Chapter 1 Introduction:

CHAPTER-1 INTRODUCTION:

A small scale industry is one in which the investment in fixed assets in plant and machinery whether held on ownership term or on lease or by hire purchase does not exceed Rupees sixty lakhs. However, in the case of an industrial undertaking as mentioned above paragraph, the limit of investment in fixed assets in plant and machinery shall be Rs. 75 Lakhs provided the unit undertakes to export altleast 30% of the annual production by the end of 3rd year from the date of commencement of production The following requirements are to be complied with by an industrial undertaking to be graded as Small Scale Industrial undertaking w.e.f. 21.12.1999 An industrial undertaking in which the investment in fixed assets in plant and machinery whether held on ownership terms on lease or on hire purchase does not exceed Rs 10 million. (Subject to the condition that the unit is not owned, controlled or subsidiary of any other industrial undertaking) Explanation: For the purpose of this note:a. "owned" shall have the meaning as derived from the definition of the expression "owner" specified in clause (1) of section 3 of the said Act; b. "subsidiary" shall have the same meaning as in clause (47) of section 2, read with section 4, of the Companies Act, 1956 (1 of 1956); c. the expression "controlled by any other industrial undertaking" means as under:i.

where two or more industrial undertakings are set up by the same person as a proprietor, each of such industrial undertakings shall be considered to be controlled by the other industrial undertaking or undertakings,

ii.

where two or more industrial undertakings are set up as partnership firms under the Indian Partnership Act, 1932 (1 of 1932) and one or more partners are common partner or partners in such firms, each such undertaking shall be considered to be controlled by other undertaking or undertakings,

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iii.

where industrial undertakings are set up by companies under the Companies Act, 1956 (1 of 1956), an industrial undertaking shall be considered to be controlled by other industrial undertaking if:-

a. the equity holding by other industrial undertaking in it exceeds twenty four percent of its total equity; or b. the management control of an undertaking is passed on to the other industrial undertaking by way of the Managing Director of the first mentioned undertaking being also the Managing Director or Director in the other industrial undertaking or the majority of Directors on the Board of the first mentioned undertaking being the equity holders in the other industrial undertaking in terms of the provisions of the following items (a) and (b) of sub-clause (iv); iv) the extent of equity participation by other industrial undertaking or undertakings in the undertaking as per sub-clause (iii) above shall be worked out as follows:a. the equity participation by other industrial undertaking shall include both foreign and domestic equity; b. equity held by a person, having special technical qualification and experience, appointed as a Director in a small scale equity participation by other industrial undertaking shall mean total equity held in an industrial undertaking by other industrial undertaking or undertakings, whether small scale or otherwise, put together as well as the equity held by persons who are Directors in any other industrial undertaking or undertakings even if the person concerned is a Director in other Industrial Undertaking or Undertakings; c. industrial undertaking, to the extent of qualification shares if so provided in the Articles of Association, shall not be counted in computing the equity held by other industrial undertaking or undertakings even if the person concerned is a Director in other industrial undertakings or undertakings; (v) where an industrial undertaking is a subsidiary of, or is owned or controlled by, any other industrial undertaking or undertakings in terms of sub-clauses (i); (ii); or (iii) and if the total investment in fixed assets in plant and machinery of the first mentioned industrial undertaking and the other industrial undertaking or undertakings clubbed together exceeds the limit of investment specified in paragraphs (1) or (2) of this notification as the case may be, none of these industrial undertakings shall be considered to be a small scale or ancillary industrial undertaking.

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CHAPTER-2 AIM OF THE PROJECT: •

To hold Seminars & Conferences on different subjects , conduct researches, organize and promote exhibitions, Shows and other activities for furtherance of trade and to found, maintain and manage educational and cultural institutions Publish Charts, catalogues, directories, leaflets, statistics , Journals , Books and other Publications, and circulating them.

•

To raise funds for carrying out the activities of the Association.

•

To accept donations, raise subscriptions from the members of the society or other persons, to invest the funds of the trust with such individual societies, firms or companies and for providing income to societies on such terms and conditions as may deem proper and necessary for the fulfillment of the aims of the societies.

•

To promote literacy, cultural and other social activities by awareness programmes, adult education, lectures, essay competitions, exhibitions, cultural programmes, press conferences and seminars.

•

To ensure the development of trade and traders so as to establish better understanding, co-ordination and unity amongst all traders and their respective organizations through the association.

•

To communicate with government, local and public authorities, other trade associations, chambers of trade and commerce in India and other countries and with individual on various subjects.

•

To organize seminars on social justice, educational and economic upliftment, to raise legal demands and fundamental rights provided by the constitution of India.

•

To arrange tours or provide conveyance to any person or persons to and for any historical or universally acclaimed religious places or to reduce or remove the mental depression which may encourage and boost the spiritual instinct for living a better and happier life

•

To do such other things/acts/activities which are necessary and which may be incidental or conducive to the attainment of any of the objects of the society.

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CHAPTER-3

Investment Limits

he definition of small scale industries has undergone changes over the years in terms of investment limits in the following manner:YEAR

INVESTMENT LIMITS

1950

pto Rs 5 lacs in fixed assets

1960

UptUo Rs 5 lacs in Plant & Machinery Upto Rs 7.5 lacs in Plant & Machinery Upto Rs 10 lacs in Plant & Machinery Upto Rs 20 lacs in Plant & Machinery Upto Rs 35 lacs in Plant & Machinery Upto Rs 60 lacs in Plant & Machinery Upto Rs 100 lacs in Plant & Machinery

1966 1975 1980 1985 1991 1997 (Dec)

ADDITIONAL CONDITIONS Less than 50/100 persons with or without power No condition No condition No condition No condition No condition No condition No condition

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CHAPTER-4 Computation of Plant and Machinery (For calculating investment limit) In calculating the value of plant and machinery, the original price thereof irrespective of whether the plant and machinery are new or second hand, shall be taken into account However, to determine the price of second hand imported machinery, the original vale of the said plant and machinery will be taken in foreign currency terms. The value of foreign currency will be converted into rupee using the "current" exchange rate , i.e. exchange rate prevalent at the time of import. The import duty will be added on the basis of "current" rate of import duty, i.e. the rate of import duty prevalent at the time of import. In calculating the value of plant and machinery, the following shall be excluded, namely:i. ii. iii. iv. v. vi.

vii. viii. ix. x. xi.

