CIIAPTER - 5

Industrial Policy for Smalt Scale Industries

5:1 Intnoduction: -

The Small Scale Industries Policy reflects the direction and pattern of

small-scale industries development. It helps to achieve the economic, social and

political objectives of development of the country. The policy incorporates all

related subjects relating to small-scale industries covering all sectors. Thus the

small-scale industries development of the country is guided and fostered by

small industries policy. The Government of India made a number of policy

statements on SSIs in post independence period. The researcher has pointed out

that, since much attention was given to policies and programmes of assistance to

small-scale sector, the policy environment could accelerate the growth of small-

scale industries. The historical policy in context of SSIs development is

presented as follows.

5:2 The SSI Sector and Industrial Policy in India

The development of small-scale sector in India has a fairly long history.

Before independence, the colonial government of the British showed no interest

in the development of small-scale industries in India. It followed the concept of

'Laiseez Faire' in economic affairs and as a result, their small-scale industries

developed in England at the cost of Indian industrializatton, because our country

was regarded by them as a source of raw material and as a vast market for their

products. The British Government for infant small-scale industries gave no

125

protection. As such, they could not face the competition of foreign companies

and did not survive.

It may be said that, the Industrial Policy of India started with the

introduction of Khadi in 1920 mainly with the intention of boycotting the foreign

goods in general and particularly cloths as a part of the non-cooperation

movement. The object was also linked to the necessity of finding employment

for spinner and weavers, providing relief from unemployment. In order to take

up the above programme, an All India Khadi Board was set up with branches in

all states inDec.l923. Matratma Gandhi was mainly responsible for the creation

of these Boards. Programmes for the development of small-scale industries were

then a national outcome of the freedom movement struggle led by Gandhiji.

Gandhiji may tle looked upon as the architect of these programmes of the

Industrial Policy of India. Because he was responsible for recogni-ing the

e of small industries for the economic prosperity of the country.l

During the trd world war, eight industrialist of Bombay published a plan

of Economic development of Indi4 which is known as the 'Bombay Plan'. The

main idea behind it was to establish a 'balanced economy' through

industrializatton. Bombay plan did not recognize the importance of regional

planning.2

It was only after independence, our free Indian Government rightly

recognized the need for the development of small-scale industries. In this context

Government adopted several industrial policy resolutions for the

industrialization of the country. For the systematic development of small-scale

t26

industries a sound and firm industrial policy was essential. Accordingly, the

central Government announced industrial policy resolutions successfuily during

the last five and half decades of economic planning.

A study of the industrial documents reveals that, small-scale industry was

assigned an important role throughout the period and promotion of small-scale

industry has all along been listed as a major objective in all our industrial policy

documents. The policy statements also indicate the line on which the

Government has been taking concrete steps. Referring to the Industrial Policy

Resolutions and Statements may highlight the point.

5.2.1 Industrial Policy resolution 1948: -

The Government of India brought out its flrst ever-Industrial Policy

Resolution 1948, so as to give organized direction to its industrialization.

Industrial Policy Resolution 1948 made a specific reference to the role and

e of small-scale industries (with village and handicraft industries) in

India's economic development. To generate employment to the large and

growing population with limited capital resources and underdeveloped

infrastructure, glowth of SSI was found to be an ideal solution. Not only these

industries were particularly suited for the better utilization of local resources and

local unskilled labour force but more importantly it would helps in achieving

local self sufficiency in respect of certain tlpes of essential consumer goods like

food, cloth, and agricultural implements.3

In addition to this, IPR 1948 mentioned in the statement that, the healthy

expansion of cottage and small-scale industries depends upon a number of

127

factors like the provision of raw material, cheap power, technical advice,

organized marketing of their produce and necessary safeguards against intensive

competition by large scale manufacture, as well as the education of the worker in

the use of the best available technique.a

At the time of the first five-year plan, Small Scale Sector (SSS) mainty

comprised cottage and village industries. To promote different segments of

small-scale industry, Government of India had set up six exclusive Boards

namely,

1) Khadi and Village Industries Board (KVIB)

2) Handloom and Board,

3) Handicraft Board,

4) Coir Board

5) Sericulture Board and

6) Small Scale Industries Board (SSIB)5

The role of the Small Scale Industries Board is to promote modern Small

Scale industry whereas the rest are for promoting traditional industries. The

setting up of Small Scale Industries Board is a landmark in the development of

modern small scale Industry in India.

