management of small scale industry

8/13/2019 management of small scale industry

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BMS@VES SSI in New Millennium 22ndFebruary, 2009

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PROJECT BY:

NAMES ROLL NO.

NITESH BANGERA 01

HIMANSHU CHANDNANI 03

SHUBHANGI ADENKAR 05

SHEEMAN AHMED 07

AKHTAR SIDDIQUE 09

BIJNESH RANA 44

SUBMITTED TO:

Prof. V.S.GOPAL

S.Y.BMS

(2008-2009)

V.E.S COLLEGE OF ARTS, SCIENCE & COMMERCE, CHEMBUR-71.


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Acknowledgement

We are very much glad to Prof. V.S.GOPAL forgiving us such a knowledgeable project.

It was an immense pleasure to work on this

project. In this project we got to know about

the

SMALL SCALE INDUSTRIES IN NEW

MILLENNIUM.

We are also hoping for such good and

knowledgeable projects in future also.

Thanking you


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INDEX

1. Introduction2.

Classification Of SSI

3. Objectives of SSI4. Traditional And Modern Small Scale Industries.5. SSIs In India (Statistics)6. Infrastructure For Modernization And Growth Of SSIs7. Programmes And Schemes8.

Incentives For Obtaining Quality System Certificate By SSI

9. Fiscal Incentives To SSIs10.Measures For Promotion And Development Of SSIs11.SSI

In PastIn Present

In Future.12.Conclusion13.Bibliography


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INTRODUCTION

Since the time of independence, the small-scale sector in India has been a major

contributor to countrys Gross Domestic Product (GDP). This traditional sector in India is

considered to have huge growth prospect with its wide range of products. With 40% in total

industrial output and 35% share in exports, the small-scale industrial sector in India is acting asEngine of Growth in the new millennium.

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 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 scaleindustries. An industrial unit can be categorized as a small- scale unit if it fulfills the capital

investment limit fixed by the Government of India for the small-scale sector.

As per the latest definition which is effective since February 28, 2007, for any industrial

unit to be regarded as Small Scale Industrial unit the following condition is to be satisfied:

i) Investment in fixed assets like plants and equipments should not be more than Rs.1.5Cr.ii) An initial Investment of capital directly / indirectly.

iii) The trade is classified Domestic, Export Oriented Units (EOU).iv) Artisians, Village, Cottage industries, are identified.v)

Women enterprise is also given importance- investment upto 10 lakhs.

The Village and Small Industries Sector comprises of five Sub-Sectors viz.,

1) Small Scale Industries (under the control of the Director of Industries and Commerce),2) Handlooms and Textiles3) Khadi and Village Industries

Handicrafts Development


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CLASSIFICATION OF SSI

Manufacturing:

Village, Cottage industry, Handloom, Handicrafts, ancillary Units.Trading:

Wholesale, Retail, Commission agentsService:

Professional services-e.g. medicine, accounting, law etc. Commercial service-e.g. warehouse, cold storage. Fashion-dry cleaning, repairing, maintenance

OBJECTIVES OF SSI: Create and generate employment. Distribute economic advantage Raise Standard of living Increase Production Promotes development of backward areas.

Traditional and Modern Small Scale Industries and Their Products: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.

Some of the traditional small scale industries are that of Khadi and Handloom, coir,

village industries etc. The modern small scale industries are that of garments, leather products

etc. But in today's scenario, most of the small scale industries in India are modern small scale

industries. The items manufactured in modern Small-scale service & Business enterprises in

India now include:

Rubber Products Plastic Products Chemical Products Glass And Ceramics Mechanical Engineering Items Hardware Electrical Items Transport Equipment

Electronic Components AndEquipments

Automobile Parts Bicycle Parts Instruments Sports Goods Stationery Items Clocks And Watches.


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Distinction Between Traditional And Modern Small Industries

Traditional small industries Modern small industriesInclude khadi, handloom, village

industries, handicrafts, sericulture, coir

etc.

Variety of goods including simple and sophisticated

goods such as TV sets, engineering products and

electronic control systems.

Highly labor-intensive Use highly sophisticated equipment and machinery.

Since independence the Government of India has nurtured this sector with special care with the

following aims:

To develop this sector as a major source of employment To encourage decentralized industrial expansion To ensure equitable distribution of income. To mobilize capital investment and entrepreneurship skills

Need to Boost Small Scale Industries:

Realizing the importance of small scale industries in Indian economy, the government is

trying to develop this industry keeping in mind the following aims:

To increase employment. To prevent unequal distribution of income. To develop capital investment.

SSIs IN INDIA

Estimated No. of Units 3.57 Million

Employment 19.96 Million

Share in Industrial Value Added 40%

Share in Total Exports 3.57 Million (45-50%)

Total Number of Items Produced Over 9,000

Number of Reserved Items 298


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Infrastructure For Modernization And Growth Of SSIs:

Institution Centers Functions

Small Industries Development

Organization (SIDO)Established in 1954,

Branches spread all

over country

Technology development, energy

conservation, pollution control,

ISO 9000 etc, training, seminars,

plant visits.

