GROUP NUMBER: 4

NILAM GADDA 12 DEEPIKA SHARMA 52

RAHUL GANGURDE 14 SWATI SHINDE 54

BIJAL GOHIL 16 SACHIN SINGH 56

FEMINA HARIYA 18 SUMIT SONI 58

SURAJ INGAWALE 20 JAY THAKKAR 60

INTRODUCTION:

Small scale industries are the backbone of the Indian industrial structure. They are
also engaged in the processing, preserving, manufacturing and servicing activities.
Small scale industries constitute an important and crucial segment of the industry
sector.

It plays crucial role In the process of economic development by value addition,

employment generation, equitable distribution of national income, regional
dispersal of industries, mobilization of capital and entrepreneurial skills and
contribution to export earnings.

Small scale industries play a key role in the industrialization of developing

country. This is because they provide large scale employment and have a
comparatively higher labour capital ratio. They need a shorter gestation period and
relatively smaller market to be economic. They need lower investments, and
facilitate an effective mobilization of resources of capital and skill which might
otherwise remain unutilized.

The small scale industry sector, manufacturing a wide range of more that 7500
products, not only caters to the needs of the lower income group, but also acts as a
nursery for the development of entrepreneurial talent. It produces mass
consumption items such as leather goods, plastic parts, ready-made garments as
well as sophisticated items such as television sets, electro-medical system, hearing
aids, tape-recorders, process electro instrument etc.
Ancillary units in the small-scale sector supply a wide diversity of products to
original equipment manufacturing producing bicycles, scooters, automobiles,
tractors, etc. Simple machine tools such as leather drilling machines, printing
machines and writing machines are also being made in the small-scale sector, its
contribution is next to agriculture in India. India is predominantly an agricultural
country. The agricultural economy accounts for 42 percent of the national income
and 72 percent of the population.

The development of small-scale industries is our integral par of the overall

economic, social and industrial development of a country. The government has
given due importance to this sector of the economy to eradicate mass poverty and
to ensure a better standard of living for the people
EVOLUTION OF THE DEFINITION OF SMALL-SCALE, ANCILLARY
AND TINY SECTOR:

Defining No. of Persons

Year Authority Capital Investment in employed
    Plant & Machinery    
                 
Government
1991 of India   Rs.60 lacs   "Do"  
                 
Government (Rs. 75 lacs for export oriented
1997 of India   units)    
(Abid
  Hussain   Rs. 3 crore   "Do"  
  Committee)      
                 
Government
2000 of India   Rs. 1 crore   "Do"  
                 
Government
2007 of India   Rs. 1.5 crore      
    Rs. 5 crore in respect of    
    71 hitech/export oriented    
    items in the hosiery/sports    
    goods sector.    
                 

ANCILLARY
INDUSTRIES:

Year Defining Capital Investment in Number of Persons

 Authority employed
    Plant & Machinery    
                 
April "Do"     Rs.60 lacs   "Do"  
1991        
                 
Aug "Do"     Rs.75 lacs   "Do"  
1991        
                 
Government
1997 of India   Rs. 3 crore   "Do"  
                 
Government
2000 of India   Rs. 1 crore   "Do"  
                 
Government Rs. 5 crore ( limit for units in
2002 of India   hosiery and hand tool sub sector    
                 
Government
2007 of India only) Rs.5 crore    
                 

TINY
SECTOR:

Defining Number of Persons

Year Authority Capital Investment in employed
    Plant & Machinery    
                 
All
SSI Policy place
1991 statement   Rs.5 lacs     s  
                 
Government
2002 of India   Rs.25 lacs     "Do"  
                  
Government
2007 of India Rs.25 lacs "Do"  
                 

Concepts and Definition of SSI:-

1) Small Scale Industries:-

The definition of small-scale industries (SSI) is broadly based on the
criterion of original value of plant and machinery which has been revised
over the years. The Finance Minister in his union budget, 2007-08, presented
to the Parliament on the Parliament on February 28, 2007 has raised this
limit to Rs 1.5 crore. However to facilitate technology up gradation and
enhance competitiveness, the investment limit [in Plant and machinery] has
been raised to Rs 5 crore in respect of 71 hi-tech export oriented items in the
hosiery/knitter, hand tools, drugs and pharmaceuticals, stationery and sports
goods sector. It is also necessary to point out at this juncture that the sector
now includes not only the SSI units but also small-scale service and business
enterprises [SSSBEs] and is thus referred to as the small enterprises sector.

