Notes Module 3 Bangalore University Semester III Small and Medium Enterprises (SME) (Module 3) Q. Explain the Concept of Small and Medium Enterprises (SME) (2 marks) Small and Medium Enterprises (SME) or Small and Medium Businesses (SMBs), are companies whose headcount or turnover falls below certain limits. The abbreviation SME occurs commonly in the European Union and in international organizations, such as the World Bank, the United Nations, and the WTO. The term small and medium businesses or SMBs is predominantly used in the U.S.A. EU Member States traditionally have their own definition of what constitutes an SME, for example, the traditional definition in Germany had a limit of 250 employees, while in Belgium it could have been 100. But now the EU has started to standardize the concept. Its current definition categorizes companies with fewer than 10 employees as "micro", those with fewer than 50 employees as "small", and those with fewer than 250 as "medium". By contrast, in the United States, when small business is defined by the number of employees, it often refers to those with fewer than 100 employees, while medium-sized business often refers to those with fewer than 500 employees. Q. How did the Ministry of MSMED come into existence?(8 marks) In India, the SME is generally referred to as 'small Scale industry' including the tiny sector and the 'Small Scale Services and Business Enterprises' (SSSBE). SMEs have always represented the model of socio economic policies of the Government of India, which emphasized judicious use of foreign exchange for import of capital goods and inputs; labor intensive mode
1. Notes Module 3Bangalore UniversitySemester IIISmall and
Medium Enterprises (SME) (Module 3)Q. Explain the Concept of Small
and Medium Enterprises (SME) (2 marks)Small and Medium Enterprises
(SME) or Small and Medium Businesses (SMBs), are companies
whoseheadcount or turnover falls below certain limits. The
abbreviation SME occurs commonly in theEuropean Union and in
international organizations, such as the World Bank, the United
Nations, and theWTO. The term small and medium businesses or SMBs
is predominantly used in the U.S.A.EU Member States traditionally
have their own definition of what constitutes an SME, for example,
thetraditional definition in Germany had a limit of 250 employees,
while in Belgium it could have been 100.But now the EU has started
to standardize the concept. Its current definition categorizes
companies withfewer than 10 employees as "micro", those with fewer
than 50 employees as "small", and those withfewer than 250 as
"medium". By contrast, in the United States, when small business is
defined by thenumber of employees, it often refers to those with
fewer than 100 employees, while medium-sizedbusiness often refers
to those with fewer than 500 employees.Q. How did the Ministry of
MSMED come into existence?(8 marks)In India, the SME is generally
referred to as small Scale industry including the tiny sector and
the SmallScale Services and Business Enterprises (SSSBE). SMEs have
always represented the model of socio economic policies of the
Government of India, whichemphasized judicious use of foreign
exchange for import of capital goods and inputs; labor
intensivemode of production, employment generation;
non-concentration and diffusion of economic power inthe hands of a
few (as in the case of the big business houses); discouraging
monopolies practices ofproduction and marketing; and finally
effective contribution to foreign exchange earnings of the
nationwith low import-intensive operations.Recognizing the
importance and contribution of small scale industry, the government
under notificationdated 9th May 2007 has amended the Government of
India (Allocation of Business) Rules, 1961.Pursuant to this
amendment, Ministry of Agro and Rural Industries (Krishi Evam
Gramin UdyogMantralaya) and Ministry of Small Scale Industries
(Laghu Udyog Mantralaya) have been merged into asingle Ministry,
namely, Ministry of Micro, Small and Medium Enterprises (Sukshma
Laghu AurMadhyam Udyam Mantralaya).
2. Now all the activity related to small scale industry, are
directed by this Ministry.Q. Explain the differentiations in SMBs
(8 marks) In accordance with the provision of Micro, Small, and
Medium Enterprises Development (MSMED) Act,2006 the Micro, Small,
and Medium Enterprises (MSME) are classified in two classes, which
are asfollows:Manufacturing Enterprises: The enterprises engaged in
the manufacture or production of goodspertaining to any industry
specified in the first schedule to the industries (Development and
RegulationAct, 1951).The manufacturing enterprises are defined in
terms of investment in plant and machinery.i) A micro enterprise is
where the turnover/investment in plant and machinery does not
exceed 25 lakh.ii) A medium enterprise is where the
investment/turnover in plant and machinery is more than 5 crorebut
does not exceed 10 crore.iii) A small enterprise is where the
investment/turnover in plant and machinery is more than 25 lakhbut
does not exceed 5 crore.2) Service Enterprises: The enterprises
engaged in providing or rendering of services and are defined
interms of investment/turnover especially in terms of equipment
used.i) A micro enterprise is where theinvestment/turnover does not
exceed 10 lakh.ii) A small enterprise is, where investment/turnover
is more than 10 lakh but does not exceed 2 crore. iii) A medium
enterprise is, where the investment/turnover is more than 2 crore
but does not exceed 5crore.Q. Explain the different types of SSIs
(8 marks)A small scale industry is an industry that is privately
owned and. operated, with a small number ofemployees and relatively
low volume of sales. Small businesses are normally privately owned
corporations, partnerships, or sole Proprietorships. InIndia small
business is categorized into following groups:1) Small Scale
Industries: A unit in which turnover/investment in plant and
machinery does not exceed5 crore.2) Ancillary Units: An undertaking
which sells not less than fifty per cent of its output to other
industrialundertakings and in which turnover/ investment in plant
and machinery does not exceed 5 crores.
3. 3) Export-Oriented Units: A unit which exports not less than
thirty per cent of its output and in whichinvestment in plant and
machinery does not exceed 5 crore.4)Tiny Units: A unit with an
turnover/investment in plant and machinery of not more than 25
lakhs.5)Small Scale Industries Owned and Managed by Women
Entrepreneurs: An enterprise promoted bywomen entrepreneurs is a
small scale industrial unit in which, individually or jointly have
share capital ofnot less than 51 per cent. Such units can avail the
special concessions offered by the government, likelow interest
rates on loan, etc.6) Micro Business Enterprises: Within the tiny
and small business sector, micro enterprises are thosewhose
turnover/ investment in plant and machinery does not exceed 25
lakhs.7) Small Scale Service and Business (Industry Related)
Enterprises: A small scale service and businessenterprise is one
whose turnover/ investment in fixed assets of plant and machinery
excluding land andbuilding does not exceed 10 lakhs.A few examples
of such enterprises include advertising agencies, marketing,
consultancy, equipmentrental and leasing, photocopying centers,
desktop publishing, industrial testing labs,6) laundry and
dry-cleaning, X-ray clinics, tailoring, beauty parlors, and so
on.8) Village Industries: Village Industries means industry located
in rural area which produces any goods ortenders any service with
or without the use of power in which the fix capital investment (on
building andmachinery) does not exceed 50,000 per capita.9) Cottage
Industries: These are also known as rural industries or traditional
industries. These are notdefined by capital investment criteria as
in the case of other small scale industries. The features ofcottage
industries) are as under:i) These are organized by individuals,
with private resources.ii) Normally use family labor and locally
available talent.iii) The equipment used is simple.iv) Capital
investment is small.v) Produce simple products normally in their
own premisesQ Explain the Role of Small and Medium Enterprises (12
marks)India is largely an agricultural country and major part of
the population lives in villages.SME are small in size, but play a
big role in economic development of a developing country like
India.India has adopted the ideal of socialistic pattern of society
with full employment, balanced regionaldevelopment and
self-reliance as the major objectives.
