SMALL SCALE INDUSTRY Learning Objectives: To introduce the meaning and concept of Small-scale industry.

. Present the characteristics of SSI. Discuss the rationale of SSI. Understand the objectives and advantages of SSI. Present the role of SSI in economic development. Present steps involved in starting an SSI. Present Government policy to ards SSI. Trace Government support to SSI during five year plan. Present impact of Globali!ation" #iberali!ation$ %T& and G'TT on SSI. Present meaning$ need$ nature and types of support and agencies of Government for SSI. 6.1 MEANING AND DEFINITION OF SMALL SCALE INDUSTRY The definition of small scale industry varies from one country to another and from one time to another in the same country depending upon the pattern and stage of development, government policy and administrative set up of the particular country. There are at least 50 different definitions of SSIs found and used in 75 countries. In some of the countries of the world the criterion for defining small enterprise is related to the si e of employment. !or e"ample in #S$ a small enterprise is one which has employment of 500 people. In #% it is less than &0 s'illed la(ours, in )ermany, less than *00 and in Italy less than 50 people. +owever, in most of the countries the definitions of SSI are related to either investment or si e of employment or (oth. The definition of small scale industry is an important aspect of government policy as it identity the target groups. The first official criterion for small scale industry in India dates (ac' to second five year plan when it was in terms of gross investment in land, (uilding, plant, machinery and the strength of the la(our force. ,n the recommendation of the !ederal association of small industries of India -!$SI., only 116 "" (anagement and )ntrepreneurship the investment in fi"ed assets in plant and machinery, whether held in ownership terms or (y lease or hire purchase, is considered instead of fi"ing the limit on overall

investment in plant and machinery. The evolution of legal concept of SSI is given in the ta(le /.0. $n ancillary unit is one which sells not less than 501 of its manufacturers to one or more industrial units. +owever for small scale industries, the planning commission of India uses the terms village and cottage industries. These include modern small2scale industries and the traditional cottage and house2hold industries as shown in fig /.0. Table 6.1 *+,- The fiscal commission for the first time defined an SSI as one hich is operated mainly ith hired labour usually *- to ,- hands. *+,.-,, The Government of India set up /entral Small Scale Industries &rgani!ation 0/SSI&1 and Small Scale Industries 2oard 0SSI21 to promote small scale industries. *+3- )mployment criterion to define SSI as dropped and under investment criterion an industry having gross value of fi4ed asset up to 5s. , #a6hs as called as SSI. *+7, The investment limit as rise to 5s. *- #a6hs 0*, #a6hs for ancillary units1. *+8- The investment limit as rise to 5s. 9- #a6hs 09, #a6hs for ancillary units1. *+8, The investment limit as rise to 5s. :, #a6hs 0., #a6hs for ancillary units1. *++, The investment limit as rise to 5s. 3- #a6hs 07, #a6hs for ancillary units1. (arch *++7 The investment limit as raised to 5s. : /rore. *+++-9--- The investment limit as reduced to * /rore. 9--7 #imit is * /rore only. Small Scale Industries (odern Small Scale Industries /ottage Industry ;illage Industry 'ncillary Industry Fig. 6.1: Types of small-scale industries 6.2 CHARACTERISTICS OF SSI The following are the characteristics of SSI -0. $ small unit is generally a one2man show. 3ven if SSI is run on partnership or company, the activities are carried (y one of the partners or directors4 the others are as sleeping partners.

-&. In case of SSI, the owner himself or herself is a manager also and hence an SSI is managed in a personali ed fashion. The owner ta'es effective participation in all matters of (usiness decision ma'ing. -*. The scope of operation of SSI is generally locali ed, catering to the local and regional demands. -5. The gestation period i.e., the period after which return on investment starts is relatively lower when compared to large units. -5. SSIs are fairly la(our intensive with comparatively smaller capital investment. -/. Small units use indigenous resources and therefore, can (e located anywhere su(6ect to the availa(ility of these resources li'e raw materials, la(our etc. -7. #sing local resources Small #nits are decentrali ed and dispersed to rural areas. Thus small units promote (alanced regional development and prevent the influ" of 6o( see'ers from rural areas to cities. -7. Small scale units are more change suscepti(le and highly reactive and receptive to socio2economic conditions. They are more fle"i(le to adopt changes li'e introduction of new products, new method of production, new materials, new mar'ets and new form of organi ation etc. 6.3 RATIONALE 3mphasi ing the very rationale of Small2scale industry in the Indian economy, the Industrial 8olicy 9esolution -I89. 0:5/ stated; <They provide immediate large scale employment, they offer a method of ensuring a more e=uita(le distri(ution of the national income and they facilitate an effective mo(ili ation of resources of capital and s'ill which might otherwise unutili ed. Some of the pro(lems that unplanned ur(ani ation tends to create will (e avoided (y the esta(lishment of small centers of industrial production all over the country>. The rationale of small scale industries so esta(lished can (roadly (e classified into four arguments as discussed (elow. 1. Employment A !"ment In view of a(undant la(our and scarce capital resources, the most important argument in favor of the SSIs that have a potential to create immediate large scale employment