2) Tiny Enterprise:-
 The investment limit in plant and machinery of Tiny units is Rs. 25
lacks irrespective of the location of the unit.

3) Export-Oriented Unit (EOU):-

An industrial undertaking in which the investment in fixed assets in
plant and machinery whether held on ownership terms or on lease or by hire
purchase does not exceed Rs. 100 lacs and has an obligation to export 30 per
cent of production.

4) Artisans, Village and cottage is defined as “Artisans (irrespective of

location) of small industrial activities (viz., manufacturing, processing,
preservation and servicing) in villages and small towns with a population not
exceeding 50,000 involving utilization of locally available natural resources
and /or human skills (where individual credit requirements do not exceed Rs.
50,000/-)

5) Woman Enterprises are those small-scale units where one or more women
entrepreneurs have not less than 51% financial holding.

6) Small-scale Service and Business (Industry-related) Enterprises

(SSSBEs):-
SSSBEs are Industry-related service and business related enterprises
with investment in fixed assets, excluding Land and Building upto Rs. 10
lakhs irrespective of location as on 31st March 2001. The following is the list
of services covered under the definition of SSSBEs
 Advertising Agencies.
 Auto repair, services and garages.
 Blue printing and Enlargement of drawing/design facilities.
 Beauty parlors and crèches.
 Colored or Black and White studios equipped with processing
laboratory.
 Desktop Publishing
 Documentary Films.
 Equipment rent and leasing.
 EDP Institutes established by voluntary associations/non-
government or organization.
 Industrial consultancy.
 Industrial photography.
 Industrial Research and Development Laboratories.
 Industrial Testing Laboratories.
 Internet browsing/setting up of cyber cafes.
 ISD/STD booths.
 Installation and operation of cable TV networks.
 Laboratories engaged in testing of raw material finished goods,
 Laundry and Dry cleaning
 Marketing Consultancy.
 Operating EPABX under franchise.
 Photo copying centers.
 Photographic laboratory.
 Ropeway in hilly areas.
  Servicing Industry Maintenance and repair.
 Servicing of agricultural farm equipments.
 Subcontracting Exchanges (SCXs) established by Industry
Associations.
 Tailoring.
 Teleprinter/Fax Services.
 Weigh bridge.
 X-ray Clinic.

Activities not recognized as SSIs and SSSBEs:

The Following activities are not recognized as SSIs and SSSBEs.

 Education Services
 General Merchandise Stores.
 Health Services including pathological laboratories.
 Hotel.
 Retail/wholesale trade establishments.
 Storage (except cold storage).
 Sales outlets for Industrial Components.
 Social Services.
 Legal Services.
MICRO AND SMALL ENTERPRISES

The “Micro, Small and Medium Enterprises Development (MSMED) Act,

2006” is the first single comprehensive legislation in India. The terms “medium
sector” and “micro enterprises “have been defined for the first time. Also
“Industries have been classified broadly into two categories namely, enterprises
engaged in the manufacture/production and other providing/rendering of services.
The term “enterprise” has been defined in terms of investment in plant and
machinery/equipment.

In order to protect, support and promote small enterprises as also to help

them become self-supporting., end number of measures have been taken by the
government.

The promotional measures cover:

 Industrial extension services,

 Institutional support in respect of credit facilities,
  Provision of training facilities,
 Supply of machinery on hire purchase terms,
 Assistance of domestic marketing as well as exports,
 Technical consultancy and financial assistance for technological
upgradation, etc.
The reservation policy is the most important policy of the government. It has
twin objectives of ensuring increased production and expanding employment
opportunities. Reservation of items for exclusive manufacture is SSI sector is
statutorily provided for in the Industries Act, 1951.

The overwhelming consideration for reservation of an item is its suitability and

feasibility for being made in the small scale sector without compromising the
quality aspect. The issue of reservation /de-reservation of product are examined on
the continual basis by an advisory committee on reservation constituted under the
Act. During the year2006-07,180 items reserved for manufacture in small scale
industries have been dereserved. As on March, 2007, 114 items have been reserved
for exclusive manufacture in the small scale sector.

Classification of Small –Scale Industries:

Small Scale Industries can be classified into five main groups.

 Manufacturing Industries i.e. industries manufacturing complete article.

 Serving Industries – It covers light repair shops necessary to maintain
mechanical equipment.
  Feeder Industries – It specializes in certain types of products and services
e.g. electroplating, casting, welding etc.
 Ancillary to large Industries- It produces parts and components and
rendering services.
 Mining or quarrying.