Cost of equipments such as tools, jigs, dies, moulds and spare parts for maintenance and the cost of consumable stores. Cost of installation of plant and machinery. Cost of Research and Development (R&D) equipment and pollution control equipment. Cost of generation sets, extra transformers, etc., installed by the undertaking as per the regulations of the State Electricity Board. Bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation. Cost involved in procurement or installation of cables, wiring, bus bars, electrical control panels (not those mounted on individual machines), oil circuit breaker/miniature circuit breakers, etc. which are necessarily to be used for providing electrical power to the plant and machinery safety measures. Cost of gas producer plants. Transportation charges (excluding taxes e.g., Sales tax, excise, etc.) for indigenous machinery from the place of manufacturing to the site of the factory. Charges paid for technical know-how or erection of plant and machinery. Cost of such storage tanks which store raw materials, finished products only and are not linked with the manufacturing process. Cost of fire-fighting equipments.

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xii.

Cost of those items of plant and machinery installed purely for power generation using non-conventional energy sources such as wind, solar energy, ocean waves, bio-gas etc.

In case of imported machinery, the following shall be included in calculating the value namely:i. ii. iii. iv.

Import duty, excluding miscellaneous expenses such as transportation from the port to the site of the factory, demurrage paid at the port. Shipping charges Customs clearance charges and Sales tax

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CHAPTER-5

Performance of Small Scale Industries • • • • •

Employment Production Exports Opportunities Economic Indicators

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CHAPTER-6 Employment Generation SSI Sector in India creates largest employment opportunities for the Indian populace, next only to Agriculture. It has been estimated that a lakh rupees of investment in fixed assets in the small scale sector generates employment for four persons.

According to the SSI Sector survey conducted by the Ministry and National Informatics Centre with the base year of 1987-88, the following interesting observations were made related to employment in the small scale sector.

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Generation of Employment - Industry Group-wise Food products industry has ranked first in generating employment, providing employment to 4.82 lakh persons (13.1%). The next two industry groups were Non-metallic mineral products with employment of 4.46 lakh persons (12.2%) and Metal products with 3.73 lakh persons (10.2%). In Chemicals & chemical products, Machinery parts and except Electrical parts, Wood products, Basic Metal Industries, Paper products & printing, Hosiery & garments, Repair services and Rubber & plastic products, the contribution ranged from 9% to 5%, the total contribution by these eight industry groups being 49%. In all other industries the contribution was less than 5%. Per unit employment Per unit employment was the highest (20) in units engaged in Beverages, tobacco & tobacco products mainly due to the high employment potential of this industry particularly in Maharashtra, Andhra Pradesh, Rajasthan, Assam and Tamil Nadu. Next came Cotton textile products (17), Non-metallic mineral products (14.1), Basic metal industries (13.6) and Electrical machinery and parts (11.2.) The lowest figure of 2.4 was in Repair services line. Per unit employment was the highest (10) in metropolitan areas and lowest (5) in rural areas. However, in Chemicals & chemical products, Non-metallic mineral products and Basic metal industries per unit employment was higher in rural areas as compared to metropolitan areas/urban areas. In urban areas highest employment per unit was in Beverages, tobacco products (31 persons) followed by Cotton textile products (18), Basic metal industries (13) and Non-metallic mineral products (12). Rural Non-metallic products contributed 22.7% to employment generated in rural areas. Food Products accounted for 21.1%, Wood Products and Chemicals and chemical products shared between them 17.5%.

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Urban As for urban areas, Food Products and Metal Products almost equally shared 22.8% of employment. Machinery and parts except electrical, Non-metallic mineral products, and Chemicals & chemical products between them accounted for 26.2% of employment. In metropolitan areas the leading industries were Metal products, Machinery and parts except electrical and Paper products & printing (total share being 33.6%). State-wise Employment Distribution Tamil Nadu (14.5%) made the maximum contribution to employment. This was followed by Maharashtra (9.7%), Uttar Pradesh (9.5%) and West Bengal (8.5%) the total share being 27.7%. Gujarat (7.6%), Andhra Pradesh (7.5%), Karnataka (6.7%), and Punjab (5.6%) together accounted for another 27.4%. Per unit employment was high - 17, 16 and 14 respectively - in Nagaland, Sikkim and Dadra & Nagar Haveli. It was 12 in Maharashtra, Tripura and Delhi. Madhya Pradesh had the figure of 2. In all other cases it was around the average of 6.

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CHAPTER-7

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 lakh rupees of investment in fixed assets in the small scale sector produces 4.62 lakhs worth 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.

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The number of small scale units has increased from an estimated 8.74 lakhs units in the year 1980-81 to an estimated 31.21 lakhs in the year 1999. From the year 1990-91 this sector has exhibited a comparitively lower growth trend (though positive) which continued during the next two years. However, this has to be viewed in the background of the general recession in the economy. The transition period of the process of economic reforms was also affected for some period by adverse factors such as foreign exchange constraints, credit squeeze, demand recession, high interest rates, shortage of raw material etc. When the performance of this sector is viewed against the growth in the manufacturing and the industry sector as a whole, it instills confidence in the resilience of the small scale sector. The estimates of growth for the year 1995-96 have shown an upswing.The growth of SSI sector has surpassed overall industrial growth from 1991 onwards.The positive trend is likely to strengthen in the coming years.This trend augurs a bright future for the small scale industry

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CHAPTER-8

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. It would surprise many to know that non traditional products account for more than 95% of the SSI exports. The exports 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.

