Setting up a Small Enterprise

The formalities for setting up of a small business enterprise is given in Fig

[1.] Selection of a Project

A strong entrepreneur is the most vital aspect of every successful project. In order to set
up a small-scale industry, a suitable project has to be decided upon. This involves:

a) Project or service selection

Before deciding on a suitable project the entrepreneur has to decide on a suitable

product or a service. The main factors are as follows:
  Background and experience of the entrepreneur

 Availability of technology and know-how for the project.

 Marketability of the product/service

 Investment capacity

 Availability of plant and machinery

 Availability of raw materials

 Availability of proper infrastructure facilities (land/shed, power, water,

transport and so on)

b) Location selection

Some of the major aspects to be considered before deciding on the location of the
project are

 Proximity to market

 Availability of raw materials

 Availability of transportation and communication facilities

 Availability of incentives/concessions

 Government policy

 Availability of suitable infrastructures facilities and

 Convenience for the promoter

c) Project feasibility study

The important facets of a project feasibility study are as follows

 Market analysis: under this analysis one need to understand the aggregate
 demand of the proposed product/services in future and its market share of the
project appraisal.

 Technical analysis: It seeks to determine whether the prerequisites for the

successful commissioning of the project have been considered and reasonably
good choices have been made with respect to location, size, and process and so
on.

 Financial analysis: It seeks to ascertain whether the proposed project will be

financially viable in the sense of being able to meet the burden of servicing debt
and whether the proposed project will satisfy the return expectations of those
who provide the capital.

 Economic analysis: It also referred to as social cost-benefit analysis, is

concerned with judging a project from the larger, social point of view. In such
an evaluation the focus is on the social costs and benefits of a project, which
may often be different form its monetary cost and benefits.

Example: need to answer to question like

What would be the impact of the project on the distribution of income in the
society?

What would be the impact of the project on the level of saving and investment
in the society?

What would be the contribution of the project towards the fulfilment of certain
criteria like self-sufficiency, employment and social order?

 Ecological analysis: The key questions raised in ecological analysis are as

follows.

What is the likely damage caused by the project to the environment?

What is the cost of restoration measures required to ensure that the damage to
 the environment is contained within acceptable limits?

d) Business plan preparation

It can be used it to establish realistic goals or targets to achieve and to determine the
current position. A business plan is used to help make crucial start-up decisions; to
reassure lenders, investors or backers; to measure operational progress; to test planning
assumptions; to adjust forecasts; and to set the standard for good operational
management.

While making a business plan keep the following points in mind

 Keep target audience in view
 Strategy – core of a business plan
 Think competitively throughout
 Be realistic
 Involve people
 e) Prepare project profile

A project profile gives a bird’s eye view of the proposed project. This may be used for
obtaining the Provisional Registration Certificate (PRC) from the District Industrial
Centre and for making, applying for Industrial Areas Development Board for land or
State Small Industries Development Corporation (SSIDC) for shed and other
infrastructures

[2.] Decide on the constitution

To start any industry the promoter(s) have to decide on the constitution of the unit. There
are four major alternatives
a) Sole proprietorship
b) Partnership
c) Corporation/Limited Company
d) Cooperative
e) Franchising

The constitution of the unit has to be decided at the initial stages of the project and the
necessary formalities should be completed by the time the application for provisional
Registration certificate is made.

[3.] Obtain SSI registration

Small-scale and ancillary units that is undertakings with investment in plant and machinery
of less than Rs 1 Crore should seek registration with the Director of Industries of the
concerned State government. Entrepreneurs desiring to start a small scale industry have to
initially obtain a Provisional Registration Certificate. One the unit goes into production,
the PRC has to be converted into a Permanent Registration Certificate (PMC)
[4.] Obtain clearance from departments as applicable

Several clearances are required from different authorities depending on the type of industry
and the location of the unit.

Example:

Agricultural land conversion

Pollution control board clearances etc.