opportunities. There are many research findings availa(le which will esta(lish that smallscale units are more la(our intensive than large units. Small units use more of la(our per unit than investment. Studies have shown that the output2employment ratio is the lowest in small sector, employment generating capacity of small sector is eight to ten times that of large scale sectors. Some scholars oppose this argument. They are of the opinion that employment should not (e created for the sa'e of employment. $ccording to them it is not how to 118 "" (anagement and )ntrepreneurship a(sor( surplus resources (ut how to ma'e the (est use of scarce resources. Then employment argument (ecomes output argument. 2. E#"$l%ty A !"ment $n important argument in favor of small2scale industries is that they ensure a more e=uita(le distri(ution of national income and wealth. This is (ased on two ma6or considerations; -i. ?ompared to ownership of large scale units, the ownership of small2scale units is wide spread. -ii. Their more la(our2intensive nature and decentrali ation and dispersal to rural and (ac'ward areas provide more employment opportunities to the unemployed. @ost of these small2scale units are proprietary or partnership concerns, the relations (etween wor'ers and employers are more harmonious in small2 scale units than in large2scale units. Ahar and Bydall do not agree this argument and give statistical evidence that wages paid to wor'ers in small2units are much lower when compared to the wor'ers in large industries. Cor'ers in small enterprises due to non2e"istence of trade unions are unorgani ed and therefore are easily e"ploited (y the employers. Dut in an underdeveloped country li'e India, even if small2scale units provide low paid 6o(s, they would (e of virtual importance in our economy where millions are already in search employment to e'e2out their livelihood. 3. De&ent $l%'$t%on A !"ment

Dig industries are concentrated every where in ur(an areas, (ut small industries can (e located in rural or semi2ur(an areas to use local resources and to cater to the local demands. +ence it promotes (alanced regional development in the country. Though it is not possi(le to start small2scale industry in every village, (ut it is =uite possi(le to start small units in a group of villages. Aecentrali ation will help tap local resources, idle savings, and local talents and improves the standard of living even in erstwhile (ac'ward areas. The good e"ample of this phenomenon is the economy of 8un6a( which has more small2scale units than even the industrially developed state of @aharashtra. (. L$tent Re)o" &e A !"ment $ccording to this argument, small enterprises are capa(le of mapping up latent and unutili ed resources li'e hoarded wealth and ideal entrepreneurial a(ility etc. Ahar and Bydall feel that the real source of latent resources argument lies in the e"istence of entrepreneurial s'ill. $ccording to them there is no evidence of an overall shortage of small entrepreneurs in India. +ence they dou(t the force of this latent resource argument. Their assertion does not appear to (e very sound simply (ecause of the fact that if small entrepreneurs were present in a(undance, then what o(structed the growth of small enterprisesE Small Scale Industry "" 119 The emergence of entrepreneurial class re=uires a conducive environment. The impressive growth in the num(er of small enterprises in the post independent period highlights the fact that, providing the necessary conditions such as power and credit facilities, the latent resources of entrepreneurship can (e tapped (y the growth of small enterprises only. 6.( O*+ECTI,ES The various o(6ectives of developing small2scale industries are in fact, implied in one

way or other, in its rationale itself, 6ust discussed in the section /.*. +owever, an attempt has (een made in this section to enumerate the main o(6ectives of developing small enterprises in India. 0. To generate immediate and large scale employment opportunities with relatively low investment. &. To eradicate unemployment pro(lem from the country. *. To encourage dispersal of industries to all over country covering small towns, villages and economically lagging regions. 5. To (ring (ac'ward areas too, in the main stream of national development. 5. To promote (alanced regional development in the whole country. /. To ensure more e=uita(le distri(ution of national income. 7. To encourage effective mo(ili ation of countrys untapped resources. 7. To improve the standard of living of people in the country. 6.- SCO.E The scope of small2scale industries is =uite vast covering a wide range of activities. These activities are characteri ed (y la(our intensive, need less capital and re=uire less sophisticated technology. The activities which are found particularly amena(le can (e successfully operated in small scale are too many to mention. $mong them the important ones are; @anufacturing activities ServicingFrepairing activities 9etailing activities !inancial activities Chole2sale (usiness ?onstruction activities Infrastructural activities li'e transportation, communication etc. In order to strengthen the scope for small2scale industries, the )overnment of India has announced reservation policy for small sector in the country. In 0:/7 only 57 items were reserved for e"clusive manufacture in small scale sector. In 0:7* the reserved 120 "" (anagement and )ntrepreneurship list included 7*/ items. Bater $(id +ussain committee dereserved 0& items and thus there are 7&5 items in the reserved list. The o(6ective of this reservation policy is to

insulate the small sector from une=ual competition of large industrial esta(lishments, so that the small firms can grow through e"pansion of e"isting units and the entry of new firms. Some of the important items reserved for e"clusive development in the small sector are food and allied industries, te"tile products, leather and leather products, foot wares, plastic and ru((er products, chemical and chemical products, glass and ceramics, pressure stove, electrical appliances, (oats and truc' (ody (uilding, auto parts components, (icycle parts, tricycles, survey instruments, sports goods, stationery items, cloc's and watches etc. It is also important to note that the performance of reserved small2scale industries does not outshine that of non2reserved small industries. G.?. Sandesara, has found that the easy entry into SSI sector has intensified competition within the sector, and resulted in e"cess supply, and thus, a fall in profita(ility. +e also adds that the reservation policy is calculated to 'eep Hinfant industry in a permanent state of infancy. +owever the main o(6ective of reservation policy has (een insulated small sector from une=ual competition of powerful large scale units, so that the small sector can grow through e"pansion on one hand, and (y the entry of new firms on the other hand seems to (e achieved. 3"amples are many to support this view. 6.6 ROLE OF SSI IN ECONOMIC DE,ELO.MENT 3conomic development is defined in a num(er of ways4 the commonest definition could (e Han increase in real per capita income of a person resulting in improvement in the levels of living. The developments of small2scale industries contri(ute to the increase in per capita income. The role of SSI in economic development is given (elow. 1. Employment SSI use la(our intensive techni=ues and therefore provide employment on a large scale, SSI accounts for 751 of the total employment in the industrial sector. SSI provides

