Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
INTRODUCTION
The definition for small-scale industrial undertakings has changed over time.
Initially they were classified into two categories- those using power with less than 50
employees and those not using power with the employee strength being more than 50 but
less than 100. However the capital resources invested on plant and machinery buildings
have been the primary criteria to differentiate the small-scale industries from the large
and medium scale industries. An industrial unit can be categorized as a small- scale unit if
it fulfils the capital investment limit fixed by the Government of India for the small-scale
sector.
As per the latest definition which is effective since December 21, 1999, for any
industrial unit to be regarded as Small Scale Industrial unit the following condition is to
be satisfied: -
Investment in fixed assets like plants and equipments either held on ownership
terms on lease or on hire purchase should not be more than Rs 10 million.
However the unit in no way can be owned or controlled or ancillary of any other
industrial unit.
The traditional small-scale industries clearly differ from their modern counterparts
in many respects. The traditional units are highly labor consuming with their age-old
machineries and conventional techniques of production resulting in poor productivity rate
whereas the modern small-scale units are much more productive with less manpower and
more sophisticated equipments.
Khadi and handloom, sericulture, handicrafts, village industries, coir, Bell metal
are some of the traditional small-scale industries in India. The modern small industries
offer a wide range of products starting from simple items like hosiery products, garments,
leather products, fishing hook etc to more sophisticated items like television sets,
electronics control system, various engineering products especially as ancillaries to large
industrial undertakings.
1
HISTORY OF SMALL SCALE INDUSTRY
Ministry of Agro and Land Rural Industries and Ministry of SSI have been merged into a
single namely, Ministry of Micro Small & Medium Enterprises.
The President under Notification 9th May 2007 has amended the Government of India
(Allocation of business) Rules 1961, Pursuant to this amended Ministry of Agro and rural
Industries ( Krishi Evam Gramin Udyog Mantralay) and ministry of SSI (Laghu Udoyag
Mantralay) have been merged into a single Ministry, namely, Ministry of Micro Small &
Medium Enterprises ( Suksham Laghu Aur Medium Udyam Mantralay )
In most parts of the world the nomenclature used is small and Medium Enterprises
(SMEs) and the citeria for defininig include the number of employees and /or the
turnover. In India the Small Scale Industry eoveks different meanings for different
agencies and the financial institution. For example for the purpose of excise and sales Tax
Exemption, the turnover alone is the determinig criterion. However in broder terms,
currently, an SSI is defined in terms of investment ceiling on the original value of
instlled plant and machinery.
7.65 The small scale sector has played a very important role in the socio-
economic development of the country during the past 50 years. It has significantly
contributed to the overall growth in terms of the Gross Domestic Product (GDP),
employment generation and exports. The performance of the small scale sector, therefore,
has a direct impact on the growth of the overall economy. The performance of the small
scale sector in terms of parameters like number of units (both registered and
unregistered), production, employment and exports is given in Table 7.15. 7.66 During
the one year period i.e., 2000-01
2
THE SMALL SCALE INDUSTRIAL UDERTAKING
Tiny Enterprises
These cover SSI units [both in the factory and Non /Factory sectors] and power
loom units. Such units mostly use power driven machinery and possess superior
production techniques. Units in this sub-sector are generally located in close proximity to
large industrial centers or urban areas. These industries are moving away from the
traditional products to knowledge-based products.
This sector Comprises tiny and cottage industry segments like handlooms, Khadi and
Village Industries, handicrafts, sericulture and silk, rubber and coir. These units are
labour- intensive, are generally located in rural and semi-urban areas and are artisan
based. Usually the capital invested is also nominal.
3
How a person can start a small scale industries in Indian Scenario.
1. For starting a Small Scale Industry other than the industries identified as those of
highly polluting nature by Pondicherry Pollution Control Committee (PPCC),
entrepreneurs have to first apply to the Directorate of Industries and Commerce,
Pondicherry ,Branch office at Karaikal ,Sub-office at Mahe and Yanam, depending on the
location of the unit for Provisional SSI Registration in the form prescribed. In case of
industries identified as those of highly polluting nature by PPCC, entrepreneurs will have
to first get clearances from the Pondicherry Pollution Control Committee through the
Directorate of Industries and Commerce and then approach for provisional SSI
registration after its clearance.