Small Industries Services

Institutes (SISIs)As of 1991, 26 SISIs Provide assistance in all phases of

manufacturing - identify items for

manufacturing, provide info on

technologies, organize

workshops. Have well-equipped

workshops and labs offering

testing services to SSIs.

Directorate of Industries 6 regional and 30 district

level establishmentsIndustrial development in states.

Implementation of SSI

promotional schemes

District Industries Centers

(DIC)

Began in 1979,

422 DICs operating in 431

districts (counties)

Provide and arrange a package of

assistance for credit guidance,

training, marketing.

National Small Industries

Corporation (NSIC)

Has 3 prototype

development and testing

centers in country.

Provide equipment on hire-

purchase basis.

Has marketing boards to promote

marketing. Testing centers also

provide advanced technicaltraining.

NISIET

(extension training

institute)

Established in 1962 by

Government of India.

Training, research and

consultancy in SSI related fields

of development, extension and

information for development.

SIDBI (Bank) Established under special

act of Parliament in 1990.

33 offices (5 regional and

28 branch offices)

To ensure increased flow of

financial assistance to SSIs. Direct

assistance and indirect assistance

schemes (e.g. refinancing)

Information Banks Under system called

National Information

System for Science and

Technology (NISSAT)

Provides information, particularly

with respect to latest

developments in field of

technology.


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Other organizations involved are: Trade Development Authority of India Regional Testing Centers Indian Institutes of Technology (IITs) Universities, polytechnics and colleges.

These provide equipment, expert personnel and testing facilities. Each institution has aconsulting division to help SSIs.

Establishment of Technology Development and Modernization Fund under the scheme ofdirect Assistance of the SIDBI.

Enterprise Strengthening service under SIDBI : Under this service, there are specificprograms including technology transfer, technology upgradation in indentified industry

clusters And management development

Technology Development Board under the Department of Science and Technology. SIDO and SISIs have introduced a program for promoting technological modernization of the

SSIsMost of the policies before the 1990s were aimed at protecting the small sector rather

than making it competitive.

Major issues that these policies did not address are as follows: Problems in obtaining credit Sickness in the SSIs

As of September 1992, about 233 thousand small-scale units were sick. Many of the

sick units ultimately close down due to finance and marketing problems. Poor

management has also be identified as a major cause of sickness.

The recent policies and programs providing management training by the SIDBI is

hopefully a step towards solving this problem.

Negative impacts of reservation policy Reservation in areas of mechanical engineering, chemical products and auto-

ancillary industry group.

Problem of large firms entering in reserved areas and no penalty. Hence the reservation policy tends to become large redundant.

The Equity policy Non-classification of a separate medium enterprise under the Indian industrial sector,regional imbalances in the concentration of small scale industries

Survey data shows that government institutions are the ``least important sources oftechnological information.''

Lack of coordination between the various support organizations set up by the government.


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PROGRAMMES AND SCHEMES

Guidelines For Assigning Studies, Research, Etc. Under The Scheme Surveys,

Studies And Policy Research

In the context of the liberalisation and globalisation of the economy the competitivestrength of the small scale industries will need to be enhanced through suitable policy

measures by which the units can be made operational and more efficient. In order to

formulate sustainable policy frameworks operational strategies and action plans there is a

need for getting relevant data as also surveys, studies and investigations including producers

as well as customers feedback on the problem areas of units in the Small Scale, Village, Khadi

and Coir Sectors. Such data collection, surveys, studies investigations etc. would be undertaken

under the above scheme and will include the following:

i) Action oriented research studies relating to problems and prospects of industrial units inthe small scale, khadi village and coir sectors, in order to improve the viability of these

industrial units to enable them to withstand competition.

ii) Policy oriented research studies to assess the impact of existing policies and suggestingremedial measures for improvement of policies and programmes appropriate for the

development of the SSI, KVI and Coir sectors.

iii) Problem oriented studies highlighting finance, sickness, raw material and marketingaspects of industrial units or group of industries.

iv) Studies relating to technological problems faced by Small Scale, Village and CottageIndustries and measures for upgradation of technology of these industries.

v) Industry related studies to find out the problems of a specific industry and suggestingappropriate measures.

vi) Area specific studies at Block Level, District Level, State Level and National Level,particularly in respect of employment generation, income creation and

creation/generation of new manufacturing techniques.

vii) Sub-contracting and ancillarisation studies for the benefit of modern small scaleindustries.

viii) Sector-specific Studies and Surveys such as a Modern Small Scale Industries, VillageIndustries, Khadi, Coir, Handloom, Handicrafts etc.

ix) Industrial potential surveys consisting of the various sub-sectors in the VSI sector,feasibility studies, market surveys and studies, demand estimates, pricing of products

etc.


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x) Evaluation of the existing policy measures in the Small Scale Industries, VillageIndustries, khadi, coir and similar sectors.

xi) Studies on micro-enterprises and micro-financing institutions.xii) Any other study or survey which the Department considers necessary for taking policy

decisions.

Identification Of The Subject Of Study And Selection Of Institutions:

The Department of SSI & ARI will first identify the specific area/areas in which

studies/surveys are proposed to be carried out with the approval of Secretary SSI&ARI. The

study/surveys may be entrusted to research, academic and training institutions, registered societies and

reputed individuals with proven competence to undertake such assignments.