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The lucrative product groups where the SSI sector dominates in exports, are sports goods, readymade garments, woollen garments and knitwear, plastic products, processed food and leather products.

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CHAPTER-9

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 opportunities in the small scale sector are enormous due to the following factors : - Less Capital Intensive - Extensive Promotion & Support by the Government

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- 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 - 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 diversity in production systems and demand structures will ensure long term co-existence of many layers of demand for consumer products / technologies/ processes. There will be flourishing and well grounded markets for the same product/process, differentiated by quality, value added and sophistication. This characteristic of the Indian economy will allow complementary existence for various diverse types of units. 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 liberalization will therefore, attract the infusion of just these things in the sector.

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CHAPTER-10 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

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CHAPTER-11 FUNDING AND FINANCEING POLICIES

General Exemption Scheme of Central Excise for SSI Units Excise concessions are one of the major support for SSI sector which faces competition from large industries In the Union Budget for 1997-98 and 1998-99 some major changes were made in the Small Scale General Excise Exemption Scheme. At present, the SSI sector enjoys excise benefits as given below. Units not opting for MODVAT credit facility The SSI units which do not want to avail MODVAT credit facility are entitled to Excise exemption and concessions on goods manufactured by them and falling in the Annexure to Not. No. 8/99-CE dated 28th Feb, 1999 as follows:Amount of clearance

Rate of duty applicable Nil duty

First clearance upto an aggregate value not exceeding Rs 50 lakhs in a financial year Next clearance upto an aggregate value not exceeding Rs 50 5% ad valorem lakhs in a financial year duty All clearances of the specified goods which are used as inputs Nil for further manufacture of any specified goods within the factory of production of the specified goods.

Units opting for MODVAT Credit Facility The SSI units which want to avail MODVAT Credit facility are entitled to Excise concessions on goods manufactured by them and falling in the Annexure to Not. No. 9/99-CE dated 28th Feb, 1998 as follows: Amount of clearance First clearance upto an aggregate value not exceeding Rs 50 lakhs in a financial year

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Rate of duty applicable 60% of normal duty will be applicable

Next clearance upto an aggregate value not exceeding Rs 50 lakhs in a financial year All clearances of the specified goods which are used as inputs for further manufacture of any specified goods within the factory of production of the specified goods.

80% of normal duty will be applicable Nil

However it may be noted that there are some items on which excise Exemption/Concession is not available whether the units opt for MODVAT credit facility or not. Policy Of Priority Credit SSI units are entitled for priority sector lending from the nationalized commercial banks on the pattern of agriculture. Out of 40 percent of bank advances earmarked as priority sector lending about 15 to 17 percent have been flowing to SSI sector. Out of priority sector credit going to small scale sector 40% is earmarked for tiny units having investment in plant and machinery below Rs. 5 lakhs and another 20% for tiny units whose investment in plant and machinery ranges between Rs. 5 lakhs to Rs. 2 lakhs are governed by Prime Lending Rate and the commercial credit worthiness of the unit. Initiative for Credit In order to ensure adequate and timely credit to the SSIs, Reserve Bank of India had set up Nayak Committee in 1991. The Committee submitted its report in 1992 which recommended, inter alia, that commercial banks may provide working capital to SSI units worked out at the rate of 20% of their annual turnover subject to a limit of Rs. 1 crore. The limit of working capital has since been raised to Rs. 5 crores. Up to March 1999, 386 specialized SSI banks branches all over the country have been operationalised with a view to provide focussed attention and increase the flow of credit to SSI sector. Banks have been further advised to increase the number of SSI branches. 370 specialized SSI branches opened up in 1997-98 and 16 more branches have been opened during 1998-99. The composite loan scheme of SIDBI has been modified and ceiling limit increased from Rs. 2 lakhs to Rs. 5 lakhs. This would facilitate easier availability of credit to the tiny sector. In the credit policy measures announced for second half of 1997- 98, it had been stipulated that with a view to ensuring prompt settlement of dues of SSI units, as also encouraging bills culture, banks were advised to ensure that with effect from

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January 1, 1998 of the total in land credit purchase of borrowers, not less that 25% should be through bills drawn on them by concerned sellers. SSI Units are often handicapped by delays in the settlement of their dues from large companies. To tackle this problem, RBI is being asked to strengthen the existing mechanisms available to SSI for discounting of bills. RBI will also modify its guidelines to commercial banks on credit appraisal to give greater weight to the amount of overdue outstanding that large units have in respect of SSI supplier. RBI had appointed a one man Committee under the Chairmanship of former Secretary, Department of Small Scale Industries and Agro and Rural Industries, Government of India, to look into various problems regarding credit flow to SSI sector and suggest appropriate measures for their redressal. The Committee has submitted its report to RBI on June 30 1998. The Committee has made as many as 126 recommendations covering various aspects relating to the SSI sector. These recommendations are being examined by RBI. RBI has decided to accept 40 recommendations

Equity Participation: In the policy measures for promoting and strengthening small, tiny and village enterprises, the Government has allowed equity participation by other industrial undertaking in small scale sector not exceeding 24% of the total share holdings of the SSI unit to provide access to the capital market, encourage modernization and technological up gradation and give boost to ancillarisation and subcontracting leading to expansion of marketing and employment opportunities

OTC Exchange; The OTC Exchange of India has been set up by leading Financial institutions like UTI, IDBI, ICICI, LIC and GIC, expressly to provide an ideal avenue for corporates of all the sizes, with special focus on small scale companies, to raise resources from the capital market. The Exchange provides sophisticated trading mechanisms like Bought out Deals, Market Making and Sponsorship which makes it very convenient for the small and medium sized companies to access the capital market. It is the only exchange allowing nation-wide as well as regional listing for smaller companies. The minimum requirement of Rs. 30 lakhs of post issue paid-up capital for a company to list on the Exchange facilitates even small enterprise promoters to set up new ventures or expand their activities.