self2employment to artisans, technically =ualified persons and professionals. These industries also offer employment to farmers when they are idle. 2. Opt%m%'$t%on o/ C$p%t$l SSI re=uires less capital per unit of output and provides =uic' returns on investment due to shorter gestation period. Small scale units help to molatise small and scattered savings and channelise them into industrial activities. 3. *$l$n&e0 Re!%on$l De1elopment SSI promotes decentrali ed development of industries. They help to remove regional disparities (y industriali ing rural and (ac'ward areas. They also help to improve the standard of living in su(ur(an and rural areas. Small (. Mo2%l%'$t%on o/ Lo&$l Re)o" &e) SSI helps to mo(ili e and utili e local resources li'e small saving, entrepreneurial talent etc. which might otherwise remain idle and unutili ed. These industries facilitate the growth of local entrepreneurs and self2employed professionals in small towns and villages. -. E3po t . omot%on SSI helps in reducing pressure on the countrys (alance of payments in two ways. !irst they do not re=uire imports of sophisticated machinery or raw materials. Secondly, SSI can earn valua(le foreign e"change through e"ports. There has (een a su(stantial increase in e"ports from the small scale sector. 6. Con)"me S" pl") SSI now produces a wide range of mass conception items. ,ver 5000 products are (eing manufactured in small scale sector. $(out one2half of the output of manufacturing sector in India comes from small scale industries. 4. Fee0e to L$ !e S&$le In0")t %e) SSI plays a complementary role to large scale sector. They provide parts, components, accessories etc. to large scale industries. They serve as ancillary units. 5. So&%$l A01$nt$!e

Small scale sector contri(utes towards the development of a socialistic pattern of society (y reducing concentration of income and wealth. They provide an honora(le and independent living to people with limited resources. They facilitate wide participation of pu(lic in the process of development. 6. S7$ e %n In0")t %$l . o0"&t%on SSI contri(utes more than one2half of the total industrial production in India. $(out 5000 products are manufactured in the small scale sector. 18. De1elopment o/ Ent ep ene" )7%p Small scale units have helped to develop a class of entrepreneur. These units facilitate self2employment and spirit of self2reliance in the society. 6.4 AD,ANTAGES OF SMALL SCALE INDUSTRIES I Small scale enterprises can (e started as per convenience of the owner in terms of space, finance, product and manpower. I The setting up of the unit and starting of production re=uires a small gestation period of only & to / months and layout can (e made as per convenience. I Bocally availa(le s'illed and semi2s'illed people can (e appointed at short notice and at a much lower wages compared to the medium and large industries. 122 "" (anagement and )ntrepreneurship I Cherever high technology involved the parent company e"ecutives will help. $lternatively, consultants can (e hired to sort out technology related pro(lems. I It is one of the (est forms of self2employment as well as giving employment opportunities to own 'ith and 'in, friends and relatives etc. I In case of rural sector the SSI units will (e a(le to have cheaper la(our especially in off seasons. I In developing countries the SSI units are a necessity to assist (igger industries and new pro6ects. Thus they not only contri(ute to the economy of the nation (ut also create employment opportunities to people around the pro6ect sites. I In case of SSI units started (y e"perienced and talented e"ecutives, there is a(undant scope to develop high technology components for @J?s and also to organi e e"ports. I Aue to increase in population there has (een increase in production of consumer goods and !ast @oving ?onsumer )oods -!@?).. In view of this there is a (igger role for small industries to ta'e up components production

and even manufacture the product itself. I The small units are e"empted from e"cise duty up to 75 la'hs per annum turnover. In case of industries in the (ac'ward districts, waiver or concession is given for various statutory ta"es. Thus lot of paper wor' and formalities are avoided. I Since employees are recruited (ased on contacts or relations there will (e loyalty to the owner and hence there will (e no trade union activity. 6.5 STE.S TO START AN SSIS Starting an SSI is a comple" 6o(. The potential entrepreneur has to pass through a num(er of steps in a step2(y2step approach to achieve his goal of setting up an SSI. In fact, deciding and motivating the self is the first (edroc' upon which the esta(lishment concept of an enterprise is entirely posited. Similarly, the identification of a via(le pro6ect ensures the proposition that <well (egun is half done>. +ence the various steps involved in esta(lishment of an enterprise through which the entrepreneur may pass are the following; 1. Decision to be self-employed9 This is the most crucial decision a youth has to ta'e, shunning wage employment and opting for self2employment or entrepreneurship. 2. Analyzing strengths, weaknesses, opportunities and threats (SWO analysis!9 The potential entrepreneur has to analy e his strengths, wea'nesses, opportunities and threats, while deciding to go for entrepreneur career. This analysis ena(les him to 'now what type and si e of (usiness would (e the most suita(le. This will vary from person to person. Small Scale Industry "" 123 3. Scanning of business en"ironment9 It is always essential on the part of the entrepreneur to study and understand the prevailing (usiness environment. In order to ensure success of his enterprise, entrepreneur should scan the (usiness opportunities and threats in the environment. +e should study the administrative framewor', procedures, policies, rules and regulations and other formalities implemented (y the government. (. raining9 Defore going to start the enterprise, the potential entrepreneur must assess his own deficiencies which he can compensate through training. +e can avail the facilities of various training institutes li'e 3AI, JI3SD#A, I3As