The Committee will also examine the details of the proposals submitted by the short listed

organizations including the cost aspect and will make recommendation to an Apex Level Committee.

Payment Schedule:

The payment for the study will be as under:

First Installment - 40% of the fees shall be released on the signing of the agreement with

regard to the terms and conditions of the study between the Department and the concerned

Institution.

Second Installment- 35% of the fees shall be released after submission of the draft report with

the stipulated time frame.

Third and final Installment- 25% of the fees shall be released on the submission of the finalreport and its acceptance by the Government.

Other Terms And Conditions:

The other general terms and conditions would be:

i) The Government shall not pay any extra amount for any cost escalation of the studyproject beyond the time period stipulated in the agreement.

ii) Unit wise information on any survey that may be conducted and the final report shouldbe made available on a floppy disc to the Department of SSI&ARI.

iii) At least 50 hard copies of the final report of the survey/study should be made availableto the Department of SSI&ARI.

iv) Government of India may, if need be, modify the terms and conditions if the studyduring the currency of the study in order to strengthen/deepen the scope/coverage of

the study.


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v) The study reports and the contents thereof would be the property of Government ofIndia and would not be published by the individual or agency who carried out the said

study without the prior approval of Government of India.

vi) The findings/raw data/processed data should not be disclosed to any agency/institutionwithout the prior approval of the Department of SSI&ARI.

Guidelines For National Entrepreneurship Development Board (NEDB):

The National Entrepreneurship Development Board (NEDB) is the apex body for

entrepreneurship development in the country. It devises and recommends to the Government,

schemes for promotion of entrepreneurship for encouraging self-employment in small scale

industries and small business. The Board also recommends suitable facilities and incentives for

entrepreneurship training. The Board may appoint committees for specific purposes and also

invite persons to the meeting of the Board, as and when necessary.

Under NEDB, funds are provided for entrepreneurship development, training, studies

etc. to meet the below mentioned objectives.

NEDB was set up by the Government with the following objectives:

i) To seek to evolve a ten years perspective plan of resource development and supportservices, required by micro, tiny, small and medium scale entrepreneurs to lead a

national drive by the concerned governmental agencies both Central and State

Government, R&D institutions, entrepreneurship promoting institutions and all others

interested in supporting the cause of entrepreneurship and entrepreneurial ventures.

ii) To articulate priorities and design and monitor the implementation of Action Plansthereby helping the area to cope with the business environment of 21stCentury.

iii) To identify & remove entry barriers for potential entrepreneurs (first generation andnew entrepreneurs).

iv) To focus on existing entrepreneurs in micro, tiny and small sector and identify andremove constraints to survivals, growth and continuously improve performance.

v) To facilitate the consolidation, growth and diversification of existing entrepreneurialventure in all possible ways.

vi) To support skill upgradation and renewal of learning processes among practisingentrepreneurs and managers of micro, tiny, small and medium enterprises.

vii) To sensitise to support agencies in the area of entrepreneurship about the currentrequirement of growth.

viii) To act as catalyst to institutionalise entrepreneurship development by supporting andstrengthening state level institutions for entrepreneurship development as most


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entrepreneurship related activities take place at the grass root level and removing

various constraints to their effective functioning.

International Cooperation

The small enterprises has emerged as a focus area for forging and promoting trade

investment ties with other countries. The economic reform programmes envisage the

emergence of the Indian industry as a global competitor with substantial presence in the

international markets. Technology upgradation and modernisation of SSI sector and promotion

of exports from small sector are inter-linked issues which are important objectives behind

promoting international cooperation. Sixteen countries viz. USA, Germany, Italy, South Korea,

UK, Taiwan, Japan, Singapore, Indonesia, Israel, Malaysia, China, Australia, Egypt, Thailand and

South Africa have been identified as thrust countries for promoting enterprise to enterprise

cooperation between the Indian SSIs and SMEs in these selected countries with a view to

upgrade the capabilities of Indian SSI sector to make it competitive in the global market.

The activities undertaken under this scheme are:

i) To conduct surveys and studies in order to identify the potential units in India andabroad for transfer of technology and promotion of joint ventures. For this purpose,

consultants could be appointed in India and abroad. Studies could be undertaken

through SIDO, NSIC and reputed industry association etc. this will be fully funded out of

Govt. grants.

ii) To depute and receive Government officials and representatives of associations andSMEs for preliminary discussion for making necessary arrangements for seminars and

enterprise to enterprise cooperation. These activities would be entirely funded by

Government under this Scheme.

iii) To hold seminars and promote enterprise to enterprise interaction through selectedagencies both in India and abroad. While common expenses for holding the seminars

etc. and the expenditure of travel of the officials from Govt. and organizations /

associations will be fully borne by Government, individual units selected for

participation in the seminar and enterprise to enterprise interactions would generally

meet their own expenses.

iv) Seminars and enterprise to enterprise interaction could be built around importantInternational Fairs, Exhibitions etc. and units selected could also participate in such fairs.

This would improve quality of participation of individual meetings. In such cases, Govt.will bear common expenditure on hiring the space etc. This could be done in close inter-

action with the Commerce Ministry and the Export Promotion Councils in identified

areas where SSIs have strength.