4. Small scale firms are helpful in the achievement of these
goals in the following ways: I) Employment: Small-scale firms use
labor intensive techniques and, therefore they have high
potentialto provide employment to a larger number of people per
unit of capital. For every worker employed inlarge scale industries
about three workers are engaged in small scale and cottage
industries. Next toagriculture small business constitutes the most
popular occupation of people in India.Small firms promote
self-employment particularly among the educated and professional
class. They alsoprovide employment t agriculturists who remain idle
during a part of the year. In fact, the healthygrowth of
small-scale industries . Government Policies and SME in India can
be an effective approach tothe pressing problem of unemployment in
the country. Several empirical India has built up perhaps oneof the
most elaborate development policy framework and program for the
small studies have revealedthat the employment generating capacity
of small-scale industries in about in times scale sector.The main
objectives of such policy framework are more than that of the
large-scale industries.a) To encourage and facilitate the entry of
new entrepreneurs in small sector.b) To support the growth of
small-scale units.2) Balanced Regional Development: Small scale
industries promote decentralized development and helpto remove
regional disparities in industrialization. Decentralized
development contributes to the processofuseful means of rural
re-construction and development. Development of decentralized
sector alsoimprove the standard of living of people in backward
regions.3) To protect small firms from acute competition from large
sector. self-sustained growth and avoidsconcentration of industries
in particular areas. By providing employment4) To solve the
problems faced by the small-scale industries in rural areas they
help to check migrationand overcrowding in urban areas. Small-scale
firms can be to encourage technology up gradation,productivity
improvement and export production in the small-scale require less
capital per unit ofoutput and, therefore, greater31 output can be
obtained with small investment. The Annual Survey ofIndustries
revealed that fixed capital per employee in case of small scale
industry was 3,706 ascompared to 27,757 in case of large scale,
industry. Small firms also provide% (Kick returns after
theirestablishment on account of short gestation period. In India,
where the rate of capital formation is low,small scale industries
are very suitable.4)Mobilization of Local Resources: Small scale
industries facilitate mobilization and utilization of
localresources and skills which might otherwise remain latent or
unutilized. Small business promotes a newcadre of small
entrepreneurs, self-employed and encourages local talent. The
growth of smallenterprises helps in tapping latent resources like
entrepreneurial skills and small savings especially inrural areas.
Small scale industries account for ninety five per cent of the
industrial units in India andcontribute almost fortyper cent of the
gross industrial value added.
5. 5) Exchange Earnings: Small scale industries help in
reducing pressure on the countrys balance ofpayments in two ways:i)
They do not require imports of sophisticated machinery and
equipment. ii) They earn valuable foreign exchange through exports
of non-traditional items and substitutions ofimports through
domestic production. Small scale industries account for forty five
per cent of totalexports from India.6) Feeder to Large Industries:
Small scale sector is complementary to the large scale industries.
Smallscale industries manufacture various types of components,
spare parts, tools and accessories which arerequired by the large
scale sector. Small firms also distribute the goods produced by
large scale firms.7)Opportunity for Artisan: In villages,
artisan/specialist/artist having expertise in different fields
arefound. Because of lack of opportunities their skills do not come
into limelight. Small businesses provideopportunities to such
people. This provides an impetus to their talent.8)Increase
Standard of Living: With the establishment of small businesses in
rural or nearby regions,villages get many types of facilities, for
example, employment, electricity, water, roads, education,banks,
modes of transportation, etc. In such a situation, promotion of
standard of living is inevitable.9)Less Pressure of Population on
Agriculture: As more population depends upon land for survival
theland is further divided into small pieces. It no longer remains
beneficial to do farming on such smallfields. Every year there is a
further increase of approximately. Thirty lakh people who depend
onagriculture. So, this has become necessary to reduce this burden
on land. This is possible only whenpeople will establish small
businesses.10)Equitable Distribution of Income: With the
establishment of these businesses the income of thecountry is not
just concentrated with some handful of city industrialists but is
also distributed amongmany small rural industrialists. This helps
to reduce the gap between the rich and the poor in
thecountry.11)Social Advantage: Small-scale units offer opportunity
for an independent way of life to people withsmall means. They
offer savings in social overheads like education, housing, and
medical facilities bytaking industry nearer to the people. They
help to raise per capita income and standard of living in
thecountry. A system of widely diffused ownership permits wider
participation of people in the process ofeconomic development.
Small-scale sector provides a base for democracy, socialism, and
self-government.Q. Explain the Problems of SMEs(12 marks)The micro,
small and medium enterprises face problems at every stage of their
operation, whether it isbuying of raw materials, manufacture of
products, marketing of goods or raising of finance.
6. These industries are therefore not in a position to secure
the internal and external economies of scale.The major problems
confronting the sector are as follows: 1) Technology Obsolescence:
Majority of the small scale units use old techniques of production
andoutdated machinery and equipment. Up-gradation of the technology
and achieving economies of scaleis one of the major problems facing
the sector. They cannot afford new machines and equipment andare
therefore not in a position to use the latest techniques of
production. They do not find it possible toconduct research and
development on a continuing basis. Therefore, productivity and
quality in smallscale firms tends to be low while unit cost of
production is generally high. But with liberalization of
theeconomy, the MSMEs are facing stiff competition from imports and
need technological up-gradation inorder to produce better quality
products at cheap rate.. As far as sourcing technology is
concerned,small businesses face the following three essential
problems: i) Lack of Technological Knowledge: Obtaining information
about technology is the first important issue.For most of them,
information about available technology options is through
word-of-mouth or from avisit to an advanced unit. Few have access
to technical literature, professional journals or informationabout
new product launches. But with the advent of internet, new vistas
are opening up throughelectronic journals, catalogue downloads and
advanced search facilities. ii) Barriers in Implementation: Actual
procurement of the technology is the next important issuebecause
even if information is obtained, there are barriers to import of
technology and other problemsrelating to technology transfer,
vendor capability, after sales support, import procedures, etc.,
whichimpede procurementiii) Funding Problem: Acquiring finance for
technology up-gradation is also a problem. Small
enterprisesgenerally look to external sources of funding for
upgrading technology as withdrawing money frombusiness entails its
own costs.2) Managerial Inadequacies: The managerial skills
required for the management of small/medium firmsare not very much
different from those necessary in large scale business. The
managerial functions ofplanning, organizing, staffing, directing
and controlling are common to both. But, the scale on whichvarious
functions are performed by owner and manager are different and in
small scale, the degree ofcomplexity is lower. The organizational
structure of latter firms is simple due to presence of
fewemployees. The owner himself acts as the manager and can
exercise personal control. However as thebusiness grows,
owner/manager finds it difficult to manage even small business
effectively. For this, itbecomes necessary to increase the amount
of manpower in the enterprise. 3) Credit and Finance: All kinds of
business enterprises require sufficient funds in order to meet
theirfixed as well as working capital requirements. Finance is one
of the critical inputs for growth anddevelopment of the micro,
small and medium enterprises. They need credit support not only for
runningthe enterprise and operational requirements but also for
diversification, modernization/up-gradation offacilities, capacity
expansion, etc. Inadequate access to credit is a major problem
facing micro, small andmedium enterprises. Generally, such
enterprises operate on tight budgets, often financed throughowners
own contribution, loans from friends and relatives and some bank
credit They are often unable
7. to procure adequate financial resources for the purchase of
machinery, equipment and raw materials aswell as for meeting
day-to-day expenses. This is because, on account of their low
goodwill and little fixedinvestment, they find it difficult to
borrow at reasonable interest rates. As a result, they have to
dependlargely on internal resources. In respect of MSMEs, the
problem of credit becomes all the more seriouswhenever any
difficult situation occurs such as a large order, rejection of
consignment, inordinate delay,in payment, etc. Sometimes they have
to close down their operations due to shortage of funds. Also,there
is little or no scope for expansion and growth due to dearth of
capital. Hence, economies of scaleare not available. 4) Managerial
and Organizational: Small scale firms are generally managed by the
owners who veryoften do not possess the skills required for the
efficient management of the enterprise. There is lack ofproper
division of work and benefits of specialization are not available.
