Steps To Start A Small Scale Industry

An Industry: is one in which something is converted into other form(s) with value-addition
using men, material, & equipment. When this involves at least 3-persons (and power is used) or
at least 5-persons (when power is not used), it is an industry, else, it is classified as an artisan
activity. Service enterprises may also be in the small-scale ambit, and there are many schemes
that are now available for financing them.

S.S.I.: A small-scale industry is one in which the investment in plant & machinery is less than
Rs. 1 crore. When investment is less than Rs. 25 Lakhs it qualifies to be treated as a Tiny
sector SSI.


PRODUCT IDENTIFICATION:

The overriding reason for anyone to think of establishing a SSI unit can be summarised in one
word - OPPORTUNITY. If one can see an opportunity to provide a product or service in a
manner to generate sufficient surplus, then one way is to start up a SSI unit.

LOCATION :
An industry can be started by the entrepreneur at either his own place / own shed, or rented place
/ rented shed. It can also be located at an industrial estate.


FORM OF OWNERSHIP :
Sole proprietorship family ownership partnership this is the entrepreneurs personal decision.

Location of unit :
Location of unit proximity to source of raw materials nearness to the market general business
climate of the region climate and environmental factors

APPROVALS :
Every SSI unit has to comply with various regulations in force. These include regulatory,
taxation, environmental and certain product specific clearances.

Licensing in the Industries sector is governed by the licensing exemption notification issued by
Govt. of India in July 25 1991 under the Industries (Development and Regulation) Act, 1951. In
SSI, there are virtually no licensing restrictions. No industrial license is required except in case
of 6 product groups included in compulsory licensing (These products groups mainly cover
products that can only be made in large sector)

But if a small-scale unit employs less than 100 workers with/without power then it would not
require a license from the Govt. of India even for the 6 product groups covered in licensing under
Schedule II of the notification

REGISTRATION:

Provisional Registration Certificate (PRC) :

In order to take steps to set up an industry for a particular product at a particular place, one needs
to Register it with the state Governments District or Tehsil Industries Centre (DIC / TIC etc),
which issues a Provisional Registration certificate (PRC).
To get the PRC, apply to the DIC etc in prescribed format with a Project Report / Project
Profile. A 2 to 3 page project report / profile would suffice if it is a small SSI. It would highlight
the background of the entrepreneur, plant & machinery to be bought & its value, details of where
the product would sell & at what price, and the sources of funds including term loan, working
capital loan, own equity, etc. For large SSI project, details like cash-flow chart will also be
needed.
The DIC etc will issue the PRC (normally, across the table) if the investment in plant &
machinery is within Rs. 1 Crore, the product is not banned, and such an activity is declared as an
industry (many services like IT, Hotels, Hospitals are included). The PRC is valid for 3-years,
and can be extended if the entrepreneur cites unavoidable circumstances.
The PRC is a prerequisite for getting other permissions permission of local authority to set up
the industry, Trade licence, Power, Pollution clearance, clearance of inspector of Boilers,
Registration for commercial Taxes (State & Central sales tax) etc. The PRC is also needed for
obtaining Term Loan & Working Capital.

Permanent Registration Certificate (PMT)
Having set up the unit and achieved Trial production, the entrepreneur is expected to take the
Permanent registration (PMT). This is also issued by the DIC etc. To get PMT, apply in
prescribed format along with copies of PRC, Power sanction, Municipal / Panchayat Licence,
First Sale Invoice, Lease or rental agreement, Partnership Deed or Memorandum of Association
(in case of limited co.), and a required affidavit. The PMT is normally issued either after
inspection or without inspection subject to later verification.


CLEARANCES :
An entrepreneur has to obtain several clearances or permissions depending upon the nature of his
unit and products manufactured.

Regulatory or Taxation Clearances
1. Registration under Sales Tax Act - Commercial Tax officer of area concerned
2. Registration under Central Excise Act - Collector of Central Excise or his nominee for
area Payment of Income Tax - ITO of the area concerned Registration of Partnership
deed - Inspector General of area concerned
3. Calibration of weights & measures - Weights and Measures Inspector of State
4. Power Connection - Designated Officer of State Electricity Board
5. Employee strength exceeding 10 with power connection or 20 without power - Chief
Inspector of Factories

Arrangement of finance :
Arrangement of finance fixed capital : the finance required for setting up infrastructure like land,
buildings, machinery etc.. this can be generated by partnership, bank loans

Arrangement of finance working capital: it is necessary for buying raw materials and recurring
expenditure. It hugely depends on the financial position of the firm.

Starting production:
After the basic trial runs, commercial production has to begin with proper quality checks in
place.

Marketing the product:
This is the last but the most important step in realizing the business ambition. No business is
complete without selling the products and ensuring that the revenues flow into the organisation.
Marketing is the prime way to enhance the business and the best way to survive in this
competitive world.