opposed to endless waits earlier).

disbursement of Incentives
The online portal for disbursing was already being developed by the National Informatics Centre (NIC). ADB team studied the process flow prepared by MSME Department and suggested the changes below: i) integration of the standalone incentive system with single window portal to provide a single interface for an applicant; ii) rationalization of the list of documents required by the MSME Department; iii) simplification of the templates for identified supporting documents, to make the supporting documents transparent and easy to understand; iv) provision for updating latest bank details in the system, eliminating the need for the applicant to visit GM-DIC to provide bank details for disbursement of incentives; v) integration of the incentive portal with the Tamil Nadu Generation and Distribution Corporation (TANGEDCO) portal to seamlessly fetch details of electricity bill during monthly claim of low tension power tariff subsidy; vi) digitally signed sanction/ rejection letter to be sent to the applicant through single window portal; and vii) online transfer of incentive scheme funds to an applicant's bank account.
Time lines were defined for key incentive disbursement related activities, i.e., issue of sanction order within 30 days, and disbursement of incentive within 15 days from the allotment of funds by the government to the department.
Key policy enablers such as time line for approval or rejection of an application, deemed approval, and parallel processing of applications were defined for the above-mentioned clearances and incentives through the Tamil Nadu Business Facilitation Act, 2018. 6 While the detailed functional inputs provided for reengineering the processes for obtaining building permits, NOCs, and the capital subsidy incentive are provided in the Annexes, key highlights of process-related interventions are presented in Figure 4. 5 Functional inputs refer to work flow or process maps, application forms, and the checklist of documents pertaining to specific clearances or incentives. 6 Discussed in the ADB Brief "Investment Climate Improvement in East Coast Economic Corridor of India: Regulatory, Institutional and Policy Reforms support to the Government of Tamil Nadu."

Institution-Related Interventions
In order to ensure that the departments undertake the requisite interventions and continue to provide services to investors in a coordinated manner through the online single window system, Government of Tamil Nadu decided to establish necessary institutional mechanisms at the districts. These mechanisms will serve the purpose of reviewing and monitoring the following key activities: 1. processing of investor applications according to the defined checklist; 2.
raising of queries within the legislatively defined time lines; 3.
rejection or approval of application within the legislatively defined time lines; 4.
deemed approval by the nodal agency, i.e., the DIC, for clearances that are not approved or rejected by the concerned department within the legislatively defined time lines; 5. parallel processing of clearances by concerned departments to expedite the processing of applications; and 6. time-bound redress of investor grievances.
A three-tier institutional structure has been established to monitor the functioning of the single window mechanism (Table 4). It is to be noted that the MSME District Single Window Committee has representation from trade associations, chambers of commerce, and technical experts to promote greater transparency and a participative approach involving private stakeholders.

CONCluSION
The Government of Tamil Nadu along with the MSME Department has undertaken significant interventions with the support of the ADB study team to implement key changes relating to processes and institutional framework, specifically the online single window mechanism.
Some of the changes related to incentives are yet to be implemented as the portal is still not fully operational. Therefore, it is important that the MSME Department reviews and monitors the progress regularly. Equally important is the dissemination of

Simplification in workflow
Elimination of redundancies in processes in terms of multiple level of reviews of an application without much value addition at each level.

Time-bound decision on applications
Time lines defined through legislation for approval or rejection of an investor application.
information to industry stakeholders after the new online single window system goes live.
To ensure the sustainability of the reforms implemented till date, it is imperative that the state government undertakes the following key activities: 1. establishing adequate information technology infrastructure at the DICs; 2.
capacity building of staff at DICs and the competent authorities in districts, regarding the new online system; 3.
seamless and user-friendly single window experience for an investor through: i) provision in the online system for viewing forms and checklists of documents both in the local language (Tamil) and English; ii) upgrade of the single window portal in sync with the portal technologies deployed by other departments (so that seamless communication is possible); and iii) automation of new MSME schemes. 4. automation of sector-specific clearances that may be required by MSMEs, and their integration with single window portal; 5. regular monitoring to ensure that government departments and agencies adhere to processing time lines as defined in the Tamil Nadu Business Facilitation Act, 2018; and 6. dissemination of information related to the new online single window system to industry stakeholders, by the DICs.  About the Asian Development Bank ADB's vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries reduce poverty and improve the quality of life of their people. Despite the region's many successes, it remains home to a large share of the world's poor. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration.
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About the Asian Development Bank
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 67 members-48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance.
ADB Briefs are based on papers or notes prepared by ADB staff and their resource persons. The series is designed to provide concise, nontechnical accounts of policy issues of topical interest, with a view to facilitating informed debate. The Department of Communications administers the series.
The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of ADB or its Board of Governors or the governments they represent. ADB encourages printing or copying information exclusively for personal and noncommercial use with proper acknowledgment of ADB. Users are restricted from reselling, redistributing, or creating derivative works for commercial purposes without the express, written consent of ADB.