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The Exchange also provides its constituents with the advantage of trading in innovative financial instruments like Debentures, Units of Mutual Funds, Bonds and other corporate papers. The Exchange uses the state-of-the-art Technology and Trading Mechanism to promote transparent and widespread transactions across the country. OTC Exchange of India has a Memorandum of Understanding with NASDAQ, USA which entails mutual exchange of information, training in various aspects of capital market and access to the global market.

SCHMES

Excise Exemptions/Concessions: Excise duty concessions have been given to the small scale Industries in what is called the General Excise Duty Exemption Scheme for small Industries. This is to enable the small scale industries to compete on favorable terms with their counterparts in the large and medium sector. Excise exemption to small scale units is mainly/chiefly granted under notification no. 175/86-CE dated 1.3.1986 as amended from time to time. As of now, the Excise Duty Exemption Scheme applies to the entire small scale industries spectrum, barring a few specified items. The relief is as follows:Clearance Slab (Rs. in lakhs) - Rate of duty 0-50 - NIL 50-100 - 5% 100-300 - Normal rate of duty The scheme is applicable to small scale industries with annual turnover limit of up to Rs. 300 lakhs. As per 1994-95 budget unregistered units have been equated with registered units with regard to excise exemption/concessions. The existing distinction between one chapter clearances and more than one chapter clearances has been removed. The higher notional credit of 5% has been withdrawn.

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Also, no officer would visit any small-scale factory without the written authorisation of the Assistant Collector indicating specifically the purpose of visit. No registration with the Directorate of Industry or DCSSI would be necessary for availing of the exemption under SSI scheme. No declaration would be required to be filed with the Central Excise as long as the sales of goods (excluding completely exempted goods) are within Rs.50 Lakhs. SSI Units have been permitted to pay excise duty on monthly basis with effect from 01.06.99. SSI exemption extended to goods bearing a brand name of another manufacturer, when produced by SSI Units located in the rural areas. The details of the scheme are being finalized by the Ministry of Finance

Venture Capital: Venture capital is a relatively new phenomenon. Technology based small scale units and first generation entrepreneur keen to enter new technology areas are the ones who can be supported by venture capital. Small industries Development Bank of India has recently introduced a venture capital scheme to extend venture capital support to SSI units. This concept needs to be widely practiced in both the public and private sector. Venture capital funds can give fund support to new units in a variety of ways. Setting up of limited partnership with the entrepreneur is one such. Major Venture Capital Financial Institutions - Technology Development & Information Company of India Limited (TDICI) - Risk Capital & Technology Finance Corporation Limited (RCTC)

National Equity Fund Scheme: Under the Schemes, small scale units are given equity type seed capital assistance to meet the margin money requirements of small units. Servicing is charged at a nominal rate of 1%. The NEFS was setup with a corpus of Rs. 10 crores and is administered by SIDBI.

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- The scope of the scheme includes projects with outlays upto Rs. 10 Lakhs and the quantum of assistance available is upto Rs. 1.5 Lakhs. Highlights Of National Equity Fund Scheme Of Sidbi In August 1987 Government introduced National Equity Fund Scheme in the Industrial Development Bank of India (IDBI) and subsequently IDBI's role relating to small scale industries was transferred to newly created organization, Small Industries Development Bank of India (April, 1990) to provide equity support to Small Scale Entrepreneurs for setting up of new units and for rehabilitation of potentially viable sick units. - The scheme provides financial assistance to SSI units in the form of long term equity type seed capital upto Rs. 1.5 lakh with a project cost not exceeding Rs. 10 lakhs. - Financial Assistance is provided at a nominal service charge of one percent per annum.

Factoring Services: Factoring services make available the much needed working capital to Small Scale Enterprises and is likely to induce customers to make timely payments for fear of adverse "customer-image" in the market. Factoring services are being increasingly set up, which is a good sign. Some private factoring companies have also come up.

Main Schemes of SIDBI: National Equity Fund Scheme which provides equity support to small entrepreneurs setting up projects in Tiny Sector. Technology Development & Modernization Fund Scheme for providing finance to existing SSI units for technology upgradation/modernisation. Single Window Scheme to provide both term loan for fixed assets and loan for working capital capital through the same agency. Composite Loan Scheme for equipment and/or working capital and also for worksheds to artisans, village and cottage industries in Tiny Sector.

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Mahila Udyam Nidhi (MUN) Scheme provides equity support to women entrepreneurs for setting up projects in Tiny Sector. Scheme for financing activities relating to marketing of SSI products which provides assistance for undertaking various marketing related activities such as marketing Researches R&D, product up gradation, participation in trade fairs and exhibitions, advertising branding, establishing distribution networks including show room, retail outlet, wears-housing facility, etc. Equipment Finance Scheme for acquisition of machinery/equipment including Diesel Generator Sets which are not related to any specific project. Venture Capital Scheme to encourage SSI ventures/sub- contracting units to acquire capital equipment, as also requisite technology for building up of export capabilities/import substitution including cost of total quality management and acquisition of ISO-9000 certification and for expansion of capacity. ISO 9000 Scheme to meet the expenses on consultancy, documentation, audit, certification fee, equipment and calibrating instruments required for obtaining ISO 9000 certification. Micro Credit Scheme to meet the requirement of well managed Voluntary Agencies that are in existence for at least 5 years; have a good track record and have established network and experience in small savings-cum-credit programmes with Self Help Groups (SHGs) individuals. New Schemes i. ii. iii. iv. v. vi.