2. All proposals for setting up of H.T. Industries will be referred to the Electricity
Department for getting initial advice regarding the availability of power for the unit . In
the case of such industries provisional registration / NOC will not be issued unless the
initial advice is received from the Electricity Department.
3. All the entrepreneurs irrespective of their size of investment, may approach the
`Single Window Committee` (Functioning in the District Industries Centre) for getting
the requisite clearances expeditiously.
4. The regional office of the District Industries Centre will make available to the
entrepreneurs/ Industrialists, the prescribed application forms for obtaining clearances/
permissions from the following Departments (Photocopies and computerised forms in
the format required by the concerned Department will also be accepted): -
4
5. Duly filled in application forms in prescribed format along with required
copies of the site, building & machinery layout plans and other relevant documents shall
be submitted to the District Industries Centre or its regional office for obtaining
Clearances / Permissions from the various Departments. The District Industries Centre or
its regional office on receipt of the applications will forward the same to the concerned
Department within three days of the receipt of the applications.
6. After installing machinery. entrepreneurs have to get licences from the concerned
Municipality/ Commune Panchayat, Licence from Inspectorate of Factories and consent
orders from the PPCC for operation of the unit.
2. After commencement of production:- Initially the unit has to obtain NOC from the
Directorate of Industries and Commerce to this effect and amendment in the Permanent
Registration Certificate.these the changes have to be effected in the licences issued by
Municipality / Commune Panchayat, Inspector of Factories and PPCC. After obtaining
those changes, Industries Department will make
5
INSTITUTE OF SKILL DEVELOPMENT & TRAINING OF SSI
Others
MSME Development Institute
Tools Rooms
Central Footwear Training Center- Agra & Chnnai.
Fragrance and Flower Development Center- Kannauj.
Procer-Cum Product Development center- Agra.
Electronics service & Training Center- Ram Nagar.
Institute for Design Electrical Measumg Instrument- Mumbai.
For running business finance is necessary. Owners of SSI need finance for fixed
assets installation to start business & working capital for keep the running condition.
Financial requirements of small scale industries can be classified into two heads:
Equity Capital :- This is the investment by the owner of the small unit for setting
up a unit. At the time of establishing business it is very much required that the
owner contribute his own capital & then he collect funds from loan.it is preferable
to purchase all fixed assets from owner funds as the chances of success as high in
that case. On the other hand depending upon interest beariy to outsiders loan acur-
ring fixed assets result to maximum payment to outsiders in from of interest and
very less amount left for entrepreneur as profit .
Laon Capital :- In real condition entrepreneur doesn’t have adequate funds for
Sting in the units, so the owner requires long term and short loan. Long term
loans
For purchase of fixed assets and short term loan for making day to day expenses. A
Financial structure will be that wfere more investments are from own (equity)
capital. But as the loan from outsider also important so the amount of outsider fund
should be less than or equal to owners fund.
6
FINANCING OF SSI
The incentives not only motivate entrepreneurs to set up industries in the small-
scale sector, but also strengthen the entrepreneurs base in the economy. Of all the
elements that go into a business, credit is the perhaps the most crucial.the best plans can
come to naught if adequate finance is not available at right time. SSIs need credit
support not only for running the enterprise & operational requirements but also for
diversification, modernization / up gradation of facilities, capacity expansion etc. In
respect of SSIs, the problem of credit becomes all the more critical whenever any
episodic event occurs such as a large order, rejection of consignment, inordinate delay
in payment etc. In general, SSIs operate on tight budgets, often financed through
owner’s own contribution, loans from friends and relatives and some bank credit.
Government of India recognized the need for a focused credit policy for SSI in the early
days of promotion of SSIs and RBI has been instrumental in devising a multi-stage
approach / financial system for credit dispensation to different sectors of the economy,
for example, agriculture, industry, exports, SSIs etc. This section focuses on the role of
SIDBI, SFCs and commercial banks in granting credit to small scale and tiny sector.
7
FINANCIAL INSTITUTION WHICH SUPPORTS DEVELOPING OF SSI
Bill Financing
Bills drawn by small scale units for the supplies made to the reputed and well
established enterprises and duly accepted by them will be financed / discounted by NSIC
for a maximum period of 90 days.
BENEFITS
100% financing at very liberal terms with easy repayment schedule.
Single window system for imported equipment. The Corporation undertakes to complete
formalities like procuring import licence, opening of Letter of Credit etc.