s.2.zlndustrial Policy Resolution 1956: -

The Karve Committee Report (1955) was one of the earliest of the

exercises, which recommended a protective environment for the growth of SSIs

in India. The Industrial Policy Resolution 1956 brought out the regulatory

framework for industrial growth. It stressed the role of small-scale industries in

128

the development of the national economy. Indushial Policy Resolution 1956 re-

emphasized that, Small Scale Industry provides immediate large scale

employrnent, it offers a method of ensuring a mor€ equitable distribution of

national income, and facilitate an effective mobilization of resources of capital

and skill which might otherwise remain unutilised.6

The indushial policy resolution of 1956 observed that, "the state has been

following a policy of supporting cottage and village and small-scale industries

by restricting the volume of production, differential taxation and extending

direct subsidies". T

A significant feature of Industrial Policy Resolution 1956 was that, the

entire Small Scale Industry Sector (SSIS) was kept outside the purview of

industrial licensing. IPR 1956 also underlined the need for modernization &

technological upgradation of small-scale industry.

A related development during this period was the launching of Industrial

Estates Programme. The prograrnme was initiated in 1955. The programme

gained significant momentum during the late 50s.

* Industrial Estates Programme had two objectives -

1) Promotion of modern small-scale industry through provision of

infrastructural facilities and economic incentives, and

2) Dispersal of industries away from metropolitan cities through suitable

location of industrial estates in rural and semi urban cities.

129

The industrial estate prcgramme was launched by the central

Government. However, in 1977, the responsibility of industrial estates was

transferred to State Governments.s

Subsequent to Industrial Policy Resolution 1956, several

schemes were inhoduced for the protection and promotion of small-scale

industry. Important among them are reservation of items for exclusive

manufacnuing in the small-scale industry sector, reservation of SSI items for

exclusive purchasing for the public sector, price preferences, excise duty

concession, water and power subsidies, transport subsidies, sales tax exemption,

concessional finance. In addition to these schemes, exclusive government bodies

were set up at the central, state and district level to deal with different activities

of small industry such as marketing, finance, technology, entrepreneurship, raw

materials etc. e

5.2.3 Industrial Policy Resolution 1977: -

The emphasis of Industrial Policy before the adoption of Industrial Policy

Resolution 1977 was mainly on large industries neglecting cottage industries by

gtving minor role to small-scale industries. But in Industrial Policy Resolution

1977 this approach was changed. The importance assigned to small-scale

industry was emphasized in greater measure in the 1977 industrial policy

resolution. The main thrust of the New Industrial Policy was on effective

promotion of cottage and small-scale industries widely dispersed in rural areas

and small towns.lo

130

The Industrial Policy resolution 1977 had given the big push to the

growth of the de-centralized sector. Thus e.g. the list of items reserved for this

sector was expanded to cover 504 items from the earlier list of 108 items (Since

then the list has been further expanded to cover in all 836 items.). The statement

also declares tlie intention of the Government to provide maximum support to

the small-scale industries for product standardization, quality control, marketing

etc. on priority basis.

Within the small-scale sector a sub-sector of tiny units was created for the

first time in the Industrial Policy Resolution lW. This sub-sector was expected

to receive preferential treatment even within small-scale sector. It was also

proposed in the statement to enact special legislation for protecting the interest

of cottage and household industries.lr

The Industrial Policy Resolution of Dec. 1977 introduced the concept of

District Industries Centers (DICs) for the development of Cottage & Small-Scale

Industries. It was decided to establish an agency in each district called the DIC,

mainly to provide and arrange a package of assistance and facilities for credit

guidance, raw material, training, marketing etc. including the necessary help to

unemployed educated young enfrepreneurs in general. The programme was

initiated on May l, 1979. At present, 422 DICs are operating in the country

covering 431 districts except Mumbai, Kolkata, Delhi, and Chennai. The

Government also initiated the 'nucleus industry' prograrnme for the

development of a core unit around which a nucleus of small unit can grow in

each area of industrial activity.