To enhance the export capabilities of SSI units. Scheme for Marketing Assistance. Infrastructure Development Scheme. Scheme for acquisition of ISO 9000 certification. Factoring Services and Bills Re-discounting Scheme against inland supply bills of SSIs.

Major schemes Technology Development & Modernization Fund SIDBI has set up Technology Development & Modernization Fund (TDMF) scheme for direct assistance of small sale industries to encourage existing industrial units in the sector, to modernise their production facilities and adopt improved and updated technology so as to strengthen their export capabilities. Assistance under the scheme is available for meeting the expenditure on

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purchase of capital equipment acquisition of technical know-how, up gradation of process technology and products with thrust on quality improvement, improvement in packaging and cost of TQM and acquisition of ISO-9000 series certification. SIDBI in July 1996 had permitted SFCs and promotional banks to grant loans for modernization projects costing upto Rs. 50 lakhs. The Coverage of the TDMF scheme has been enlarged w.e.f. 1.9.1997. Non-exporting units and units which are graduating out of SSI sector are now eligible to avail assistance under this scheme. National Equity Fund National Equity Fund (NEF) under Small Industries Development Bank of India (SIDBI) provides equity type assistance to SSI units, tiny units at one per cent service charges. The scope of this scheme was widened in 1995-96 to cover all areas excepting Metropolitan areas, raising the limit of loan from Rs. 1.5 lakhs to Rs. 2.5 lakhs and covering both existing as well as new units: a. The following are eligible for assistance under the scheme:i. New Projects in tiny and small scale sectors for manufacture, preservation or processing of goods irrespective of the location (except for the units in Metropolitan areas). ii. Existing tiny and small scale industrial units and service enterprises as mentioned above (including those which have availed of NEF assistance earlier), undertaking expansion, modernization, technology up gradation and diversification irrespective of location (except in Metropolitan areas). iii. Sick units in the tiny and small scale sectors including service enterprises as mentioned above, which are considered potentially viable, irrespective of the location of the units (except for the units in Metropolitan areas). iv. All industrial activities and service activities (except Road Transport Operators). b. (b) Project cost (including margin money for working capital) should not exceed Rs. 10 lakhs in the case of new projects in the case of existing units and service enterprises, the outlay on expansion/modernization/technology up gradation or diversification or rehabilitation should not exceed Rs. 10 lakh per project. c. There is no change in the existing level of promoters' contribution at 10% of the project cost. However, the ceiling on soft loan assistance under the Scheme has been enhanced from the present level of 15% lakh per project to 25% of the project cost subject to a maximum of Rs. 2.5 lakh per project.

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NSIC Schemes:

Bill Financing Bills drawn by small scale units for the supplies made to the reputed and well established enterprises and duly accepted by them will be financed / discounted by NSIC for a maximum period of 90 days. WORKING CAPITAL FINANCE Finance for augmenting working capital of viable and well managed units, on selective basis in case of emergent requirements, to enable them to payoff their purchases of consumable stores and spares and production related overheads particularly electricity bills, statutory dues, etc.

EXPORT DEVELOPMENT FINANCE Finance for export development to export oriented units for meeting their emergent requirements. Pre and post shipment finance shall also be provided to such units at usual terms & conditions. THE EQUIPMENT LEASING SCHEME The object of the Leasing Scheme is to assist SSI Units to procure industrial equipment for modernization, expansion and diversification of their industries ELIGIBILITY •

Exclusively for existing && financially viable SSI units including ancillary units, duly registered as SSI units with the Directorate of Industries.

BENEFITS •

100% financing at very liberal terms with easy repayment schedule. Simple formalities and speedy sanction. Single window system for imported equipment. The Corporation undertakes to complete formalities like procuring import licence, opening of Letter of Credit etc. 26

Tax rebate on full 5 year lease rental. BASIC TERMS •

Lease period of 5 years extendable by another 3 years. Repayment as lease rental at the rate of Rs.24 per Rs.100 per month of the cost of machine. There is no separate interest. Minimum assistance provided is Rs.100,000 and maximum subject to SSI ceiling of Rs.6,000,000 or Rs.7,500,000 in case of an ancillary unit. The value of installed machinery at original cost including value of the machine proposed to be obtained under leasing should not exceed Rs.6,000,000 or Rs.7,500,000 in case of an ancillary unit. The unit will have to pay the following before the order for equipment can be placed on the supplier :Amount equal to three months rental (six months rental for special equipment) and Approximately 7% cost of the equipment (8% for Imported equipment) to cover the insurance charges of the machinery for the period of lease i.e. 5 years and administrative charges of the Corporation. The unit/party must carefully read the terms and conditions and also the list of the documents to be furnished along with the application as printed on the application form. The party will have to execute an Agreement Bond before delivery of machine. Payment of lease rental will start after three months of delivery of machine. The cost of the application form is Rs.25/-. The application can be submitted to NSIC Branch Office/Regional Office of the area in which the unit is located