Some owner7manageit arereluctant to adopt modern methods of
organization and management. There instability in businessbecause
the sickness and dearth of the owner manager directly affects the
survival and growth of thesmall firm.5) Raw Materials and Products:
Non-availability of quality raw materials on a timely basis in an
adequatequantity is one of the main problems faced by micro, small
and medium enterprises. There is acuteshortage of even the basic
raw materials required by small scale units. These units are under
a handicapin obtaining raw materials of requisite quality at
reasonable prices. They do not get the benefits of bulkbuying. For
example, the handloom industry is facing shortage of yarn. Small
scale industries also faceshortage of power due to which they are
unable to make full utilization of plant capacity. Majority ofthem
cannot afford to install their own power generating plants to
ensure uninterrupted operations.6) Marketing and Export: Out of
several problems faced by small and medium scale entrepreneurs,
theabsence of adequate marketing and export facilities is one of
their main concerns. Almost all types ofbusiness enterprises face
marketing problems, but the small and medium scale enterprises face
greaterdifficulty in the marketing and distribution of their
products.Some of these are: i) Competition from Large Firms: Small
and medium entrepreneurs tend to face tough competition fromthe
products and sales/marketing strategies of large scale firms
entrepreneurs. They, at times, find itvery difficult to cope with
large scale entrepreneurs in terms of cost, quality, standards,
popularity,meeting ever-changing demands/preferences of consumers,
etc.ii) Lack of Marketing Networks: Most of them do not have their
own marketing network. So, theyultimately have to rely on outside
sources for distributing their products. This also tends to raise
the costof their products and services. iii) Lack of Marketing
Concepts: Most of them do not have good knowledge and/or experience
ofvarious marketing concepts and strategies. As a result, they are
unable to understand quickly andaccurately the prevailing as well
as constantly changing market trends. Furthermore, in spite of
having
8. huge potentialities of extensive market for their products,
they are mainly unwilling to opt for efficientmarketing
techniques.iv) Lack of Resources: They also lack the resources and
funds needed for effective sales promotion.Many of such enterprises
cannot afford to spend much on advertising, sales promotion,
marketresearch, etc.v) High Cost of Production: They find it
difficult to sell their output at remunerative prices because
ofhigher cost of production and non-standardized quality of
products.vi) Low Negotiating Power: They also have to sell their
products at throwaway prices due to their weakbargaining power
(especially in dealing with big buyers) and urgent needs of
funds.Thus, it is right to say that most of small and medium
entrepreneurs do not correctly understand as towhat kind of
products are actually needed by the market, how big/small is the
market, when theproducts are needed and how to deliver such
products. All these problems keep them mainly isolatedfrom the
market trends and conditions and, thus, tend to restrict their
operations. 7) Infrastructure: Infrastructure needed by
entrepreneurs include all types of transportation facilitieslike
railways, waterways, roadways and airways (depending on the type of
small and medium scale firmrunning by these entrepreneurs) as per
the suitability of the business, as well as proper
establishedchannels of telecommunication and adequate supply of
power. Lack of any of these facility can causeserious damages to
the firms value chain process, i.e., to the production, consumption
and distributionof the products of small and medium entrepreneurs,
who already face problems of lack of finance,inadequate marketing
facilities, technological obsolescence, etc.Some of the major
problems faced by small scale entrepreneurs with respect to
infrastructure are:i) Inadequate infrastructural facilities creates
the problem of acute shortage of basic raw materials,especially
those which are scarce and need to be imported from distant places,
needed by small andmedium scale enterprises. ii) Small and medium
scale entrepreneurs find it difficult to distribute their products
to the marketswhich are located at far-off places because of
incomplete construction or non-existence of
basicroads/highways.iii) Lack of proper airways and waterways
facilities also restricts the growth prospects of thosemedium/small
scale firms whose target market is located abroad.iv) Small and
Medium scale enterprises face shortage of power supply, due to
which they are unable tomake full utilization of plant capacity.
Most of them find it difficult to install their own power
generatingplants, so as to ensure their uninterrupted operations,
due to lack of required funds.
9. v) Most of them are located in rural areas or remote areas
of the country, due to which they find itdifficult to communicate
with people outside the region. This is because of non-existence of
propertelecom network.Q. What are Prospects of SME (12 marks)The
small-scale industries occupy a very important position in any
economy. Traditionally, they producecertain specialized items over
which they enjoy virtual monopoly because of the skill and
expertisedeveloped over the years. Many items produced in the
small-scale sector are also used as raw materialsin the large-scale
industry. Thus, small-scale industries contribute to large-scale
production in no smallmeasure. They will have to take effective
measures in the following areas: I) Quality Control: The products
of large-scale industries are of high quality and precision. In a
freeeconomy, the products of the small-scale industry can compete
with those of the large-scale sector onlyif the high quality is
maintained. To meet the competition from the large-scale sector,
small-scaleindustries should get a good share of the export market
where high-quality products are essential. 2) Marketing
Arrangements: Many small-scale units have perished because of their
inability to sell whatthey produced. This happened because of lack
of proper marketing arrangements. In a free economy,inadequate
marketing arrangements would only accelerate the downfall of
small-scale units, as theywould have to counter competition from
the large-scale sector, which enjoys a ready market for
itsproducts. The small-scale units need to conduct systematic and
continuous market research and arrangeto tie-up with prospective
buyers in order that their products may be readily sold.