8
2 Small Industries Service Institute (SISI)
The scheme was launched on the auspicious day of 2nd October, 1993. the birth
Anniversary of Mahatma Gandhi all over the country the main objective of the PMRY
scheme was to provide easy subsidized financial assistance to educated unemployed
youth for starting their own enterprises in manufacturing, business and service and trade
sectors initially the scheme was aimed at providing self-employment to one millon
educated unemployed youth in the country by setting up 7 lakh micro enterses through
inducting service and buiness ventures over a period of 21/2 yers. The scheme was a
stupendous success and caught the imagination of the youth. Overwhelmed with the
response and ever-increasing need, the government has decided to mark it a permanent
scheme and framed modalities and guidelines for its successful implementation and fulfil
the purpose for which it designed.
9
• Locations / Networks of SISI
o SISI Agartala (Tripura)
o SISI Ahmedabad (Gujarat)
o SISI Agra (UP)
o SISI Allahabad (UP)
o SISI Bangalore (Karnataka)
o SISI Mumbai (Maharashtra)
o SISI Calcutta (West Bengal)
o SISI Cuttack (Orissa)
o SISI Guwahati (Assam)
o SISI Hubli (Karnataka)
o SISI Hyderabad (A.P.)
o SISI Indore (M.P.)
o SISI Imphal (Manipur)
o SISI Jaipur (Rajasthan)
o SISI Kanpur (U.P.)
o SISI Karnal (Haryana)
o SISI Ludhiana (Punjab)
o SISI Chennai (Tamil Nadu)
o SISI Margao (Goa)
o SISI Muzaffarpur (Bihar)
o SISI Nagpur (Maharashtra)
o SISI New Delhi (New Delhi)
3 NSIC
NSIC assist and promotes SSI sector through various schemes. A composite term
lone scheme assists existing and prospective entrepreneurs to acquire land and building ,
machinery ,equipment and working capital at one place. Machinery and equipment are
provided through hire purchase and leasing on easy financial terms and full financing .
Working capital finance and off the shelf availability of scarce materials are also
provided. SSI units can get registered with NSCI to avail benefits of local /global tender
and also for Government Store Purchase Programme . NSIC also does bill discounting up
to a specified limit. The 5 NSIC Technical Service Centers and a number of extension
centers provide technically trained manpower testing facilities and prototype
modification. The Technology Transfer Centre provides on-line data on latest technology.
The NSIC-STP complex provides packaged infrastructure facilities for software
export units to be set up in the complex NSIC also provides various marketing facilities
(e.g. exhibitions, BSM, etc.). It also operates an Indo-Italian Line of Credit for select
sectors. NSIC is also working out a programme for development of SSI sector in the
North-Eastern Region. Once approved in principle, NSIC will implement a scheme a
10
Mentoring / Advisory services for SSI sector in select clusters. Technocrats and
successful firm owners will provide the service to SSI units on a payment basis, which
will be supported by the scheme NSIC has offices all over.
c) Foreign currency loan for import of equipment are also available to export
oriented small scale enterprises.
d) SIDBI also provide venture capital assistance to the entrepreneurs for their
innovative ventures if they have a sound management team, long term
competitive advantages and a potential for above average leading to attractive
return on investment.
11
b) Technology Bureau for Small Enterprise formed to oversee Technology Transfer,
March making Servise, Finance Syndication and facilitating Joint Ventures.
c) SIDBI Foundation for Micro Credit has been launched to provide financial assist-
ance to the poor to meet emerging needs of the micro finance sector especially in
the rural areas.
PERFORMANCE OF SIDBI
SIDBI's efforts have resulted in increased flow of credit to SSI sector since inception as
indicated below:
12
It concentrates mostly on medium and large scale projects .by an agreement with other
Financial Institution and IDBI, the IFC specializes in financing of certain industries like
jute, cement, sugar etc.
IDBI also borrows abroad and secures funds under arrangements with foreign
financial institution, foreign banks and foreign governments and operates foreign lines of
credit, secured by the Government.
FUNCTIONS
NATIONAL INTREST
FINANCIAL REPORTING AND RECORDS
CARPORATE DISCLOSURE PARTIES
COMPETETION
13
EQUAL RIGHTS
PROHIBITED BUSINESS
CORPORATE OPPORTUNITY
ETHICAL STANDARDS
Sources Of Funds
Issue of bonds and debentures in the market, fixed deposits from the public, borrowings
from RBI, IDBI, state government etc. These bodies assist small scale industries, units in
backward areas, new entrepreneurs etc. Industrial Development Corporation, Industrial
Investment corporation were set by some states for promotion, infrastructural
development, and financial, managerial and entrepreneurial guidance to the industrialists,
provision of industrial sheds/ plots for setting units up of small units etc.