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INCENTIVES FOR OBTAINING QUALITY SYSTEM CERTIFICATE

BY SMALL SCALE INDUSTRIES

Different State Government's Scheme For Providing Incentives To SSI Units

GOVERNMENT OF A. P.-INDUSTRIAL POLICY 2000 - 2005

In order to improve the qualities of raw materials and also finished products, the unit

holder will be allowed for testing facilities for their products / raw materials and also to obtain

the BIS Certificate etc. 20 % of the balance 50 % investment subsidy and maximum of Rs. 2.00

lakhs will be provided on production of respective bills from Registered/Reputed Testing

Laboratories / B.I.S

GOVERNMENT OF M.P-INDUSTRIAL POLICY AND ACTION PLAN 1994

In order to increase export, products manufactured in the State need to be made more

competitive. Assured quality is the key to competitiveness. Obtaining an ISO 9000 is an

important step in this direction. In this context the State Government will provide assistance by

reimbursing upto 50% of fees paid to a recognized certification institution.

The State Government is keenly aware of the need for environmental protection along

with rapid industrial development in order to encourage installation of environmental

protection equipment, such equipment will be exempt from commercial taxes.

GOVERNMENT OF KERALA-INDUSTRIAL POLICY 2001

Technology Upgradation, Quality Certification, Intellectual Property

Upgradation of and transfer of technology to industry will be priority strategy for the

industrial development of Kerala. The R&D institutions in the State will be enabled to take up

technology development in specific industrial sectors in the state. Encouragement will be given

for getting accreditation with international quality testing agencies.

Grants will be provided to industrial units for quality certification by approved

institutions/research laboratories at the rate of 50% of the expenditure subject to a maximum

of Rs. 2 lakhs per unit.


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GOVERNMENT OF KARNATAKA

Scheme For Providing Incentive For Units Obtaining ISI Certification For Their

Products:

The State Government would provide a Subsidy of 50% of the fees and other chargespayable to the Bureau of Indian Standards (BIS) or Rs. 5 000/- (Rupees Five Thousand),

whichever is less, to the units which obtain ISI Certification for their products. In addition, the

Government would also provide subsidy to an extent of 25% of the expenses of Rs. 25 000/-

(Rupees Twenty Five Thousand), whichever is less, towards setting up of testing facilities for

getting the prescribed ISI Certification.

The grant of subsidy shall be subject to the following conditions:

1. The scheme shall be applicable only to the SSIs units registered and established in theState of Karnataka.

2. The unit shall be eligible to get the subsidy only once in each of the above cases.3. The subsidy shall be available to 50 units each year on first-cum-first serve basis.4. The subsidy would be released after the unit gets ISI Certification5. Subsidy for investment on testing equipments shall be available only after due

certification from the BIS that these equipments were necessary for getting the ISI mark.

Subsidy would be released based on estimated value of equipments indicated by BIS.

6. Applicants must have applied and received ISI Certification or Certification of BISregarding testing equipments on or after the Date of the Order to be eligible for Subsidy

under the scheme and a copy of the grant of such certification must be submitted along

with the application prescribed

7. The operational details of the scheme would be as prescribed by the Directorate ofIndustries and Commerce from time to time.

Scheme For Providing Incentive To Units Obtaining ISO 9000 Series Certification

Or Its Equivalent Indian Standard (IS 14000):

The State Government would provide a subsidy to an extent of 50% of the cost for

obtaining the ISO 9000 Series Certification, (cost includes application fee, assessment fee and

the annual licence fee for the first year or Rs. 50 000/- (Rs Fifty Thousand) only whichever is

less) to the units which obtain the ISO 9000 series Certification or its equivalent Indian Standard

(IS 14000 Series). The grant of subsidy shall be subject to the following conditions.

1. The scheme shall be applicable only to the SSI units registered and established in theState of Karnataka.

2. The unit shall be eligible to get the subsidy only once under the scheme.3. The subsidy shall be available to 10 (ten) units each year on first-come-first-serve basis.4. This benefit shall not be available to the units which have availed the benefit under the

GOI scheme.


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5. Applicants must have applied and received the ISO Certification (or its Indian Equivalent)on or after the date of the order to be eligible for claiming subsidy under the scheme

and a copy of the grant of such certification must be submitted along with the

application prescribed.

6. The operational details of the scheme would be as prescribed by the Directorate ofIndustries and Commerce.

GOVERNMENT OF GUJARAT-INDUSTRIAL POLICY 2000

Assistance For Quality Certification:

The State Government accords high priority for quality improvement. Assistance will be

provided to industrial units obtaining quality Certification from approved institutions/research

laboratories, at the rate of 50% of the expenditure up to a maximum of Rs. 2 lakhs

GOVERNMENT OF ORISSA-INDUSTRIAL POLICY 2001

Technology Upgradation:

The State Government accords priority on upgradation of technology by industrial units.

Encouragement will be given to get accreditation with International Quality, Testing Agencies

so as to make them internationally competitive. Government of India/SIDBI/FIS schemes on

Technology Upgradation will be actively pursued and promoted. The Technology Cell (TBIIP) set

up in OSFC with the help or UNIDO will be strengthened. Venture capital fund ofSIDBI/OSFC/IPICOL will be available for promotion of I.T. units.