e"isting in our country. These institutes are providing tailor2made 3ntrepreneurship Aevelopment 8rogrammes -3A8s. and s'ill up gradation training programmes for the (enefit of the new entrepreneurs, e"isting entrepreneurs and for the employees of the small scale industries. -. #roduct selection9 The most important step is to decide what (usiness to venture into, the product or range of products that shall (e selected for manufacture and in what =uantity. The level of activity will help in determining the si e of (usiness and thus form of ownership. ,ne could generate as many pro6ect ideas as one can through environment scanning and short list a few of them as discussed in the last chapter. ?losely e"amine with the help of opportunity analysis each one of them and ero on the final product or products. 6. $arket sur"ey9 It is always convenient to manufacture an item (ut difficult to sell. So it is rational on the part of the entrepreneur to survey the mar'et thoroughly (efore em(ar'ing upon production. @ar'et survey implies systematic collection of data (y the entrepreneur a(out the product for manufacture, demand2supply lag, e"tent of competition, fre=uency of demand pattern and design of demand, its potential share in the mar'et pricing, distri(ution policy, etc. The principle is to produce what actually people demand. The entrepreneur can contact the concerned authorities for this, and will (e discussed later. 4. %orm of organization9 $ firm can (e constituted as proprietorship, partnership, limited company -pu(licFprivate., cooperative society, etc. This will depend upon the type, purpose and si e of entrepreneurs (usiness. ,ne may also decide on the form of ownership on the (asis of resources at hand or from the point of view of investment. 5. &ocation9 The ne"t step will (e to decide the location where the unit is to (e esta(lished. Cill it (e hired or ownedE The si e of plot, covered and open area and the e"act site will have to (e decided. 6. echnology9 To manufacture any item, technology is used. Information on all availa(le technologies should (e collected (y the entrepreneur and the most 124 "" (anagement and )ntrepreneurship suita(le one to (e identified. This will also (e useful to determine the type of machinery and e=uipment to (e installed. The entrepreneur can contact AI?, T?, etc.

18. $achinery and e'uipment9 +aving chosen the technology, the machinery and e=uipment re=uired for manufacturing the chosen products have to (e decided, suppliers have to (e identified and their costs have to (e estimated. ,ne may have to plan well in advance for machinery and e=uipment especially if it has to (e procured from outside the town, state or country. 11. #ro(ect report preparation9 $fter deciding the form of the ownership, location, technology, machinery and e=uipment, the entrepreneur should (e ready to prepare his pro6ect report or the feasi(ility study. The economic via(ility and the technical feasi(ility of the product selected have to (e esta(lished through a pro6ect report. $ pro6ect report that may now (e prepared will (e helpful in formulating the production, mar'eting, financial and management plans. It will also (e useful in o(taining finance, shed, power connection, water connection, raw material =uotas, etc. The entrepreneur has to consider the guidelines given (y the 8lanning ?ommission in preparing the report -see chapter 7.. 12. #ro(ect appraisal9 ,rdinarily, pro6ect appraisal implies the assessment of a pro6ect. It is a techni=ue for e"2ante analysis of a scheme or pro6ect. Chile preparing to set up an enterprise, the entrepreneur has to carefully appraise the pro6ect from the standpoint of economic, financial, technical, mar'et, managerial and social aspects to arrive at the most socially2feasi(le enterprise. To avail the finance from the financial institutions and (an's, a comprehensive appraisal of pro6ects carrying techno2economic feasi(ility aspects should (e underta'en (y the entrepreneur. Thus, a pro6ect which is selected should (e technically feasi(le and economically via(le, and then only it will (e (an'a(le. !or this, the following appraisals can (e performed at the preliminary level; -a. 3conomical appraisal -(. !inancial appraisal -c. Technical appraisal -d. @anagement appraisal -e. ,rgani ational appraisal -f. ,perational appraisal -g. @ar'et appraisal 13. %inance9 !inance is the life(lood of the enterprise. 3ntrepreneur has to ta'e certain steps and follow specified norms of the financial institutions and (an's to o(tain it. $ num(er of financial agencies provide capital assistance and

