Small Scale Industries

Introduction
The Small Scale Industry is an enterprise whose employee count and revenue falls below certain
levels. Small Scale Industries in India provide job opportunity to more than 65 million people.
Internationally SMEs report for 98% of business statistics and are accountable for triggering
originality and competition.
Small scale industry in India is renowned for its socio economic growth factors and even
industrial expansion. One of the unique features of small scale industry is that its growth has
generated better job prospects helping free enterprise and inculcation of expertise besides
guaranteeing better utilization of limited fiscal reserves and technology. Additionally, they play
an important part in attaining the economic targets and sociopolitical aims.
Establishing a small scale enterprise requires detailed project report so that promoters can
understand that in how many years the endowments can be forfeited. Project Report for Small
Scale Industry helps in identifying the product line and target market of the sector, besides
evaluating the level of skill and accuracy. Hence, a small scale industry project report must
contain 5-7 years evaluations in context of revenues, expenditures, cash flows and outflows,
balance sheet of legal responsibilities and assets in hand, and reimbursement agendas of working
capital and long-term loans, etc. In this way the endorsers can make use of the estimations
provided by the firm in the project reports and compare it with the real performance and
accordingly
take
remedial
steps
against
the
negative
disparities.
The promoters establishing their commercial enterprises without considering the project reports
are taking a big risk as they are equipped with any measuring units to assess the firm's
performance. In the competitive market ambiance, industrialist must not make a foray into a new
sector or set up a new business without preparing Project Reports.
While preparing the project report for small scale industry always keep in mind that the
statistical figures are not discouraging for the promoters. The project valuation should encourage
a sense of practicality among them.
The other users who could require the project reports are industrialists, Financiers, banks,
Financial Analysts, merchants, clients, certifying authorities, Management Accountants, etc

Meaning
Small scale industries were defined on different basis but since March1, 1999, small industries
include all those units having a fixe capital of Rs. 1Crore invested therein. It was previously Rs.
3 Crore. Industries with a fixed capital of Rs.25 lacks (earlier Rs. 50 lacks) are calling Tiny
industries. Small scale industries employees hired labor and machines and power are used.
Scientific instruments industry in Ambala, carpet manufacturing industry in panipat ,hosiery
industry at Ludhiana, T.V. manufacturing units in Delhi are some of the examples of small scale
industries

History
The Institute for Small-Scale Industries was established on March 2, 1966 through a bilateral
agreement between the Republic of the Philippines and the Government of the Kingdom of the
Netherlands. Its principal objective then as now was to assist and promote the development and
growth of the small-scale industrial sector in the Philippines. Originally set up as the training
institute for the Philippine small industries, it gradually built up its capabilities and expanded its
activities to include research, extension, and information programs.
On August 4, 1969, the Institute was established through Republic Act No. 6041 as a research
and extension unit of the University of the Philippines.
The Institute had its permanent home with the completion of the four storey E. Vibrate Hall in
1986.
From then, UP ISSI conducted several consultancy training courses, seminars, technical studies
in the field of medium and small-scale industries with emphasis on Philippine industries

TINY ENTERPRISES
Government have already announced increase in the investment limits in plant and machinery of
small scale industries, ancillary units and export oriented units to Rs 6 million, Rs 7.5 million,
and Rs 200 thousand respectively. Such limits in respect of "TINY" ENTERPRISES would now
be increased from the present Rs 200 thousand to Rs. 500 thousand, irrespective of location of
the unit. Limit in plant and machinery for determining the status of SSI/Ancillary units as on date
is Rs 10 million. For tiny it is Rs 2.5 million and for SSSBE Rs 500 thousand.
Service sub-sector is a fast growing area and there is need to provide support to it in view of its
recognized potential for generating employment. Hence all Industry-related service and business
enterprises, recognized as small scale industries and their investment ceilings would correspond
to those of Tiny enterprises.
A separate package for the promotion of Tiny Enterprises is now being introduced. This
constitutes the main thrust of Governments new policy.
While the small scale sector (other than Tiny Enterprises) would be mainly entitled to one-time
benefits (like preference in land allocation/power connection, access to facilities for
skill/technology up gradation), the Tiny enterprises would also be eligible for additional
support on a continuing basis, including easier access to institutional finance, priority in the
Government Purchase Programed and relaxation from certain provisions of labor laws.

It has also been decided to widen the scope of the National Equity Fund Scheme to cover
projects up to Rs. 1 million for equity support (up to 15 per cent). Single Window Loan Scheme
has also been enlarged to cover projects up to Rs 2 million with working capital margin up to Rs
1 million. Composite loans under Single Window Scheme, now available only through State
Financial Corporations (SFCs) and twin function State Small Industries Development
Corporation (SSIDCs), would also be channelized through commercial banks. This would
facilitate access to a larger number of entrepreneurs.

FINANCIAL SUPPORT MEASURES

Inadequate access to credit both short term and long term remains a perennial problem facing
the small scale sector. Emphasis would henceforth shift from subsidized/cheap credit, except for
specified target groups, and efforts would be made to ensure both adequate flow of credit on a
normative basis, and the quality of its delivery, for viable operations of this sector. A special
monitoring agency would be set up to oversee that the genuine credit needs of the small scale
sector are fully met.
To provide access to the capital market and to encourage modernization and technological up
gradation, it has been decided to allow equity participation by other industrial undertakings in the
SSI, not exceeding 24 per cent of the total shareholding. This would also provide a powerful
boost to ancillarisation & sub-contracting, leading to expansion of employment opportunities.
Regulatory provisions relating to the management of private limited companies are being
liberalized. A Limited Partnership Act will be introduced to enhance the supply of risk capital to
the small scale sector. Such an Act would limit the financial liability of the new and non-active
partners/entrepreneurs to the capital invested.
A beginning has been made towards solving the problem of delayed payments to small industries
by setting up of factoring services through Small Industries Development Bank of India
(SIDBI). Network of such services would be set up throughout the country and operated through
commercial banks. A suitable legislation will be introduced to ensure prompt payment of Small
Industries bills.

INFRASTRUCTURAL FACILITIES
To facilitate location of industries in rural/backward areas and to promote stronger linkages
between agriculture and industry, a new Scheme of Integrated Infrastructural Development
(including Technological Back-up Services) for Small Scale Industries would be implemented
with the active participation of State Governments and financial institutions. A beginning in this
direction will be made this year itself.

A Technology Development Cell (TDC) would be set up in the Small Industries Development
Organization (SIDO) which would provide technology inputs to improve productivity and
competitiveness of the products of the small scale sector. The TDC would coordinate the
activities of the Tool Rooms, Process-cum-Product Development Centers (PPDCs), existing as
well as to be established under SIDO, and would also interact with the other industrial research
and development organizations to achieve its objectives.
Adequacy and equitable distribution of indigenous and imported raw materials would be ensured
to the small scale sector.

MARKETING AND EXPORTS

In spite of the vast domestic market, marketing remains a problem area for small and tiny
enterprises. Mass consumption labor intensive products are predominantly being marketed by the
organized sector. The tiny/small scale sector will be enabled to have a significant share of such
markets. In addition to the existing support mechanism, market promotion would be undertaken
through cooperative/public sector institutions, other specialized/professional marketing agencies
and consortia approach, backed up by such incentives, as considered necessary.
National Small Industries Corporation (NSIC) would concentrate on marketing of mass
consumption items under common brand name and organic links between NSIC and SSIDCs
would be established.
Government recognizes the need to widen and deepen complementarily in production programs
of large/medium and small industrial sectors. Parts, components, sub-assemblies, etc. required by
large public/private sector undertakings would be encouraged for production in a technoeconomically viable manner through small scale ancillary units. Industry associations would be
encouraged to establish sub-contracting exchanges, in addition to strengthening the existing ones
under the SIDO. Emphasis would also be laid on promotion of a viable and competitive
component market.
Though the Small Scale Sector is making significant contribution to total exports, both direct and
indirect, a large potential remains untapped. The SIDO has been recognized as the nodal agency
to support the small scale industries in export promotion. An Export Development Centre would
be set up in SIDO to serve the small scale industries through its network of field offices to
further augment export activities of this sector.

MODERNISATION,TECHNOLOGICAL AND QUALITY UPGRADATION

A greater degree of awareness to produce goods and services conforming to national and
international standards would be created among the small scale sector.

Industry Associations would be encouraged and supported to establish quality counseling and
common testing facilities. Technology Information Centers to provide updated knowledge on
technology and markets would be established.
Where non-conformity with quality and standards involves risk to human life and public health,
compulsory quality control would be enforced.
A reoriented programme of modernization and technological up gradation aimed at improving
productivity, efficiency and cost effectiveness in the small scale sector would be pursued.
Specific industries in large concentrations/clusters would be identified for studies in conjunction
with SIDBI and other banks. Such studies will establish commercial viability of modernization
prescriptions, and financial support would be provided for modernization of these industries on a
priority basis.

PROMOTION OF ENTREPRENEURSHIP
Government will continue to support first generation entrepreneurs through training and will
support their efforts. Large number of EDP trainers and motivators will be trained to
significantly expand the Entrepreneurship Development Programmes (EDP). Industry
Associations would also be encouraged to participate in this venture effectively.
EDP would be built into the curricula of vocational and other degree level courses.
Women entrepreneurs will receive support through special training programme. Definition of
"Women Enterprises" would be simplified. The present stipulation regarding employment of
majority of women workers would be dispensed with and units in which women entrepreneurs
have a majority shareholding and management control, would be defined as "Women
Enterprises".