The State Government Departments and Agencies will have to purchase their

requirements of these items only from local industries with ISO/ISI/EPM certification for the

items, by inviting competitive quotations from such industries. Efforts will be made to distribute

the purchase order quitably among the participating industries, prepared to accept the lowest

negotiated rate keeping in view their production capacity.

Any local small scale industrial unit having ISO or ISI Certification for its products will get

an additional price preference of 3 % or 2 % respectively.


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GOVERNMENT OF RAJASTHAN-INDUSTRIAL POLICY 1998

Technology Upgradation And Quality Improvement:

The State Government will institute Quality Awards to accord recognition to

entrepreneurs achieving excellence in the field of quality.

Preference will be given to ISI/ISO marked products in procurement by the State

Government and its Public Sector Enterprises.

GOVERNMENT OF JHARKHAND-JHARKHAND INDUSTRIAL POLICY 2001

Incentives For Quality Certification:

Small Scale / Ancillary Industries would be encouraged to seek ISI / ISO certification. The

State Government shall facilitate for reimbursement of charges for acquiring ISO 9000 ( or itsequivalent) certification to the extent of 75% of the cost subject to a maximum of Rs. 75000/- in

each case from the Central Government.

Purchase of ISO/ISI certified products will be given preference.

GOVERNMENT OF PUNJAB-INDUSTRIAL POLICY AND INCENTIVES CODE-1996

Modernization And Technology Upgradation Incentive

The Modernization and Technology Upgradation Incentives shall be granted to the

existing small scale Industrial Units for obtaining ISO standards and purchase of testing

equipment on obtaining ISO standard with financial assistance from SIDBI, NSIC, PFC or

commercial Banks through their specialized branches or any other branch of a scheduled bank.

GOVERNMENT OF HARYANA-INDUSTRIAL POLICY 1999

Reimbursement Of ISO 9000 Certification Expenses:

With the objective of promoting Quality Management Systems in the small and medium

industrial sector and for strengthening their products marketing and exports, the Society shall

give away incentives to SMEs for acquiring ISO 9000. The Govt. of India has formulated a policy

of giving away incentives to industrial units acquiring ISO 9000 certification. A sum of Rs. 75

000/- is given as subsidy to the SSI unit who is awarded ISO 9000 certification. To supplement

Govt. of India policy, SMERFH shall give Rs. 50 000/- or 50 % of the expenditure, whichever is


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FISCAL INCENTIVES TO SSIs

Fiscal incentives are provided through tax concessions granted in the form of

exemptions of direct or indirect taxes leviable on production or profits, besides special tax

concessions. These incentives have been provided to promote the SSIs.

TAX HOLIDAY

With effect from financial year 2005-06, deduction in respect of profits and gains for small scale

industrial undertakings is available under Section 80IB.

Small scale industrial undertaking can claim deduction at the following rates:

a) If SSI unit is owned by a company, the deduction available is 30% for first 10 years,b) If SSI unit is owned by a co-operative society, the deduction to be availed is 25% for first

10 years, and

c) If any other person owns SSI unit, the deduction to be claimed is 25% for first 10 years.The small scale units can avail this tax exemption facility only after fulfilling the following

conditions:

a) No small scale or ancillary undertaking shall be subsidiary of, or owned or controlled byother industrial undertaking.

b) SSI unit can manufacture any nature/type of goods/article to avail deduction.c) They should employ at least 10 workers in a manufacturing process carried out with the

aid of power or at least 20 workers in a manufacturing process carried out without the

aid of power.

d) This tax exemption from total income is allowed from the assessment year in which theunit begins to manufacture or produce goods or articles.

EXCISE CONCESSIONS

Government of India has provided a major relief by granting full exemption from the

payment of central excise duty on a specified output and thereafter slab-wise concessions.

The following concessions are available to them in this regard:

a) SS units producing goods up to Rs. 100 lakhs are exempted from payment of exciseduties.

b) SSI units having turnover less than Rs.60 lakhs per annum need not have a separatestoreroom for storing the finished products.c) SSIs are also not required to maintain any statutory records.d) There is no distinction between registered and unregistered units for SSI concessions.

Duty liability is to be discharged by 15th of the following month.

e) Normally, excise officers are not expected to visit SSI units paying less than Rs.11 lakhsduty annually.


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MEASURES FOR PROMOTION AND DEVELOPMENT OF SSIs

Central and State Governments have formulated several schemes to make the SSIs vital

and competitive.

RESERVATION POLICY

Reservation of items for exclusive manufacture in SSI sector has been one of the

important policy measures for promoting and protecting this sector against competition from

medium/large/ multinational companies

The policy received statutory backing in 1984 under Industries (Development &

Regulation) Act, 1951. However with the opening up of Indian trade in 1991, most of reserved

items were importable with the removal of quantitative restrictions. This paved the way to

phase out reservation in due course, and every year some items were dropped from the

reserved list. Out of 836 items reserved in 1989, 39 items were dereserved in four phases viz.,15 items in 1997, 9 items on 1999, 1 item on 2001 and 14 items on 2001. Subsequently, 51

items were dereserved in 2002, 75 items in 2003 and 85 items in 2004, 108 in March 2005, and

180 in May 2006. Now 298 items stand reserved for this sector.