 Relationship Between Small And Large Units:

1) SUPPLEMENTARY: Due to the supplementary role of small-scale units

they can fill in the gaps between large scale production. In Madras city a
small tricycle factory sustained and flourished alongside a large cycle
factory.

2) COMPETITIVE: Certain industries like tiles and bricks,preserved fruits,

perishable edibles and fresh baked goods required small engineering skill
and demands craftsmanship and artistry. The small-scale industry can
compete in these selected products with the large-scale sector.

3) COMPLEMENTARY: Today many small units produce intermediate

products for large units. Examples of such complementary items are plastic
 dust cover for video recorders, electronic passive components etc. Under
complementary relationship, small-scale units function under the cover of
the large units and enjoy the advantage of protected markets for their
products.

4) ANCILLARISATION: Many small supply components, parts and

accessories to large films, in the sense they serve as ancillaries. E.G. Maruti
Udyog, Bajaj, Mahindars, Tata Motors, etc. buys some components and
accessories used in their products.

5) JOBBING: Sometimes large enterprises provide components and material

to small scale units. The small units process these materials and components
into finished parts or sub-assemblies.

6) MERCHANDISING: There are small-scale units who do not undertake

marketing activities but distribute and sell their products through large-scale
units. For e.g. Hindustan Lever Limited distributes cosmetics and soaps
produced by small firms. Even stabilizers, refrigerators, footwear etc.
manufactured by small firms are marketed by large units.

7) SERVICING: Many small firms have been assigned the job of repair and
maintenance of products manufactured by large units. E.g. digital
equipment, personal computers, calculators etc. Small scale industries also
start servicing and repairing shops for the products of large units.
 CHARACTERISTICS OF SMALL-SCALE INDUSTRIES:

1) SMALL CAPITAL INVESTMENT: Small-scale industries require less

capital as compared to medium or large-scale industry. Cottage Industries
require very little capital. An artisan family could start their business with
just a few hundred rupees.

2) GENERATE EMPLOYMENT: Small-scale industries are generally

labour intensive and hence create an employment opportunity which is
the need of the hour. It is very helpful in a developing country like India
where we have a lot of underemployment problems.

3) PERSONAL CONTACT: There is a personal supervision of all the

activities i.e. production, purchase, labour and marketing of goods and it
is done by the entrepreneur himself.
4) LOCATION: Small-scale industries are generally located in rural and
semi- urban areas. They can be easily located anywhere provided raw
material; labour and finance are easily available.

5) EXPLOITATION of HUMAN RESOURCES: Child and women

labour in particular are exploited by small-scale industries. The
exploitation takes place in industries located in rural areas. A great
amount of child labour is used in these industries.

6) ENTREPRENEURIAL GROWTH: Small-scale industries activity is a

beehive of entrepreneurship. The small-scale industrial activity has been
growing at faster rate even then the large-scale sector.

7) TECHNOLOGY: Small-scale industries do not require high level of

technology. Indigenous technology is used as far as possible. Being
labour intensive not much of capital is needed.

8) DISPERSAL OF MANUFACTURING ACTIVITY: The metropolitan

cities have become congested. Small-scale industries make it possible to
transfer manufacturing activities from congested metropolitan cities to
the rural and semi urban areas.

9) POOR ORGANISATION AND MANAGEMENT: The management

and organization of small-scale industry is poor and negligible. Very
often the management is on trial and error basis. There is no delegation of
authority.
 10) OWNERSHIP: Most of the small-scale industries are privately
owned and organized as sole proprietorship. The owners and the family
workers generally form the largest component of small-scale force.

Objectives of Small Scale Industries:

1. To create vast employment opportunities for the people.

2. To effect decentralization of industries by creating industrial estates.
3. Redistribution of economic power as well as income.
4. To raise the standard of living of the people.
5. To increase industrial production.
6. To facilitate mobilization of resources for capital and skill.
7. To utilize available resources.
8. Promoting industrial development of backward areas.
9. To bring about an integration of development of rural economy on one hand
and large scale industry on other hand.
10.To tap latent resources like entrepreneurial ability hoarded wealth etc.

Importance of Small Scale Industries:

Small scale industries play an important role in the process of country’s industrial
development. It accounts for 40% of the total value of industrial production and
contributes directly about 33% of the aggregate exports.

In a developing like India it is a small scale industry that continues the backbone of
the industrial structure. Its development has created vast employment opportunities
and has also brought about decentralization.