t3l

A separate wing was crealed in the IDBI for small-scale industries to

provide effective financial support to this sector. Finally, special efforts were

envisaged for modernizing khadi and village industries and for promoting

appropriate technologies all around. 12

5.2.4Industrial Policy Resolution 1980: -

The policy statement emphasizes that SSIs are more important from the

point of view of ancillarisation.r3 The basic thrust of the Industrial Policy

Resolution 1980 was to ensure a continued growth of the small-scale sector

without, at the same time, preventing the growth of medium and large scale

sector. The policy statement of 1980 made it clear that, the existing support

programme for marketing as well as for the reservation of items in small-scale

sector will continue. This policy laid guidelines for strengthening the existing

facilities for credit, technology modernization, and supply of critical raw

materials. lo It suggested certain measures such as, increased availability of raw

materials, accelerated flow of institutional funds, establishment of wide

enhepreneurial base by providing appropriate training and preferential treatment

for industries started in backward areas. 15

5.2.5 New Small Enterprise Policy , l99l: -

As a part of the process of economic reforms and opening up of the

economy, separate New Industrial Policy was announced for promoting and

strengthening small, tiny and village industries on 6fr August 1991 for the frst

time. Till then, policy measures for small-scale industries formed a part and

parcel of the general industrial policy of the country. Further, all earlier

r32

industrial policies emphasized on protection as much as on development. The

New Industrial Policy l99l marked a departure from the past as the thnrst was

on SSI development more than anything else.

tl The salient features of the policy were -l) The ceiling limit of investment in case of tiny enterprises was raised from

Rs. 2 lakh to Rs. 5 lakh, irrespective of the location of the unit.

2) Equity participation in SSI for large (domestic and foreign) industries was

allowed up to 24Vo. This was to encourage modernizatton and technology

upgradation.

3) The policy proposed a separate package for promotion of tiny enterprises.

These units were to get support on continuing basis whereas the small-

scale enterprises were entitled to get one-time benefits.

4) Industry associations were to be encoruaged to set up sub-contracting

sashenges. This was to promote complementarily between large and

small enterprises.

5) Introduction of a Scheme of Integrated Infrastnrctural Development for

small-scale industries.

6) Introduction of technology upgradation schemes called "LIPTECH" in

selected centers in SSI clustered regions.16

7) Setting up of a special monitoring agency to oversee the genuine credit

needs of the Small-Scale Sector.

8) Setting up of Technology Development Cell in the Small Industrial

Development Organi zation.

r33

e)

10)

11)

Setting up of an Export Development Centre in the SIDO.

Market promotion of SSIs products through co-operative / public sector

institutions, other specialized professional / marketing agencies and the

consortia approach, sale of SSI products under cornmon brand names.

The small and tiny sector was to be accorded priority in allocation of

indigenous raw materials.

The tiny sector was to be accorded priority in the govemment purchase

programme.

The scope of the National Equity Fund (NEF) scheme and Single

Window Scheme (SWS) was enlarged.

Permission was granted to private industry to set up industrial estates and

More important feature was the introduction of a new legal form of

organisation of business, namely, restricted or limited partnership. In this

form, the liability of at least one partner is unlimited. This is a welcome

provision.

12)

13)

r4)

15)

16) De-regulation, de-bureaucratization and simplification of statutes,

regulations, and procedures.

This policy reserved 836 items for exclusive manufacture in the Small-

Scale Sector. 17

In India, with the introduction of New Industrial Policy reforms in July

1991, industry has undergone a structural change in regard to certain parameters

governing its structure and functioning. The focus of the policy reforms has been

to provide competitive stimulus for accelerated industrial growth. The thrust of

134

the new policy has therefore been to inject new sources of competition in order

to induce greater industrial efficiency and international competitiveness. Further

the policy aims at enabling enhepreneurs to take investment decisions based on

commercial judgrrent with reduced regulatory role of the Government.

The phase that started in 1991 (1991 to 1997) reforms could be termed as

a period of confrontation because it was the phase of confrontation with

challenges ernerging out of liberalization, privatization and globalization. It

brought the sector face to face with competition. The protection enjoyed so far

was drastically reduced through de-licensing, reduction in excise and custom

duty rates. Placement of several items on OGL list and by making credit

worthiness as the criteria for credit disbursement. For ttre first time, a separate

policy for SSI development was announced in 1991 whose primary objectiv.e

was to impart greater vitality and growth to this sector focus rrcved from cheap

credit to adequate credit through the implementation of the Nayak Committee

r@orlmendations. To provide additional support to emplolment generation,

need for direct intervention was realized which led to the intnoduction of the

Prime Minister's Rozgar Yojana of creating millions of additional jobs through

micro-enterprises. New tool rooms, process-cum-product development centers

with latest technological back up were set up.