Advertisement: Theproducts of the large-scale sector are widely
advertised on TV, radio, and newspapers and are well-known. Since,
small-scale industrial units suffer from resource inadequacy; most
of them cannotadvertise their products on the mass media. As a
result, the products of the small-scale units remainlargely
unfamiliar to the public and the units find it very difficult to
attain their sales goals.3)Increasing Competition: An entrepreneur
faces several managerial problems in relation to
production,marketing, infrastructure, financing, etc. The basic
cause for many of such issues is the existence ofintense
competition in the market scenario. Large scale firms/industries
that have huge production anddistribution network, or enterprises
that have goodwill in the market or have intellectual
propertyrights/standardization for their products or produces large
range of products, etc., are more likely todominate the business
environment in the country. In contrast, small and medium scale
enterprisesmainly deal in one specialized line of products, have
very small production and distribution network, andgenerally have
no protection for their products. As a result, in spite of having
useful and good qualityproducts or having products similar to those
produced by large scale firms, they are largely not able
tocreate/hold demand for their products and tend to lose customers
to large scale enterprises owing tocut-throat
competition.4)Recovery of Receivables: The funds of many
small-scale industrial units are blocked in receivables. As
aresult, recycling of funds is affected and production suffers. In
a competitive environment, it must beensured that receivable dues
are realized without delay. The small-scale units will have to make
specialeffort to collect their dues for their growth. They may have
to utilize the services of factoring companies
10. for the purpose. Professionalism in Management: Many
small-scale industrial units have suffered anaccount of proprietary
management. Barring very tiny and small units, management of
small-scaleindustries has become complex. Hence, small-scale
industrial units must be managed by professionalmanagers in order
to compete successfully with the large-scale sector, which is
professionally managed.5)Inventory Control: Proper inventory
control is an essential prerequisite for optimum production of
anindustrial unit. Yet, a large number of small-scale units remain
unaware of this requirement. As a result,they have to remain
content with a sub-optimal level of production that affects their
profitabilityadversely. It is, therefore, imperative that
small-scale units familiarize themselves with inventory
controltechniques and introduce them at work, particularly in the
context of competition in a free economy.6) Opportunities: By its
less capital intensive and high labor absorption nature, the SSI
sector has madesignificant contributions to employment generation
and also to rural industrialization. This sector isideally suited
to build on the strengths of Indias traditional skills and
knowledge, by an infusion oftechnology, capital, and innovative
marketing practices. This is the opportune time to set-up projects
inthe small-scale sector. It may be said that the outlook is
positive, indeed promising, given somesafeguards. This expectation
is based on an essential feature of the Indian industry and
demandSICKNESS IN SMEIntroduction.Sickness is a universal
phenomenon. It is a major problem of SME (SSI) in all countries of
the world, may it be developed or developingcountries. SME sickness
is a matter of serious concern because besides affecting the
owners, employees,creditors, and suppliers, it causes wastage of
national resources and social unrest.Growing incidence of sickness
has been one of the major problems faced by the industrial sector
of thecountry. Substantial amount of loan able funds of financial
institutions is blocked-up in sick industrialunits causing not only
wastage of resources but also affecting the healthy growth of the
Indianeconomy. Not only some of the traditional industries like
cotton textiles, jute, and sugar have been of afflictedwith
sickness, but even some other modern industries like engineering,
chemicals, rubber, cement,electrical, and paper have been affected.
Therefore, it has been considered very essential to
detectindustrial sickness at an early stage and taking measures to
prevent sickness.Q. Explain Meaning of Sick Unit (2 marks)The
prevalence of sickness in SSI sector is a cause of concern. The
definition of sickness in SSI sector hasbeen undergoing changes.
The Reserve Bank of India (RBI) was instrumental in appointing
committeesfrom time-to-time to look into the issue of the sickness
affecting the Sector.
11. The latest definition of sickness given by the Working
Group on Rehabilitation of Sick Units set-up bythe RBI (Kohli
Committee) is given below: A small-scale industrial unit is
considered sick when:1) If any of the borrowable accounts of the
unit remains sub-standard for more than six months, i.e.,principal
or interest, in respect of any of its borrowable accounts has
remained overdue for a periodexceeding one year will remain
unchanged even if the present period for classification of -
account assub-standard is reduced in due course;or 2) There is
erosion in the net worth due to accumulated losses to the extent of
50 per cent of its networth during the previous accounting year;
and3) The unit has been in commercial production for at least two
years.Q. Explain the Criteria to Identify Sickness (2 marks)The
necessary information on sickness and incipient sickness among the
Units in the Sector wascollected the All India Third Census of
Small Scale Industry 2001-2002. In order to measure
incipientsickness, measuring sickness, the latest definition given
by the Kohli Committee was adopted. Thus, thefollowing a were
adapted to identify sick/incipient sick units in the Third Census1)
Continuous decline in gross output compared to the previous 4
financial years;2)Delay by more than 12 months in repayment of loan
taken from institutional sources; and3) Erosion in the net worth to
the extent of 50 per cent of the net worth during the previous
accountingyear.Q. Explain Symptoms for Sickness (8 marks)Symptoms
for SicknessTiwari Committee identified certain symptoms which
would be quite helpful in the detection ofindustrial sickness at
the beginning or incipient stage. These symptoms are:1. Continuous
irregularity in cash credit accounts;2. Continuous decline in gross
output for three consecutive years was identified as a suitable
indicator,whereas as small-scale sector is concerned, small-scale
industrial unit is considered to be sick that hasincurred a cash
loss in the previous accounting year and is likely to incur cash
losses in the rentaccounting account of cumulative cash losses to
the extent of 50 per cent or more of its peak net worthduring the
last five yearscontinuously defaulted in meeting four consecutive
half-yearly installments ofinterest or two half-yearly installments
of principal on term loan.3.poor capacity utilization;
12. 4.profit fluctuations,5. downward trends in sales and
stagnation, or fall in profits followed by contraction in the hare
of themarket;6.higher rate of rejection of goods manufactured;
education in credit summations whenever thecompanies are in
financial difficulty;7.they open a separate mount with another bank
and deposit all collections therein; Failure to paystatutory
liabilities;8.interest on loan on due dates.9.financing capital
expenditure out of funds provided for working capital
purposesAccording to State Bank of India, "A sick unit is that unit
which fails to generate an internal surplus on aLarger and longer
outstanding in the bill accounts; continuous basis and depends for
its survival uponfrequent infusion of external funds". Longer
period of credit allowed on sale documents negotiatedthrough the
bank and frequent returns by There are different perceptions of the
symptoms andcharacteristics of SSI sickness To an investor, it is
one which skips dividends, an industrialist, it is a unit which is
making losses. To abanker, its a unit which is not repaying its
loan or -submission of periodical financial data/stockstatement,
etc., in time;According to the Sick Industrial Companies Act,
1985,A sick industrial company indicates an industrial ,unit
increase in working capital on account of ,(registered for not less
than seven years) which is showing accumulated losses equal to or
exceeding itspresent Increase in debtors and particularly dues from
selling agents, net worth at the end of anyfinancial year, and has
also suffered cash losses during that financial year and in the
increase increditors, and immediate preceding year. Thus an
industrial unit was defined as sick if:a)general decline in that
particular industry combined with many failuresb)rapid turnover of
key personnel;c)existence of a large number of law suits against
the company; .d)rapid expansion and too much diversification within
a short time;- Initially, only private sector companies were
covered under the Sick units, Industrial Companies Act. In December
1991, public sector companies were also brought under the purview
of version of fundsfor purposes other than running the unit; this
Act.