venture capital for starting an enterprise. There are some agencies which Small Scale Industry "" 125 provide financial assistance on concession rates. #nder 8@9K and 93)8 schemes financial assistance and su(sidies are (eing provided to the persons who want to set up their own enterprise. Aetails of it are discussed in chapter 7. 1(. #ro"isional registration9 It is always worthwhile to get the unit registered with the government. The entrepreneur has to o(tain the prescri(ed application form for provisional registration from AI? or Airectorate of Industries. $fter having duly filled in the application form, he has to su(mit the application with all relevant documents in the local AI? or Airectorate of Industries. This will ena(le the entrepreneur to avail various government facilities, incentives and assistances schemes including financial assistance from JSI?FS!?sF%LI?. The ta(le /.& and ta(le /.* gives the details. 1-. echnical know-how9 In some cases, technical 'now2how may (e arranged for setting up enterprise. This can (e arranged through T?,s, JSI?, SSIA?, AI?, private consultants, SISI, 3A2institutes, foreign colla(orators, India Investment ?entre, and Industry, etc. !acilities are also availa(le to SSI for ma'ing technical 'now2how arrangements including turn2'ey 6o(s. 16. #ower and water connection9 The sites, where the enterprise will (e located, should either have ade=uate power connections or this should (e arranged. 3ntrepreneur can calculate the total power re=uirement and determine the nearest pole from which power will (e given to the enterprise as it can materially affect the installation cost. Similarly, the water connection will have to (e o(tained or provision should (e made for ade=uate water supply to the firm. 14. )nstallation of machinery* +aving completed the a(ove formalities, the ne"t step is to procure the machinery for installation. @achinery should prefera(ly (e installed as per the plan layout. 15. +ecruitment of manpower9 ,nce machines are installed, the need for manpower arises to run them. So the =uantum and type of manpower is to (e decided. This presupposes the s'illed, uns'illed and semis'illed la(our, administrative staff etc. !urther, sources of getting desired la(our and staff mem(ers (e indented and recruited. 8ossi(ly, the la(our force has to (e trained either at the entrepreneurs premises or in a training esta(lishment.

16. #rocurement of raw materials9 9aw materials are the important ingredients for running an enterprise. The la(our will re=uire raw materials to wor' upon the installed machinery. These materials may (e procured indigenously or may have to (e imported (y the entrepreneur. 3ntrepreneur has to identify the cheap an assured sources of supply of raw materials for running his own enterprise. )overnment agencies. -See ta(le /.&. can assist in case the raw materials are scarce or imported. 126 "" (anagement and )ntrepreneurship 28. #roduction9 The unit esta(lished should have an organi ational set2up. To operate optimally, the organi ation should employ its manpower, machinery and methods effectively. There should not (e any wastage of manpower, machinery and materials. If items are e"ported, then the product and its pac'aging must (e attractive. 8roduction of the proposed item should (e ta'en up in two stages; -i. Trial production -ii. ?ommercial production Trial production will help tac'ling pro(lems confronted in production and test mar'eting of the product. This will reduce the chances of loss is the eventuality of mista'es in pro6ect conception. ?ommercial production should (e commenced after the test2mar'eting of the product. 21. $arketing9 @ar'eting is the most important activity as far as the entrepreneurial development is concerned. Larious aspects li'e how to reach the customer, distri(ution channels, commission structure, pricing, advertising, pu(licity, etc. have to (e decided (y the entrepreneur. Bi'e production, mar'eting should also (e attempted cautiously, that is, in two stages namely; -i. Test stage -ii. ?ommercial mar'eting stage Test mar'eting is necessary to save the enterprise from going into disrepute in case the product launched is not well accepted (y the customers. It will also assist the entrepreneur in carrying out modifications or additions in designs and features of the product. +aving successfully test mar'eted the product, commercial mar'eting can (e underta'en. The entrepreneur can contact the Small industries mar'eting corporation.

22. ,uality assurance9 Defore mar'eting, the product =uality certification from DIS -Dureau of Indian Standards.F$)@$9%F+$BB@$9%, etc., should (e o(tained depending upon the product. If there is no =uality standards specified for the products, the entrepreneur should evolve his own =uality control parameters. Muality, after all, ensures long term success. 23. #ermanent registration9 $fter the small scale unit goes into production and mar'eting, it (ecomes eligi(le to get permanent registration (ased on its provisional registration from AI? or Airectorate of Industries. 2(. $arket research9 ,nce the product or service is introduced in the mar'et, there is strong need for continuous mar'et research to assess needs and areas for modification, upgradation and growth. @ar'et (ecomes waterloos for most SSI entrepreneurs as they ignore the vital day2to2day operation. Initial success should not lure the entrepreneur into a sense of complacency. Small Scale Industry "" 127 Table 6.2: Sources of information Sl. !. "rea State level agencies ati!nal level agencies *. Project selection SISI$ DI/$ ID/<S$ II/<s$ T/&<s$ S=/s$ SI/$ I/$ I)2$ PT/ /2$ SID&$ /SI5$ D)P$ II/$ I=/I$ IP2$ >5D/$ )DI 9. 5egistration and licenses /I=$ DD/'$ DI/$ )2$ G(D$ SI/$ %P/2$ I/$ #'$ ST/$ T/ /)/D$ //I)$ ISI$ ID/$ (I/$ >SI/$ 5/$ 5T$ S/$ DGTD :. =inance DI/$ 2an6$ S=/$ SI/$ II/s$ ID/s /2$ /)/$ I/I/I$ ID2I$ I=/I$ >IS/$ S2I$ DI/ .. Technical DD/'$ DI/$ D?/II$ T&/s$ G(D /IP)T$ /SI5$ II/$ II=T$ (5D/$ >SI/$ 5T$ S2S$ SISI$ /ITD$ I/(5 ,. Training )DPs$ SISI$ T/Ds$ DI/s S2I$ /2$ /IP)T$ I5#$ >ISI)T$ IITs$ >IS2UT$ )DI 3. Infrastructure facilities DI/$ )2$ ID/$ #' 7. 5a materials DI/$ (ID$ (D/$ SI/$ I/$ ST/ //I)$ ((T/$ (D/$ SP/

