MAHARASHTRA STATE BOARD OF TECHNICAL EDUCATION

(MUMBAI)

REPORT ON

“Study of management principals applied to a small-scale industry’’

SUBMITTED BY

JAY NAGNATH SURYATAL

GUIDED BY

Prof. V.N. Bhorde

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 SHREEYASH POLYTECHNIC
DEPARTMENT OF CIVIL ENGG.
AURANGABAD-431007
2023-24
CERTIFICATE

This is to certify that the MICRO-PROJECT entitled named

“Study of management principals applied to a small-scale industry” submitted By JAY
SURYATAL Has completed the project satisfactorily in subject Management report for the academic
year 2023-2024 as prescribed in the curriculum.

Place: Aurangabad

Date: ………………

Seat: ……………..

Enrollment No: ……………………

Prof. S. R .Shirale Prof V.N. Bhorde

(H.O.D) (Guide)

Prof. S.S.Khandagale

(Principal)
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 ACKNOWLEDGEMENT
Gives us immense pleasure to present the Micro-Project named
“Study of management principals applied to a small-scale industry” as prescribed in the curriculum.
It is a matter of great pleasure to our deep sense of gratitude to the Principal Prof. S.S .Khandagale
of Shreeyash Polytechnic, Aurangabad, for her inspiration. We special thanks Prof. V.N. Bhorde for
her encouragement.

You’re obediently

JAY SURYATAL

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 INDEX
1. Introduction
2. Classification Of SSI
3. Objectives of SSI
4. Traditional And Modern Small Scale Industries.
5. SSIs In India (Statistics)
6. Infrastructure For Modernization And Growth Of SSIs
7. Programmes And Schemes
8. Incentives For Obtaining Quality System Certificate By SSI
9. Fiscal Incentives To SSIs
10. Measures For Promotion And Development Of SSIs
11. SSI
✓ In Past
✓ In Present
✓ In Future.
12. Conclusion
13. Bibliography

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 INTRODUCTION
Since the time of independence, the small-scale sector in India has been a major
contributor to country’s 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 as
Engine 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 scale
industries. 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 Textiles
3) 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 agents

Service:
• 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 • Electronic Components And
• Plastic Products Equipments
• Chemical Products • Automobile Parts
• Glass And Ceramics • Bicycle Parts
• Mechanical Engineering Items • Instruments
• Hardware • Sports Goods
• Electrical Items • Stationery Items
• Transport Equipment • Clocks And Watches.

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 Distinction Between Traditional And Modern Small Industries

Traditional small industries Modern small industries

Include khadi, handloom, village Variety of goods including simple and sophisticated
industries, handicrafts, sericulture, coir etc. 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 Established in 1954, Technology development, energy
Organization (SIDO) Branches spread all conservation, pollution control,
over country ISO 9000 etc, training, seminars,
plant visits.
Small Industries Services As of 1991, 26 SISIs Provide assistance in all phases of
Institutes (SISIs) 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 Industrial development in states.

level establishments Implementation of SSI
promotional schemes
District Industries Centers Began in 1979, Provide and arrange a package of
(DIC) 422 DICs operating in 431 assistance for credit guidance,
districts (counties) training, marketing.
National Small Industries Has 3 prototype development Provide equipment on hire-
Corporation (NSIC) and testing centers in purchase basis.
country. Has marketing boards to promote
marketing. Testing centers also
provide advanced technical
training.

NISIET Established in 1962 by Training, research and

(extension training Government of India. consultancy in SSI related fields
institute) of development, extension and
information for development.
SIDBI (Bank) Established under special To ensure increased flow of
act of Parliament in 1990. financial assistance to SSIs. Direct
33 offices (5 regional and assistance and indirect assistance
28 branch offices) schemes (e.g. refinancing)
Information Banks Under system called Provides information, particularly
National Information System with respect to latest
for Science and Technology developments in field of
(NISSAT) 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 a
consulting division to help SSIs.
✓ Establishment of Technology Development and Modernization Fund under the scheme of
direct Assistance of the SIDBI.
✓ Enterprise Strengthening service under SIDBI : Under this service, there are specific
programs 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
SSIs
Most 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 of
technological 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 competitive
strength 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 producer’s as well as
customer’s 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 in
the 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 suggesting
remedial 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 marketing
aspects of industrial units or group of industries.

