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Government Policies for SSI Units
Government Policies for Small and Tiny Enterprises
The Small Scale Industrial Sector has emerged as a dynamic and
vibrant sector of the economy during the eighties. At the end of the
Seventh Plan period, it accounted for nearly 35 percent of the gross
value of output in the manufacturing sector and over 40 percent of the
total exports from the country. It also provided employment
opportunities to around 12 million people.
The primary objective of the Small Scale Industrial Policy during the
nineties would be to impart more vitality and growth-impetus to the
sector to enable it to contribute its mite fully to the economy,
particularly in terms of growth of output, employment and exports. The
sector has been substantially delicensed. Further efforts would be made
to deregulate and debureaucratise the sector with a view to remove all
fetters on its growth potential, reposing greater faith in small and
young entrepreneurs.
All statutes, regulations and procedures would be reviewed and modified,
wherever necessary, to ensure that their operations do not militate
against the interests of the small and village enterprises.
1.0 TINY ENTERPRISES
1.1 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.
1.2 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.
1.3 A separate package for the promotion of Tiny Enterprises is now
being introduced. This constitutes the main thrust of Government’s new
policy.
1.4 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 Programme and
relaxation from certain provisions of labour laws.
1.5 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
channelised through commercial banks. This would facilitate access to a
larger number of entrepreneurs.
2.0 FINANCIAL SUPPORT MEASURES
2.1 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.
2.2 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.
2.3 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.
2.4 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.
3.0 INFRASTRUCTURAL FACILITIES
3.1 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.
3.2 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.
3.3 Adequacy and equitable distribution of indigenous and imported raw
materials would be ensured to the small scale sector, particularly the
tiny sub-sector. Policies would be so designed that they do not militate
against entry of new units. Based on the capacity needs, Tiny/Small
Scale units would be given priority in allocation of indigenous raw
materials.
3.4 A proper and adequate arrangement for delivery of total package of
incentives and services at the District level will be evolved and
implemented.
4.0 MARKETING AND EXPORTS
4.1 In spite of the vast domestic market, marketing remains a problem
area for small and tiny enterprises. Mass consumption labour 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.
4.2 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.
4.3 Government recognizes the need to widen and deepen complementarily
in production programmes 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
techno-economically 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.
4.4 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.
5.0 MODERNIZATION, TECHNOLOGICAL AND QUALITY UP GRADATION
5.1 A greater degree of awareness to produce goods and services
conforming to national and international standards would be created
among the small scale sector.
5.2 Industry Associations would be encouraged and supported to establish
quality counseling and common testing facilities. Technology
Information Centres to provide updated knowledge on technology and
markets would be established.
5.3 Where non-conformity with quality and standards involves risk to
human life and public health, compulsory quality control would be
enforced.
5.4 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.
5.5 Indian Institutes of Technology (IITs) and selected Regional/other
Engineering Colleges will serve as Technological Information, Design and
Development Centres in their respective command areas.
6.0 PROMOTION OF ENTREPRENEURSHIP
6.1 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.
6.2 EDP would be built into the curricula of vocational and other degree
level courses.
6.3 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".
7.0 SIMPLIFICATION OF RULES AND PROCEDURES
7.1 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.
7.2 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.
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