CHAPTER-12 27

SSI FINANCE State Financial Corporations (SFCs) In pursuance of the SFCs Act, 1951, SFCs were set up mainly to finance small and medium scale units. Their area of operation is generally restricted to the concerned States. SFCs also assist small scale units for their modernization and technology up gradation programmes by providing soft loans, restructuring the sick small scale units through rehabilitation schemes and through equity type assistance under SIDBI's seed capital scheme. At present, there are 18 SFCs (including TIIC which was set up as a company) in existence for more than 40 years and operate as Regional Development Banks. The SFCs have played an important role in the evolution and growth of small and medium scale industries in their respective states. They provide financial assistance to industrial units by way of term loans, direct subscription to equity, guarantees, etc. Over the years SFCs have expanded their activities and coverage of assistance. One-Man Committee set up by RBI under the Chairmanship of former Secretary, SSI &ARI, to look into various problems regarding credit flow to SSI sector and support appropriate measures for their redressal has given the following recommendations in its report submitted to RBI which are being processed by them:- Restructuring of weaker SFCs by the Government. - Funds for lending under Single Window Scheme by SFCs should be placed by SIDBI with the SFCs in adequate measures. - Each SFC should get into an MOU with one or two Public Sector banks and participate in joint lending in which both term loan and working capital is provided jointly. For example, 80 per cent of the term loan could be given by SFC and 20 per cent by bank. In case of working capital which may be sanctioned at the same time as term loan, the proportion could be reversed, i.e., 80 per cent by bank and 20 per cent by SFC. However, the working capital account be managed and supervised by the bank through its specialised SSI branches. - SIDBI should sign MOUs with the State Governments to provide some assistance to SFC prior to the approval of assistance packages by the Government of India/SIDBI. - The staff of SFCs has to be adequately trained and SIDBI may be asked to make arrangements for this purpose.

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Credit Flow:

Credit is the prime input for sustained growth of small scale sector and its availability continues to be a matter of concern. Credit provided for creation of fixed assets like land, building, plant and machinery is called long term credit. Credit provided for running the industry for its day to day requirement for purchasing raw material and other inputs like electricity and water etc. and for payment of wages and salaries is called short term credit or working capital.

Institutional Arrangement:

Small Scale Industrial Sector is provided working capital by commercial banks and in some cases by cooperative banks and regional rural banks. Term loans are provided by State Financial Corporations (SFCs), Small Industries Development Corporations (SIDCs), National Small Industries Corporation (NSIC) and National Bank for Agriculture and Rural Development (NABARD). Financial assistance from NSIC and to some extent from SIDCs is available in the form of supply of machinery on hire purchase basis/deferred payment basis. Small sized SSI and tiny units also get some term loans from commercial banks along with working capital in the form of composite loans. Refinance to these institutions is provided by the Small Industries Development Bank of India (SIDBI). Such refinance comprises assistance provided to State Financial Corporation Bills, Finance Scheme, Special Capital/Seed Capital Scheme, new debt instruments and to National Small Industries Corporation. Long term loan are provided to the smalls scale industrial units by SFCs mainly through Single Window Scheme and National Equity Fund as also direct assistance provided to State Financial Corporations in the form of refinance. Some part of working capital for pre-operative expenses is also provided by State Financial Corporations to Small Scale Industrial Units under the Single Window Scheme.

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Credit to SSI Sector from Public Sector Banks: The table below gives the positions with regard to flow of credit to SSI Sector:-

Net Bank Credit Credit to SSI No. of SSI Accounts (in lakhs) SSI Credit as percentage of Net Bank Credit

At the end of March 1995 1,69,038

At the end of March 1996 1,84,381

At the end of March 1997 1,89,684,

At the end of March 1998 2,18,219

At the end of March 1999 2,46,203

25,843 32.25

29,485 33.77

31,542 N.A.

38,109 29.64

42,674 N.A.

15.29

15.99

16.6

17.5

17.33

There is a marginal decline in share of credit to SSI sector as a percentage of net bank credit.

Steps taken by Reserve Bank of India to improve credit flow to SSI sector a) The Government had raised the investment limit for SSIs from Rs.60 lakhs to Rs.300 lakhs and for tiny units from Rs.5 lakhs to Rs.25 lakhs. In order to ensure that credit is available to all segments of tiny sector. RBI has issued instructions that out of the funds normally available to SSI sector, 40% be given to units with investment in plant and machinery up to Rs. 5 lakhs; 20% for units with investment between Rs. 5 lakhs to Rs.25 lakhs and remaining 40% for other units. b) Public sector banks have been advised to operationalise more specialised SSI branches at centres where there is a potential for financing many SSI borrowers. As on March 1998, 370 specialised SSI branches are working in the country. c) To extend 'Single Window Scheme' of SIDBI to all districts to meet the financial requirements (both term loan & working capital) of SSIs. d) With a view to moderating the cost of credit to SSI units, banks are advised to accord SSI units with a good track record the benefits of lower spread over the Prime Lending Rate.

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e) In order to take expeditious decision on credit proposals of SSI units, banks have been advised to delegate enhanced powers to the branch managers of the specialised SSI branch so that most of the credit proposals are decided at the branch level.

Monitoring: Credit to SSIs is monitored periodically by Reserve Bank of India, Department of SSI & ARI, National Advisory Committee of SIDBI, State Level Bankers Committee and District Level Coordination Committees of the Bank.

Fresh initiatives announced in the Budget of 1999-2000: In this budget speech the Finance Minister has announced the following measures for improving credit supply to SSI sector a) A new credit insurance scheme launched. Inability to provide adequate security to banks and low recovery are often sighted as major constraint in flow of investment credit of SSI units. The problem is more acute for export oriented and tiny sector enterprises. To alleviate this problem, the Finance Minister announced that a new credit insurance scheme will be launched. b) Composite Loan Scheme Limit Enhanced to Rs. 5 Lakhs The composite loan scheme of SIDBI and commercial banks is designed to case operational difficulties of the small borrowers by presiding term loan and working capital through a single window. The limit for composite loans currently at Rs. 2 lakhs has been enhanced to Rs. 5 lakhs. c) Working Capital Limit Enhanced to Rs. 5 Crores For SSI units the working capital limit is determined by the banks on the basis of simple calculation of 20% of their annual turnover. The turnover limit for this purpose has been enhanced from Rs. 4 Crore to Rs. 5 Crore.