8. Plant and machinery DI/$ II/$ S=/$ S)/$ I/$ ID2 //I)$ >SI/$ SISI +. (ar6eting information DI/$ T/&<s$ S)/$ SI/$ 5I(/& D)P$ DGSD$ //I)$ II=T$ (ID$ SI/$ I/(5$ I/'5 Table 6.3: 'pplication forms S. !. S#bject "gencies $"% &lanning Stage *. Provisional registration number DI/ 9. 'pplication for shed or plot SID/ :. >o objection certificate from local authorities #' 0#ocal 'uthority1 .. >o objection certificate from health department District health officer ,. >o objection certificate from electricity department )lectricity department 3. #oan application for term loan S=/ " >2 " >SI/ 7. Subsidy registration DI/ 8. 'pplication for building plan and estimates 'pproval of architect " contractor +. 'pplication for ban6 account " cash credits " or6ing capital loan >2 *-. 'pplication for air and ater pollution no objection certificate State pollution control authority **. 'pplication for the approval of production programme for certain restricted items DI/$ SISI$ /entral (inistry -ontd... 0&7 "" (anagement and )ntrepreneurship *9. 5egistration of partnership deed 5egistrar of firms *:. 'pplication for ancillary units Parent companies *.. 5egistration of firms 5egister of firms *,. 'pplication for the boilers and plant layout of the unit Inspector of 2oilers *3. 'pplication for the production of petroleum based products (inistry of Petroleum *7. 'pplication for )4cise 5egistration >umber )4cise Department *8. 'pplication for #ate4 in rubber based products 5ubber 2oard *+. >o objection certificate from =orest Department for ood based products State conservation of forests 9-. 'pplications for essential commodity items as ra materials District /ivil Supply Department 9*. 'pplication for imported ra materials DI/ " )4port-Import 2oards 99. 'pplication for imported of machines DI/ " )4port-Import 2oards

9:. 'pplication for ra materials @uota D " / " )4port A Import 2oards. $'% (#ring )*+le*entati!n !, &r!ject 9.. 'pplication for po er connection #ocal )lectricity Dept. 9,. 'pplication for ater #' 93. 'pplication for /-=orm 0Sales Ta41 Sales Ta4 Department 97. 'pplication for state Sales Ta4 5egistration Sales Ta4 Department 98. 'pplication for central Sales Ta4 5egistration Sales Ta4 Department 9+. 'pplication for e4emptions from Sales Ta4 DI/ " Sales Ta4 Dept. :-. 'pplication for e4emption from &ctroi Duty DI/ " #' :*. 'pplication for storing of inflammable ra material Director of )4plosives. $-% (#ring .#nning !, /nter+rise :9. 'pplication for Permanent 5egistration >umber DI/ " ::. 'pplication for subsidy claims DI/ :.. 'pplication for po er subsidy #' :,. 'pplication for food preservation ordinance license. =ood /ontroller :3. 'pplication for registration in case of more than 9employees ithout po er use or more than *- employees ith po er use. #abour %elfare 2oard " )mployment )4change " P.=. /ommissioner :7. 'pplication for product mar6eting to the /entral Government Department DI/$ DGSD Small Scale Industry "" 129 6.1( AGENCIES OF GO,ERNMENT FOR SSI The ministry of small scale industries is the administrative ministry in the )overnment of India for all matters relating to small scale and village industries which designs and implements policies and programmes for promotion and growth of small industries. The Aepartment of small2scale industries was created in 0::0, in the @inistry of Industry to e"clusively formulate the policy framewor' for promoting and developing small2scale industries in the country. It initiates appropriate policy measures, programmes and schemes for promotion of SSI. The policy measures include setting up of a networ' of institutions to render assistance and to provide a comprehensive range of services and

common facilities for SSIs. The range of services cover consultancy in techno2economic and managerial aspects, training, testing facilities, and mar'eting assistance through the agencies created for the specified functions. These activities are supported (y a host of other centralFstate government departments, promotional agencies, autonomous institutions, non2government organi ations and so on. The implementation of policies, programmes and schemes for providing infrastructure and support services to small enterprises is underta'en through its attached office, namely Small Industries Aevelopment ,rgani ation -SIA,., %hadi Lillage and Industry ?ommission -%LI?. and ?oir Doard, Jational Small Industry ?orporation -JSI?. and 138 "" (anagement and )ntrepreneurship various training institutes. The institutional networ' can (e (roadly classified as under and is shown in fig. /.&. -0. ?entral level institutionsFagencies -&. State level institutionsFagencies -*. ,ther agencies -entral Level SSI 2oard B;I/$ SID& >SI/$ >P/ >ST)D2 >ISI)T$II) >I)S2UD )DI State Level DIS DI/S S=/S SSID/ Ot0ers Industry 'ssociation 5 C D &rgani!ation >on-Government &rgani!ations SSIS Fig 6.2: Institutions supporting small-scale industries 6.1- NATURE AND TY.ES OF SU..ORTS .ol%&y S"ppo t -0. The investment limit for the tiny sector will continue to (e 9s. &5 la'h. -&. The investment limit for the SSI sector will continue to (e at 9s. 0 crore.