13. The 1992 amendment (introduced in February 1994) has
altered the criterion somewhat; firms onlyneed to be registered for
five years, instead of earlier seven years, while other criterion
will remainsame in spite of major changes in the shareholdings.1)
It was registered for at least seven years,2) It incurred cash
losses for the current and the preceding year, and3) Its net worth
has eroded.Q. Suggest some remedial measures for SICK units (8
marks)1) Effective Planning: SSIs are required to conduct detailed
survey of the existing situations prevailing insmall sector and
draw productive programs2) Improvement in Techniques of production
and proper technology: SSIs should improve theirtechniques of
product and adopt modern technology.3) Training and Development:
SSIs should make concerted efforts in imparting proper education
trainingto workers engaged in this sector as they are valuable
asset of industry. Expenditure on trainingdevelopment activities
should be treated as an investment. Small Industries Associations
should involvethemselves in providing knowledge and skills required
tothem in the changing e.g. Workers should beencouraged to innovate
themselves in the production process as it would enable to compete
with theirmedium and large-scale counterparts. For this purpose,
effective motivation reward system is highlydesirable.4) Provision
of Infrastructural Facilities: Development-finance, power
arrangement, water supply, etc.,necessary for the smooth
functioning of SSIs. State Development Corporation, small
industriescorporations, state technical consultancy organizations
are engaged in provision of these facilities buttheir system needs
further improvement5) Regular Supply of Raw Materials: Small
Industries Development Corporations and other canalizingagencies
responsible for the supply of raw materials to small-scale sector
should take necessary,maintain a continuous but proper supply of
raw materials to SSIs. They should also ensure that bogusare to be
excluded from this type of support. 6) Adequate Credit Arrangement:
For SSIs, traditional sources of financing offer little scope
forexpansion and alternative means like venture capital are yet to
be developed for them. SEBI hasformulated guide for venture capital
and there is hope for better finance facility for this sector.
Besides,prioritys lending scheme should be made more broad-based
and credit limit is to be enhanced. The SSI*depend on their own
funds and loaned fund from non-banking sector as they are unable to
get propersupport banks and other funding agencies. The SIDBI is
trying to provide these facilities but internedinvolved in the
system are creating problems for them. So, SIDBI should try to
bring transparency,effectiveness in its functioning.
14. 7) Effective Marketing Arrangements: SSIs should focus on
brand, product, and market development.should try to remain in the
market and special thrust should be given on quality improvement
proProducts at low costs and passing on the benefits to consumers
would go in long way to improvemarketing performance. The large
companies earn handsome profits from marketing the products ofunits
by charging a much higher price from the customers. The reason is
they have brands. So, SSIs s tryto popularize their products in the
market which will provide them separate product and brand
identity.This strategy will benefit them in the long-run. However,
efforts should be made to maintain standardquality of the output
then they will get positive support from their potential customers.
8) Development of Suitable Machinery: SSIs have different typical
problems and that are handled bytaking offensive strategies. SSIs
Association should be offensive and objectively clear in their g
pleadingtheir cases with the government. Associations like FICCI,
Assocham, and CH are more maintaining theirrelations with the
government They should also involve themselves in , the problems
being faced bytheir members through seminar, conferences, etc.Q.
Explain the term institutional support to SME (2 marks)The term
institutional support system generally refers to the economic
environment of industry andbusiness comprising authorities and
institutions whose decisions and operational framework affect
thelevel of business.These institutions include government owned
agencies, statutory corporations and semi-autonomousorganizations.
In our country, these authorities and agencies are government
organizations andentrusted with sufficient powers to regulate and
promote SSIs in specific areas of activities.Basically,
institutional support system is necessary at three stages of
enterprise development. These are1) Inception or promotion of a
business or industrial unit2) Day to day management or routine
management3) Expansion and diversificationQ. Explain the term
institutional support to SME in Indian context (2 marks)In Indian
context, institutional support systems include two dimensions:1)
Support system developed by Central Government2) Support system
developed by State Governments,3) Support system developed by Other
Agency
15. Q. Elaborate on Support System Developed by the Central
Government (12 marks)The Department of small scale industries was
developed in 1991 under the Ministry of Industry. Thisdepartment
has been responsible for the development and monitoring of the
following support system: 1) SSI Board (Small Scale Industries
Board): It was established in 1954 to provide effective
coordinationand inter-institutional linkages for the benefits of
small scale sector. The Board being an apex body hasbeen entrusted
to play its advisory role in solving the problems of small scale
sector. The Board has beenconstituted with the following members:2)
SIDO (Small Industries Development Organization): This organization
as the name suggest is mainlycreated for development of various
small-scale units in different areas. SIDO is a nodal agency
foridentifying the needs of SSI units, coordinating and monitoring
the policies and programs for promotionof the small industries. It
undertakes various programs of training, consultancy, evaluation
for needs ofSSI and development of industrial estates. All these
functions are taken care with the OrganizationStructure of 27
offices, 31 SISI (Small Industries Service Institutes). 31
Extension Centers of SISI and 7Centers related to Production and
Process Development. The main functions performed by the SIDO
ineach of its three categories of functions are as follows:i)
Functions Relating to Co-ordinationa) To evolve a national policy
for the development of small scale industries,b) To co-ordinate the
policies and programs of various State Governments, .ii) Functions
Relating to Industrial Developmenta) To reserve items for
production by small-scale industries,b) To collect data on consumer
items imported and then, encourage the setting of industrial units
toproduce these items by giving coordinated assistance,c) To render
required support for the development of ancillary units, andd) To
encourage small scale industries to actively participate in
Government Stores Purchase Program bygiving them necessary
guidance, market advice and assistance.iii) Functions Relating to
Extension a) To make provision of technical services for improving
technical process, production planning,selecting appropriate
machinery, preparing factory lay-out and design,b) To provide
consultancy and training services to strengthen the competitive
ability of small-scaleindustries,c) To render marketing assistance
to small-scale industries to effectively sell their products,
and
16. d) To provide assistance in economic investigation and
information to small-scale industries.3) NSIC (National Small
Industries Corporation Ltd.): It was started by the Central
Government in 1955with the objective of promoting and developing
SSI units throughout the country.It started with multiple
objectives of helping SSI units for:i) Providing machinery on hire
purchase,ii) Assisting, marketing and exports,iii) Enlisting SSI
units for tender participation in Government purchases,iv)
Organizing supply of raw-materials,v) Training of personnel, andvi)
Assistance inmodernization of the units. In India, NSIC has 5
technical centers, 9 zonal offices, 33branches, 14 sub-branches, 10
business development offices, and 2 tech-parks.The corporations
Head Office is at Delhi. The company employs, over 500
professionals and it also hasan office in Johannesburg from where
it handles its operations pertaining to South African nations.