SIMPLIFICATION OF RULES AND PROCEDURES

The persistent complaint of small scale units of being subjected to a large number of Acts and
Laws, being required to maintain a number of registers and submit returns, and face an army of
inspectors, would be attended to within a specified time frame of three months.
Procedures would be simplified, bureaucratic controls effectively reduced, unnecessary
interference eliminated and paper work cut down to the minimum to enable the entrepreneurs to
concentrate on production and marketing functions.

Difference: Large Scale, Small and Cottage Industry

The difference among the industries is defined on the basic of use of capital equipment according
to instruction of the Government.
According to instruction of the Government of 1985, industries whose investment on fixed
capital like machineries and equipments is less than Rs. 35 lakhs is known as Small Scale
Industries. For large scale industries, promoter or entrepreneur as one person or two persons are
not able to provide capital for construction of large scale industries.
So the entrepreneurs or promoters of large scale industries collect the required capital through
the shares of small values. They also get loan from the market through different ways. But small
scale industries are not able to get the required capital through all these sources.
As large scale industries produce more than small scale industries, the extent of market is more
for large scale industries. Small scale industries can manage themselves with their local market
but large scale industries cannot. Large scale industries cannot function if they do not get
adequate market.
Cottage industries are also known as small scale industries because of the investment. Still then
there are some differences between small scale industries and cottage industries.
According to Fiscal Commission, 1950, a cottage industry is one which is carried on wholly or
primarily with the members of the family either as a whole or as a part-time occupation.
According to Fiscal Commission, 1950, a small scale industry is one which employs hired labor
from 10 to 50. In cottage industry, there is an owner but no hired labourers but in small scale
industries both owner and hired labor are present.
Cottage industries mainly use traditional techniques of production or simple methods of
production but small scale industries use power, new techniques of production and new
machineries etc.
Khadi and Gramodyog, handlooms, ornamental products of silver and gold and small industries
are the examples of cottage industries. TVs, radios, electronic products and other consumer
goods are examples of small scale industries

Difference between Small Scale Industry and Large Scale Industry

Small Scale Industry
1. These industries employ less number of persons and capital.
2. Most of the work is done by manpower, small machines and tools.

3. Raw materials used are less and the production is consequently less.
4. They are scattered in rural and urban areas and are in the private sector, e.g., cycle,
T.V., radio.

Large Scale Industry

(i) These industries employ a larger number of persons and capital.
(ii) The work is done mostly by larger machines and laborers.
(iii) Raw materials and used is large and there is mass production.
(iv) They are located in urban centers and are in the public sector or run by big industrialists,
e.g., Cotton textiles, Jute textiles.

VILLAGE AND SMALL INDUSTRIES

Village and small industries in their different aspects are an integral and continuing element both
in the economic structure and in the scheme of national planning. The primary object of
developing small industries in rural areas is to extend work opportunities, raise incomes and
standard of living and to bring about a more balanced and integrated rural economy. Inevitably,
in rural areas, the traditional industries have to be given immediate consideration. As the rural
economy develops, technical changes will take place in different fields and correspondingly, the
pattern of rural industrialization will also change from simple crafts meeting elementary needs to
small industries based on steadily improving techniques and designed to satisfy the needs of a
more advanced character. These developments will necessarily be spread over a long period; in
the meantime, support through legislation and various positive measures of organization and
assistance for the existing village industries is absolutely vital to the stability and growth of the
village economy. Thus, the sector of village and small industries is not to be viewed as a static
part of the economy, but rather as a progressive and efficient decentralized sector which is
closely integrated, on the one hand, with agriculture and, on the other, with large-scale industry.
The main considerations which influence the priority given to village and small industries in
rural and industrial development programs were set out at length in the first Five-Year Plan.
During the past three years, with the setting up of various special organizations, the ground has
been prepared for programs of larger magnitude.

OBJECTIVES AND BASIC POLICIES

The Village and Small Scale Industries Committee: The programme for village and small
industries to be carried out during the second plan period is con-'siderably larger than in the first.
Programmes for the second plan and problems connected with their implementation have been
recently reviewed by a committeethe Village and Small Scale Industries (Second Five Year

Plan) Committee, commonly known as the Karve Committee, which was appointed by the
Planning Commission in June, 1955. In making its proposals the Committee kept three principal
aims in view, namely,
1. to avoid as far as possible, during the period of the second plan, further technological
unemployment such as occurs specially in the traditional village industries;
2. to provide for as large a measure of increased employment as possible during the plan
period through different village and small industries; and
3. to provide the basis for the structure of an essentially decentralized society and also for
progressive economic development at a fairly rapid rate.
The Committee, however, envisaged that even in the traditional village industries, to the extent
immediately possible, technical improvements should be adopted, and for the future there should
be a regular programme of gradual transition to better techniques. At the same time, where new
capital investment had to be made it should be, as far as possible, on improved equipment, the
improvement being in some cases in the nature of additions to or adaptations of existing
equipment.
The concept of a decentralized economy is not necessarily related to any given level of
technique or mode of operation. What it implies is that technical improvements will be adopted
in such a manner and to such.extent as will permit comparatively small units which are widely
scattered or dispersed throughout the country to undertake economic activities. On this view,
whatever the villagers can undertake by way of improved industry in their own village should be
organized on a village basis. The Committee considered that the progressive expansion and
modernization of rural industry could be best brought about by the-establishment of small
industrial units, along with the necessary services in large villages and small towns located all
over the country. Industrial expansion on the periphery of large towns could scarcely be said to
reduce the concentration of industry. What was needed, therefore, was a pattern of industrial
activity in which a group of villages converging on their natural industrial and urban centre form
a unit or, to use the Committee's expression, "a pyramid of industry broad-based on a progressive
rural economy". Economies of scale and organization should also be secured for small units
through organized cooperative working, as in rural community workshops.
In the Industrial Policy Resolution of 30th April, 1956, reference has been made to the policy of
supporting cottage and village and small-scale industries, which the State has been following by
restricting the volume of production in the large-scale sector, by differential taxation, or by direct
subsidies. It is stated that while such measures will continue to be taken, whenever necessary, the
aim of the State policy will be to ensure that the decentralized sector acquires sufficient vitality
to be self-supporting and its development is integrated with that of large-scale industry. The State
will therefore, concentrate on measures designed to improve the competitive strength of the
small-scale producers. For this it is essential that the technique of production should be
constantly improved and modernised, the pace of transformation being regulated so as to avoid,
as far as possible, technological unemployment. Lack of technical and financial assistance and
suitable working accommodation and inadequacy of facilities for repair and maintenance are

among the serious handicaps of small-scale producers. The Resolution mentions in this
connection that a start has been made with the establishment of industrial estates and rural
community workshops to make good these dificien-cies. The extension of rural electrification
and the availability of power at prices which the workers can afford will also be of considerable
help. Emphasis is laid in the Resolution on the organization of industrial cooperatives which
greatly assist many of the activities relating to small-scale production. Such cooperatives should
be encouraged in every way and the State should give constant attention to the development of
cottage, village and small-scale industries.
Proposals for non-expansion of the capacity of a large-scale industry have to be considered from
two different points of view. The first is the extent to which such a measure would enlarge the
market for small units. It may sometimes be that for lack of organization or other similar reasons
full advantage may not be taken of the available market. The second aspect to consider is the
volume of production of a commodity that may be required in the economy. In this connection
the likely trends of future demand are specially relevant during a period of development in which
considerable public and private outlay will occur. Within the limits set by the need to avoid
shortage of goods on the one hand, and the extent to which production in small units can be
organized effectively to take advantage of a larger market, in any individual case, on the other
the balance of public advantage will determine whether and at what level the capacity of a largescale industry should be limited. In applying the policy there is need for review from time to time
in the light of changing economic conditions- It is therefore necessary that licensing of
industries, which already applies to industries listed in the schedule to tlie Industries
(Development and Regulation) Act, 1951, should also be extended to the field of agricultural
processing, especially to rice mills. Appropriate legislation for this purpose should be enacted.
In Imposing a chess or an excise duty oa the pro-ductioil of a large industry, as the Village and
Small-Scale Industries Committte pointed out, the objects are, firstly, to raise funds from the
consumers of a product; secondly, to take away a portion of the additional profits accruing to
large units in consequence of a limit on expansion of capacity or production; and thirdly, to
provide for a limited price differential in favour of small units. The imposition of chess or an
excise duty in appropriate situations is a well-recognized fiscal device and each case has to be
considered on its merits. The question of subsidies which are sometimes proposed raises issues
of a different character. The Village and Small Scale Industries Committee did not generally
express itself in favour of new measures for introducing subsidies on production or rebates on
sales. It felt that the cost of schemes of protection afforded to any activity should be readily
measurable and schemes of protection for normal economic activity should be so planned that
they could be withdrawn in a reasonable time. There are a few limited exceptions which the
Committee has suggested as, for instance, the proposal for a small subsidy for improved
equipment used in the hand-p'ounding of rice. In the proposals of the Village and Small Scale
Industries Committee, for all the village industries taken together, the total amount of production
subsidy envisaged is estimated to be about Rs. 8 cores. Rebates on the sale ofhandloom and
traditional khaki are estimated to involve expenditure respectively of about Rs. 20 cores and Rs.
7 cores.
The devices for giving effect to the idea of common production programs which have been
discussed above represent only a part of the totality of action to be taken for the development of