It is believed that dereservations will enable medium/large/ multinational companies to

move out of capital intensive manufacturing to enter labour-intensive production. This shift

over will certainly create new employment opportunities at rapid rate.

GOVERNMENT'S PURCHASE PREFERENCE POLICY FOR SSI PRODUCTS

Realizing that small scale units face the problem of marketing their products at

remunerative prices, Government stores purchase programme was initiated to assist small-

scale industries in obtaining a fair share of the total purchases made by the Government and its

departments. Bulk and departmental buyers such as the Railways, Defence and Communication

ministries and companies are invited to participate in buyer-seller meets to enrich SSI units

knowledge regarding terms and conditions, quality standards, etc required by the buyer. Under

the Stores Purchase Policy of the Government 409 items of stores were reserved for exclusive

purchase from KVIC/Women's Development Corporations/Small Scale units.

This list also includes 8 handicraft items reserved for purchase from the Handicraft

Sector.


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TECHNICAL ASSISTANCE

Technology is the key to enhance an organisation's competitive advantage in today's

dynamic information age. SSIs need to develop and implement a technology strategy in

addition to financial, marketing and operational strategies, and adopt the one that helps

integrate their operations with their environment, customers and suppliers. National smallIndustries Corporation Ltd (NSIC) offers SSI units the following support and services through its

Technical Services Centre, Extension Centres, Software Technology Parks and Technology

Transfer Centre:

a) Technology audits and benchmarking.b) Technology needs assessment.c) Technology sourcing.d) Application of new techniques.e) Technology acquisition.f) Material testing facilities through accredited laboratories.g) Product design including Computer Aided Designsh) Common facility support in machining.i) Energy and environment services at selected centers.j) Classroom and practical training for skill upgradation

Software Technology Parks (STPs) facilitate small industries in setting up 100%

exportoriented units for software export. They also act as major point to activate software

exports directly through NSIC. These STPs extend support in terms of the requisite

infrastructure to the SSI units to start business operations with a minimum lead-time.

Following facilities are available at NSIC Software Technology Park:

a) Built-up Space:This enables the software industries to commence their operations withminimum gestation period.

b) Instant Power Connection: Instant power connections and Generator facility is alsoavailable on site, which will allow software units to work without any interruptions.

c) High Speed Data Link: High-speed data communication facility through satelliteconnection is available. The member units can avail 64 kbps to 2Mbps dedicated leased

channels.

d) Business Centre: A business centre comprising of Conference Hall, Photocopier, Fax,Training aids, etc. is available inside the STP complex for the member units.

e) Telephones:Each member units will be provided with one telephone line for businesspromotion on occupation.


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RAW MATERIAL ASSISTANCE

NSIC aims to help SSI units by financing purchase of raw material (both indigenous and

imported), thus allowing them to focus on manufacturing quality products. State Directorate of

Industries distributes scarce raw materials to small units. State Small Industries Development

Corporations have set up depots for distribution of raw materials to SSIs. The CentralGovernment has introduced a buffer stock scheme to ensure availability of scarce raw materials

to this sector.

FINANCIAL ASSISTANCE

Central and State Governments have introduced several schemes to ensure adequate

and timely availability of credit to SSIs through various institutions.

The main features of the financial services offered by institutions are as follow:

a) Financial assistance for the equipment and marketing activities under one roof withspeed and efficiency.

b) Prompt clearance of the proposals with minimum processing time and withoutcumbersome paper work.

c) Assistance in preparing the proposals and completion of document formalities.d) Market oriented interest rates and service charges with liberal terms of margin, level of

assistance and repayment schedules.

e) Arrangement with commercial banks for sanction of loan proposals received from smallenterprises.

NEW INITIATIVES

1 Advisory and Mentoring Services: Inadequate management skills are often the cause of

non-performance of small enterprises. NSIC's advisory and mentoring services are aimed at

effectively addressing this impediment to growth. It offers Mentor-pupil relationship

services in which the Mentor, a person with wide experience is running his own business,

will volunteer his services to individual or a group of units - the pupil. An advisor, a senior

professional, generally retired and a specialist in a specific area will assist in the process.

Mentors and advisor will provide the necessary professional and moral support in the early

lifecycle of an enterprise or to existing units facing critical operational problems.

2 Technology Business Incubators:Innovative entrepreneurial ideas have to be fostered and

developed in a supportive environment before they become attractive for Venture Capital

Institutions. Incubation centre enable technical entrepreneurs to conduct their Research

and Development programmes in a professional, friendly and supportive environment,

without making any further investment.


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Technology Business incubators are an important tool for entrepreneurial development.

Recognizing this need, NSIC has setup the following Technology Business Incubators.

i. Information Technology.ii. Product Design.iii. Energy and Environment.iv. Bio-Technology.v. Electronics and Communications

3. Suppliers Rating Accreditation Services: Accreditation, a necessity for buyer comfort,

speaks of the enterprise's ability to supply reliably and effectively a product, in accordance

with the customers changing needs. NSIC provide accreditation to SSI units by developing

an effective accreditation system process through collaboration with Indian and

International Accreditation agencies. Accreditation is provided at two levels - for all

Government purchases and for private national and international buyers.