[5.] Arrange for land/Shed

Once the location of the unit is decided, the land for the project could be conveniently taken
from the State Industrial Areas Development Board. However, private land could also be
purchased, but it has to be converted for industrial purpose and other necessary
legal/formalities will have to be completed.

[6.] Arrange for plant and machinery

The plant and machinery required for the project could be purchased from recognised
manufacturers/dealers. (Direct Purchase). The plant and machinery could also be taken on
a hire purchase scheme operated by the National Small Industries Corporation (NSIC).
This is a Government of India corporation.

[7.] Arrange for infrastructure

The main infrastructure facilities required for a SSI unit are land or shed for the project,
power connection, water supply and telephone facility.

Check out for the availability, rate, and quality etc. of the same.

[8.] Prepare project report

For any new project or venture, proper planning is necessary. A detailed project report
provides such a plan for the project. The report is useful to the entrepreneur for planning
and implementing the project. It is essential for obtaining finance and other clearances for
 the project. The project report gives a detailed insight of the project and indicates the
techno-economic viability of the project.

The general points to be kept in mind while preparing a project report are given below:

 Proper validation of the data and information based on reliable sources

 Effective presentation by use of charts, graphs, and pictorial forms

 Cost minimisation and timeliness etc.

[9.] Apply and obtain finance

There are various sources of funds. Small-scale units can obtain finance for their projects
under two main categories
 Term Loan
 Working Capital Loan

[10.]

a) Proceed to implement: The entrepreneurs will have to take necessary steps to

physically implement the project after obtaining the various licenses, clearances,
infrastructure facilities and so on.

b) Obtain final clearances: Entrepreneurs are required to take several final clearances
when the unit is ready for commissioning or as soon as it goes into production.

Environment pollution related clearances

[1.] Pollution control: A No Objection Certificate (NOC) should be obtained from the state
pollution control board before commencement of construction activity. In case the industry
falls in the highly polluting category, a fully-fledged or rapid environment impact
assessment (EIA) has to be carried out and submitted to the state pollution control board
for approval, after which the construction can commence.
 [2.] Industries requiring water and affecting effluent disposal: A No Objection Certificate
should be obtained from the State Pollution Control Board before commencement of
construction activity.

[3.] For units functioning outside the industrial area: Permission has to be sought from the
municipal corporation/municipality/panchyat. In case private agricultural land is purchased
for the project, the land would have to be rezoned as industrial zone. Permission to convert
such agricultural land to industrial area would have to be obtained from the local office of
Directorate of Town and Country Planning before the actual start of the construction.

[4.] Registration and licensing of a boiler: Safety clearances of the Chief Electrical Inspector
and the Chief Inspector of Boilers are required before commencing operations with
electrical and pressure vessels (boilers) respectively.

[5.] For registration as a 100 per cent export-oriented unit (EOU) which can enjoy many
additional concessions, the clearances of the development commissioner of the Export
Processing Zone (EPZ) is required. If the company wishes to offer equity shares to the
public, the clearance of the Securities Exchange Board of India (SEBI) has to be taken.

Environmental Problems

Industrialization, while important for the economic growth and development of a society, can also
be harmful to the environment. Amongst other things industrial process can cause climate change,
pollution to air, water and soil, health issues, extinction of species, and more.

Air Emissions
Industry is a major cause of air pollution, since the operation of factories results in the emission of
pollutants, including organic solvents, respirable particles, sulphur dioxide (SO2) and nitrogen
oxides (NOX). These pollutants can both harm public health and damage the environment by
contributing to global phenomena such as climate change, the greenhouse effect, ozone hole and
increasing desertification.
Wastewater
The sources of effluent - treated or untreated wastewater that is discharged into surface waters -
are many and varied. Effluent can come from industrial outlets, treatment plants, and sewers.
Untreated wastewater can cause environmental woes including: pollution of groundwater
reservoirs, damage of transport and wastewater treatment systems, and degradation of treated
wastewater and sludge such that it would disqualify them from being used for agricultural
purposes.