village and small industries. They are intended ordinarily to afford time and opportunity to the
sector of village and small industries to gain the necessary strength to develop on its own. They
have to be supplemented, wherever feasible, by common marketing arrangements through
cooperative organizations in which the State may participate. A great deal of attention must be
given to ensuring that the positive measures of organization and assistance succeed and succeed
without loss of time.
Industrial Cooperative and Associations.It is common ground that in village and small
industries co-operatives have to be developed to the greatest extent possible. The experience of
the Handloom Board in encouraging the formation of weavers' cooperatives illustrates some of
the conditions needed for the growth of co-operation in small industry. The number of
handlooms included in the co-operative fold increased from 626,119 in 1950-51 to 788,664 in
1953-54 and to 878,984 in 1954-55 and was expected to reach a million *y the end of the first
Plan. For the formation of co-operatives the Handloom Board has provided assistance to weavers
in share capital and in working capital from 75 to 87% per cent of the share value is contributed
as loan by the Government and die balance is provided by the weaver. Working capital will be
provided at uniform rates ofRs. 200 per cotton loom and Rs. 500 per silk loom. Weavers' cooperative organizations at different levels are federated so that there are central agencies
available for supplying raw materials, offering technical advice, arranging for credit from cooperative sources, and providing better marketing facilities. In the coir industry, 120 primary coir
marketing societies, 22 husk co-operative societies and 2 central coir marketing cooperative
societies have been formed. In some states, progress has been made among particular classes of
artisans, as among tanners and leather workers in Bombay, Uttar Pradesh and Punjab, and among
palm gur manufacturers in Madras.
A combination of factors is required, first for establishing industrial co-operatives and, secondly,
for maintaining and developing them. In almost all village and small industries there is scope for
supply and marketing cooperatives. Producer co-op'-ratives, however, have greater possibilities
in some fields than in others. Supply and marketing co-operatives are in themselves an important
means of aiding small units and securing steady improvement in techniques, including quality
control holding of stocks against future demand and supply of credit The setting up of cooperatives of either type will enable small scale industry to utilise in increasing measure financial
assistance from the Government and from institutions and also guidance from technical service
institutes, training centres and mobile technical services. For small-scale industries, especially
those run by small entrepreneurs, a common form of organization will be the trade association
set up for either purchase of raw-materials or sale of finished products or both. It is possible that
members of such associations may, after a certain period of working together for specific
purposes, like to form themselves into cooperatives. Trade associations may, thus, be an
independent form of organization as well as a step leading on to the establishment of
cooperatives. In organising cooperatives for the various village and small industries it will be
desirable to have targets to be attained during the plan period.
Both for organising supply and marketing cooperatives, and producer co-operatives, it is
essential that Industries Departments in the States should build up efficient extension
organizations which can reach artisans in the main urban centres and in groups of villages. An
extension organization is particularly needed in rural areas where, because of the intimate

relationship between community production and community demand, favourable conditions exist
for forming artisans' co-operatives. A small beginning in this direction is being made In 25 pilot
areas selected under the national extension and community development programme.
A network of well-organized industrial cooperatives for supply and marketing will be essential if
a scheme of assured marketing as envisaged by the Village and Small-Scale Industries
Committee is to be tried out. The principal objective of such a scheme is to provide an incentive
for continuous and increased production by offering to purchase the entire output of selected
products or varieties at a pre-determined price or at a margin between the price of the raw
material and the price of the final product which gives the artisan an adequate wage. The
Committee suggested that the scheme may be introduced in the first instance on an experimental
basis for handloom cloth in a few selected centres and for selected varieties. The modus operandi
will be that the estimates of overall demand for an article will be broken up into requirements of
production from various regions and centres in the country and on that basis arrangement will be
made to supply raw materials to the producers and to take over their entire output The finished
product will be purchased by cooperative institutions on behalf of the State and goods so
purchased may be held in stock until the time of sale. The price and terms of sale will be
determined by the State and any losses that cooperative institutions may incur will be made good
provided they are in excess of the losses normally arising out of trade operations. While the
details of such a scheme will have to be worked out before it can be introduced even on
experimental scale in respect of any village or small industry product, it can, in certain
circumstances be an improvement on the system of fixed rebates which exists in certain
industries. It is desirable that experience in operating such a scheme should be gained at selected
centres in one or two fields in which possible losses are not likely to exceed appreciably the cost
of existing rebates.
The various operations connected with the purchase of raw materials and equipment and the sale
of finished products through industrial co-operatives necessarily involve a large organisational
effort as also suitable arrangements for stocking and warehousing. In respect of agricultural
products a scheme of co-operative marketing and rural warehousing has alrady been worked out
and legislation for the setting up of the necessary machinery is on the anvil. There may be some
difficulty in bringing co-operatives of agricultural producers and industrial co-operatives within
the framework of the same scheme, but there should be scope for mutual assistance. To some
extent it may be possible to use warehousing and godown facilities organized for agricultural
products for products of village and small industries.
A stores purchase policy sympathetic to the requirements of small units can be an important
factor in the success of programs in the decentralized sector. The purchasing procedures will
need to be re-orientated where necessary so that the small units are assured of definite
opportunities in the context of Government procurement and are thus able to utilise their
potential capabilities.
Marketing research provides the basis of knowledge and information for shaping and properly
orientating the production programs of the various industries. Such research can be organized
either by a series of ad hoc investigations or can be combined with schemes ofreserach or
marketing. The object in both cases, however, would be to make a close study of the needs and

tastes of consumers, consumer behaviour towards competing products and services, changes in
prices and their influence on demand etc. This is a field in which not much work has been done
so far. It is suggested that studies in respect of the marketing of the more important products of
village and small industries may be undertaken and on the basis of results obtained, the scope of
marketing studies can be gradually extended.
As small town and rural electrification is extended, a larger number of small industries will be
worked outby power and the adoption of improved techniques will be facilitated. In the chapter
on Irrigation and Power, the econo'mic aspects of small town and rural electrification have been
described at some length. During the second five year plan the number of places with population
less than 10,000 which have electricity is expected to increase from 6,500 to 16,559. In the first
instance extension of power supply can take place most conveniently in villages which are
situated close to urban areas or which lie along the routes of grid transmission lines from which
subsidiary lines can be constructed. It has been recommended that urban and rural electrification
schemes should be worked in an integrated manner, so that the suplus from revenue realised
from urban and industrial consumers can be utilised for reducing rates to rural consumers. It is
also emphasised that even with the existing programme of power development a larger number
of villages than that now proposed can be provided electricity if an organized, co-operative
approach is adopted for its utilisation in rural areas. Further, it is suggested that where there is
scope for utilisation of electricity in agriculture and the small industries, local schemes could be
undertaken in the form of diesel installations or in hilly areas through hydro-electric stations. It is
hoped also to evolve some small working units for the development of wind power.
Housing of Artisans.Improvement of housing conditions of artisans should be an important
item in the programs of decentralized industrial development, as often the house of the artisan is
also his workplace. Provision for this may be found to the extent possible from the allotment for
individual industries but this will need to be supplemented by giving due attention to the needs of
those engaged in cottage, village and small industries in the national housing programme. While
framing projects under the rural housing programme, the requirements of village artisans should
be kept especially in view.
Credit and Finance.Satisfactory arrangements for meeting the requirements of finance hayed a
vital part in the development programs for village and small industries. Besides short-term or
working capital needed for purchase and stocking of raw materials and for the stocking of
finished goods, finance is also needed for enabling artisans to contribute to the share capital of
co-operatives, for the purchase of tools antf equipment and for investment in land, buildings,
machines and other equipment. Loans for share capital will not be required to the same extent in
small-scale industries (many of which are in the hands of small entrepreneurs) as in village
industries where the co-operative form of organization is of the utmost importance. Working
capital and medium-term and long-term finance are needed in all village and small industries,
although the need for long-term finance will be relatively greater in those industries which use
better techniques and equipment and need specially constructed premises.
Existing arrangements for provision of finance are far from satisfactory. Some part of the
finance required is supplied by State Governments under the provisions of their State Aid to
Industries Acts. To a very limited extent medium and long-term finance is beginning to be

provided by State Finance Corporations. Co-operative institutions are able to obtain some
working capital through banking channels. The Reserve Bank of India and the State Bank of
India will have a large role in any integrated scheme of finance for village and small industries.
Assistance under State Aid to Industries Acts has been recently liberalized to some extent and
larger powers of sanction are being delegated to local authorities, but the amounts available from
this source are yet small. There can be no doubt that normal banking and institutional agencies
will have to be utilised far more than at present if the credit needs of village and small industries
are to be met in any large measure. A coordinated policy based on close collaboration between
the Reserve Bank, the State Bank of India, State Finance Corporations and central cooperative
banks is necessary. A beginning in this direction is being made by undertaking pilot schemes for
enlarging and coordinating credit facilities available to small scale industries in selected centres.
These schemes are to be worked under the auspices of the State Bank of India and will be
supervised and guided by local co-ordination committees. In the scheme of co-ordination which
has been drawn up State Governments co-operative credit agencies, State Finance Corporations
and the State Bank of India will all function together. Each agency will meet specific credit
needs and at the same time overlapping will be avoided. These pilot schemes will provide
experience for drawing up similar integrated schemes for each group of village and small
industries with reference to its specific requirements. In some fields for instance, provision of
finance for share capital has the first priority, as in cooperatives of handloom weavers. In its
report, the Rural Credit Survey Committee emphasises the need for the Reserve Bank of India to
take an active role in the provision of short-term credit for industrial cooperatives. The necessary
legislation for this purpose has now been enacted.