The Government of India set up an expert committee on small-scale

industries in December 1995, under the chairmanship of Shri. Abid Hussain was

to address the need for reforms in the existing policies and design new policies

which would facilitate the growth of viable and efficient small-scale industries to

135

make them globally competitive. The expert committee in its report laid

emphasis on removing protection, abolishing reservation, enhancement of SSI

inveshent limit and restructuing supportive, specialized, and financial

institutions. It also emphasized on cluster approach for future strategy for

development. *

To strengthen the technological capabilities of small scale industries in

the emerging globally competitive environment, the Government of India

enhanced the investment ceiling from Rs. 60 lakh to Rs. 300 lakh on December

lO, 1997**. This is irrespective of categories i.e. whether ancillary or export

oriented unit. The Government has also decided to enhance the investment

ceiling of tiny units from Rs. 5 lakh to Rs. 25 lakh inespective of location of the

unit.

5.2.6 Comprehensive Policy Package, 2000: -

The Union Government initiated a number of steps to support and

strengthen SSI truly in the country. The decisions like formation of a Group of

Ministers to recommend measures for SSI promotion, constitution of a

committee under chairmanship of Shri. S. P. Gupta, member of Planning

Commission and Constitution of SSI reservation policy were important among

them.

The Hon'ble Prime Minister announced a comprehensive policy package

for the small-scale sector on August 30, 2000.

* Abid Hussain committee Report p.lO4,** Gazette Notification Govt. of India p.85

136

c)

d)

e)

* Some of the important initiatives taken in the policy were -

a) SSI exemption limit for excise duty rose from Rs. 50lakhs to Rs.l crore.

b) Hike in inveshent limit to Rs. 5 crore for 41 items, as compared to Rs. I

crore for the rest of the SSI sector.

Providing credit linked capital subsidy of 12% against loans for technology

upgradation in specified industries.

Conductrng the third census of SSIs after a gap of 12 years.

Raising the limit of investment in industry related service and business

enterprise from Rs. 5 lakh to Rs. 10lakh.

Continuation of the ongoing scheme of granting Rs. 75,000 to each small-

scale enterprise for obtaining ISO 9000 certification by the end of Tenth

Plan.

The limit of composite loans under the Credit Guarantee Scheme enhanced

from Rs.l0laktr to Rs. 25 laktrs.

Raising the family income eligibility limit of Rs. 24,(X)0 to Rs. 40,000 per

annum, under the Prime Minister's Rozgar Yojana that finances to micro

enterprises.

Encouraging SSI associations to develop and operate testing

laboratories.

Constitution of group to recommend streamlining of inspections.

Increasing the coverage of Integrated Infrastructure Development (IID)

Scheme to progressively cover all areas in the country with SOVo reservation

for rural areas *O SO percent of plots earmarked for tiny secror.

s)

h)

i)

i)

k)

t37

l) In the National Equity Fund Scheme, the project cost limit was revised from

Rs. 25 lakhs to 50laktrs.

m) Setting up of Incubation Centers in sunrise industries.

As stated earlier, the Third Census of SSIs (covering both registered and

unregistered units) was conducted during the year 2001-02. This has provided

valuable information regarding the SSI sector. 18

In splte of all these policy measures the Government has announced

important measlues in recent years. They are as follows:

1) While the investment limit for SSI sector continues to be Rs.l crore the

investment limit for specific list of hi-tech and export-oriented units raised to

Rs. 5 crores to facilitate their suitable technology upgradation so that they

can maintain their competitive edge.

The excise exemption for SSIs was enhanced from Rs. 50lakh to Rs. 1 crore.

To address the problem of collaterals faced by the SSI units, a Credit

Guarantee Fund was launched to provide guarantee for loans up to Rs. 25

laktr. Such loans are provided by commercial banks, selected well performing

RRBs and other Financial Institutions without any collateral including third

party guarantee. A credit Guarantee Trust Fund was created to implement the

scheme.

To encourage technology upgradation, a credit Linked capital subsidy

Scheme for technology upgradation was launched. Under this scheme, 15

percent capital subsidy is admissible on loans up to Rs. 1 crore, provided by

Scheduled Commercial Banks / State Finance Corporation / National Small

2)

3)

4)

138

s)

Industries Corporation (NSIC), to small-scale industries for technology

upgradation.

In the past few years, the government was following the policy of de-

reservation. It was believed that this would help the SSI units to upgrade their

technology and improve the quantity of their products. As a result of this

policy, the number of items reserved for the SSI sector came down from 836

to 605 prior to the Union Budget, 2005-06.