Land Pollution
Leakage from the fuel and energy industries, as well as industries involving hazardous materials,
are the main causes of land contamination. Examples of soil pollution sources are oil refineries
and pipelines transporting gas, oil depots, gas stations, garages, metal treatment and coating
factories, chemical plants, dry cleaning businesses, printing businesses, the textile industry, and
sites where hazardous materials are stored.

Soil contamination is caused by direct exposure to the pollutant, leakage of toxic gases into
buildings, and groundwater pollution. The properties of soil result in pollutants remaining in the
soil long after the pollution incident.

Hazardous Materials
Hazardous materials are widely used in a variety of different businesses, including industry and
agriculture. If not properly treated, stored, or dealt with, hazardous materials can cause damage to
human health, environment and property.

Solid Waste

Solid waste is generated wherever there is human activity and is characterized by a several
different streams, each with different characteristics and components. These include industrial
waste, dry waste, and organic waste.

Pesticides and Pest Control Products

Animals are considered dangerous to humans when there is a risk of them spreading disease,
injuring a person, damaging property, or becoming an intolerable nuisance. Examples of "pests"
include: mosquitoes, flies, cockroaches, fleas, fire ant, mice, and bats. Non-approved pesticides
can damage the environment and result in the poisoning of living things and in environmental
pollution.

Asbestos and Harmful Dust

Products that contain asbestos (friable or cement) that is in a state of disintegration may cause the
release of asbestos fibres into the air. This can be hazardous to the environment and can cause
human illness such as lung disease.

Radiation

The public and the environment are at-risk from exposure to both ionizing radiation (sources
include radioactive materials, x-ray machines, and accelerators) and non-ionizing radiation
(sources include electrical installations, mobile broadcasting centres and lasers).

Noise
Frequent or prolonged exposure to loud noises is not only a nuisance, but can cause damage to a
person's physical and mental health.

Examples: Unreasonable Noise from Construction Equipment etc.

Environmental Pollution Act

The Environment (Protection) Act was enacted in 1986 with the objective of providing for the
protection and improvement of the environment. It empowers the Central Government to establish
authorities [under section 3(3)] charged with the mandate of preventing environmental pollution
in all its forms and to tackle specific environmental problems that are peculiar to different parts of
the country. The Act was last amended in 1991.

Objectives:

 To protect and improve air, water and land environment

 To prevent hazards to all living creatures and properties

  To maintain a pleasant relationship between human beings and their environment.

Important features of this act

 This act empowers the government to lay down procedures and safeguards for prevention
of accidents that cause pollution and remedial measures if an accident occurs.

 The government has the authority to close/prohibit or regulate any industry or its operation
if violation of the provisions of the act occur.

 Any person who fails to comply or contravenes any provision of the act is punishable with
imprisonment for a term extending up to five years or a fine up to one lakh rupees or both.

 An additional fine of Rs.5000 per day may be imposed for entire period of violation of
rules.

 The act fixes the liability on the person who is directly in-charge unless it is proved that
the offence was committed without his/her knowledge or consent.

 This act empowers the officer of central government to inspect the site and collect samples
of air, water, soil or other material for testing.

This act is the most comprehensive legislation with powers for central government to act directly
without interference from regulatory authorities or agencies.
ORGANIZATIONAL SUPPORT SERVICES – CENTAL & STATE
GOVERNMENT

Entrepreneurship is a multifaceted phenomenon, which has gained popularity around the world.
Becoming an entrepreneur is a challenging task, which requires various resources and facilities.
Small-scale enterprises, given their small resources, find it difficult to have their own. Finance has
been an important resource to start and run an enterprise. In addition to finance, a minimum level
of prior built-up of infrastructural facilities such as transport and communication are needed to
start any enterprise. Creation of infrastructural facilities involves huge funds, which the small
entrepreneurs do lack. In view of this, various Central and State Government institutions have
come forward to help small entrepreneurs in this regard by providing them various kinds of support
and facilities.