5 Commercial Bank
In India, the banks are major sources of finance, are encouraged in several ways to extend
export fianance, to achive the objectives of foreign trade policy. Credit requirement of
SSIs is basically of two types- Long Term Loans and working Capital. Commercial banks
with their extensive network of branches operating nation wide are primary channels for
working capital requirement.
Banks are required to compulsory ensure that defined percentage (currently 40%) of their
overall lending is made to priority sectors as classified by RBI. These sector their include
agriculture, small industries, export etc. The inclusion of small industries in this lists
makes them eligible for this earmarked credit. With the liberalization of the Indian
economy, greater emphasis was placed on meeting the credit needs of SSIs. This was
manifest through the following initiatives taken by RBI.
a) Credit for tiny sector has been earmarked within overall lending to small
industries. In order to ensure that credit is available to all segments of SSI sectors
RBI has issued instruction that out of the funds normally available to SSI sector,
40% be given to units with investment inplant & machinery up to Rs. 5 lakhs,
20% for units with investment between 5 lakhs to Rs. 25 lakhs and remaining
40% for other units.
b) Public sector banks have been advised to operationalise more specialized SSI
branches at centers where there is a potential for financing many SSI borrowers.
As on March 2002, 391 specialised SSI branches are working in the country.
c) ‘Single Window Scheme’ was extend to all districts to meet the financial
requirements (both term loan & working capital) of SSIs.
14
d) Laghu Udyami Credit Card (LUCC) Scheme was launched by the public sector
banks for providing simplified & borrowed friendly Credit facilities to SSi, tiny
enterprises retail traders & artisans.
e) Composite loan limit was enhanced to Rs.50 lakhs from Rs.25 lacks.
7 Public Deposits
Public deposit means collecting funds by general public by issuing public deposit
certificate. The small scale unit need not to keep any security against funds collected by
public deposit, but rate of interest is higher than the interest rate provide by commercial
bank.
IDBI also borrows abroad and secures funds under arrangements with foreign financial
institution, foreign banks and foreign governments and operates foreign lines of credit,
secured by the Government.
Small Scale Industries (SSIs) have always been regarded for their high
employment intensity. SSIs today employ over 192 lakh persons and this is targeted to
grow at 4% per annum during the 10th Plan period of 2002-2007. Though often described
as ideal vehicles for promotion creation of jobs in the economy, at the same time, it is
also true that the nature of employment in the sector is undergoing change. Employment
generation figure declined from 6.3 persons per SSI in 1987-88 (2nd Census) to 3.6
persons per SSI in 1999-2000 (Sample Survey). Expert committees which have looked at
this issue have also come up with different sets of recommendations. The Task Force on
Employment Opportunities under Shri Montek Singh Ahluwalia had identified SSIs as an
important source of employment and as an important incubator for entrepreneurship. The
Task Force however called for a shift in policy from protection to promotion. The Task
Force felt that almost 70% of the total employment opportunities generated over the next
10 years were likely to be in the services sector. On the other hand, a Special Group on
15
Employment for creation of 10 million employment opportunities per year over the 10th
Plan under Dr. S.P. Gupta has recommended that since more than 92% of employment
generation in the economy is coming from small and medium enterprises, including
agriculture - commonly defined as the unorganized sector, there is need to give special
focused attention for meeting the requirements of small and medium enterprises to enable
them to create more jobs in the future.
During the 1990s, jobs in the organized sector grew at less than 1% per annum
while jobs in the SSI sector increased by 3.5% every year. In the changing scenario, on
account of globalization and liberalization, what shall be the impact on the creation of
new jobs by SSIs? Does increase in capital intensity of SSIs, as they go in for
technological upgradation, imply that lesser jobs will be available? You may perhaps like
to pose such questions to the Hon'ble Minister of State (SSI), Smt. Vasundhara Raje,
who shall be joining us for an online chat session. Avail of this opportunity to address
your queries to the Minister and seek clarifications on various issues.
Topic for discussion: SSI's as creator of jobs Time: 4 pm IST on 16th July 2002
16