OUTLAY ON VILLAGFE AND SMALL INDUSTRIES

Expenditure incurred on the development of village and small industries during the first five year
plan is shown below:

Expenditure on village and Small Industries in the First Plan

(1)
Handlooms
Khad
Village industries
Small-scale industries
Handicrafts
Silk and sericulture
Coir
Total

1951-55

Rs.
cores)
(Budget)

(2)
6.5
4.9
1,1
2.0
0.4
0.8

(3)
4.6
35
3.0
3-2
0.6
0.5
0.1
15.5

15.7

1955-56 1951-56

(4)
11.1
8.4
4.1
53.
1.0
1.3
0.1
31.2

The draft plans for the second five year period prepared by the various Boards and by State
Governments were considered by the Village and Small Scale Industries Committee which had
been set the task of preparing proposals, by industries and wherever possible, by States, for the
utilisation of resources which were expected to be available during the second plan for the
development of village and small-scale industries. The Committee recommended programs and
allocations involving a total outlay of about Rs. 260 cores which also included provision for
working capital which is estimated to amount to about Rs. 65 cores. An allocation of Rs. 88 cores
was proposed for the handloom industry including cotton, silk and wool, Rs. 2.2 cores for wool
spinning and weaving (khaki), Rs. 23 cores for decentralized cotton spinning and khaki, Rs. 47.4
cores for the various village industries, Rs. 11 cores for handicrafts, Rs. 65 cores for small scale
industries, Rs, 6 cores for sericulture, Rs. 2 cores for coir spinning and weaving and Rs. 15 cores
for general schemes. As explained below, the plan provides an outlay ofRs. 200 cores, in addition
to working capital require ments. The distribution of outlay between different industries as
proposed tentatively for the second five year plan is given below:

Distribution

of

Outlay

for

Village

and

Small

(Rs. cores)
Industry Outlay
1.

Handloom
Cotton weaving
Silk weaving
Wool weaving

2.

Khadi Wool spinning and weaving

Decentralised cotton spinning, and khaki

3.

Village Industries
Hand pounding of rice
Vegetable oil (ghani)
Leather footwear .& tanning (village)
Gur and Khandsari
Cottage match
Other village industries

4
5.
6.

Handicrafts
Small Scale industries
Other industries
Sericulture
Coir spinning and weaving

56.0
I.5
2.0
59.5
1.9
14.8
16.7
5.0
6.7
5.0
7.0
1.1
14.0
38.8
9.0
55.0
5.0
1.0

Industries

7.

General schemes (Administration, research, etc.)

Total

15.0
200.0

The outlay of Rs. 200 cores does not include any specific provision for the Ambar Charkha
programme which will be considered further after tests now in progress have been completed.
The provision for working capital required for the development of the various villages and small
industries will be made by G6vem-ment in the initial years of the plan period, that is until
adequate arrangments for the supply of working capital through normal banking and institutional
channels become available. The provision for working capital will be in addition to the plan
provision of Rs. 200 cores. The Boards concerned with the development of various village and
small industries as well as State Governments will estimate their requirements of working capital
for the first two or three years of the plan period and indicate them separately when working out
detailed programs for these industries. The All-India Khadi and Village Industries Board have
estimated their requirements of working. capital for the entire plan period at about Rs. 2 5 cores
of which about Rs. 7 cores is for khaki and the balance for village industries. It is envisaged that
as early as possible the bulk of the working capital needed should come from co-operative and
other banking agencies.
The outlay of Rs. 200 cores provided in the plan will cover the cost of schemes to be
implemented directly by the Centre, Central assistance for the State schemes. States' contribution
for the centrally assisted schemes and any expenditure which States may incur from their own
resources on schemes which are not centrally assisted. Besides this provision, in the programme
for the rehabilitation of displaced persons, Rs. 11 cores have been provided for cottage and
medium industries and industrial loans and Rs. 7 cores for vocational and technical training.
Programmes for the welfare of backward classes also have some provision for vocational and
technical training and for selected village and small industries. In the programme budget of
community development blocks also there is provision to the extent of Rs. 4 cores for rural arts
and crafts.
Part of the programme for village and small industries will be implemented directly by the
Central Ministries or by all-India Boards functioning under their aegis. The remaining programs
will be implemented by States on the advice of the Ministries and the Boards. The following
allocations represent the tentative cost of the schemes to be implemented centrally and by the
States:

Expenditure

on

Village

and

Small

Industries

in

the

(Rs. cores)
Industry
(1)
Handloom

Centre
(2)
1.5

States
(3)
58.0

Second

Plan

Khadi & Village Industries

Handicrafts
Small scale industries
Sericulture
Coir spinning and weaving .
General schemes
Total

4.0
3.0
10.0
02
0.3
6.0
25.0

51.5
6.0
45.0
4.8
0.7
9.0
175.0

The great majority of the schmeswillbe implemented by the State Governments or in the case
ofkhadi and village industries by State Boards and registered institutions functioning in the
States. The schemes to be centrally implemented will be generally those which are of an all-India
character and can best be undertaken by the Centre. These schemes relate to such aspects as the
provision for central organizations, publicity, training and research, exhibitions and fairs, hirepurchase of machinery and the work of special institutions like the National Small Industries
Corporation. These schemes are explained later in this chapter.
In the revised plans of States the total allocation made for village and small industries is about
Rs. ,120 cores. In due course these allocations will be revised so as to accord more closely with
the pattern of distribution visualised in the Village and Small Scale Industries Committee's
Report The Central Ministries and the all-India Boards have also worked out tentative
distribution between States of the allocations proposed for industries with which they are
concerned. These will be taken into consideration in revising allocations in the States. The
'general schemes' for which a provision of Rs. 15 cores has been made relate to more than one
industry or to groups of industries, such as production-cum-training centres, research institutions
and emporia and sales depots. A sum of Rs. 6 cores out of the provision of Rs. 15 cores has been
earmarked for the general schemes of the All-India Khadi and Village Industries Board,
including those pertaining to intensive area development, training programs and technical
research. A sum of Rs. 3 cores has been allotted for strengthening staffs of State Industries
Departments. From the balance ofRs. 6 cores schemes for research, training, emporia, etc., which
are to be implemented mostly by State Governments will be financed. In implementing village
and small industries programs the common procedure is for proposals of States to be scrutinised
by the all-India Boards concerned before they are approved by the Central Government. Schemes
relating to khaki and village industries however, are in a separate category, since much of the
initiative in proposing schemes comes from the All-India and State Khadi and Village Industries
Boards and the schemes are carried out mainly by their registered or recognized institutions and
by societies. The patterns of financial assistance which have been evolved over the past three or
four years need to be reviewed in relation to programs for the second five year plan.

Small Scale Industries

Industries falling in this group are of varied types, but their common features at present are their
urban or semi-urban location and use of machines, power and modem techniques. They are run
by small entrepreneurs or self-supporting workers, and sometimes by cooperatives. Some units in
this field, e.g., those manufaturing bicycle parts or sewing machine parts, may be ancillary to
large industries but as a rule they are not linked to them by well-established sub-contracting

system but as suppliers of products against occasional orders. The working definition adopted by
the Small Scale Industries, Board brings within the scope of the term 'small scale industries' all
units or establishments having a capital investment of less than Rs. 5 lakhs and employing less
than 50 persons when using power. For development in this field the principal needs are the
imparting of training and technical advice regarding the adoption of improved tools, machines
and new techniques, supply of raw materials and power at reasonable rates, supply of adequate
finance on fair terms, facilities for importing or purchasing machines and assistance in the
marketing of products. Problems of marketing are simplified to the extent that small-scale
industries are developed as ancillaries of large industries. Such coordination between the two
sectors of industry requires, however, that (a) purchase of articles or parts from small industries
is specifically provided lor while planning the production programmes of the large units, and (b)
the small industries are brought up to a level where they can maintain an assured supply of
products of the requisite standard and specifications. The practice has recently been introduced
of laying down appropriate conditions and reservations at the time of licensing the establishment
or substantial expansion of a large industry, so as to provide scope for the products of the related
smaH industries.
Small Industries Service Institutes.The programme to be undertaken directly by the Central
Government involving an expenditure of about Rs. 10 cores includes further extension of
technical servicing through the Small Industries Service Institutes and the establishment of an
industrial extension service, a scheme for hire-purchase of machinery, establishment of a
marketing service and the undertaking of pilot projects in selected centres and industries. It is
proposed to increase the number of Small Industries Service Institutes from four to 20, so that
each State has at least one Institute. The Institutes will not merely provide technical advice in
response to enquiries from small units regarding improved types of machines, equipment and
processes, use of raw materials and methods of reducing cost, but their technical staff will
contact small units and advise on their problems, thus providing a useful extension service. The
Institutes will also arrange to give demonstrations in the use of improved technical services and
machines through their own workshops as well as through model workshops set up in centres
outside the Institutes and through mobile workshops mounted on trucks. Further they will
operate on behalf of the National Small Industries Corporation in regard to the supply of
machinery and equipment to small industrialists on a hire-purchase system. They will also
provide a marketing service by giving advice and information to small industries on existing and
potential markets and on adaptation of their production to suit such markets. Schemes for the
hire-purchase of machinery and equipment and for a marketing service are a natural corollary of
the industrial extension service. The terms for the hire-purchase of machinery at present are 20
per cent initial payment for general purposes machines and up to 40 per cent. for special
machines and the rate of interest is 4Vt per cent but, if necessary these terms will be liberalised.
The marketing service is to be operated along three lines. Firstly, wholesale depots will be
opened for certain articles in related centres, for example, footwear in Agra and locks in Aligarh,
and the National Small Industries Corporation will purchase these goods according to certain
quality standards and sell them to retailers in adjacent areas or other centres. Mobile sales-vans
will be operated for arranging the sale of these goods in distant areas and for selecting suitable
retail shops at which the goods will be sold at market prices. Secondly, the National Small
Industries Corporation will negotiate with the Director-General of Supplies and Disposals for