Inthe 54 years of its existence, the National Small Industrial
Corporation Limited has gone from strength tostrength and has
successfully managed to modernize small- scale industries in India
by making themtechnology-oriented and by emphasizing quality. NSIC
has also reinforced the small-scale industry byfortifying its ties
with the large and medium-scale industries.Functions of NSICi)
Financial assistance by way of hire purchase scheme for purchase of
local and imported machinery.ii) Provision of various equipment on
lease basis.iii) Assistance for marketing the produce in the
country and also to help in exporting the products of SSunits.iv)
Enlisting quality conscious good SSI units for sending enquiries of
government stores and purchasedepartments. v) Training of workers
in various trades required for SSI units.vi) Assistance in
up-gradation of technology, processes, and modernization of plant
and machinery.vii) To make bulk purchases of important
raw-materials and distribute to SSI units at reasonable
rates.avoids speculation and exploitation by the traders.viii) To
develop industrial estates and testing facilities in the industrial
areas.
17. 4) SIDBI (Small Industries Development Bank of India):
Small Industries Development Bank of India was,established in 1990
as a development bank exclusively for the small-scale industries.
It is a Centra1government undertaking. The prime aim of SIDBI is to
promote and develop small industries byproviding them the valuable
factor of production, finance. Many institutions and commercial
bankssupply finance both long-term and short-term, to small
entrepreneurs. SlDBI coordinates the work of allof them.Financial
Assistance Scheme of SIDBIThe main obstacles and problems in the
growth of industrial units are the paucity of
primaryinfrastructure, unavailability of suitable market for
selling the products, working capital requirement anddifficulties
arising out of the delays in receiving the bills.Considering these
problems, the following provisions are included in the various
schemes of SIDBI: i) Loan assistance to the institutions providing
market or marketing avenues to the small entrepreneurs.ii) Loan
assistance to ancillary units and also for modernization and
upgrading technology.iii) Loan assistance to institutions providing
primary services and infrastructure and developing thegrowth
centers.iv) Loan assistance to NSIC.v) Loan assistance to private
companies which function on rental basis or contract basis.SISI
(Small Industries Service Institute):Small Industries Service
Institute is a national level organization established by the
Central government.At the state level, SISI functions under the
Director assisted by Deputy Directors. There are 28 SISIs and30
branch of SISIs set-up in State capitals and other industrial
cities all over the country.Functions of SISI i) Technical
Information: SISI provides information about the supply and the
availability of rawmaterials. It gives technical information about
the machines and equipment. Technical know-how aboutthe process of
production, quality testing and standardization of products,
modernization and preparingproduct design are other services
provided by SISI. ii) Workshop: SISI is a well-equipped workshop
which provides services to entrepreneurs at reasonablerates. Jobs
related with machine shops, heat treatment, hardness testing are
carried out in theseworkshops. The main motive of the workshop
facility is to improve the quality of the products. iii) Technical
Training: SISI provides technical training to the workers employed
in the various industrialunite as well as the entrepreneurs in
order to improve standards of quality and labor. In the
extensioncenters of SISI, training is provided for machine shop
practice, milling, heat treatment, blueprint reading,etc. Economic
Investigation Division: SISI collects and compiles statistical
information regarding various
18. aspects concerned with the establishment and development of
small industries. Important aspects aredemand and supply scenarios
for different products, investment, raw material, etc. This
divisionprepares review reports on the items reserved for the
small-scale industry. The study of sick industries isalso
undertaken by this division. In such studies, SISI tries to
identify the causes of the sickness of thesmooth working of these
units.v) Export Promotion: SISI plays a significant role in the
efforts regarding export promotion. A specialarrangement is made to
provide information about exporting the products. On behalf of the
smallentrepreneurs, SISI participates in international exhibitions
and promotes the products in the foreignmarkets.vi) Modernization:
SISI guides the entrepreneurs in the quality up gradation,
modernization andimprovement of productivity.vii) Development of
the Market: SISI acts as a link between the tiny and the small
industries and themedium and the large-scale industries. It
provides information about the products and the services ofthe
small entrepreneurs to the requirements of the large industries.
Thus, it bridges the small industrieswith the large industries and
tries to develop the market. Many of the products manufactured by
thesmall industries are purchased by the large industries.
viii)Library: SISI has a huge collection of books, journals,
magazines, newspaper clippings etc. It providesvaluable services to
small entrepreneurs through its well-equipped library. It has a
collection ofhundreds of project reports. Entrepreneurs can use
these readymade project reports at reasonablerates. ix) Exhibition:
A permanent exhibition is arranged by SISI in its office premises.
SISI exhibits productsmanufactured by small entrepreneurs. The
exhibition is free of cost. Thus, SISI provides
multifariousservices to the small entrepreneurs.Activities of SISI
The main activities of this institution are as follows:i)
Assistance/Consultancy to prospective entrepreneurs,ii)
Assistance/Consultancy rendered to existing units,iii) Preparation
of state industrial profiles,iv)Preparation/Updating of district
industrial potential surveys,v) Project profiles,vi)
Entrepreneurship development programvii) Motivational
campaigns,viii) Production index,
19. ix) Management development program,x) Skill development.6)
KVIC (Khadi and Village Industries Commission):The Khaki and
Village Industries Commission (KVIC) is a statutory body formed by
the Government ofIndia, under the Act of Parliament, `Khaki and
Village Industries Commission Act, 1956. It is an apex organization
under Ministry of Micro, Small and Medium Enterprises Govt. of
India, withregard to khadi and village industries within India,
which seeks to "plan, promote, facilitate, organizeand assist in
the establishment and development of khadi and village industries
in the rural areas incoordination with other agencies engaged in
rural development wherever necessary." In April 1957, ittook over
the work of former All India Khadi and Village Industries Board.
