Edp Small Scale

7/30/2019 Edp Small Scale

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Meaning and Concept of Small Scale Industry:

In most of the developing countries like India, Small Scale Industries (SSI) constitute an important andcrucial segment of the industrial sector. They play an important role in employment creation, resourceutilisation and income generation and helping to promote changes in a gradual and phased manner. Theyhave been given an important place in the framework of Indian planning since beginning both for economicand ideological reasons. The reasons are obvious.

The scarcity of capital in India severely limits the number of non-farm jobs that can be created because

investment costs per job are high in large and medium industries. An effective development policy has toattempt to increase the use of labour, relative to capital to the extent that it is economically efficient.

Small scale enterprises are generally more labour intensive than larger organisations. As a matter of fact,small scale sector has now emerged as a dynamic and vibrant sector for the Indian economy in recent yearsIt has attracted so much attention not only from industrial planners and economists but also fromsociologists, administrators and politicians.

Definition of Small Scale Industry:

Defining small-scale industry is a difficult task because the definition of small-scale industry varies fromcountry to country and from one time to the another in the same country depending upon the pattern andstage of development, government policy and administrative set up of the particular country.

Every country has set its own parameters in defining small-scale sector. Generally, small-scale sector isdefined in terms of investment ceilings on the original value of the installed plant and machinery. But in theearlier times the definition was based on employment. In the Indian context, the parameter are as follows.

The Fiscal Commission, Government of India, New Delhi, 1950, for the first time defined a small-scaleindustry as, one which is operated mainly with hired labour usually 10 to 50 hands.

Fixed capital investment in a unit has also been adopted as the other criteria to make a distinction betweensmall-scale and large-scale industries. This limit is being continuously raised up wards by government.

The Small Scale Industries Board in 1955 defined, "Small-scale industry as a unit employing less than 50employees if using power and less than 100 employees if not using power and with a capital asset not

exceeding Rs. 5 lakhs".

'The initial capital investment of Rs. 5 lakhs has been changed to Rs. 10 lakhs for sma industries and Rs15 lakhs for ancillaries in 1975. Again this fixed capital investment limit was raised to Rs. 15 lakhs forsmall units and Rs. 20 lakhs for ancillary units in 1980. The Government of India in 1985, has furtherincreased the investment limit to Rs. 35 lakhs for small-scale units and 45 lakhs for ancillary units.

Again the new Industrial Policy in 1991, raised the investment ceilings in plant an machinery to Rs. 60lakhs for small-scale units and Rs. 75 lakhs for ancillary units.

As per the Abid Hussain Committee's recommendations on small-scale industry, the Government of Indiahas, in March 1997 further raised investment ceilings to Rs. 3 crores for small-scale and ancillaryindustries and to Rs. 50 lakhs for tiny industry.

The new Policy Initiatives in 1999-2000 defined small-scale industry as a unit engage in manufacturingrepairing, processing and preservation of goods having investment in plant and machinery at an originalcost not exceeding Rs. 100 lakhs.

In case of tiny units, the cost limitation is up to Rs. 5 lakhs. Again, the Government of India in its budgetfor 2007-08 has raised the investment limit in plant and machinery of small-scale industries to 1.5 corersAn ancillary unit is one which is engaged or proposed to be engaged in the manufacture c production ofparts, components, sub-assemblies, tooling or intermediaries or rendering services and the undertakingsupplies or renders or proposes to supply or render not less than 50% of its production or services, as the


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case may be, to one or more other Industries undertakings and whose investment in fixed assets in plantand machinery whether held on ownership terms or lease or on hire-purchase does not exceed Rs. 75 lakhs.

For small-scale industries, the Planning Commission of India uses terms 'village an small-scale industries'These include modern small-scale industry and the traditional cottage and household industry.

Role and Importance of Small Scale Industry in India

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 inpromotion and growth of various development activities.

It is estimated that this sector has been contributing about 40% of the gross value of output produced inthe manufacturing sector and the generation of employment by the small-scale sector is more than fivetimes to that of the large-scale sector.

This clearly shows the importance of small-scale industries in the economic development of the countryThe small-scale industry have been playing an important role in the growth process of Indian economy sinceindependence in spite of stiff competition from the large sector and not very encouraging support from thegovernment.

The following are some of the important role played by small- scale industries in India.

1. Employment generation:

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

2. 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 harnessingdormant, previously overlooked talent.

Thus, a huge amount of latent resources ;re being mobilised by the small-scale sector for the development ofthe economy.