 Central Level Institutions

 State level Institutions
 Other agencies

Central level Institutions

NSIC (National Small Industries Corporation)

NSIC has been working to promote, aid and foster the growth of micro, small and medium
enterprises in the country.

NSIC has set up Training cum Incubation Centre managed by professional manpower.

Some of the main services provided by NSIC are described below

a) Machinery and Equipment (Hire-Purchase Scheme)

 Supply of indigenous and imported machinery on easy financial terms, mainly
targeted at first-generation entrepreneurs, women entrepreneurs, weaker sections,
physically challenged and ex-servicemen.
b) Machinery and equipment (Lease scheme)
 100 per cent finance to facilitate SSIs in diversification and technology up
gradation.
 Tax rebate on full-year rentals.
c) Financial Assistance Scheme
 Provide finance to SSIs for the following activities.
 Marketing
 Bills discounting
 Raw material purchases
 Exports
d) Assistance for procurement of raw material
 Supply under the off-the-self basis scheme
 Import of raw materials
  Providing scarce materials on priority basis
 Supplies through NISC depots/godowns
e) Marketing Assistance

The objective of the marketing programme of NSIC are the following.

 Ensure fair margin to producers of goods

 Standardization and quality control with testing facilities
 Market products under a common brand name
 Provide publicity to SSI products
 Upgrade technology by supplying sophisticated machinery and equipment
f) Government Store Purchase Programme
Eligible SSIs (those competent to execute government orders) are registered under the
Single Point Registration Scheme of the NSIC.
The units registered under the Single Point Registration Scheme with the NSIC are given
the following facilities.
 Issue of tender forms/sets free of cost
 Advance intimation of tenders issued by DGsandD
 Exemption from payment of earnest money
 Waiver of security deposit up to the monetary limit for which the unit is registered.
 Issue of competency certificate in case the value of an order exceeds the monetary
limit, after due verification.

National Institute for Entrepreneurship & Small Business Development (NIESBUD)

 It is a premier organization of the Ministry of Skill Development and Entrepreneurship,

engaged in training, consultancy, research, etc. in order to promote entrepreneurship.

 Its goal is to promote, support and sustain entrepreneurship and small business through
training, Education Research and consultancy.

 The major activities of the Institute are Training of Trainers, Management Development
Programmes, Entrepreneurship-cum-Skill Development Programmes and
Entrepreneurship Development Programmes.
SMALL INDUSTRY DEVELOPMENT ORGANISATION (SIDO)

Central Small Industry Organization (CSIO) is the heart of all agencies dealing with the
development of small industry — renamed as Small Industries Development Organization (SIDO).
The office of the Development Commissioner, SSIs is also known as the Small Industries
Development Organization (SIDO), established in 1954. It is a policy-making, coordinating and
monitoring agency for the development of SSI entrepreneurs. It is the nodal agency that advises
the Ministry of Industry and other Ministries in formulating policies and programmes for the
development of SSIs. It also overseas the 'package of services' rendered by the SISIs at field level
and provides comprehensive range of consultancy services and technical, managerial and
marketing assistance to SSI units.

The SIDO provides common facilities

 Technology support services

 Marketing assistance and
 Entrepreneurial development support through its network of 30 Small Industries Service
Institutes (SISIs), 28 Branch SISIs, 4 Regional Testing Centers (RTCs), 7 Field Regional
Testing Centers (RTCs), 2 Small Entrepreneur Promotion and Training Institutes (SEPTIs)
and 1 Hand Tool Design Development and Training Centre.
 The SIDO also has a network of Tool Rooms and Process-cum Product Development
Centers (PPDCs) to provide technology and training support

SIDO performs functions such as

 Conducting training courses through SISIs and Extension Centers

 Organizing EDPs and motivational campaigns for rural artisans, educated unemployed,
women entrepreneurs and physically handicapped persons;
 Securing reservations of certain products for SS's;
 Assisting and encouraging entrepreneurs to set up industrial units in rural areas and
estimating the requirements of raw materials of SSIs.