Its head office is based in Mumbai, with its six zonal offices in
Delhi, Bhopal, Bangalore, Kolkata,Mumbai an Guwahati. Other than
its zonal offices, it has offices in 29 states for the
implementation ofits various. I functions also comprise building up
of a reserve of raw materials and implements for supplyto producers
Objectives of KVIC The KVIC has three main objectives which guide
its functioning.These are as follows:i) The Social Objective:
Providing employment in rural areas.ii) The Economic Objective:
Providing salable articles. iii) The Wider Objective: Creating
self-reliance amongst people and building-up a strong
ruralcommunity spin The commission seeks to achieve these
objectives by implementing and monitoringvarious schemes and
program too achieve these objectives, the following schemes are
provided by KVIC:i) Financial assistance for purchase of land,
building, workshop, shed, machinery, and equipment at rateof
interest;ii) Working capital provision;iii) Prime Ministers
Employment Generation Program (PMEGP);iv) Rebate Scheme;v) Equity
capital;vi) Loan provision for purchase of raw materials;vii)
Marketing avenues and selling centers for the products of artisans
and craftsmen;viii) Subsidies for the registered societies of
artisans and craftsmen belonging to scheduled castscheduled tribes,
ex-servicemen, women, etc
20. 7) Specialized Institutions: In addition to the above
institutions, the Government has also set-up following specialized
institutionsto boost the growth of all types of small-scale
industries in the country: i) Central Institute of Tool Design,
Hyderabad: The Central Government set-up this Institute in 19
withthe help of UNDP and ILO to help small-scale industries by
imparting specialized training to personnelworking in the design
and manufacture of tools, jigs, fixtures, dies and molds. The other
functionsperformed by it are:a) To offer consultancy and advisory
services and assistance in the design and development of tools. b)
To suggest proper measures to improve the standard of tools,
tooling elements, jig componentfixtures, dies, etc.c) To offer the
needed tool room facility. A governing council which consists of
representatives of theGovernment and industry is constituted to
look at the management of the Institute. The governingcouncil is
headed by the Development Commissionerii) Central Tool Room
Training Centers: In order to provide tool room services and
facilities inmanufacture and training, the Government has set-up
four tool room training centers located IBangalore, Calcutta,
Ludhiana and New Delhi.iii) Central Institute of Hand Tool,
Jalandhar: This institute has been set-up with a view to
provideimproved technology, raw materials, design and testing for
handloom industry. This is the only instituteof its kind in the
country located at Jalandhar.iv)Institute for Design of Electrical
Measuring Instruments (IDEM), Mumbai:This institute was set-up in
1969 with the assistance from UNDP. It was set-up to provide
technicalconsultancy services in the matters relating to design and
development of electrical and electronicinstruments, tool designing
and fabrication and training.v) National Institute of
Entrepreneurship and Small Business Development (NISEBUD), New
Delhi: It is anapex national level institute of its kind set-up at
New Delhi in 1983. Its main functions are to coordinateresearch and
training in entrepreneurship development and to impart specialized
training to variouscategories of entrepreneurs. Besides, it also
serves as a forum for interaction and exchange of viewsbetween
various agencies engaged in activities relating to entrepreneurial
development.vi) National Institute of Small Industries Extension
Training (NISIET), Hyderabad: This institute was set-upin 1956 to
develop the required manpower for running small-scale industries in
the country.Accordingly, its main functions are:a) To impart
training to the persons engaged in small-scale industries.b) To
undertake research studies relating to development of small-scale
industries.
21. c) To enter into agreements relating to consultancy
services both with national and internationalorganizations to
provide consultancy services to small industries in the country.
The institute conductscourses in business management for the
benefit of the entrepreneurs and semi-managerial personnelof small
industries. It is located at Hyderabad.vii) Other Institutes:
Following are some of the important institutes set-up by the
Government fordevelopment of small-scale industries:a) Electronic
Training and Service Institute, Nainital.b) Central Machine Toots
Limited.c) Sports Goods and Leisure Timed) Central Institute of
Plastics Engineering and Tools, Madras.e) National Institute of
Foundry and Forging Technology, Ranchi.Q. Explain Support System
Developed by the State Government (12 marks)Director of Industries
is the highest authority at kite level to execute the policies and
programs withregard to SSIs, medium and large scale
enterprises.Director/commissioner is responsible for the overall
supervision of support system developed for theSSIs in the state.
These support systems are as follows:1) DIC (District Industries
Centers): Governments in the past taken a number of measures for
thedevelopment of small and village industries, but the actual
achievements have been far below theexpectations. Also the focus of
attention for industrial development was mainly on large cities and
Statecapitals to the neglect of district areas. In addition,
multiplicity of institutions involved in small
industriesdevelopment and complicated systems and procedures made
the job of promoting the industrial unitsan uphill task for small
entrepreneurs. It was felt necessary to establish a development
agency, whichcould provide all services and facilities to village
and small industries under one roof. Accordingly, theDICs were
established in May 1978 in order to cater to the needs of small
units. 2) SFC (State Financial Corporations): The State Financial
Corporation Act was passed by theGovernment of India in 1951 with a
view to provide financial assistance to small and medium
scaleindustries which were beyond the scope of IFCI. According to
this Act, a State Government isempowered to establish a financial
corporation to operate within the State.Functions of SFCMain
function of the SFCs is to provide loans to small and medium scale
industries engaged in themanufacture, preservation or processing of
goods, mining, hotel industry, generation or distribution ofpower,
transportation, fishing, assembling, repairing or package articles
with the aid of power, etc. StateFinancial Corporation is
authorized to grant financial assistance in the following
forms:
22. i) Granting of bans or advances to industrial concerns
repayable within a period not exceeding twentyyears. ii)
Subscribing to the debentures of industrial concerns repayable
within a period not exceeding twentyyears.iii) Guaranteeing loans
raised by industrial concerns repayable within a period not
exceeding twentyyears iv) Underwriting the issue of stock, shires,
bonds or debentures by the industrial concerns subject totheir
being disposed off within seven years.v) Guaranteeing deferred
payments due from any industrial concern in connection with
purchase ofcapital goods in India. vi) Acting as an agent of the
Central Government or State Government or the Industrial
FinanceCorporation of India in respect of any business with an
industrial concern in respect in respect of loanssanctioned to
them.3) SSIDC (State Small Industries Development Corporations):
Under the Companies Act, SSIDC werestarted in 1956 in all the
states under the Companies Act. These Slate Government undertakings
takecare of the growth and development needs of village industries,
tiny industries and small industries.Different states give focus
and importance to different industries based on the raw-material
and skillavailability in their states.Functions of SSIDCi) Assist
for procurement of machineries on hire purchase scheme.ii) Assist
in marketing of the products.iii) Keep stock of vital and scares
raw-materials and distribute to small industries.iv) Develop
industrial sheds, estates and godowns for use of small
industries.4) SIDC (State Industrial Development Corporations): The
State Industrial Development Corporations(SIDCs) act as catalyst
for promotion and development of medium and large enterprises in
theirrespective states. In tandem with changing business
environment, SIDCs are making efforts to diversifytheir activities
to cover a range of services and schemes and have entered into the
areas of equipmentleasing, merchant banking, venture capital and
mutual funds.The State Industrial Development Corporations (SIDCs)
Incorporated under the Companies Act aswholly-owned undertakings of
State Governments for promotion and development of medium and
largeindustries in respective states, provide financial assistance
in the form of rupee loans,underwriting/direct subscriptions to
shares/debentures, guarantees, inter-corporate deposits, and
alsoopens letters of credit on behalf of its borrowers.