3. Equitable distribution of income:

Small entrepreneurs stimulate a redistribution of wealth, income and political power within societies inways that are economically positive and without being politically disruptive.

Thus small-scale industries ensures equitable distribution of income and wealth in the Indian society whichis 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 ascompared to large industries and are having large employment potential.

4. Regional dispersal of industries:

There has been massive concentration of industries m a few large cities of different states of Indian unionPeople migrate from rural and semi urban areas to these highly developed centres in search of employmentand sometimes to earn a better living which ultimately leads to many evil consequences of over-crowdingpollution, creation of slums, etc. This problem of Indian economy is better solved by small- scale industries


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which utilise local resources and brings about dispersion of industries in the various parts of the countrythus promotes balanced regional development.

5. Provides opportunities for development of technology:

Small-scale industries have tremendous capacity to generate or absorb innovations. They provide ampleopportunities for the development of technology and technology in return, creates an environmentconducive to the development of small units. The entrepreneurs of small units play a strategic role incommercialising 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.

6. Indigenisation:

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

7. Promotes exports:

Small-scale industries have registered a phenomenal growth in export over the years. The value of exports ofproducts of small-scale industries has increased to Rs. 393 crores in 1973-74 to Rs. 71, 244 crores in 2002-

03. This contributes about 35% India's total export. Thus they help in increasing the country's foreignexchange reserves thereby reduces the pressure on country's balance of payment.

8. Supports the growth of large industries:

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

9. Better industrial relations:

Better industrial relations between the employer and employees helps in increasing the efficiency of

employees and reducing the frequency of industrial disputes. The loss of production and man-days arecomparatively less in small- scale industries. There is hardly any strikes and lock out in these industriesdue to good employee-employer relationship.

problems faced by Small Scale Industries in India

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

1. 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 createinnumerable problems for the survival of small industries. Non-availability of adequate skilled manpower inthe rural sector poses problem to small-scale industries.

2. Inadequate credit assistance:

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


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3. Irregular supply of raw material:

Small units face severe problems in procuring the raw materials whether they use locally available rawmaterials 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, increasedcost of raw materials, foreign exchange crisis and above all lack of knowledge of entrepreneurs regardinggovernment policy are other few hindrances for small-scale sector.

4. Absence of organised marketing:

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

5. Lack of machinery and equipment:

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

6. Absence of adequate infrastructure:

Indian economy is characterized by inadequate infrastructure which is a major problems for small units togrow. Most of the small units and industrial estates found in towns and cities are having one or moreproblems like lack of of power supply, water and drainage problem, poor roads, raw materials andmarketing problem.

Thus absence of adequate infrastructure adversely affect the quality, quantity and production schedule ofthe enterprises which ultimately results in under-utilization of capacity.

7. 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.

8. Other problems:

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

SIDBI

Small Industries Development Bank of India (SIDBI) was established as wholly owned subsidiary ofIndustrial Development Bank of India (IDBI) under the small Industries Development of India Act 1989. It is

the principal institution for promotion, financing and development of industries in the small-scale sector. Italso coordinates the functions of institutions engaged in similar activities. For this purpose, SIDBI hastaken over the responsibility of administrating Small Industries Development Fund and National EquityFund from IDBI.

Capital. SIDBI started its operations from April 1990 with an initial authorised capital of Rs. 250 crore,which could be increased to Rs. 1000 crore. It also took over the outstanding portfolio of IDBI relating tosmall scale sector held under Small Industries Development Fund as on March 31,1990 worth over Rs.4000 crore.


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What are the objectives of SIDBI?

In the setting up of SIDBI, the main purpose of the government was to ensure larger flow of assistance tothe small-scale units. To meet this objective, the immediate thrust of the SIDBI was on the followingmeasures:

(i) initiating steps for technological upgradation and modernisation of existing units;

(ii) expanding the channels for marketing the products of the small scale sector; and

(iii) promotion of employment-oriented industries, especially in semi- urban areas to create more employ-ment opportunities and thereby checking migration of population to urban areas.

What are the functions of SIDBI?

SIDBI provides assistance to the small-scale industries sector in the country through the existing bankingand other financial institutions, such as, State Financial Corporations, State Industrial DevelopmentCorporations, commercial banks, cooperative banks and RRBs. etc. The major functions of SIDBI are givenbelow:

(i) It refinances loans and advances provided by the existing lending institutions to the small-scale units.

(ii) It discounts and rediscounts bills arising from sale of machinery to and manufactured by small-scaleindustrial units.