The Integrated Infrastructure Development (IID) Scheme was extended to

cover the entire country with 50 percent reservation for rural areas.

A new scheme named Market Development Assistance (MDA) was launched

exclusively for the SSI sector.

To ensure credit delivery to the SSI sector a number of steps were

undertaken. They are -

D The composite loan limit was raised from Rs. 50laktr to Rs. L crore;

i) Laghu Udyami Credit Card (LUCC) scheme was liberalizeAby enhancing

the credit limit from Rs. 2 lakh to Rs. 10 lal*r, for borrowers having a

satisfactory track record;

iii) The limit of collateral free loans was raised from Rs. 5 lakh to Rs. 15 lakh

and up to Rs. 25 lakh in case of SSI units with a good track record;

iv) The small and Medium Enterprises (SME) fund of Rs. 10,000 crore was

operationalised by the SIDBI since April zO0/. Eighty per cenr of the

lending from this fund will be for SSI units, at interest rate of 2 per cent

below the prevailing PLR (Prime Lending Rate) of the SIDBI. Te

6)

7)

8)

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5.2.7 180 De-reserved Items Notified. -

According to notification released by the Union Ministry of Small Scale

Industries in New Delhi on May 16,2006.,36 products in the category of auto

parts / components, ancillaries and garage equipment were among the 180 items

de-reserved ln2OO6-07 for purposes of production by the non-SSI sector. A total

of 2l products in the chemicals and chemical products' category were de-

reserved. In the category of "Mechanical engineering (excluding transport

equipment)" 76 products were de-reserved in 2005-06. The Government in

2W2-03 on regular basis started the process of substantive de-reservation when

108 items were de-reserved.

With the latest announcement, the list of items reserved for production in

the small-scale industry has come down to about 300, compared to neady 800 in

200G'01. However, reserved products can be produced by large sector

enterprises, provided they undertake to export at least 50 per cent of their

installed capacity.

The policy of substantive de-reservation is being combined with granting

higher investment limits for select product lines in the reserved list. This step

will enable domestic manufacturers to achieve economies of scale and

technological modernization to compete with products being imported under a

falling import duty regime.20

Thus the process of economic development led to changing priorities, the

policy focus shifted to regional imbalances (1977), Ancillarization (1980),

140

exports and dispersal in rural areas (1990) and then to small tiny and village

industries.

No doubt, in the past five and half decade some adjustments were made in

this policy to meet the changing needs of the overall economy but the basic

thnrst remains unchanged. The policy framework underwent changes in

accordance with the course of industrial development in the country.

5:3 The SSI Sector and Industrial Policy in Maharashtra

Maharashtra has been the leader on industrial front of India. (Maharashtra

ranks frst amongst rhajor states in terms of private investment). It accounts for

20 percent of total private investment and in terms of State Domestic Product,

which accounts for 15 per cent of National Income2l. Per capita income of Rs.

23,U91-, more than 60 percent higher than the national average. Maharashtra

contributes 22 pr cent of India's net value added in organized industrial sector.

The state accounts for 3O per cent of softrrare export. Matrarashtra ranked 3d in

the 2l Indian States ranked by HDI, next only to Goa and Delhiz. It has always

been trying hard to develop, sustaining industrial growth; facilitale speedier flow

of investment by creating conductive industrial climate in the state. Maharashtra

has developed a solid base of industrial infrastructure, strong human resources

and sustaining and diverse industrial base. This was possible because

Maharashtra pioneered several policy initiatives, since inception, in diverse field.

The development of Maharashtra has a fairly long history. This

development has been the result of a series of planned efforts in the form of

r4l

policy decision, economic plans, and special assistance programme undertaken

by the Government.

The Industrial Policy of Government of India generally governs industrial

policies of a state Government. However, within the state, the formation of

strategic planning for the effective implementation of the national policy is the

responsibility of the respective state Governments. As Maharashtra state was

formed in 1960 Maharashtra Government started planning for the healthy

development of small-scale industries sector in the state with the setting up of

suitable instinrtional machinery. Hence, Maharashtra State Financial Corporation

(MSFC), Maharashtra Small Scale Industries Development Corporation

(MSSIDC), SICOM, Maharashtra Industrial Development Corporation (MIDC),

were set up. The MIDC was assigned the important task of location of industrial

estates and creation of necessary infrastnrctural facilities for healthy growth of

small-scale industries.