-*. The ministry of SSI and $9I will (ring out a specific list of hi2tech and e"portoriented industries which would re=uire the investment limit to (e raised upto 9s. 5 crore to admit suita(le technology upgradation and to ena(le them to maintain their competitive edge. -5. The Bimited 8artnership $ct will (e drafted =uic'ly and enacted. $ttempt will (e made to (ring the (ill (efore the ne"t session of parliament. F%)&$l S"ppo t To improve the competitiveness of small2scale sector the e"emption for e"cise duty Bimit rose from 9s. 50 la'hs to 9s. 0 crore. -0. The composite loans limit rose from 9s. 00 la'h to 9s. &5. la'h. -&. The Small2Scale Service and Dusiness -Industry 9elated. 3nterprises -SSSD3S. with a ma"imum investment of 9s. 00 la'hs will =ualify for priority lending. -*. In the Jational 3=uity !und Scheme, the pro6ect cost limit will (e raised from Small Scale Industry "" 139 9s &5 la'h to 9s 50 la'h. The soft loan limit will (e retained it &5 percent of the pro6ect cost su(6ect to a ma"imum of 9s. 00 la'h per pro6ect. $ssistance under the J3! will (e provided at a service charge of 5 percent per annum. -5. The eligi(ility limit for coverage under the recently launched -$ugust, &000. ?redit )uarantee Scheme has (een revised to 9s. &5 la'h from the present limit of 9s. 00 la'h. -5. The Aepartment of 3conomic $ffairs will appoint a Tas' !orce to suggest revitali ationFrestructuring of the State !inance ?orporations. -/. The Jaya' ?ommittees recommendations regarding provision of &0 percent of the pro6ected turnover as wor'ing capital is (eing recommended to the financial institutions and (an's. In/ $)t "&t" e S"ppo t -0. The Integrated Infrastructure Aevelopment -IIA. Scheme will progressively cover all areas in the country with 50 percent reservation for rural areas. -&. 9egarding upgrading Industrial 3states which are languishing, the @inistry of SSI and $9I will draw up a detailed scheme for the consideration of the planning commission. -*. $ plan scheme for cluster Aevelopment will (e drawn up. -5. The !unds availa(le under the non2lapsa(le pool for the Jorth23ast will (e used for Industrial Infrastructure Aevelopment, setting up of incu(ation centers, for cluster Aevelopment and for setting up of IIAs in the Jorth23ast including Si''im. Te&7nolo!%&$l S"ppo t $n0 :"$l%ty Imp o1ement

-0. ?apital su(sidy of 0& percent for investment in technology in selected sectors. $n Inter2ministerial committee of 3"perts will (e set up to define the scope of technology upgradation and sectorial priorities. -&. To encourage Total Muality @anagement, the scheme of granting 9s. 75,000F2 to each unit for opting IS,2:000 ?ertification will continue for the ne"t si" years i.e., till the end of the 00th plan. -*. Setting up of incu(ation centers in Sunrise Industries will (e supported. -5. The TDS3 set up (y SIADI will (e strengthened so that it functions effectively as a Technology Dan'. It will (e properly networ'ed with JSI?, SIA, -S3J3T programme. and $8?TT. -5. SIA,, SIADI and JSI? will 6ointly prepare a compendium of availa(le technologies for the 9 N A institutions in India and $(road and circulate it among industry associations for the dissemination of the latest technology related information. 140 "" (anagement and )ntrepreneurship -/. ?ommercial (an's are (eing re=uested to develop schemes to encourage investment in technology upgradation and harmoni e the same with SIADI. -7. ,ne2time capital grant of 50 percent will (e given to Small2Scale $ssociations which wish to develop and operate Testing Ba(oratories, provided they are of international standard. M$ ;et%n! S"ppo t -0. SIA, will have a @ar'et Aevelopment $ssistance -@A$. programme, similar to one o(taining in the @inistry of ?ommerce and Industry. It will (e a plan scheme. -&. The vendor Aevelopment 8rogramme, Duyer2Seller meets and 3"hi(itions will ta'e place more often and at dispersed locations. In/o m$t%on$l S"ppo t -0. )eneral information. -&. TechnicalF@ar'eting e"pertise in specific areas. -*. Technical and financial e"pertise. -5. Implementation assistance for turn2'ey pro6ects. In&ent%1e) $n0 S"2)%0%e) -0. 3"port2import su(sidies. -&. Interest free loans. -*. Su(sidy for 9 N A wor'. -5. ?apital investment su(sidy. -5. Transport su(sidy. -/. Interest su(sidy. -7. Su(sidy for power generation. -7. 3"emption from property ta".