placing stores purchase orders with small industries. Thirdly, the Small Industries Service
Institutes through a special whole-time technical officer will explore the scope for obtaining
orders from large industries for various components and parts which small units can
manufacture.
As the marketing service and the hire-purchase system of machinery are extend on a large scale
it will become necessary to set up subsidiary corporations of the National Small Industries
Corporation. It is proposed to set up four such subsidiaries at Bombay, Calcutta, Madras, and
Delhi. These corporations may in addition stock and supply iron and steel and other raw
materials required for the use of small industries which Government wish to promote as
ancillaries to large units and for other similar developmental purposes. As a part of the technical
service programme of the Central Government, the services of foreign experts for selected
industries such as footwear, surgical instruments, lock-making, surveying and drawing
instruments and electroplating and galvanising, have been obtained.
Industrial estates.A provision of Rs. 10 cores has been made for setting up industrial estates in
the second five year plan with a view to providing conditions favourable to working efficiency,
maintenance of uniform standards in production and economic utilisation of materials and
equipment. The principal objective is to enable a number of small-scale units to have the
advantage of common services and other facilities, such as, a good site, electricity, water, gas,
steam, compressed air, railway sidings, watch and ward, etc. Being located near one another,
some units may be better able to use the goods and services of others, so that they become
interdependent and complementary. Two types of industrial estates, large ones costing from .Rs.
40 to 50 lakhs and small ones costing from Rs. 20 to 25 lakhs are expected to be established. It is
proposed that the responsibility for contruction and management should vest in the State
Governments but that the Central Government should advance to Stale Governments the entire
cost of the estates in the form of loans. State Governments will run the estates through
corporations or such other agencies as they may decide to set up. Sites in the estates will be sold
outright to industrial units or given to them on hire purchase terms. In some cases buildings will
be erected on sites and let out on a rental or a rent-cum-purchase basis or, if necessary, sold outright. Ten large industrial estates have already been approved for Rajkot, Delhi, Madras, West
Bengal, Mysore, Travancore-Cochin and in the U.P. For the small industrial estates eight areas
have been tentatively selected.
The Village and Small Scale Industries Committee expressed the view that industrial estates
should be located in such a way that they do not encourage further concentration of population in
large urban centres. In deciding the location of the estates, especially the smaller estates, this
consideration should be kept in view so that preferably they are developed in or near towns of
comparatively small size.
Schemes in Slate p!ans-T}ie technical service schemes of the Centre and tlie schemes of
industrial estates will influence the general direction and the pace of development of small-scale
industries but the pattern of development of these industries will really be set by the manner in
which various schemes are framed and carried out in the States. State schemes are broadly of
four types, namely,

a. technical service and research schemes, e.g., training-cum-production or training-cumdemonstration centres and polytechnics;
b. production schemes of a pilot character initiated departmentally with a view to-being
turned over to industrial co-operatives or private enterprises;
c. production schemes of a commercial character and loans to private concerns under State
Aid to Industries Acts; and
d. Schemes for supply of power.
The training and technical service programmes in the States will supplement the Central
programme to be implemented through the Small Industries Service Institutes. The need
forcoordina tion in this matter as well as in other development activities as between the Small
Industries Service Institutes and Industries Departments in the States has been recognised and
steps have been taken to define the relative sphere of activity of the two and the manner in which
they will coordinate their respective functions. While the Institutes are intended to serve
primarily as a technical service agency. State Industries Departments will continue to handle all
matters regarding enquiries for starting industries, financial and other forms of assistance needed
by industries, organization of industrial cooperatives, etc. There will be mutual consultation in
such matters as pilot schemes of Central Government, such as, model workshops, arranging for
the services of technical experts and preparation of lists of industries suitable for different
regions. Model schemes for some industries have already been prepared by the office of the
Development Commissioner for small scale industries.
In proposing schemes for developing various small-scale industries conditions of demand,
availability of raw materials and other relevant factors have to be studied carefully. It could be
useful to select for different regions the industries for which favourable conditions exist and
which should, therefore, be specially promoted and assisted. In preparing departmental schemes
and in scrutinising the applications from private persons for loans and other assistance, reference
to lists of selected industries could be of much assistance. Exploratory surveys as well as
intensive studies are needed for their preparation and for the necessary modifications in the light
of changing conditions. A programme of investigations has already been initiated by the Smallscale Industries Board and a team has completed reports on four industries in the northern region,
namely sports goods, sewing machines and parts, bicycles and parts and leather footwear and one
industry on an all-India basis, namely, automobile batteries for the northern region. Similar teams
for the eastern, southern and western regions have also started working. Pending the completion
of these studies, tentative lists of industries could be drawn up by State Industries Departments
on the basis of their own experience and judgement, so that a measure of direction and guidance
can be given to developments in this field.

Sericulture
Sericulture has a high employment potential and provides supplementary occupation to large
numbers of rural families. As silk fabrics have to compete in the market with other textiles the
stability and expansion of the industry can be ensured only by continuous effort to improve

quality and reduce cost. Schemes for the improvement and development of both mulberry and
non-mulberry silk have been in operation during the first plan period, but in all directions a larger
effort is envisaged in the second five year plan. The bulk of the programme will be implemented
in the State, Central schemes being confined to general coordination and all-India research
centres. In regard to mulberry silk an important item in the development programme is the
reduction in costs of mulberry leaf through substitution of existing mulberry with higher yielding
grafts both in rainfed and in irrigated areas, evolving new varieties of mulberry of higher yield
and improvemen't in cultivation methods, manuring, etc. These and other measures for bringing
about improvement in mulberry and cocoons will be supplemented by steps for the
modernisation of silk reeling, by encouraging the substitution of improved basins for country
charkhas and Dy converting of improved basins for filatures into multi-end basins and
introducing central cooking system and drawing chambers. Utilisation of bye-products in the
spun silk industry is necessary for the service of the reeling industry and steps will be taken to
rehabilitate and extend the spun silk industry. As an experimental measure cooperative societies
for raising young worms of the first and second stages collective are to be established.
Cooperative marketing and testing of cocoons, grading of cocoons and introduction of a system
of payment of cocoon prices on actual yield will also be undertaken. Work in the conditioning
houses at Calcutta and Bangalore and at the Berhampur station will be further developed. Two
training institutes are to be established for training personnel for sericulture departments in the
States.
As regards non-mulberry silk the development programme provides for plantations as well as
improvement of basic seed cocoon production for eri, muga and tassar. Organisation of seed
supply, improvement of spinning and reeling, marketing and training and research will be
undertaken more or less on the same lines as for the mulberry silk industry.

Coir Industry
The coir industry has two main branches, namely, manufature of coir yarn from husk and the
manufacture of coir goods such as mats, mattings, carpets and rugs from coir yam. The
development programme for the second plan period will be directed mainly to the solution of the
main problem of the industry, namely, to strengthen the position of the producers through the
organization of co-operative societies. Thondu (husk) co-operative societies will be organised for
the collection of husks and their distribution to primary co-operative societies. Primary cooperative societies will be organised for retting, distribution of retted husk to members for the
production of coir yam and for the collection of yam. Coir marketing societies will be organised
for the sale of the yam received from primary societies. An encouraging beginning with cooperative organization was made during first plan period but the programme envisaged for the
second plan period is on a much larger scale. Unions are also to be set up for exercising
supervision and control over primary societies. Co-operatives are to be assisted by grants
towards establishment expenses and by loans to meet-their working capital requirements.
The development programme for the manufacture of coir goods is concerned chiefly with the
reorganisation of some of the small factories and individual manufacturers into mat and matting
cooperative societies and the establishment of a central coir products marketing society.
Experimental work on the mecnanisation ot the processes of coir weaving will be continued and

further developed, and a central coir research institute and a pilot plant are proposed to be
established. By opening show rooms and warehouses abroad and by sending trade delegations to
foreign countries, the foreign market for coir and coir products is to be developed further

What are the problems faced by Small Scale Industries in India?

Small-scale industries in India could not progress satisfactorily due to various problems that they
are confronted with while running enterprises. In spite of having huge potentialities, the major
problems, small industries face are given below.

Problem of skilled manpower:

The success of a small enterprise revolves around the entrepreneur and its employees, provided
the employees are skilled and efficient. Because inefficient human factor and unskilled
manpower create innumerable problems for the survival of small industries. Non-availability of
adequate skilled manpower in the rural sector poses problem to small-scale industries.

Inadequate credit assistance:

Adequate and timely supply of credit facilities is an important problem faced by small-scale
industries. This is partly due to scarcity of capital and partly due to weak creditworthiness of the
small units in the country.

Irregular supply of raw material:

Small units face severe problems in procuring the raw materials whether they use locally
available raw materials or imported raw materials. The problems arise due to faulty and irregular
supply of raw materials. Non-availability of sufficient quantity of raw materials, sometimes poor
quality of raw materials, increased cost of raw materials, foreign exchange crisis and above all
lack of knowledge of entrepreneurs regarding government policy are other few hindrances for
small-scale sector.

Absence of organized marketing:

Another important problem faced by small-scale units is the absence of organized marketing
system. In the absence of organized marketing, their products compare unfavorably with the
quality of the product of large- scale units. They also fail to get adequate information about
consumer's choice, taste and preferences of the type of product. The above problems do not
allow them to stay in the market.

Lack of machinery and equipment:

Small-scale units are striving hard to employ modern machineries and equipment in their process
of production in order to compete with large industries. Most of the small units employ outdated
and traditional technology and equipment. Lack of appropriate technology and equipment create
a major stumbling block for the growth of small-scale industries.

Absence of adequate infrastructure:

Indian economy is characterized by inadequate infrastructure which is a major problems for
small units to grow. Most of the small units and industrial estates found in towns and cities are
having one or more problems like lack of of power supply, water and drainage problem, poor
roads, raw materials and marketing problem.
Thus absence of adequate infrastructure adversely affect the quality, quantity and production
schedule of the enterprises which ultimately results in under-utilization of capacity.