Moreover, the Government of Matrarashtra announced various policies

conducive for the rapid growth of SSIs. The creation of pleasant environment

having adequate infrastructure, power, peaceful and productive labour force and

enterprising people of the state have been attracting the Indian as well as MNCs

to set up or collaborate in the setting up of industrial units in Maharashtra.

Due to regional imbalance in the industrial development in the state, the

Government of Matrarashtra paid considerable attention to the development of

small-scale industries in order to use the local resources and create employment

opportunities in rural and small towns. As such the industrial policies of the

r42

Government of Matrarashtra have been evolving on the principle objective of

economic development through employment generation.

Moreover, the State Government has been providing a wide range of

facilities from finance and raw material to quality testing and marketing of

product of SSIs.23

In the wake of economic reforms initiated in the country Indushial Policy

of Matrarashtra brought a paradigm shift in the approach from protection to

liberalization (a number of control regimes were dismantled in the areas of

industrial policy, taxation, foreign investment, export-imports, reduction of

imports tariffs), to encourage investment and capital formation.

The industrial policy of Matrarashtra 1993 mainly aimed at simplification

of procedures and rationalization of nrles and the Industry, Trade and Commerce

Policy 1995 aimed at emlnwering people at all levels with special focus on

infrastnrcnue development with private sector participation. A Comprehensive

Information Technology Policy was announced in 1998, keeping in view the

importance of the IT sector for employment generation.

The Government of Matrarashtra has declared 'Industrial Policy 2001 for

the development of Small Scale Sector and for encouraging establishment of

new indusrial units in the state in the form of 'package scheme of Incentives'.

In order to encourage the dispersal of industries to less developed areas of

the state, Government has been giving a package of incentives to new/ extension

unit set up in the developing region of the state since 1964 under a scheme

popularly known as the "Package Scheme of Incentives".

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5.3.1 Package Scheme of Incentives 1993 -

The Package Scheme of Incentives, introduced in 1964., was amended

from time to time. The last amended scheme, commonly known, as the 1993

scheme was operative from The l*t October 1993 to 31't March 2001 (See Table

No.21).

For the purpose of the 1993 scheme, the classification of the talukas of

the Raigad district in the Konkan Division is shown in the following Table No.

20 as it was given in the preamble.

Table No.5.1

Classifrcation of Talukas

Raigad District (Konkan Division)

@: With BMR, $ : Outside BMR. (BMR- Bombay Metropolitan Region)

District Group A Group B Group C Group D Group D+

Raigad

Alibag. @ Alibag. $ Karjat. $ Poladpur

Karjat. @ Khalapur. $ Mahad.

Khalapur. @Panvel. $

Mangaon.

Panvel. @ Pen. $ Mhasala.

Pen. @ Roha. $ Murud.

Uran. @ Sudhagad. $ Shrivardhan.

I4

Table No. 5.2

Package Scheme of Incentives 1993 for Small-Scale Industries

Source: - SSIS in India the Growth Sector for the Millennium, DevelopmentCommissioner (SSIs), Ministry of Small Scale Industries, Government of India, 20()F,P.77

Year

&

Gnoup

1993

Subsidy onI'ixedCapitalInveshent(rn To

terms,maximumlimit in Rs.Million)

Perccntage ofSalesTax Reliefon flxed CaprtalInvesfunt(from date ofcommencementof production)

PowerSubsidy(from dateofconunence-mentofproducffon)

InfnrstructureAnd TechnicalSupport

Others

tD+t

.At

.Bt

,c,

.Dt

Not

applicable

@ l5%o

Rs.0.70

million

@ 2Wo

Rs. I

million

@ 257o

Rs.

l.Smillon

@ 80Vo

Rs.2

million

Exemption/

Deferal / Interest

Unsecured Free

Loan -Group

'A'not

applicable

-Group'B' @

lOOVo,6 years

-Group'C' @

ll$Eo,8 years

-Group'D' @

l2OVo 10 years

-Group'D+' @

l3OVo,12 years

Units in

A/BIC

Groups

entitled to a

refund of

Electricity

Duty in the

forrr of a

grant

for 5 years

In D/I)+

Groups, the

grant period

is extended

to 7 years

and 10

years

respectively

Prreparation of

Feasibility

Study

Implementation

Agency to

contribute 75%

towards cost of

Study

Concession in

capital cost of

power supply

to prestigious

units

Refund on

OctroilEntry

Tax (in lieu

of Octroi)

through

a grant

restricted to

lNVo of the

fixed capital

investment

by the unit

for a period

of 5tll9ll2years in the

WCIDID+

Groups,

respectively.