All SSIs except those falling within the specialized boards and agencies like KVIC, Coir Boards
and Central Silk Board fall under the purview of the SIDO.
NSTEDB

The National Science & Technology Entrepreneurship Development Board (NSTEDB),

established in 1982 by the Government of India to promote knowledge based technology driven
enterprises. The Board aims to convert "job-seekers" into "job-generators" through Science &
Technology (S&T) interventions.

The NSTEDB has verities of programs. The programs starts from creating awareness (i.e.
Entrepreneurship Awareness Camp (EAC)) by sponsoring three day program in the academic
institutions with the aim to germinate entrepreneurs after the gap of 3-5 years

Here what we can say that just through the seeds in the wild without putting water & fertilizer in
the seed & with expecting some of them will germinate as entrepreneur. It is one of the very low
budget program but an effective program of this board. Its success rate is around 5%.

Then the next programs are the training programs like Entrepreneurship Development Programme
(EDP) of 6-8 weeks durations, aims at training the S&T graduates and the diploma holders in the
essentials of conceiving, planning, initiating and launching an economic activity or an enterprise
successfully.

Faculty Development Programme (FDP) is designed to train and develop professionals in

entrepreneurship development so that they can act as resource persons in guiding and motivating
young S&T persons to take up entrepreneurship as career. The duration of program is 2-3 weeks;
Technology Based Entrepreneurship Development Programme (TEDP), its primarily focuses on
training and developing need of S&T entrepreneurs in a specific technology area (e.g. Leather,
Plastic, Electronics and communication etc.) The duration of program is about 6 weeks;

The flagship program that the NSTEDB have is the Technology Business Incubation (TBI)
program.

State level Institutions

DIC (District Industries Centres)

 The 'District Industries Centre' (DICs) programme was started by the central government
in 1978
 The objective of providing a focal point for promoting small, tiny, cottage and village
industries in a particular area and to make available to them all necessary services and
facilities at one place.
 The District Industries Centre is the institution at the District level, which provides all the
services and support facilities to the entrepreneur for setting up Micro, Small and Medium
Enterprises. This included identification of
o suitable schemes
o preparation of feasibility reports
o arrangements for credit facilities
o machinery and equipment’s
o Provision of raw materials and development of industrial clusters etc.

State Financial Corporations (SFCs)

 This is State level financial institutions which play a vital role in the growth of small &
medium enterprises in the concerned States.
 They offer financial assistance in the form of direct subscription to debentures/equity, term
loans, guarantees, discounting of bills of exchange & seed/ special capital, etc.
 SFCs have been set up with the purpose of catalyzing higher investment, engendering
greater employment & extending the ownership base of industries.
  They have also started offering assistance to newer types of business activities like tissue
culture, floriculture, poultry farming, services related to engineering, marketing and
commercial complexes. In India, there are 18 State Financial Corporations (SFCs).

STATE INDUSTRIAL DEVELOPMENT CORPORATIONS (SIDCs)

The State Industrial Development Corporations (SIDCs) were incorporated under the Companies
Act, 1956, as wholly owned State Government Undertakings for promoting industrial
development.

The main functions of SIDCs are to provide assistance in the form of term-loans, underwriting
direct subscription to shares / debentures and guarantees. They also undertake a variety of
promotional activities like preparation of feasibility reports, conducting industrial potential
surveys, entrepreneurship development programmes and developing industrial estates. Some
SIDCs also offer a package of developmental services such as technical guidance, assistance in
plant locations and coordination’s with other agencies. In line with the changing environment,
many SIDCs are making efforts to diversify and mutual funds. There are 28 SIDCs in the country.