-:. Incentives for J9I. -00. 3"emption from income ta". -00. Sales ta" e"emptions. -0&. 8rice preference to SSIs. -0*. Su(sidyFassistance for technical consultancy. -05. 3"emptions from stamp duty. -05. 8rovisional for seed capital. -0/. $llotment of controlled or su(sidi ed raw materials. -07. Su(sidy for cost of mar'et studyFfeasi(ility study or reports. Small Scale Industry "" 141 Ot7e Type) o/ S"ppo t -0. Streamlining 9ules and 9egulations. -&. 3ntrepreneurship development training. -*. 9eha(ilitation of sic' units. Learning activit1 6.4: ;isit an entrepreneur and discuss ith him about the agencies to be contacted for registration$ mar6eting assistance and technical support. 6.16 ANCILLARY< TINY AND SER,ICE INDUSTRIES $n ancillary unit is one, which sells not less than 50 1 of its manufactures to one or more industrial units. The limit of investment is same for ancillary units and smallscale industries. The investment limit for tiny industry is 9s. &5 la'h in plant and machinery. There is no restrictive condition of the location of the unit in small towns. These enterprises would (e entitled to preference in land allocations, power connection, access to facilities or s'illFtechnical upgradation. These would also have easy access to institutional finance, priority in )overnment purchases and rela"ation in la(or laws. Service units provide services such as hotel and hospital services. The investment ceiling is fi"ed at 9s. 0.0 million -e"cluding land and (uildings.. ?hapter Summary In India a small2scale industry is defined as an industry having gross value of fi"ed asset in plant and e=uipment up to 9s. 0 crore. The characteristics of SSI are oneman2 show, scope of operation is generally locali ed, low gestation period, fairly la(our intensive and generally ma'es use of local resources. The rationale of SSI can (e (roadly classified into employment argument, e=uality argument, decentrali ation argument and

latent resource argument. SSI plays a crucial role in economic development. $n entrepreneur has to follow a step2(y2step procedure to start an enterprise right from identification of opportunities. The )overnments o(6ectives and intensions towards SSI were announced through her five Industrial policy 9esolutions -I89.. The main thrust of I89 0:57 was protection, in I89 0:5/ it was protection plus development, in I89 0:77 the focus was on protection, development and promotion. The I89 0::0 focus was on promotion of e=uality, technology and efficiency. In 0::0 new economic policies were announced. The )overnment of India has given great importance for the development of smallscale sector in the successive five year plans. The total e"penditure towards SSI in first five year plan was 9s. 57 ?rore and in the eighth five year plan total e"penditure towards SSI was 9s. /**5 ?rore. )lo(ali ation, Bi(erali ation, CT, and )$TT have 142 "" (anagement and )ntrepreneurship impact on SSIs, (oth positive and negative. The agencies of the )overnment to (e contracted are classified as State and central )overnment agencies. These agencies provide financial support, technical support and mar'eting support etc. M#3STI,JS *. %hat do you mean by Small-Scale industryD #ist the characteristics of Small-scale industries. 9. )4plain the rationale of SSI. :. )numerate the objectives of SSI. .. Discuss the scope SSI. ,. )4plain the role of SSI in economic development. 3. Discuss the advantages of SSI. 7. )4plain in brief the steps involved in starting an SSI. 8. )4plain the Government policy for SSI through five Industrial Policy 5esolutions. +. Discuss the Government<s support to SSI during five year plans. *-. )4plain the impact of Globali!ation and #iberali!ation on SSI. **. )4plain the impact of %T& and G'TT on SSI. *9. Discuss agencies of Government for SSI. *:. Discuss the meaning and need of support. *.. )4plain in brief the nature and types of support for SSI. OOO

The list of various State and ?entral )overnment agencies supporting small2 scale industries is given in previous chapter. Their activities and functions are discussed in the following sections. 4.1 NATIONAL SMALL INDUSTRIES COR.ORATION =NSIC> The Jational Small Industries ?orporation -JSI?., an enterprise under the union ministry of industries was set up in 0:55 in Jew Aelhi to promote aid and facilitate the growth of small scale industries in the country. JSI? offers a pac'age of assistance for the (enefit of smallPscale enterprises. 0. Single point registration9 9egistration under this scheme for participating in government and pu(lic sector underta'ing tenders. &. )nformation ser"ice9 JSI? continuously gets updated with the latest specific information on (usiness leads, technology and policy issues. *. +aw material assistance9 JSI? fulfils raw material re=uirements of small2scale industries and provides raw material on convenient and fle"i(le terms. 5. $eeting credit needs of SS)9 JSI? facilitate sanctions of term loan and wor'ing capital credit limit of small enterprise from (an's. 5. #erformance and credit rating9 JSI? gives credit rating (y international agencies su(sidi ed for 4.3 SMALL INDUSTRIES SER,ICE INSTITUTES =SISI> The small industries service institutes have (een set up in state capitals and other places all over the country to provide consultancy and training to small entrepreneurs (oth e"isting and prospective. he main functions of S)S) include9 -0. To serve as interface (etween central and state government. -&. To render technical support services. -*. To conduct entrepreneurship development programmes. -5. To initiate promotional programmes. he S)S)s also render assistance in the following areas9 -0. 3conomic consultancyFinformationF3A8 consultancy. -&. Trade and mar'et information. -*. 8ro6ect profiles. -5. State industrial potential surveys.

-5. -/. -7. -7.

Aistrict industrial potential surveys. @oderni ation and in plant studies. Cor'shop facilities. Training in various tradeFactivities.

*. Discuss the support provided by >SI/ to small scale industries. 9. )4plain various activities of SID&. :. )4plain the functions of SISI. )numerate various types of assistances rendered by it. .. Discuss the important functions of SSID/. ,. )4plain in brief the main function of DI/. 3. Discuss the various activities of T)/S&B. 7. )4plain the focused consultancy areas of T)/S&B. 8. )4plain the procedure for getting industrial sheds"plots from BI'D2. +. )numerate the projects for hich BS=/ gives preference. *-. #ist various loan schemes of BS=/. **. Discuss e@uity lease finance and hire purchase schemes of BS=/. OOO