75Vo Conti-

bution

towards cost

of feasibility

study

145

5.3.2 Package Scheme of Incentives 2001 -

The Government of Matrarashtra recognnized the need to address the

emerging challenges in the phase of second generation economic reforms, the

need for encouraging hi-tech and sunrise industries in the Information

Technology and Small Scale Industries to reap ttre strengths of the state in its

developed areas, and to facilitate exports from the state. In the wake of the

national consensus for abolishing the sales tan based incentives, the further

rationalization of incentives, their scale, and mode of release was under the

consideration of the Government. Government has decided to revise the 1993

scheme and bring into force a new scheme, namely the 'Package Scheme of

Incentives, 2OOl' for intensifyrng and accelerating the process of dispersal of

industries to less developed regions and promoting high-tech industry in

developed areas of the state coupled with the object of generating mass

employment opportunities.

Jt Area Classification. -Matrarashtra State has been classified into A, B, C, D, and D+

areas for purposes of incentives. This classification is based mainly on the

degree of development in that particular area. Thus a highly developed area is

classified'A'and a least developed area is classified as'D+'.

Industrial Units in the areas classified as B, C, D, and D+ are offered

incentives on graded scale in the ascertaining order, according to size of

investment in the category of small scale Units (investment in plant and

t46

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machinery not exceeding Rs. 30 millions). The detailed taluka wise

classification of the areas of the state made accordingly has been indicated in

Annenue 24.

Implementing agencies for Small Scale projects are the District Industry

Centers located at the district headquarters of all the districts in Mattarashtra.

Matrarashtra State Financial Corporation (MSFC) is the disbursement and

monitoring authority for SSIs units financed by it.

* Exemption from Blectricity lluty. -New industries establishing in C, D and D+ areas and no-industry

District(s) will be exempted from payments of electricity duty for a period of 15

years. In other parts of the state, 100 percent Export Oriented Units (EOUs),

Inforrration Technology (IT), and Biotechnology (BT) units and industries

setting up in Special Economic Tnne (SEZs) and Electronic Hardware

Technology Parks will be exempted from paynent of electricily duty for a

period of 10 years.

'* VYaiver of Stamp Duty and Registration Fees. -IT units in public IT parks were exempted from Stamp Duty and

Registration fees up to 31st March 2006. All new industrial units (including IT

and BT units) and expansion were exempted from payment of Stamp Duty and

Registration Fees up to 31st March 2006 in C, D and D+ areas and no industry

District(s). However, 50 percent of the Stamp Duty and Registration Fees were

waived for IT units set p in other IT parks in Talukas / areas in the state in 'A'

and 'B' categories.

148

* Octroi Refund. -The Scheme of refund of octroi provided under the Package Scheme up

to 31st March 2006 on the same pattern where account based cess or other levy

was charged instead of or in lieu of octroi, such charge was also eligible for

refund as in the case of octroi.2

Table No.53

Scleme of Refund of Octroi under PSI

Taluka/Areaclassifrcation

Ceiling as percentageof Fixed Capital

Investment

Monetary ceiling(Rs. in lacs)

A

B

c 10 20

D 20 30

D+ 25 35

No Industry District N 35

The subsidy was disbursed in equal annual installments over 5 years.

Existing SSI and Small Scale IT and BT units were eligible for 75 percent of the

subsidy admissible as above for additional investment to the extent of 25 percent

or more priority for the disbursement of the incentives was given to sick units

and 10O per cent Expert Oriented Units. The reference of incentives to an

eligible unit, which has turned sick during the eligibility period was considered

on priority only if and was a scheme for rehabilitation has been approved and

implemented under the BIFR provisions or which the approval of the Directorate

149

of Industries respectively for SSI units.

'* Interest Subsidy to new textile, hosiery, and knitwear SSI units. -New textile, hosiery and knitwear SSIs setting up in different parts of the

state were also eligible for interest subsidy on the interest actually paid to the

financial institutions / bank on the term loan for creating fixed capital assets,

equals to the interest payable at 5 percent per annum as started applicable for the

complete period of eligibility.

Table No. 5.4

Interest subsidy to SSI under PSI

Talukas/Area

classification

Monetary ceiling

(Rs. in lacs)

Maximum period

(in years)

A

B

C 10 4

D 20 5

D+ 25 6

No Industry District 35 7

* Bxemption from Sales Tax for Khadi Village Industries. -

Khadi and Village industries were exempted from Sales Tax up to Rs. 24

lakh per annum available to ft*radi and village industry units registered with and

assisted by the Maharashtra state Khadi and village Industry Board.