Competition from large-scale units and imported articles:

Small-scale units find it very difficult to compete with the product of large-scale units and
imported articles which are comparatively very cheap and of better quality than small units
product.

Other problems:
Besides the above problems, small-scale units have been of constrained by a number of other
problems also. They include poor project planning, managerial inadequacies, old and orthodox
designs, high degree of obsolescence and huge number of bogus concerns. Due to all these
problems the development of small-scale industries could not reach a prestigious stage.

What is the Role and Importance of Small Scale Industry in India?

1. A small scale or cottage industry may be defined as an enterprise or seriesof

operations carried on by a workman skilled in the craft on hisresponsibility, the finished
product of which, he markets himself -Prof. K.T. Sash

2.

Indian economy is an under developed economy. Its vast resources are either unutilized
or under-utilized. A major section of man power is lying idle. The per capita income is
low. Capital is shy and scarce and investment is lean. Production is traditional and the

technique is outdated. The output is insufficient and the basic needs of the people remain
unfulfilled

. Industrialization is the only answer to this present state of disrupted economy. The
problem is of the approach which should be direct, utilitarian and pragmatic. Such
industries do not require huge capital and hence suitable for a country like India

. The small scale industries have a talent of dispersal. They can be accessible to the
remote rural areas of the country and do not lead to regional imbalances and
concentration of industries at one place, which is responsible for many economic
resources such as entrepreneurship and capital.

3SSI means small scale industries, which is an industrial undertaking with the investment
not exceeding Rs.100 lakhs in plant and machinery. In cases of auxiliary industries the
investment ceiling on plant and machinery is also Rs.100 lakhs.

4 Small Scale Industries help the economy in promoting balanced development of

industries across all the regions of the economy.

Small Scale Industries are adept in distributing national income in more efficient and
equitable manner among the various participants in the process of good production than
their medium or larger counterparts.

Small Scale Industries enjoy a lot of help and encouragement from the government
through protecting these industries from the direct competition of the large scale ones,
provision of subsidies in the form of capital, lenient tax structure for this industry

5. Before Independence, the present small scale industry was meant to denote the village
and the urban cottage industry

.This group included a variety of industries ranging from manufacturing of Iron safes,
locks, carpets, marble jigs, baskets, hand-loom cloth and the like.

In fact, at that time the term cottage and Small scale industries was used in
juxtaposition to large scale industries, which were established under the British
patronage.

They received encouragement and support during the freedom movement.

The small scale industries found a prominent place in the economic programme
envisaged by the Indian National Congress.

6. After 1947 Jawaharlal Nehru maintained separate entities of small scale industries. He
was of the view that a small industry was the middle sector and it would overlap both the
cottage and the large industries.1977 industrial Policy The basic policy support of SSI

sector had its roots in the Industrial Policy Resolution 1977, laid emphasis on reservation
of items. The reservation economically viable and technologically feasible products to be
exclusively manufactured by small scale industry began with a list of 47 items which was
gradually extended to too many products.

7. 1991 Industrial Policy Equity participation of up to 24% by other industrial

undertakings including foreign companies. Hike in investment limit for tiny sector from
Rs. 2 lakh to Rs. 5 lakh. Support from National Equity Fund for projects up to Rs. 10
lakh. Single window loans to cover projects up to Rs. 20 lakhs. Banks to be involved.
Relaxation of certain provisions of labor laws. Subcontracting Exchanges to be set up by
industry associations Factoring services through SIDBI to overcome the problem of
delayed payments. Women enterprises redefined Package for handloom and handicraft
sector Export development centre in SIDO Marketing of mass consumption items by
NSIC under a common brand name.1995 WTO Policy The formation of WTO in 1995
resulted in a major challenge to the well being of the SSI. The protection given to the SSI
in the form of reservation and quantitative restrictions has been withdrawn. More than
160 items reserved under the SSI category have been de reserved.

8. Micro, Small and Medium Enterprises Development Act, 2006(MSMED Act)* The
Act provides the framework for recognition of enterprises (Manufacturing and services)
and integrating the micro, small and medium enterprises. Categorization of SMEs: SMEs
have been categorized into manufacturing and service industry within which the
classification based on investment in plant and machinery or in equipment has been
made: Manufacturing Enterprise:

9 Micro: investment up to Rs. 25 lakhs Small Enterprises: investment above Rs. 25 lakhs
and up to Rs. 5 crore Medium Enterprise: investment above Rs. 5 crore and up to Rs. 10
crore Service Enterprises: Micro: investment up to Rs. 10 lakhs Small Enterprises:
investment above Rs. 10 lakhs and up to Rs. 2 crore Medium Enterprise: investment
above Rs. 2 crore and up to Rs. 5 crore Other Features: Establishment of funds for
promotion, development and enhancement of competitiveness of these enterprises.
Progressive Credit Policies and practices. Preference in Government procurement of
products and services of micro and small enterprises. More effective mechanism for
mitigating problem of delayed payment to micro and small enterprises. Simplification of
process for closure of business by all three categories of business

10. It contributes almost 40% of the gross industrial value added in the Indian economy.
It has been estimated that a million Rs. of investment in fixed assets in the small scale
sector produces 4.62 million. 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.

11. Production From Small Scale Industries Production (Rs. 000 cores) at 1993-94
prices300000250000200000150000 Production (Rs. 000 cores) at 1993-94 prices100000
50000 0

12. SSI Sector in India creates largest employment opportunities for the Indian populace,
next only to Agriculture. It has been estimated that 100,000 rupees of investment in fixed
assets in the small-scale sector generates employment for four persons.

13. Food products industry has ranked first in generating employment, providing
employment to 0.48 million persons (13.1%). The next two industry groups were Nonmetallic mineral products with employment of 0.45 million persons (12.2%) and Metal
products with 0.37 million persons (10.2%). In Chemicals & chemical products,
Machinery 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%.

14. Per unit employment was the highest (20) in units engaged in beverages, tobacco &
tobacco products mainly 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.

15. 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%.Urban As for urban areas, Food Products and Metal
Products almost equally shared 22.8% of employment. Machinery 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%).

16. 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%.

17. No of Employment in Small Scale Industries in India.

18. SSI Sector plays a major role in Indias present export performance. 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. The 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. SSI Sector contributes about 45%-50% of
the Indian Exports. Direct exports from the SSI Sector account for nearly 35% of total
exports. It contributes around 15% to exports indirectly. Nontraditional products account
for more than 95% of the SSI exports.

19. Export from small sector

20. The opportunities in the small-scale sector are enormous due to the
followingfactors:Less Capital Intensive Extensive Promotion & Support by Government
Reservation for Exclusive Manufacture by small scale sector Project Profiles Funding Finance & Subsidies Machinery Procurement Raw Material Procurement Manpower
Training Technical & Managerial skills Tooling & Testing 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. Small industry sector has performed
exceedingly well and enabled our country to achieve a wide measure of industrial growth
and diversification.

21. Development measures should be spread Rising productivity needs to be made

sustainable Assistance programs need to be tackled Skill based needs need to be
improved

In a developing country like India, the role and importance of small-scale industries is very
significant towards poverty eradication, employment generation, rural development and creating
regional balance in promotion and growth of various development activities.
It is estimated that this sector has been contributing about 40% of the gross value of output
produced in the manufacturing sector and the generation of employment by the small-scale
sector is more than five times to that of the large-scale sector.
This clearly shows the importance of small-scale industries in the economic development of the
country. The small-scale industries have been playing an important role in the growth process of
Indian economy since independence in spite of stiff competition from the large sector and not
very encouraging support from the government.
The following are some of the important role played by small- scale industries in India.

Employment generation:
The basic problem that is confronting the Indian economy is increasing pressure of population on
the land and the need to create massive employment opportunities. This problem is solved to
larger extent by small-scale industries because small- scale industries are labor intensive in
character. They generate huge number of employment opportunities. Employment generation by
this sector has shown a phenomenal growth. It is a powerful tool of job creation.

Mobilisation of resources and entrepreneurial skill:

Small-scale industries can mobilize a good amount of savings and entrepreneurial skill from
rural and semi-urban areas remain untouched from the clutches of large industries and put them
into productive use by investing in small-scale units. Small entrepreneurs also improve social
welfare of a country by harnessing dormant, previously overlooked talent.
Thus, a huge amount of latent resources are being mobilised by the small-scale sector for the
development of the economy.

Equitable distribution of income:

Small entrepreneurs stimulate a redistribution of wealth, income and political power within
societies in ways that are economically positive and without being politically disruptive.
Thus small-scale industries ensures equitable distribution of income and wealth in the Indian
society which is largely characterised by more concentration of income and wealth in the
organised section keeping unorganised sector undeveloped. This is mainly due to the fact that
small industries are widespread as compared to large industries and are having large employment
potential.

Regional dispersal of industries:

There has been massive concentration of industries m a few large cities of different states of
Indian union. People migrate from rural and semi urban areas to these highly developed centres
in search of employment and sometimes to earn a better living which ultimately leads to many
evil consequences of over-crowding, pollution, creation of slums, etc. This problem of Indian
economy is better solved by small- scale industries which utilise local resources and brings about
dispersion of industries in the various parts of the country thus promotes balanced regional
development.

Provides opportunities for development of technology:

Small-scale industries have tremendous capacity to generate or absorb innovations. They provide
ample opportunities for the development of technology and technology in return, creates an
environment conducive to the development of small units. The entrepreneurs of small units play
a strategic role in commercialising new inventions and products. It also facilitates the transfer of

technology from one to the other. As a result, the economy reaps the benefit of improved
technology.