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CHAPTER-13

Priority Sector TEXT OF NEW NOTIFICATIONS SPECIFYING CATEGORY ‘A’ AND CATEGORY ‘B’ OF INDUSTRIALLY BACKWARD DISTRICTS In exercise of powers conferred by section 80-IA of the Income-tax Act, 1961 (43 of 1961), as amended by section 3 of the Income tax (Amendment) Ordinance, 1997 (15 of 1997) and in supersession of the Notification of Government of India, Ministry of Finance, Department of Revenue (Central Board Direct Taxes) number 636(E), dated 3-9-1997] [Notification No.10404 (F.No.142/20/94-TPL (PT-III), dated 3-9-1997][except as respects things done or omitted to be done before such supersession, the Central Government specifies the following districts as industrially backward districts of Category ‘A’ and Category ‘B’ under sub-clause (c) of clause (iv) of sub-section (2) of section 80-IA read with rule 11EA of the Income-tax Rules, 1962. Explanation: For the purpose of this notification, the districts correspond to the districts mentioned in the Report of the Study Group on identification of Backward Districts dated 4th October, 1994 and are based on districts as they stood in the Census Report of 1991. Where a district specified as an industrially backward district for the purposes of section 80-IA is reorganized, either by split or otherwise, after the Census Report of 1991, all the areas comprised in the district as it existed in the Census Report of 1991 will qualify for the purpose of this rule. 2. This notification shall be deemed to have come into force with effect form the 1st day of October, 1994. EXPLANATORY MEMORANDUM The Central Government had set up a Study Group to identify industrially backward districts for the purposes of section 80-IA of the Income-tax Act, 1961. The Group submitted its Report to the Central Government in the month of October 1994. The Central Government constituted another Study Group to review the said Report. On the basis of the reports of both the Study Groups, the Central Government decided that the industrially backward districts should be classified into two categories, i.e. Category ‘A’ and Category ‘B’. Section 80-IA was amended by the Income-tax (Amendment) Ordinance, 1997) so as to classify the industrially backward districts of Category ‘A’ and industrially backward districts of Category ‘B’. The Said Ordinance has come into force on

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the 16th September, 1997. Rule 11EA of the Income-tax Rules, 1962 has also been amended retrospectively with effect from 1-10-1994 so as to give effect to the amendment made in section 80-IA of the Income-tax Act by the said Ordinance. It is certified that the retrospective operation of this amendment shall not prejudicially affect the interest of assesses.. Note: Deduction under Sec. 80IA of the Income Tax Act has been extended upto 31.3.2002

SCHEMS

Prime Minister's Rozgar Yozna PMRY is being implemented since 1993. The Scheme is designed to create and provide sustainable self-employment opportunities to one million educated unemployed youth in the country during the 8th Plan period. During the last 5 years of its implementation, it was felt that certain parameters of the PMRY Scheme needed modification. For example condition of eligibility such as age, educational qualifications was coming in the way of expanding the coverage of the scheme in some cases. Similarly the total financial assistance per case was found to be insufficient in case of certain viable activities. Modifications Government, therefore, has decided to modify some of these parameters of the Scheme. The upper age limit has been relaxed beyond 35 years by 10 years for SCs/STs and women and the educational qualifications for eligibility under the Scheme has been relaxed from matric (passed or failed) to VIIIth passed. Similarly, the upper limit of project cost has been increased from Rs. 1 lakh to Rs. 2 lakhs (Rs. 1 lakh for business sector and Rs. 2 lakhs for other activities). The PMRY scheme would now cover all economically viable activities including agriculture and allied activities but excluding direct agricultural operations like raising crop, purchase of manure etc. The details of the changes made in the parameters of the PMRY Scheme are given below. The modified financial parameter of increase in the upper limit of the project cost from Rs. 1 lakh to Rs. 2 lakhs has been effective from 1.4.1999

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Further clarifications i) Margin/ Subsidy/ Project Costs: Class sanctioned during the current year up to 31.3.99 shall continue to be sanctioned on the basis of the modalities on subsidies/margin/project costs as originally notified in the scheme in 1993. Their disbursement in the current year and thereafter till the cut off dates in the following year shall be in accordance with the sanction conditions. The changed subsidy/margin and project costs and modalities on subsidies/margins/project costs for the general as well as the seven North-Eastern States shall be applicable from 1.4.99: and to cases sanctioned thereafter. ii) Training and other assistance: The ceiling on training expenditure for the industrial sector shall continue to remain at the rate of Rs. 1,000/- per case inclusive of stipend and Rs. 500/- per case inclusive of the stipend for service and business sectors to be made available to States/UTs. Contingency funds at the rate of Rs. 250/- per case sanctioned to the States/UTs shall be admissible. Flexibility in expenditure shall be notified in due course. iii) Age: a) Educated unemployed from the age group of 18 to 35 years are eligible under the scheme. A relaxation up to 10 years in the upper age limit shall be admissible to SCs/STs, ex-servicemen, physically handicapped and women i.e. up to the age of 45 years. b) In the case of the seven North Eastern States, the upper age limit has been relaxed, in general up to 40 years. For the SCs/STs, ex-servicemen, physically handicapped and women the relaxation shall be up to the age of 45 years.