150

Table No. 5.5

Sales Tax Incentives for Small Scale Units

Group SSI Units Vo of Fixed

Capital Investment

No. of years earlier ifthe ceilings is reacled

A 100 6

B

c 110 8

D t20 10

D+ 130 t2

The comprehensive Policy package of the Government of Matrarashtra

has strengthened both domestically and globally. Thus the achievements of SSI

are primarily due to the active policy support and comprehensive programme of

assistance launched by the Government of Maharashtra.

Under the collective incentive scheme of the Government of Maharashtra,

'Special Capital Subsidy' is made available to SSIs. For this purpose talukas in

the district are classified development wise ds C, D, and D+ excluding the

connected area to the Mumbai. The Government of Maharashtra has been

implementing Pradhanmantri Rojgar Yojna, Margin Money Scheme, DIC Loan

Scheme, and National Equity Fund Scheme for various

SSls/Services/Occupation through DIC Alibag. Under this scheme through

financial institutions financial assistance, subsidy and working capital is made

available to the entitled educated unemployed boys and girls in the district.

l5l

To sum up, for planning and dispersal of industries, the development of

small-scale industries in India has received the attention of the Government

since independence. Furttrermore, the growth of this sector has been one of the

most significant features of our planned economy. It is mentioned that, because

of the above policy measures the Small Scale Sector has grown "leaps and

bounds" during the last five and half decades and that it has shown its worth and

it has earned its place in the economy.

--___{r__-__

t52

References: -

1. S.V.S. Sharma, Small Entrepreneurial Development in India: in Some

Asian Countries, Light and Life hrblisher, New Delhi, 1979, p.ll .

2. Radharani Choudhury, The Plan for Economic Development in India, Book

Land hrt. Ltd., Calcutta 1959, p.61.

3. Ram K. Vepa, Small Industries Development Programme, Indian Institute

of Public Administration, New Delhi, p.7.

4. J.C. Sandesara, Small Industry in India Evidence and Interpretation, Sardar

Patel Institute of Economic and Social Research, Ahemdabad, Nov.1980,

p.7.

5. J.C. Sandesara, Industrial Policy and Planning 1947-199t, Sage

Publication, New Delhi, 1992, p.7-8.

6. J.C. Sandesar4 Opcit, 1980, p.7.

7. Thanulingom, N., Natarajan K., Incentives Help, homote Small Scale

Industry, Yojana, March 1-15, 1989, p.18.

8. Alexander, P. C., Industrial Estates in India" Asia hrblishing House,

Bombay, 1963,p.13.

9. J. C. Sandesara, Opcit,1992,p.8.

10. J. C. Sandesara, Opcit,1980, p.8.

11. M. L. Narasaiah, Development of Small Scale Industries, Discovery

Publication House, New Delhi, 1999, pp.6-7 .

12. S. K. Mishra, and V. K. Puri, Economic Environment of Business,

Himalaya Publication House, Mumbai, 2N2, p.594.

153

13. Laghu udyog, A Journal of small Scale Industries, Development

commissioner (sSf, Ministry of Small scale Industry, Govt. of India,

April - September 2W3, Vol. No. 9 to Z, p.63.

14. J. C. Sandesara, Opcit,1992,p.9

15. R. c. umat, The New Industrial and Investment Policy, Yojana, July 16-31,

1991, p.8.

16. J. C. Sandesara, Opcit, 1992,p.9.

17. Mishra, s. K. and Puri v.K., Development Issues of Indian Economy,

Himalaya Publishing House, Mumbai, 2005, pp.208-09.

18. Laghu udyog samachar, A Journal on small scale lndustries,

Development Commissioner (SSI), Ministry of Small Scale Industry, Govt.

of India Vol.6 to 8, Jan.-March, 2W5,p.43.

19. Mishra S. K. and hri V.K., Opcit, p.2lD.

20. Competition Success Review, July 2006,p.207.

21. RBI Bulletin, 2005-06.

22. B. Mungekar (Ed.), The Economy of Matrarashtra, Himalaya Publishing

House, Mumbai, 20o.3, p.165.

23. Economic Survey of Matrarashtra 2005-06, Government of Maharashtra,

p.190.

24. Government of Maharashtra, Industries, Energy and Labour Department,

Mumbai, 2001, p.1-13.

r54