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SSI in Past

While the first two decades after Independence focused on institutional support, the

third decade saw the use of reservation of products for exclusive manufacturers in small sector

as the preferred policy intervention. In the fourth decade, the endeavor was to promote

linkages of SMEs with large units, specially the public sector units (PSUS).

Liberalisation of the domestic economy made it easy for fresh capacity came up in the

form of large units across Industry segments. Despite substantial increase in the number of

players in each industry segment, the Small Scale sector has managed to hold on its own and

withstand the onslaught of competition. In certain cases, they have proved themselves to be

extremely adopt at beating large industrial houses which were enable to respond promptly to

changing market needs or innovate in time.

These were only Five pillars of SSI in India:

Handlooms:

Handlooms form a part of heritage of India and richness and diversity of our country and

artistry of the weavers. It plays a very important role in the economy. Handloom is the largest

economic activity after agriculture. This sector is estimated to provide direct and indirect

employment Due to effective State intervention through financial assistance and

implementation of various developmental and welfare schemes, this sector has been able to

withstand competition from the power loom and mill sectors. This sector contributes

substantially to the export income of the country.

Powerlooms:

The decentralised powerloom sector plays an important role in meeting the clothing

needs of the country. The powerloom industry produces a variety of cloth both grey as well as

processed bearing intricate designs.

Textiles:

The Textile Industry of the State is the forerunner in Industrial development and is

providing massive employment. It is predominantly spinning oriented.

Garments:

Garments occupy a predominant position in World trade as it is the second fastestgrowing product category next only to office and telecom equipment.


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Handicraft:

The Handicrafts sector is of special significance in the country's economy due to its

contribution to employment generation and foreign exchange earning through exports as well

as retaining heritage and tradition.

Sickness in the SSI Sector

As on March 31, 2001, there were 2,49,630 sick SSI units which had obtained loans from

banks. An amount of Rs. 4,506 crore of bank credit was blocked in these units. Of these only

13,076 units were considered potentially viable by the banks with outstanding credit of Rs. 399

crore. Further, banks had identified 2,25,488 units with outstanding bank credit amounting to

Rs. 3,943 crore as unviable.

Rehabilitation of sick units is a costly proposition as it involves rescheduling of past over

dues with concessions on interest amount due, additional credit for modernisation andtechnology upgradation and provision for fresh working capital. Presently, the State Level Inter-

Institutional Committee (SLIIC) of banks and financial institutions is the only forum looking into

rehabilitation of potentially viable sick SSI units.


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SSI in Present

The process of liberalisation, while providing tremendous opportunities, has thrown up

new challenges for the Indian small-scale industries sector.

Due to the unique characteristic of resilience and flexibility, the SSI sector has generallyperformed better than the manufacturing and the overall industry sector.

Like production, export from the SSI sector also have generally shown better growth

trends as compared to overall exports of the country, barring a few years.

In the view of the changes in EXIM policies and the Government stance, export from SSI

sector have increased.

Employment Generation:

SSI Sector in India creates largest employment opportunities for the Indian populace,

next only to Agriculture. It has been estimated that a Crore rupees of investment in fixed assetsin the small scale sector generates employment for persons.

Production:

The small scale industries sector plays a vital role for the growth of the country. It

contributes 40% of the gross manufacture to the Indian economy.

It has been estimated that a Crore rupees of investment in fixed assets in the small scale

sector produces lakhs of goods or services with an approximate value addition of ten

percentage points.

The small scale sector has grown rapidly over the years. The growth rates during the

various plan periods have been very impressive.

Export contribution:

SSI Sector plays a major role in India's present export performance. 45%-50% of the

Indian Exports is being contributed by SSI Sector. Direct exports from the SSI Sector account for

nearly 35% of total exports. The number of small scale units that undertake direct exports

would be more than 5000.

Besides direct exports, it is estimated that small scale industrial units contribute around

15% to exports indirectly. This takes place through merchant exporters, trading houses and

export houses. They may also be in the form of export orders from large units or the production

of parts and components for use for finished exportable goods.


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It would surprise many to know that non-traditional products account for more than

95% of the SSI exports.

The export from SSI sector has been clocking excellent growth rates in this decade. It

has been mostly fuelled by the performance of garment, leather and gems and jewellery units

from this sector.

Economic Indicators:

The Small Scale Industry today constitutes a very important segment of the Indian

economy. The development of this sector came about primarily due to the vision of our late

Prime Minister Jawaharlal Nehru who sought to develop core industry and have a supporting

sector in the form of small scale enterprises.

Small Scale Sector has emerged as a dynamic and vibrant sector of the economy.

Today, it accounts for nearly 35% of the gross value of output in the manufacturingsector and over 40% of the total exports from the country.

In terms of value added this sector accounts for about 40% of the value added in themanufacturing sector.

The sector's contribution to employment is next only to agriculture in India. It istherefore an excellent sector of economy for investment.