Indigenisation:
Small-scale industries make better use of indigenous organisational and management capabilities
by drawing on a pool of entrepreneurial talent that is limited in the early stages of economic
development. They provide productive outlets for the enterprising independent people. They also
provide a seed bed for entrepreneurial talent and a testing round for new ventures.

Promotes exports:
Small-scale industries have registered a phenomenal growth in export over the years. The value
of exports of products of small-scale industries has increased to Rs. 393 cores in 1973-74 to Rs.
71, 244 cores in 2002-03. This contributes about 35% India's total export. Thus they help in
increasing the country's foreign exchange reserves thereby reduces the pressure on country's
balance of payment.

Supports the growth of large industries:

The small-scale industries play an important role in assisting bigger industries and projects so
that the planned activity of development work is timely attended. They support the growth of
large industries by providing, components, accessories and semi finished goods required by
them. In fact, small industries can breathe vitality into the life of large industries.

Better industrial relations:

Better industrial relations between the employer and employees help in increasing the efficiency
of employees and reducing the frequency of industrial disputes. The loss of production and mandays are comparatively less in small- scale industries. There is hardly any strikes and lock out in
these industries due to good employee-employer relationship.
Of course, increase in number of units, production, employment and exports of small- scale
industries over the years are considered essential for the economic growth and development of
the country. It is encouraging to mention that the small-scale enterprises accounts for 35% of the
gross value of the output in the manufacturing sector, about 80% of the total industrial
employment and about 40% of total export of the country

Production
The small-scale industries sector plays a vital role in the growth of the country. It contributes
almost 40% of the gross industrial value added in the Indian economy.

It has been estimated that a million Rs. of investment in fixed assets in the small scale sector
produces 4.62 million 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. The number of small-scale units has increased from an
estimated 0.87 million units in the year 1980-81 to over 3 million in the year 2000.
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.
Year

Target Achievement

1991-92

3.0

3.1

1992-93

5.0

5.6

1993-94

7.0

7.1

1994-95

9.1

10.1

1995-96

9.1

11.4

1996-97

9.1

11.3

1997-98

8.43

1998-99

7.7

1999-00

8.16

2000-01 (P) *

8.90

P-Projected (April-December)

Employment
SSI Sector in India creates largest employment opportunities for the Indian populace, next only
to Agriculture. It has been estimated that 100,000 rupees of investment in fixed assets in the
small-scale sector generates employment for four persons.

Generation of Employment - Industry Group-wise

Food products industry has ranked first in generating employment, providing employment to
0.48 million persons (13.1%). The next two industry groups were Non-metallic mineral products
with employment of 0.45 million persons (12.2%) and Metal products with 0.37 million persons
(10.2%).
In Chemicals & chemical products, Machinery parts 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).

Location-wise Employment Distribution - 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%.

Urban
As for urban areas, Food Products and Metal Products almost equally shared 22.8% of
employment. Machinery 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 lowest figure of 2. In all other cases it was around the average of 6.
Year

Target
Achievement Growth rate
(lakh nos.) (lakh nos.)

1992-93 128.0

134.06

3.28

1993-94 133.0

139.38

3.28

1994-95 138.6

146.56

5.15

1995-96 144.4

152.61

4.13

1996-97 150.5

160.00

4.88

1997-98 165

167.20

4.50

1998-99 170.1

171.58

2.61

1999-00 175.4

177.3

3.33

P-Provisional

Export
SSI Sector plays a major role in India's present export performance. 45%-50% of the Indian
Exports is contributed by SSI Sector. Direct exports from the SSI Sector account for nearly 35%
of total exports. 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 have been clocking excellent growth rates in this decade. It has been
mostly fuelled by the performance of garments, leather and gems and jewellery units from this
sector.
The 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.
The SSI sector is reorienting its export strategy towards the new trade regime being ushered in
by the WTO.

Year

Exports
(Rs.
Crores)
(at current prices)

1994-95

29,068
(14.86)

1995-96

36,470
(25.50)

1996-97

39,249
(7.61)

1997-98

43946
(11.97)

1998-99

48979
(10.2)

1999-00 (P) 53975

(10.2)
P-Provisional

MajorExportMarkets
An evaluation study has been done by M/s A.C. Nielsen on behalf of Ministry of SSI. As per the
findings and recommendations of the said study the major export markets identified having
potential to enhance SSIs exports are US, EU and Japan. The potential items of SSIs have been
categorized into three broad categories.

ExportDestinations
the Export Destinations of SSI products have been identified for 16 product groups.

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

Less Capital Intensive

Extensive Promotion & Support by Government

Reservation for Exclusive Manufacture by small scale sector

Project Profiles

Funding - Finance & Subsidies

Machinery Procurement

Raw Material Procurement

Manpower Training

Technical & Managerial skills

Tooling & Testing 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. 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 labor absorption nature, SSI sector has made significant
contributions to employment generation and also to rural industrialization. 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. 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 bugbear of the sector has been
the inadequacies in capital, technology and marketing. The process of liberalisation coupled with
Government support will therefore, attract the infusion of just these things in the sector.
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 labor absorbtion nature, SSI sector has made significant
contributions to employment generation and also to rural industrialization. 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. 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.

Government And Small Scale Industries

Cottege and small scale industries have always been playing an important role in India.In ancient
India small industries enjoyed the patronage of the state. Indian goods were known throught the
world for their quality and craftsmanship. The british Rulers in India Discouraged the
development of industries. The goods produced in the England were given preference in Indian
markets. Govt in fact, played no role to encourage industrial development of country. After
independence Govt took keen interest in the development of small scale industries in India.
Various industrial policies of 1948, 1956, 1980, gave special cmphasis to small sector. 1991 a
special policy for small scale sector was announced by Govt of India so as to new imputs to the
development of this sector

Government Measures For Small Scale SectorReservation On Product:- A

number of items have been reserved for then exclusive production of small scale sector. These
units have been protected from completion

Preference In Government Purchase:- A number of items from SSI sector have been
reserved for government purchase. Some items have been provide price preference up to 15
percent over units in the large scale sector

Machinery On Hire Purchase:- National small scale industries corporation arrange the
supply of machines on hire purchase to the small scale units

Marketing Assistance:-A number of govt agencies such as small industries development

corporation, National small sector industries corporation provide all types of marketing help to
the small scale sector

Training:- Training to existence and potential entreprencurs are offered by entreprencurship

development institute of india, technical consultancy organization, financial institutions
commercial bank etc.

Institutional arrangements:-The govt has established a number of institution and boards

to provide help for the development of small scale industries. SSI development organization has
been set up at centre. The head of this organization is known as development commissioner. All
india small industries board has also established under the chairmanship of union industries
minister. The minister of industries has also set up separate department of small scale agro and
rural industries and takes remedial measures.

Procedure of SSI (Small Scale Industries) Registration In Punjab

INTRODUCTION AND CAPITAL REQUIREMENTS:
SSI stands for Small Scale Industries. A small scale industry (SSI) is an industrial undertaking in
which the investment in fixed assets in plant & machinery, whether held on ownership term or on
lease or hire purchase, does not exceed Rs. 1Crore. However, this investment limit is varied by
the Government from time to time.

Objectives of the Registration Scheme

i. To enumerate and maintain a roll of small industries to which the package of incentives and
support are targeted.
ii. To provide a certificate enabling the units to avail statutory benefits mainly in terms of
protection.
iii. To serve the purpose of collection of statistics.
iv. To create nodal centres at the Centre, State and District levels to promote SSI.

Features of the Scheme

i. Registration is voluntary and not compulsory.
ii. Two types of registration is done in all States. First a provisional registration certificates
given. And after commencement of production, a permanent registration certificate is given.

iii. PRC is normally valid for 5 years and permanent registration is given in perpetuity.

COMPULSORY/ VOLUNTARY REGISTRATION:

Registration of a small scale unit is not compulsory. But, its registration with the State
Directorate or Commissioner of Industries or DICs makes the unit eligible for availing different
types of Government assistance like financial assistance from the Department of Industries,
medium and long term loans from State Financial Corporations and other commercial banks,
machinery on hire-purchase basis from the National Small Industries Corporation etc.

Benefits under the Small Scale Industries Schemes:Since the company is registered as a SSI, it avails the following benefits:1. Cheap Bank Finance
2. Under the governments Focus Scheme, the company is funded by 50% for buying the
machines.
3. Duty Drawbacks
4. Exempt from Sales Tax
5.Exempt from Excise Duty
6. Its even easier to get licenses and permissions
7. Credit guarantee scheme
8. Priority sector lending
9. Capital subsidy
10. Reduced customs duty
11. Power tariff subsidies
12. ISO-9000 Certification reimbursement
13. Exemptions under tax laws etc.
14. and several other benefits provided by the State Government

The registration certificate so issued by the concerned authority is seen as a

proof of the unit being a small scale unit. It enables the unit to get several
concessions like:

Income tax exemption and Sales tax exemption as per the State Government policy.

Incentives and concessions in power tariff, etc.

Price and purchase preference for goods produced.

Availability of raw material depending on existing policy.

TYPES

OF

REGISTRATION

PROVISIONAL REGISTRATION: A small scale unit is generally subjected to two

types of registration. Initially, a provisional registration is granted for the proposed enterprise. It
is termed provisional because the enterprise is yet to come into existence. It is granted for a
specified period of time during which the unit is expected to be setup.
A Provisional Registration Certificate (PRC) enables the unit to obtain :(i) Term loans and working capital from financial institutions, banks under priority sector
lending;
(ii) Facilities for accommodation, land and other approvals;
(iii) no objection certificates (NOCs) and clearances from regulatory bodies such as pollution
control board, labor regulations, etc.
Though, provisional registration is not compulsory for getting a permanent registration. But, a
provisional certificate enables the unit to apply to the various departments and agencies for
assistance in setting up of the enterprise.