The following advantages suggest the importance of small scale industries.

1. Labour Intensive:
Small scale industries do not require large amount of capital. They are labor
intensive and can provide employment to large amount of people. The
energy of the unemployed and the underemployed may be utilized for
productive purpose in the economy.

2. Equitable Distribution of Income and Wealth:

By creating opportunities for small business, small enterprises can bring
about a more equitable distribution of income and wealth which is socially
necessary and desirable.

3. Production:
 Small scale industries projects can be undertaken in a short period and hence
can increase the production in the short run and the long run. The small scale
sector produces a large proportion of the national products.

4. Dispersal of manufacturing activities:

Small scale industries will make possible transfer of manufacturing activity
from congested cities to the rural and semi urban areas. This will help in
bringing about a balanced regional growth.

5. Linkages:
The large scale industries create an opportunity or facility for the growth of
small scale industry. The growth of large motor industry will create
opportunities for setting up of small service station and repair centers.

6. Own Identity:
Small scale enterprises have their own place in the country’s economy.
Imperfect competition protects the small firms market and enables them to
exist even if they are not efficient in terms of cost.

7. Training ground for local entrepreneur:

 Small scale industrial enterprises are the training ground for local
entrepreneurs. Small scale industry knowledge and skill can be transferred to
other enterprises.

8. Mobilization of services:
In the rural areas savings are generally used in unproductive consumption.
The growth of cottage and small scale industry can offset the investment
opportunities to people living in under developed countries.

9. Facilitates capital formation:

The development of small scale industries will generate additional savings;
this will facilitate capital formation in the economy,

10. Export Potential:

Nearly 20% of the total value of export comes from small scale industry.
The main items of exports of small scale sectors include engineering goods,
sports goods, finished leather, readymade cotton garments, processed foods,
etc.

Apart from this, the small scale enterprises have the following advantages too:

1. They are innovative and productive.

2. The products of these enterprises earn a substantial foreign exchange.
3. They have a favorable capital output ratio.
 4. They meet substantial part of increasing demand for consumer goods
including human consumption goods.
5. They require a short gestation period.

Roll and performance of small scale industries.

Small scale and cottage industries are the most important employment
providing sectors of the country. Following are its functions.
1) Expansion of small scale sectors and its share in industrial output: The
total number of small scale units both registered and unregistered stood at
101 lakhs in 2000-2001 and this rose to 123.42 lakh in 5005-06. the average
annual growth rate over the period of this six years was around 4.1%.The
output of small scale units was Rs. 1840 crore in 2001 and rose to 272668 cr
in 2005-06.
2) Employment generation: The small scale units employed 2399.09 lakh
people in 2000-01 and this number has consistently risen to 294.91 lakh
people in 2005-06. that is about three crore people. As there is
unemployment problem in India, creation of employment opportunities
depends upon the development of small scale and cottage industries. There
is already surplus labour in agriculture while the large scale industrial sector
being capital intensive in nature has limited employment opportunities.
3) Relative efficiency as compared with large scale sector: According to a
study the small scale industries by investing only 7% to 15% of the total
manufacturing sectors capital contribution to nearly 1/5 of industrial output.
Between1980-94 layout productivity and capital productivity in small scale
sector grew at a faster rate than the large scale sector.
4) Equitable distribution of national income: The small scale and cottage
industries ensure a more equitable distribution of national income and
wealth. This happens because of ownership of small scale industries being
more wide spread and they possess a much larger employment potential as
compared to large scale industries.
5) Mobilization of capital and entrepreneur skill: A number of entrepreneurs
are spread over small towns and villages of the country. Obviously large
 scale industries cannot utilize them as efficiently as small scale and village
industries which are distributed over the entire length and breadth of the
country. Similarly large industries cannot mobilize savings done by the
people in areas far flung from urban centers. In addition to this a large
number of other resources spread over the country can be put to an effective
use by the small scale and cottage industries.
6) Regional dispersal of industries: There has been concentration of large
industries in the state of Maharashtra, west Bengal Gujarat and Tamil Nadu.
Therefore disputes in industrial development have increased. More
industries in the urban areas have created pollution problems. As against
this the small scale industries are mostly set up to satisfy local demand and
they can be dispersed over all the state very easily.
7) Contribution to exports: With the establishment of a large number of
modern small scale industries in the post independence period, the
contribution of the small scale sector in export earnings has increased by
leaps and bounds

Registration of Small-Scale Industry:

It is not compulsory for small-scale industry to get itself registered but it is in the
interest of the entrepreneur to register his unit with the State Directorate of
Industries.

