The problems centre on the failure of Ireland to act on the provisions of the Natura 2000 Directive and EU Habitats Directive.
These specified that baseline studies had to be undertaken on all marine areas, both bays and inlets, which have been designated as Special Areas of Conservation (SAC) or Special Protection Areas (SPA) for birds.
With 80pc of marine aquaculture projects located in designated bays, Ireland's failure to act on the EU directives is now proving a major threat to the continued operation of the industry, and is viewed as a roadblock to development.
Divisions between the departments of agriculture and environment over who should carry the cost of undertaking the baseline surveys have exacerbated the problems.
While the Department of Agriculture claims that "significant progress" has been made on the baseline analysis projects, Mr Flynn insists that no conservation objective studies have been completed to-date, apart from in a small number of bays.
Mr Flynn says fish farmers are continually battling State departments who do not appear to understand the basic requirements of the sector.
"It is a bureaucratic nightmare. It is no exaggeration to say that this industry is suffering from a heavy dose of Government incompetence," Mr Flynn maintains.
"Until the National Parks and Wildlife Service (NPWS) do the baseline surveys and set conservation objectives for the designated bays it is impossible for the licence issue to be sorted."
He explains that all plans for new fish farming projects, or extensions to existing operations, have to meet guidelines laid down in the NPWS studies.
A major investment drive for the fish farming sector was announced by the Department of Agriculture in July but it is now feared that much of the funds targeted for the sector will not be spent.
Under the initiative €5m in grant aid was earmarked for new projects. But Mr Flynn claims that up to €4.5m of this aid package will be left unused because grant aid cannot be accessed by projects in an SAC or SPA that do not have the appropriate environmental assessments undertaken.
"These assessments cannot be undertaken until the baseline studies are carried out by the NPWS. It's hard for fish farmers to claim they are meeting conservation objectives when the objectives have not been set," the IFA official explains.
He says the impasse has now hit a critical juncture, with projects being put on hold as grant aid goes unused.
"At least 200 jobs have been lost in fish farming businesses over the last three years and the opportunity to create up to 500 new jobs has been missed," Mr Flynn maintains.
The Department of Agriculture says the delay in making progress through the licence applications reflected "the complexity of aquaculture licensing and the need to comply with all national and EU legislation".
Officials would not be drawn on a timeframe of clearing the applications backlog, which stood at 511 at the start of September.
"In the case of aquaculture sites located within Natura 2,000 areas, the Department of Agriculture, Fisheries and Food, in conjunction with the Marine Institute and the National Parks and Wildlife Service (NPWS) of the Department of the Environment, Heritage and Local Government, are engaged in a comprehensive programme to gather the baseline data appropriate to the conservation objectives of these areas," a Department statement explains.
"The appropriate assessment of applications will be dealt with on a bay-by-bay basis and bays have been prioritised for assessment taking account of the scale of aquaculture activity in the bays," it adds.
But the implications of the licence delays for new business ventures are immediate and pressing. A case in point is that of Michael O'Neill who runs an abalone farm near Castletownbere in west Cork.
Mr O'Neill has invested up to €4m in the new facility, which will be one of the largest producers of the shellfish delicacy in the world.
With fished stocks of abalone in sharp decline globally, Mr O'Neill's venture has real potential for expansion.
The former fisherman said the Beara Peninsula is an ideal location for such a farm because of the pristine quality of the local seas, the tradition of fish processing in the area and the availability of ample supplies of seaweed to feed the abalone.
The farm, which is among the most modern in Europe, started operations last year and the first crop of abalone will be harvested this winter.
The existing plant has the capacity to generate an annual turnover of €2.5m. However, Mr O'Neill believes there is market potential for at least double the current output.
While capital is in place for expansion, Mr O'Neill is struggling to get approval to harvest seaweed from a nearby site.
"The seaweed project would create four jobs at the moment and has the potential to provide another six," Mr O'Neill says.
The west Corkman says there is potential to develop 20 more factories like the Beara unit along the west coast.
"We are only scratching the surface here. We have the technology and we have shown that this can be done at a commercial level," he maintains.
The Government has set ambitious targets for the fish farming sector. These goals are set out in the National Seafood Plan 2007-13, which was drawn up earlier this decade.
Total production of mussels in 2006 was 37,543t but the plan envisages increasing this to more than 60,000t by 2013. Similarly, the intention is to drive oyster output from 9,660t to over 16,400t.
The targets from finfish were even more challenging. Total output from farmed salmon, trout and other species is to treble, going from 12,726t to 35,300t.
However, the Department of Agriculture has now admitted that no grant aid will be forthcoming to salmon farms due to allegations that they are infecting wild stocks with sea lice.
"The minister supports the development of a sustainable salmon farming sector but concerns have arisen from a public and statutory consultation process with regard to the negative impact that sea lice emanating from salmon farms could be having on migratory wild salmonids," a Department statement says.
"To address these concerns, it has been decided that no financial assistance will be given to marine salmon aquaculture licence holders during the course of this National Plan until such time as the sea lice issue has been satisfactorily resolved," it adds.
Those involved in the sector reject the accusation and claim that it is another example of Government bowing to interest groups opposed to the sector.
Richie Flynn points to continued efforts by the Minister for the Environment to increase the number of bays and inlets that are designated as SACs.
"It is absolutely crazy to extend these areas ahead of sorting out existing problems," he maintains.
Fish farmers argue that the manner in which their industry has been treated contradicts the stated Government objective of creating tens of thousands of jobs in the green industry.
"Here you have an indigenous, sustainable industry that has shown innovation in the way it farms, that has developed markets for our natural produce, that is located in some of the most peripheral regions of the country and still Government departments appear to be doing their best to sink it," Mr Flynn insists.