% Of SSI In Total Exports

Product % of SSI in total exports

Sports goods 100

Readymade garments 90

Woolen garments, knitwear 35

Processed foods 65

Marine products 29

Leather products 80

Plastic products 45

Cosmetic, basic chemicals & pharmaceutical

products 55

Engineering goods 30


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SSI in FutureTo encourage R&D in the SSI sector, provision of

suitable fiscal incentive could be considered. It has been

suggested that a Renewal / Upgradation of Technology fund

for SSI Units be created and the contribution made out of

their profit be exempted from income tax.

Opportunities:

Small industry sector has performed exceedingly well

and enabled our country to achieve a wide measure of

industrial growth and diversification.

By its less capital intensive and high labour absorbtion

nature, SSI sector has made significant contributions to

employment generation and also to rural industrialisation.

This sector is ideally suited to build on the strengths of ourtraditional skills and knowledge, by infusion of technologies,

capital and innovative marketing practices.

The capacity building for SSI sector in terms of infrastructural facilities, availability of

raw material, R&D, development of human skills, dissemination of information and formation

of industry cluster need to be developed to take advantage of new opportunities

The opportunities in the small scale sector are enormous due to the following factors:

Less Capital Intensive Extensive Promotion & Support by the Government Reservation for Exclusive Manufacture by small scale sector Project Profiles Funding Finance & Subsidies Machinery Procurement Raw Material Procurement Manpower Training Technical & Managerial skills Tools & Tools utilisation support Reservation for Exclusive Purchase by Government Export Promotion Growth in demand in the domestic market size due to overall economic growth

Increasing Export Potential for Indian products.


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Growth in Requirements for ancillary units due to the increase in number of greenfieldunits coming up in the large scale sector.

So this is the opportune time to set up projects in the small scale sector. It may be said

that the outlook is positive, indeed promising, given some safeguards. This expectation is based

on an essential feature of the Indian industry and the demand structures.

The promotional and protective policies of the Govt. have ensured the presence of this

sector in an astonishing range of products, particularly in consumer goods. However, the bug

bear of the sector has been the inadequacies in capital, technology and marketing. The process

of liberalisation will therefore, attract the infusion of just these things in the sector.

To Open Up Small Scale Industry, Govt Set To Remove Restrictive Law:

Moving to liberalise small-scale industries (SSIs), theGovernment is all set to remove a

restrictive clause in a 1951 law that prevented non-SSI players from setting up small units. Thenumber of items reserved for small-scale industries will remain the same at 114 but the

restrictive clause will go. The idea is that our SSIs must have access to technology and capital.

Once the notification clears Parliament, SSIs would only be defined on the basis of one

definition capital investments of up to Rs 5 crore in plant and machinery.

This is important because we have got to modernise our SSIs. It is not that some

reservations that are there would go away. Excise and other benefits will remain. The SSI sector

needs foreign equity. If today someone wants to set up an SSI unit and ancillary units, they

cannot fund it because it is not allowed. Now there is no limit. They can own an SSI. FDI would

be allowed, but it will be governed by the investment policy. So if a large industry is allowed 51per cent in that sector, then they will also be allowed 51 per cent in SSIs as well.

The big challenge is no more generating or earning foreign exchange which was the case

15 years ago, but generation of employment. In the end, the question (about policies) is if they

would multiply employment generation. In my view, any investment that generates additional

economic activity is great.
http://www.indianexpress.com/special/government,%20india/http://www.indianexpress.com/special/government,%20india/


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CONCLISION

Small Scale Industry sector has emerged as Indias engine of growth in the New

Millennium. The SSI sector accounts for nearly 40 per cent of value added in the manufacturing

sector and 34 per cent of total exports from the country. Through 95 per cent of industrial units

in the country, the sector provides employment to about 20 Million persons.

The Government has recognized its importance for the economy and its intention

towards promotion of SSIs is reflected in various Industrial policy Resolutions right from the

year 1948. The primary objective of the Small Scale Industrial Policy during the nineties was to

impart more vitality and growth-impetus to the sector to enable it to contribute its mite fully to

the economy, particularly in terms of growth of output, employment and exports. The sector

has been substantially delicensed. Further efforts would be made to deregulate and

debureaucratise the sector with a view to remove all fetters on its growth potential, reposing

greater faith in small and young entrepreneurs. All statutes, regulations and procedures were

reviewed and modified, wherever necessary, to ensure that their operations did not militate

against the interests of the small and village enterprises.

Government is aware of the challenges faced by SSIs and has been trying to improve

their competitiveness through various measures. These consist of the following:

a) Tax concessions have been provided to SSIs to promote investment in this sector andalso to grant relief to small entrepreneurs.

b) Technological facilities have been increased.c) In order to facilitate adequate flow of credit efforts have been done.d) Measures have also been taken to improve infrastructure facilities and promote

marketing of products.

e) To improve access to latest information, automation of the Ministry of SSI Office of DC(SSI), Directorate of Industries and District Industries Centres have been set up.

f) Other initiatives, such as, Advisory and Mentoring Services, Technology businessIncubators, Suppliers Rating Accreditation Services have been taken up.


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BIBLIOGRAPHY

SEARCH ENGINES:

www.google.com www.wikipedia.com www.yahoo.com

BOOKS REFERRED:

Management of Small-Scale Industries-J.C. Saboo

Management of Small-Scale Industries- Romeo S.Mascarenhas

management of small scale industry

Documents

Transcript of management of small scale industry