However, registration with the State Directorate of Industries or District Industries

Centre helps in getting assistance from the government. The registration of small-
scale unit is done in two stages viz.

 Provisional registration
  Permanent registration

In case of subsidiaries it is subject to the normal licensing provisions under the

Industries (Development and Regulation) Act, 1951.

Registration is done in two steps:

1. Provisional registration:

Application for provisional registration is done in Form 4-A with the District
Industries Centre (DIC). Provisional registration is possible even when one is
planning to set up unit. The provisional certificate is issued within a week unless
the proposed industry is one which needs raw material which the government has
declared non-available to new units because of their scarcity.

The initial validity of provisional registration is for one year. It may be renewed for
a further period of two years in four 6 monthly extensions on submission of
satisfactory proof that the entrepreneur has taken active steps to establish the new
unit and needs more time.

The following documents are required foe provisional registration:

 Application in the prescribed form dully filled and signed by the proprietor,
partners, directors as the case may be
 Photocopy of ration card of proprietor, partners, directors who have signed
the application.
 Passport size photos of proprietor, partners, directors as the case may be.
 If the unit is a partnership firm, photocopy of the partnership deed.
 In case the applying unit is a company, photocopy of Memorandum, Article
of Association and the Certificate of Incorporation
If the small scale unit comes within the purview of the Factories Act e.g. employs
10 persons with power or 20 without power, registration with the Inspector of
Factories will also be required otherwise unit has to be registered under the Shops
and Establishment Act, wherever applicable.

Provisional Registration enable to:

 Apply for power and water connection

 Apply for financial assistance to institutional & commercial bank.
 Apply to NSIC or other institutional for procuring machine on hire purchase
basis.
 Apply for shed in an industrial estate or construction of a shed.
 Apply for NOC to the local authorities.
 Obtain registration for sales-tax duty, excise duty etc.

Permanent registration:

When the factory building is ready, power connection is given, the machinery has
been installed, the entrepreneur may apply for permanent registration.

Within seven days of the receipt of the application the district industries officer
informs about the date and time for inspection of of the unit. If the results are
satisfactory that the unit is capable of production activity then a registration
certificate will be issued by the Directorate of industries.
The application for permanent registration should be made in prescribed form.
Along with the application of the following documents to be submitted:

a) Photocopy of the house tax receipt in the name of the small scale unit or rent
receipt or NOC from the land lord.

b) Photocopy of sales bill of each item.

c) Photocopy of municipal License, wherever applicable.

d) Photocopy of purchase invoice of raw material.

e) Photocopy of partnership deed if the unit is a partnership.

f) Photocopy of Memorandum of Association and certificate of incorporation, if

the unit is a company.

g) Photocopy of approved scheme and project report if the unit is assembling/

manufacturing.

h) If power is not in the name of the unit then NOC from the connection holder
along with proof of the quantum of power installed in the home of connection
holder and power consumption bill.

i) An affidavit in the prescribed proforma duly attested by notary public.

All the registered units are required to submit half-yearly reports about the
production and sales to the directorate of industries in triplicate. In case the unit
fails to submit such returns within a prescribed period, the applicant may be
refused to import certain raw materials.

Registration with DGS & D/NSIC:

A small unit can get itself registered with director general of supplies and disposal
(DGS&D) or National Small Industries Corporation if it wants to avail of the
benefit of purchases made for government offices. For this the application should
be made in the prescribed form along with the following documents:

a) Ownership documents in respect of the firm’s factory and machinery.

b) Income tax clearance certificate.

c) Copies of balance sheet and Profit and Loss account for the last three years.

d) Certificate in Form A in case of a partnership firm.

e) Copies of Memorandum and Articles of Association in case of a company.

De-Registration:

Reasons:

1. If the units remains closed continuously for a period exceeding one year.

2. If the units fail or refuse or avoids to give full and truthful information called
upon by registering authority from time to time ands in particular the half yearly
reports.
A show cause notice is sent to the party by registered post at the address given in
the application form and given 30 days’ time to appeal. If the party refuses to
accept the notice or the unit is reported to be closed, the notice should be duly
pasted on the premises.

Action to de-register may be taken only after the expiry of the 30 days from the
date of notice. The order for de-registration will have to be signed by the Joint
Director of Industries or the General Manager of the District Industries Centre
where the unit is functioning.