(iii) It extends seed capital/soft loan assistance under National Equity Fund, Mahila Udyam Nidhi andMahila Vikas Nidhi and seed capital schemes.

(iv) It grants direct assistance and refinance loans extended by primary lending institutions for financingexports of products manufactured by small-scale units.

(v) It provides services like factoring, leasing, etc. to small units.

(vi) It extends financial support to State Small Industries Corporations for providing scarce raw materials toand marketing the products of the small-scale units.

(vii) It provides financial support to National Small Industries Corporation for providing; leasing, hire pur-chase and marketing help to the small-scale units.

Financial Assistance Scheme of SIDBI

It is the general observation that the main obstacles and problems in the growth of industrial units are thepaucity of primary infrastructure, unavailability of suitable market for selling the products, working capitalrequirement and difficulties arising out of the delays in receiving the bills. Looking to the above problemsSIDBI has included many provisions into its various schemes.

1. Loan assistance to the institutions providing market or marketing avenues to the small entrepreneurs.

2. Loan to ancillary units and also for modernisation and upgrading technology.

3. Loan to institutions providing primary services and infrastructure and developing the growth centres.

4. Loan assistance to NSIC.

Apart from the above loan assistance, SIDBI also serves the following:

(a) Refinance to SSIDCs which supply raw material to small units and provide them market avenues.


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(b) Bill discounting facility

(c) Refinance for loan given by state level institutions and banks under the single window system for fixedand working capital.

(d) Refinance of loan given to certified professionals and self-employed people for business like small clinicsand hospitals, nursing homes, development of tourism etc.

5. Refinance for loan given by banks and concerned institutions for new projects, expansion and

modernisation of existing units, quality improvement and rehabilitation of the units.

Similarly, SIDBI provides assistance to women entrepreneurs and ex-servicemen under its various schemesSo in the above way SIDBI makes a good platform for the budding entrepreneurs.

The 'District Industries Centre' (DICs) programme was started by the central government in 1978 with theobjective of providing a focal point for promoting small, tiny, cottage and village industries in a particulararea and to make available to them all necessary services and facilities at one place. The finances for settingup DICs in a state are contributed equally by the particular state government and the central government.

To facilitate the process of small enterprise development, DICs have been entrusted with most of theadministrative and financial powers. For purpose of allotment of land, work sheds, raw materials etc., DICsfunctions under the 'Directorate of Industries'. Each DIC is headed by a General Manager who is assisted byfour functional managers and three project managers to look after the following activities :

Activities of District Industries Centre (DIC):

i. Economic Investigation

ii. Plant and Machinery

iii. Research, education and training

iv. Raw materials

v. Credit facilities

vi. Marketing assistance

vii. Cottage industries

Objectives of District Industries Centre (DIC):

The important objectives of DICs are as follow :

i. Accelerate the overall efforts for industrialisation of the district.

ii. Rural industrialisation and development of rural industries and handicrafts.

iii. Attainment of economic equality in various regions of the district.

iv. Providing the benefit of the government schemes to the new entrepreneurs.

v. Centralisation of procedures required to start a new industrial unit and minimisation- of the efforts andtime required to obtain various permissions, licenses, registrations, subsidies etc.

Functions of District Industries Centre (DIC):

i. Acts as the focal point of the industrialisation of the district.


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ii. Prepares the industrial profile of the district with respect to :

iii. Statistics and information about existing industrial units in the district in the large, Medium, small aswell as co-operative sectors.

iv. Opportunity guidance to entrepreneurs.

v. Compilation of information about local sources of raw materials and their availability.

vi. Manpower assessment with respect to skilled, semi-skilled workers.

vii. Assessment of availability of infrastructure facilities like quality testing, research and developmenttransport, prototype development, warehouse etc.

viii. Organises entrepreneurship development training programs.

ix. Provides information about various government schemes, subsidies, grants and assistance available fromthe other corporations set up for promotion of industries.

x. Gives SSI registration.

xi. Prepares techno-economic feasibility report.

xii. Advices the entrepreneurs on investments.

xiii. Acts as a link between the entrepreneurs and the lead bank of the district.

xiv. Implements government sponsored schemes for educated unemployed people like PMRY schemeJawahar Rojgar Yojana, etc.

xv. Helps entrepreneurs in obtaining licenses from the Electricity Board, Water Supply Board, No ObjectionCertificates etc.

xvi. Assist the entrepreneur to procure imported machinery and raw materials.

xvii. Organises marketing outlets in liaison with other government agencies.

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Edp Small Scale