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

v) Industry related studies to find out the problems of a specific industry and suggesting
appropriate 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 scale
industries.

viii) Sector-specific Studies and Surveys such as a Modern Small Scale Industries, Village
Industries, 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,
Village Industries, 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 final
report 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 study
project beyond the time period stipulated in the agreement.

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

iv) Government of India may, if need be, modify the terms and conditions if the study during
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 of India
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/institution
without 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 support
services, 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 Plans
thereby helping the area to cope with the business environment of 21 st Century.

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

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

v) To facilitate the consolidation, growth and diversification of existing entrepreneurial

venture in all possible ways.
vi) To support skill upgradation and renewal of learning processes among practising
entrepreneurs and managers of micro, tiny, small and medium enterprises.

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

viii) To act as catalyst to institutionalise entrepreneurship development by supporting and

strengthening 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 and abroad
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 and
SMEs 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 selected
agencies 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 important
International 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 charges
payable 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 the
State 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 Certification
5. 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 BIS
regarding 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 of
Industries 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 the
State 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 of
Industries 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 of
SIDBI/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
its equivalent) 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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 less, incurred in acquiring ISO 9000/equivalent certification if the unit has not availed the
incentives of Government of India. If the unit has availed the incentives granted by Govt. of
India then no subsidy will be reimbursed to the unit by SMERFH.
ELIGIBILITY

1. Small and Medium industrial units with fixed capital investment upto Rs. 500 lacs shall
be eligible for grant of incentives.
2. Submission of copy of ISO 9000 or equivalent certification to the SME industrial unit
3. Documents showing payment of charges (invoices & receipts) made to the certification
agency, counsel and purchase of machinery
4. The application should reach the Department for examining the case within 9 months
from the date of issue of ISO 9000 or equivalent certification by the certification agency.
5. An affidavit from the unit that they have not received any subsidy from Govt. of India

GOVERNMENT OF WEST BENGAL-INDUSTRIAL POLICY 2000

Subsidy For Quality Improvement In The Small Scale Sector:

An eligible Industrial unit in the Small Scale Sector shall be reimbursed 50% of the
expenditure upto a maximum of Rs. 5 lakhs for installing pollution control devices and obtaining
ISI Certification / ISO 9000 from approved Institutions/Research Laboratories.

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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 by

other 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 the
unit 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 excise
duties.
b) SSI units having turnover less than Rs.60 lakhs per annum need not have a separate
storeroom 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 lakhs
duty 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 unit’s
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 small Industries
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 Designs
h) 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 with
minimum gestation period.
b) Instant Power Connection: Instant power connections and Generator facility is also
available on site, which will allow software units to work without any interruptions.
c) High Speed Data Link: High-speed data communication facility through satellite
connection 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 business
promotion 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 Central
Government 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 with
speed and efficiency.
b) Prompt clearance of the proposals with minimum processing time and without
cumbersome 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 small
enterprises.

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 customer’s 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 fastest

growing 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 and
technology 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 generally
performed 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 assets
in 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 manufacturing
sector 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 the
manufacturing sector.
• The sector's contribution to employment is next only to agriculture in India. It is
therefore 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
55
products
Engineering goods 30

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 SSI in Future
To 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 our
traditional 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 greenfield
units 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), the Government is all set to remove a
restrictive clause in a 1951 law that prevented non-SSI players from setting up small units. The
number 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 51
per 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.

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 CONCLISION
Small Scale Industry sector has emerged as India’s 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 and
also 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 business
Incubators, Suppliers Rating Accreditation Services have been taken up.

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