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CHAPTER-14

SWOT Analysis of a Small Scale Industry: Let us take the case of Baba Indian Water Industries (BIWI) a low profile company run by CEO, Mr.Sura Hara Prasad which is located at Nemli in the district of Nizamabad of Andhra Pradesh dealing with the manufacturing and marketing of cleaning liquids. The company is manufacturing and marketing the products which are divided into four segments: Firstly, Domestic cleaning liquids like NOBAC, LOOCID and SURFEX, Secondly, Industrial cleaning liquids like DAZLEAN and GEMLIQ, Thirdly Medical related liquids like HYPODIN and ANTI-B and Fourthly, Lab and automobile related liquids like LABCEE and ABCOOL. All the products are well entrenched in the market and are in great demand. The strength of this company is its strong presence in many districts of Telangana region in AP with strong marketing network created by way of good relations, strong financial background and highly motivated and dedicated workforce. ·

Low population (not that many mouths to feed)

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We grow a lot of food. NZ exports more food than we import.

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Abundant fresh water

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Geographically isolated

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Decent soil

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Stable democratic political system

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Minor but good quality reserves of oil and natural gas

·

Good cool temperate to warm temperate climate

·

Approximately 60% of electricity generated from renewable

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The much-touted No 8 fencing wire mentality - using ingenuity to innovate with limited resources. This attitude got a good workout during the protectionism of the 80s, which really wasn't that long ago so we should be able to resurrect it. - experience with alternative currency systems (even national) - fair number of social organizations (as far as I can judge from Kerikeri), showing the will for social engagement - open minded people (as compared to my home country Belgium), willing to discuss and contemplate alternatives to the 'quest for growth' - Maori population (especially the older people), who still have a living memory of strong local communities based around a share economy and small scale organical agriculture  High literacy rate  Socially progressive culture  Nowhere in New Zealand is too far from the sea, which tends to buffer temperature extremes. New Zealand is a very good place for growing things. At present, much of what we grow is on the basis of potential export receipts (cows, pines), but there is a lot of potential to grow other things.

The weakness is that, it is not able to expand further to other regions of AP due to technical problems. · Highly geographically dispersed population in both rural and suburban areas limiting the feasibility of public transport. · Geographically isolated meaning at the end of the global supply chain. ·

Very little manufacturing exists

· We import significant amounts of staple foods such as grains and pulses.

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·

Traditional grain growing areas are being converted to dairy

·

We rely on significant amounts of imported synthetic fertilizers

·

High rate of car ownership •

Foreign ownership of banks and most industry

•

Tiny economy - super vulnerable to sudden changes

•

Highly urbanized

•

- no long culture of local community life, most towns are spread out and lack a true centre Health and medical supplies almost entirely imported - including contraceptives (it's a subset of the more general point about the lack of local manufacturing) Domestic transport 99% dependent on fossil fuels Pervasive culture of the private car

Governance arrangements at every level (local, regional, national) which favour cars and roads over other modes of transport Poor urban, and very poor rural and inter-city, rail links and services Electricity generation and transmission system not well organized to get renewably-generated power to domestic consumers: for example, 15% of New Zealand's electricity is used by the Tiwai Point aluminium smelter, but, if this were to close, transmission constraints make it difficult to send this electricity to where most domestic consumption occurs Political power of resource-extraction industries, e.g. Solid Energy (coal SOE) Almost complete dominance of neo-classical ("liberal") economic views in Universities, the media, Government departments etc.: both in terms of the dominance of these views within institutions dealing with economics, and the dominance of economics over other disciplines

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The opportunities are that, this particular segment has wider scope, as consumers are conscious of health and hygiene factors due to growing literacy and affordability due to raising disposable income levels. The company can gradually look at exports as an alternative option as its products are highly qualitative. The company is also aggressively manufacturing new brands and variants such as GEMLIQ, which is meant for cleaning of glass and plastic surfaces. · Dependence on pastoral agriculture means there is a “clear slate” with which we can redesign agriculture to incorporate appropriate water management and polycultutral farming strategies. I.e. re-localization of food production. Thus reducing impact on natural systems through agriculture rather than increasing impacts · Abundant opportunity through medium to micro hydro, wind and tidal systems to decentralize the electricity grid and further increase renewable generation. · Spread out nature of suburban sprawl leaves opportunity to incorporate local food production into medium density population areas through the use of current wasteland, road verges, parks and backyards. · Significant opportunities to close the loops on numerous waste streams such as nutrient and energy capture from sewage, putrescible waste, farming run-off and forestry. - national currency with small population makes swap to alternative monetary system (i.e. interest free) easier, especially if current currency would become unstable (due to massive foreign devestment) Many potential renewable energy resources are being barely utilised at present - for example, New Zealand has better solar energy potential than Germany, yet use of solar energy (both passive and active) in New Zealand is minuscule, because current policies, housing

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regulations etc. in New Zealand do not encourage the use of solar energy. "Tightly coupled" political system which means that the chains of influence are relatively small - this cuts both ways, as it makes it easier for both ordinary citizens and for big business to influence political processes.

The threats are that, being a SSI it is finding a great difficulty in standing up against stiff competition from big brands in this segment. And being a fast growing company, the unknown companies can go for duplicity of these products and bring disrepute. ·

Existing lineal/industrial paradigm

·

Liquid energy shortfalls impacting on transport.

·

Continued contamination of soil and waterways •

Quick fix band aid solution

•

Foreigners withdrawing all their investments ala Iceland

•

- 'law and order' and overregulation response from government on growing crisis, thereby restricting local initiatives to build on alternatives Most of population lives close to coast, and often not far above sea level - so, many cities and towns vulnerable to rapid sea level rise Likely short-to-medium effects of climate change on New Zealand include more droughts in east of both islands, more heavy rain & flooding in the west - both threaten food production Likely influx of climate refugees, firstly from Pacific Islands and Australia - this is a threat only if it overwhelms our systems' capacity to absorb additional people

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