Other agencies

Confederation of Indian Industry (CII)

The Confederation of Indian Industry (CII) is a premier industry association in India, playing
a pivotal role in India’s economic development and industrial advancement. Established in 1895,
CII is a non-government, not-for-profit, industry-led and industry-managed organization,
with over 9,000 members from the private as well as public sectors, including SMEs and MNCs.

Objectives:

 To create and sustain an environment conducive to the growth of industry in India.

 To foster collaboration between the government and industry to ensure effective policy
frameworks.
 To enhance competitiveness, promote innovation, and ensure sustainable development.
Key Roles and Functions:

1. Policy Advocacy: CII represents industry viewpoints to the government at both national
and state levels, influencing policy-making and regulatory reforms.
2. Business Development: It supports business expansion by facilitating networking,
business meets, and international delegations, helping Indian industries expand globally.
3. Skill Development and Education: Through its various initiatives and partnerships, CII
contributes to employability and vocational training, thus bridging the industry-
academia gap.
4. Technology and Innovation Promotion: CII encourages R&D and technology adoption
in industries through innovation forums, incubators, and partnerships.
5. Sustainability and CSR: It helps businesses integrate environmental and social
governance (ESG) practices and promotes corporate social responsibility (CSR)
activities.
6. SME Support: CII has specific cells and programs tailored to empower Small and
Medium Enterprises (SMEs) by providing them access to finance, technology, and global
markets.

Significance:

CII is an essential pillar in nation-building, acting as a bridge between the government and
industry. Its contributions span across various sectors including infrastructure, manufacturing,
services, education, health, and rural development.

Federation of Indian Chambers of Commerce and Industry (FICCI)

The Federation of Indian Chambers of Commerce and Industry (FICCI) is one of the oldest
and largest apex business organizations in India. It was established in 1927 on the advice of
Mahatma Gandhi by industrialists G.D. Birla and Purshottamdas Thakurdas.
Objectives and Mission:

FICCI serves as a voice of India's business and industry. Its mission is to:

 Promote economic development and competitiveness of Indian industry.

 Represent business interests and influence public policy.
 Provide a platform for networking and collaboration among businesses.

Key Roles and Functions:

1. Policy Advocacy: FICCI works closely with the government to shape policies that affect
Indian businesses. It makes representations on behalf of industries to address issues and
seek reforms.
2. Business Promotion: Organizes trade fairs, exhibitions, seminars, and conferences to
encourage domestic and international trade.
3. Research and Knowledge Dissemination: Provides research-based insights and sectoral
analysis to support informed policy-making and decision-making for businesses.
4. Global Networking: Facilitates international collaborations by engaging with global
chambers of commerce and trade bodies.
5. Support to MSMEs: Assists micro, small, and medium enterprises (MSMEs) through
capacity-building programs, mentoring, and access to finance and markets.
6. Skill Development and Innovation: Undertakes initiatives for entrepreneurship
development, innovation promotion, and workforce skill enhancement in alignment with
India’s economic goals.

Significance for Entrepreneurs:

For entrepreneurs and startups, FICCI provides exposure, networking opportunities, and access to
industry experts and policymakers. It acts as a catalyst for growth, innovation, and global outreach.

Associated Chambers of Commerce and Industry of India (ASSOCHAM)

Introduction: The Associated Chambers of Commerce and Industry of India (ASSOCHAM)

is one of the premier apex trade associations of India. Established in 1920, it represents the interests
of trade, commerce, and industry in India and acts as an interface between industry, government,
and other stakeholders.

Objectives:

 To promote domestic and international trade.

 To facilitate the growth and development of Indian industries.
 To influence policy decisions through constructive dialogue with the government.
 To provide a platform for networking and collaboration among businesses.