23. They are also involved in setting up of medium and large
industrial projects in the Joint sector/assistedsector in
collaboration with private entrepreneurs or wholly-owned
subsidiaries. In order to accelerateindustrial development various
states have set up Industrial Development Corporations. Andhra
Pradeshand Bihar were the first states to set up such corporations
in 1960.Most of the states have set upinstitution at
present.Functions of SIDCi) Grant of financial assistance.ii)
Provision of industrial sheds or plots.iii) Promotion and
management of industrial concerns.iv) Promotional activities such
as identification of project idea, selection and training of
entrepreneur,provision of technical assistance during project
implementation.v) Providing risk capital to entrepreneur by way of
equity participation and seed capital assistance. 5)TCO (Technical
Consultancy Organization): Technical Consultancy Organization plays
a crucial role in theindustrialization process of the state. The
TCOs are organizations established by the state governments.The
primary objective of the TCO is to furnish industrial and technical
consultancy to the entrepreneurs.The TCO is sponsored by national
and state level financial institutions and banks like ICICI, IDBI
IFCI, SFC,SIDC, SSIDC, commercial banks, etc.Functions of TCOi)
Identification of potential entrepreneurs among different target
groups as rural poor, women,minorities, SCs, STs, etc.ii)
Identification of area specific viable manufacturing and servicing
activities. iii) Extending candidate specific hand-holding support
right from project identification, securingfinancial assistance,
accessing market through guidance and monitoring during project
implementationand commercial operation.iv) Capacity building of
other support providers. 6) Industrial Estates: Developing
countries require institutional arrangements for their
rapidindustrialization and balanced growth. One such institutional
measure is industrial estates. The termindustrial estate is called
by different names, e.g., industrial park, industrial zone,
industrial region,industrial city, industrial area, and industrial
township, etc.An industrial estate has been defined as a method of
"organizing, housing and servicing industry, aplanned clustering of
industrial enterprises offering standard factory buildings erected
in advance of
24. demand and a variety of services and facilities to the
occupants". The main features of an industrialestate are as
follows:i) It is a tract of land sub-divided and developed into
factory plots or sheds. ii) It provides several common facilities
or infrastructural amenities such as water, power, transport,tool
room, training, bank, post-office, repairs and maintenance, etc.,
to the occupants.iii) It is a planned clustering of industrial
units.iv) It is designed as a tool of industrialization and
balanced regional development.v) It may be developed in urban,
semi-urban or rural areas.vi) It may be large, medium and
small.vii) It may be set-up by the Government or by cooperatives or
by private agencies.Types of Industrial Estates Industrial estates
may be classified into the following categories: i) General Purpose
or Composite Industrial Estates: Such an industrial estate provides
accommodationto all types of small-scale industries. It consists of
a wide variety and range of industrial units. Most ofthe industrial
estates in India are of this type. ii) Special Purpose Industrial
Estates: This type of industrial estate is particularly constructed
forspecified groups of entrepreneurs, e.g., technically qualified
persons, craftsmen or artisans, etc. Forexample, industrial estates
for artisans and technical personnel have been set-up at
Hyderabad.iii) Ancillary Industrial Estates: Such as industrial
estate houses manufacturing units, which produce,parts and
components for a large industrial unit. It is generally set-up near
the parent unit. iv) Functional Industrial Estates: This type of
industrial estate consists of industrial units manufacturingthe
same product. Such estates have been set-up for leather goods,
electronics, sports-goods, foodpreservation, ceramics, etc. v)
Flatted Factory Estates: These are multi-storey buildings
constructed in big cities, to provide space toindustrial units
manufacturing light weight goods with the help of simple machine
tools. They help toconserve spaceQ. Explain the Support System
Developed by Other Agency (12 marks) Besides, Central Government
and State(Government agencies, there are some
Non-Governmentalagencies who are also supporting the cause of small
scale industries in the country. These agenciesinclude
Non-Government organizations and industry associations.They provide
a common platform to voice SSI needs and initiate cooperative
efforts.
25. Government policies have stressed the increasing role of
these associations and NGOs in setting upcommon facilities and
other cooperative ventures in technology, marketing and other
support systems.Some of these major associations are as follows: 1)
ICSI (Indian Council of Small Industries): It was established in
1979 to help tiny, cottage and smallindustries and artisans of
rural areas. Membership of ICSI constitutes about 1500 associations
of thedecentralized sector. Its main functions are as follows:i)
Information disseminationii) Entrepreneurship developmentaliii)
Consultancy and managerial supportiv) Training & Research2) LUB
(Laghudyog Bharti): It was founded in 1995 to promote and safeguard
the interest of tiny andsmall scale industries. It has been given
representation on the national and state level governmentbodies
responsible for the development of SSIs. It is responsible to
undertakei) Entrepreneurial trainingii) Support for technology
upgradationiii) Marketing services.However, it would be better for
LUB to take necessary steps in channelizing resources from its
members.Sufficient fund is necessary to meet out growing needs of
the above functions.3) FASH (Federation of Associations of Small
Industries of India):It was promoted in 1959 to represent the
problems of SSIs with the government and liaising with
otheragencies involved in promotion of SSI sector. Its objectives
are as follows:i)To promote the development of small scale tiny and
cottage industries ii) To cooperate with industrial business,
educational institutions in collecting and exchanging:information
pertaining to the small scale sector,iii) To undertake
professional, technical and management consultation services;iv) To
undertake studies, surveys and research assignments,(v) to further
the cause of small industries by interacting with Union and State
Governments and otherbodies( vi) To establish and operate trade
centers display centers, sub-contract exchanges and
otherpromotional institutions for the benefit of the small scale
sector and
26. vii) To establish test centers, laboratories and common
facility centers for the SSI sector. 4) WASME (World Association
for Small and Medium Enterprises): It was established in 1981 to
ensurebusiness, cooperation among its members. Its membership
represents chamber of commerce, smallindustries development
corporations, financial institutions and commercial banks and other
StateGovernment agencies of developing countries. It facilitates
technology transfer, manpower trainingaregister of
experts/consultants, organizing seminars and conferences and acting
as a clearingfinformation and marketing services etc.5) FICCI
(Federation of Indian Chambers of Commerce and Industry): The FICCI
was established in 1927as the national agency through which the
chambers of commerce and trade association in India
couldcrystallize their views on current economic problems. It
serves as the coordinating agency for thecommercial and industrial
Interests as represented by various chambers of commerce and
tradeassociations. The representative functions occupy the foremost
place in the activities of the federation.The Federation maintains
very close relations with the Union Government.6)
ACCH/ASSOCHAM(Associated Chambers of Commerce & Industry of
India): ASSOCHAM is anotherapex organization like -FICCI to which
some of the older chambers of commerce are affiliated. It
wasfounded in December 1920. It seeks to make the businessmens
voice heard and to ensure that theirviews are taken into account in
the molding of the nations economic life. It also undertakes
persuasiveactivities directed to the administrative departments and
to the law makers with a view-to acquaintthem with the viewpoint of
the member.7) PHDCCI (PHI) Chambers of Commerce and Industry): It
was promoted in 1905 to represent theinterest of trade and industry
in northern India. It provides a meeting ground for representatives
ofcommerce and industry with the government. It also constitutes
various expert committees and taskforces through which members
representing various interest, pool knowledge and experience
arerequired to work in the interest of business community. The
association has also launched a new systemin 1995, Small Industries
and Business (SIB) Help Line to assist and support the SSIs. It is
responsible forthe coordination between SSI units and commercial
banks and financial institutions.8) CII (Confederation of Indian
Industry): It was created in 1992 by changing the name of
Confederationof Engineering Industry (ECI). The CEI itself was a
creation of two merging associations like IndianEngineering
Association (1912) and Engineering Association of India (1942) in
1974. It is responsible foradvisory, consultative and
representative services to industry and the government. It has been
givenrepresentation on major policy formulating ,bodies, related
with the industry. It is also expected to workas a nodal agency for
international.9) FIEO (Federation of Indian Exporters
Organization): This is an apex organization set up in October1965
by the Ministry of Commerce. It represents Indian entrepreneurs
spirit of enterprise in the globalmarket. The Federation performs
activity of common nature such as sending trade
delegationsabroadand inviting trade delegations from foreign
countries, sponsoring commodity and market surveysC011eOtill-and
dissemination of commercial intelligence