PERMANENT

REGISTRATION: Once

the unit has commenced commercial

production, it is granted permanent registration. It is a life time registration given after physical
inspection
of
the
enterprise
and
scrutiny
of
certain
documents.

PROCEDURE OF REGISTRATION FOR SSI

The State Directorate or Commissioner of Industries or District Industries Centres (DICs) are
the concerned authorities for registration of small scale units. This registration is both location
specific and product specific. Like in certain State capitals and metropolitan cities, it is granted
to only those units which are located in the designated industrial areas/estates.
Such a registration procedures is generally uniform across the States. However, there may be
some modifications done by individual States.

DOCUMENTS REQUIRED PROVISIONAL REGISTRATION:

1

Form Part I to be filled in by the applicant in detail which include, name of Proprietor,
Name of Firm, Location of Firm, Communication Address, Main Item to be
Manufactured/, Total Investment, Total Value of Plant and Machinery to be installed etc.

Self-attested PAN Card copy of the Proprietor/ Partners/ Directors

Self-Attested Address Proof of the Proprietor/ Partners/ Directors

PAN Card Copy of the Partnership Firm/ Company

Partnership Deed/ MOA-AOA of the Company

Proof of Land i.e. Rent Deed in case the land is taken on rent and Lease Deed, if it is
owned by the Proprietor or any Partner

DOCUMENTS REQUIRED PERMANENT REGISTRATION:

Some of the formalities required to be completed for seeking permanent registration are :Form Part II to be filled in by the applicant in detail
Clearance from the municipal corporation
State pollution control board clearance
Sanction from the electricity board
Ownership/tenancy rights of the premises where unit is located
Copy of partnership deed/Memorandum of articles of association in case of a private limited
company
Sale bill of product manufactured
Sale bill of each end product
Purchase bill of each raw material
Purchase bill of machinery installed
BIS/QC certificate if applicable
An affidavit giving status of the unit, machinery installed, power requirement, etc.
Whatever be the registration scheme, the main purpose is to maintain statistics and a roll of such
units for providing incentives as well as to create nodal centres at the Centre, State
and District levels to promote SSIs. It gives recognition to the industrial unit and helps in
generating
a database for
policy
planning.
Taxation Provisions relating to Small Scale Industries
In a developing country like India, Small Scale Industries play a significant role in economic
development of the country. They are a vital segment of Indian economy in terms of their
contribution towards countrys industrial production, exports, employment and creation of an
entrepreneurial base. These industries by and large represent a stage in economic transition from

traditional to modern technology. Small industry plays a very important role in widening the base
of entrepreneurship. The development of small industries offers an easy and effective means of
achieving broad based ownership of industry, the diffusion of enterprise and initiative in the
industrial field.
Given their importance, the Government policy framework right from the First plan has
highlighted the need for the development of SSI sector keeping in view its strategic importance
in the overall economic development of India. Accordingly, the policy support from the
Government towards Small Scale Industries has tended to be conducive and favourable to the
development of small entrepreneurial class. Government accords the highest preference to
development of SSI by framing and implementing suitable policies and promotional schemes.

De-Registration
A Small Scale Unit can violate the regulations in the following ways which will make it liable
for de-registration:
i. It crosses the investment limits.
ii. It starts manufacturing any new item or items that require an industrial license or other kind of
statutory license.
iii. It does not satisfy the condition of being owned, controlled or being a subsidiary of any other
industrial undertaking.

PROCEDURES FOR SMALL SCALE INDUSTRIAL LICENSING

License
According to economics license means:A government-issued permission to engage in an activity or to operate a business.
Criteria For SSI in India
Industry employing less than 100 workers.
Having fixed assets of less than Rs 10 lakhs need not obtain any license.
(Subject to the condition that the unit is not owned, controlled or subsidiary of any other
industrial undertaking)
Small scale units have to conform to the rules and regulations prescribed by state or local
authority under the Factories Act.

The Industries (Development and Regulation) Act, 1951

Section 10 refers to the requirement of registration of existing industrial units.

Section 11 refers to the requirement of licensing of new industrial undertakings.
Section 11A deals with licences for the production of new articles.
Section 13 refers, inter alia to the requirement of licensing for effecting substantial
expansion.

LIST OF ITEMS RESERVED FOR THE SMALL SECTOR

EXEMPTION FROM INDUSTRIAL LICENSING

Licensing is exempted for industrial undertakings (including MRTP/FERA
companies)other than those in the small scale/ancillary sector, if
i) The proposed article(s) of manufacture is not included in Annex I, II or is not reserved
for
small
scale/ancillary
sector.
ii) The proposed project is not located within 25 kms. from the periphery of the standard
urban area limits of a city having a population of more than 1 mln according to the
1991Census (list enclosed).
This condition, however, will not apply to electronics, computer software, printing
industry and other non-polluting industries that may be notified from time to time.
Those units who have received SIA or DTDG registrations for manufacture of the
reserved items.

SUBSTANTIAL EXPANSION
Substantial expansion of existing units will also be exempt from licensing provided the item of
manufacture is not covered by Annex I, Annex II or reserved for the small scale/ancillary sector.

Manufacture of New Article

 Existing units will be permitted to manufacture any new article without additional
investment if the article is not otherwise subjected to compulsory licensing
This facility would be available notwithstanding any location conditions.

FILING OF MEMORANDA
In respect of new projects for manufacture of articles not covered by compulsory
licensing or their substantial expansions the only requirement would be that the industrial
undertaking shall file a memorandum in prescribed form to the Secretariat for Industrial
Approvals (SIA) in the Ministry of Industry.
Such a memorandum will also have to be filed by those industrial undertakings to be
engaged in non-scheduled industries i.e. those not covered under the I(D&R) Act.
The memorandum will be accompanied by a crossed demand draft of Rs. 1000/- in
favour of the Pay and Accounts Officer, Department of Industrial Development, Ministry
of Industry, Nirman Bhavan, New Delhi - 110011.
The receipt of the memorandum will be acknowledged by the SIA and a reference
number will be given. Industrial undertakings should quote this reference number in all
future correspondence, if any, with the SIA

REGISTRATION OF SSI
Small Scale and ancillary units (i.e. undertaking with investment in plant and machinery
of less than Rs. 6.0 million and Rs. 7.5 million respectively) should seek registration with
the Director of Industries of the concerned State Government.

Registering Your SSI Unit

The main purpose of Registration is to maintain statistics and maintain a roll of such units
for
the
purposes
of
providing
incentives
and
support
services.
States have generally adopted the uniform registration procedures as per the guidelines.
However, there may be some modifications done by States. It must be noted that small
industries is basically a state subject. States use the same registration scheme for
implementing their own policies. It is possible that some states may have a 'SIDO
registration scheme' and a 'State registration scheme'.

Benefits of Registering

The regime of incentives offered by the Centre generally contains the following:
- Credit prescription (Priority sector lending), differential rates of interest etc.
- Excise Exemption Scheme
- Exemption under Direct Tax Laws.
- Statutory support such as reservation and the Interest on Delayed
Act.

Payments

States/UTs have their own package of facilities and incentives for small scale. They relate
to:
Development of industrial estates
Tax subsidies
Power tariff subsidies
Capital investment subsidies &
Other support.
Both the Centre and the State, whether under law or otherwise, target their incentives and
support packages generally to units registered with them.

Objectives of the Registration Scheme

- To enumerate and maintain a roll of small industries to which the package of incentives and
support
are
targeted.
-To provide a certificate enabling the units to avail statutory benefits mainly in terms of
protection.
- To serve the purpose of collection of statistics.
- To create nodal centres at the Centre, State and District levels to promote SSI.

Features of the Scheme

- DIC is the primary registering centre
- Registration is voluntary and not compulsory.
- Two types of registration is done in all States.
I
Provisional registration certificate
II
Permanent registration certificate , after commencement of production
- PRC is normally valid for 5 years and permanent registration is given in perpetuity

Provisional Registration Certificate (PRC)

- This is given for the pre-operative period and enables the units to obtain the term loans and
working capital from financial institutions/banks under priority sector lending.
Obtain
facilities
for
accommodation,
land,
other
approvals
etc.
- Obtain various necessary NOCs and clearances from regulatory bodies such as Pollution
Control Board, Labour Regulations etc.

Permanent Registration Certificate

Enables the unit to get the following incentives/concessions:

Excise
exemptions
- Income-Tax exemption and Sales Tax exemption as per State Govt. Policy.
Incentives
and
concessions
in
power
tariff
etc.
Price
and
purchase
preference
for
goods
produced.
- Availability of raw material depending on existing policy.

Procedure for Registration

Features of the present procedures are as follows:
- A unit can apply for PRC for any item that does not require industrial license which means
items listed in Schedule-III and items not listed in Schedule-I or Schedule-II of the licencing
Exemption Notification. Units employing less than 50/100 workers with/without power can
apply for registration even for those items included in Schedule-II.
- Unit applies for PRC in prescribed application form. No field enquiry is done and PRC is
issued.
- PRC is valid for five years. If the entrepreneur is unable to set up the unit in this period, he can
apply afresh at the end of five years period.
- Once the unit commences production, it has to apply for permanent registration on the
prescribed form.
The following form basis of evaluation:
- The unit has obtained all necessary clearances whether statutory or administrative. e.g. drug
license under drug control order, NOC from Pollution Control Board, if required etc.
- Unit does not violate any locational restrictions in force, at the time of evaluation.
- Value of plant and machinery is within prescribed limits.
- Unit is not owned, controlled or subsidiary of any other industrial undertaking as per
notification.