Key Functions:

1. Policy Advocacy: ASSOCHAM actively engages with the government and regulatory
bodies to represent industry concerns and suggest reforms that foster ease of doing
business.
2. Research and Knowledge Sharing: The chamber publishes research reports, white
papers, and surveys on various sectors of the economy, helping businesses make informed
decisions.
3. Events and Seminars: ASSOCHAM organizes conferences, workshops, trade fairs, and
summits that offer opportunities for business promotion and knowledge exchange.
4. Skill Development: It undertakes initiatives to promote entrepreneurship and skill
development, especially among youth and women entrepreneurs.
5. Global Outreach: ASSOCHAM facilitates international partnerships by engaging with
foreign trade organizations and participating in global trade missions.

Impact:

 It has helped shape critical policy decisions in areas like taxation, foreign investment,
infrastructure development, and digital economy.
 It supports small and medium enterprises (SMEs) by offering training, resources, and
platforms for growth.
Conclusion: ASSOCHAM plays a vital role in India's economic development by acting as a bridge
between business and government. Its contribution to creating a conducive business environment
and promoting entrepreneurial spirit is widely recognized both nationally and internationally.

NABARD (National Bank for Agriculture and Rural Development):

 It formed based on the Committee to Review the Arrangements for Institutional Credit for
Agriculture and Rural Development (CRAFICARD) which outlined the need for a new
organizational device for providing undivided attention, forceful direction and pointed
focus to credit related issues linked with rural development.
 Formation of National Bank for Agriculture and Rural Development (NABARD) was
approved by the Parliament through Act 61 of 1981.
 NABARD came into existence on 12 July 1982.
 It was dedicated to the service of the nation by the late Prime Minister Smt. Indira Gandhi
on 05 November 1982.
 Set up with an initial capital of Rs.100 crore, its’ paid up capital stood at Rs.10,580 crore
as on 31 March 2018.
 It aimed at building an empowered and financially inclusive rural India through specific
goal oriented departments which can be categorized broadly into three heads: Financial,
Developmental and Supervision.

Industrial Finance Corporation of India (IFCI)

 IFCI Ltd. was set up in 1948 as Industrial Finance Corporation of India

 It provide medium and long term finance to industry.
 The Government of India, as per the Budget for FY 2014-15 has mandated IFCI for setting
up of a Venture Capital Fund under Social Sector initiatives with an aim to promote
entrepreneurship among the Scheduled Castes (SC) and to provide concessional finance to
them.

Small Industries Development Bank of India (SIDBI)

 Set up on 2nd April 1990 under an Act of Indian Parliament, acts as the Principal Financial
Institution for Promotion, Financing and Development of the Micro, Small and Medium
 Enterprise (MSME) sector as well as for co-ordination of functions of institutions engaged
in similar activities.
 Over the years, SIDBI has been working towards the sustainable development of MSME
sector

Government Subsidy for Small Business in India

Government subsidy for small business is very much effective in any small-scale industry. Many
incentives are provided with both by the Central and State Governments to pro-mote the growth
of small-scale industries specially MSME.

[1.] The Credit Guarantee Fund Scheme for Micro and Small Enterprises
The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was
launched by the Government of India to provide collateral-free credit to Indian MSMEs.
Both the existing and the new enterprises are eligible for the scheme.
The scheme provides credit facilities in the form of term loans and working capital facility
of up to Rs. 100 lakh per borrowing unit. The amount is contributed by the Government
and SIDBI in the ratio of 4:1, respectively. The scheme also offers rehabilitation assistance
to sick units covered under the guarantee scheme.
[2.] SAMPADA Scheme for Agro-Marine Produce Processing
SAMPADA stands for Scheme for Agro-Marine Produce Processing and Development of
Agro-Processing Clusters. With a budget of Rs. 6000 Crores, the SAMPADA scheme is
aimed to integrate current and new schemes in the food processing sector. The main
objective is reducing food wastage and doubling farmers’ income.
[3.] Government Subsidy for Small Business from NSIC
NSIC provides two basic subsidies. Such as raw material assistance and marketing
assistance. Raw Material Assistance Scheme aims at helping Small Scale
Industries/Enterprises by way of financing the purchase of Raw Material (both indigenous
& imported).
This gives an opportunity for SSI to focus better on manufacturing quality products. Under
the Scheme, marketing support is provided to Micro, Small & Medium Enterprises through
National Small Industries Corporation (NSIC) to enhance competitiveness and
marketability of their products.
 [4.] Credit Linked Capital Subsidy Scheme for Technology Up gradation (CLCSS)
Up gradation of the process as well as the corresponding plant and machinery is important
to help SMEs reduce the cost of production and remain price competitive in the global
market. To help SMEs flourish in international trade markets, the Ministry of Small Scale
Industries (SSI) runs a scheme for technology up gradation of Small Scale Industries.
Known as the Credit Linked Capital Subsidy Scheme (CLCSS), it aims at facilitating
technology up gradation by providing the upfront capital subsidy of 15% (limited to
maximum Rs.15 lakhs) to SSI units for credit availed by them for the modernization of
their plant and machinery. All sole proprietorship, partnership firms, cooperative, private
and public limited companies are eligible for this scheme.
[5.] Capital Subsidy for Solar Lighting and Small Capacity PV Systems
The Government of India has launched the Jawaharlal Nehru National Solar Mission
(JNNSM) to promote sustainable energy generation and support the growing need for
energy in India while addressing India’s energy security challenge. The JNNSM provides
a host of subsidies and soft loans for the promotion and penetration of solar energy
generation in the nation.
Through the capital subsidy for solar lighting and small capacity PV systems, the JNNSM
provides capital subsidy of up to 40% of the approved unit cost (benchmark cost) for solar
lighting systems and small capacity Photovoltaic systems. Capital subsidy of 90% of the
benchmark cost, would be available for special category states, viz. NE, Sikkim, J&K,
Himachal Pradesh and Uttarakhand.

Incentives to Small Scale Industries in India

An incentive is a motivational factor which induces a person to work hard or to do his work more
efficiently.

[1.] Reservation:
To protect the small-scale industries from the competition posed by large-scale industries,
the Government has reserved the production of certain items exclusively for the small-scale
sector. The number of items exclusively re-served for the small-scale sector has been
considerably increased during the Five Year Plan Periods and now stands at 822.
 However, prior to the 1997 – 98 Budget the number of items reserved for the small-scale
sector stood at 836. The Finance Minister de-reserved 14 items in the 1997 – 98 Budget.
[2.] Preference in Government purchases:
The Govern-ment as well as Government organizations shows preference in procuring their
requirements from the small-scale sector. For instance, the Director General of Supplies
and Disposals purchases 400 items exclusively from the small-scale sector. The National
Small-Scale Industries Corporation assists the SSI units in obtaining a greater share of
Government and defense purchases.
[3.] Marketing assistance:
The National Small Industries Corporation (NSIC), the Small Industries Development
Organization (SIDO) and the various Export Promotion Councils help SSI units in
marketing their products in the domestic as well as foreign markets. The SIDO conducts
training programmes on export marketing and organizes meetings and seminars on export
promotion.
[4.] Excise duty:
In respect of SSI units excise duty concessions are granted to both registered and
unregistered units on a graded scale depending upon their production value. Full exemption
is granted up to a production value of Rs.30 lakhs in a year and 75 % of normal duty is
levied for production value exceeding Rs.30 lakhs but not exceeding Rs.75 lakhs. If the
production value exceeds Rs.75 lakhs, normal rate of duty will be levied.
[5.] Supply of raw materials:
In order to ensure regular supply of raw materials, imported components and equipment’s,
the Government gives priority allocation to the small-scale sector as compared to the large-
scale sector. Further, the Government has liberalized the import policy and streamlined the
distribution of scarce raw materials.