SMALL BUSINESS 2

Procedure of registration as a Small Scale Industry (SSI)

One of the advantages of small scale industries is that they are more flexible to adapt to changes to the
new method of production, the introduction of new products, etc. Small scale units as compared to large
scale units are more change susceptible and highly reactive and responsive to socio-economic conditions.
The objective of small scale industries is to adapt to the latest technology and to produce better quality
products at lower costs.

Even in this type of business, registration is voluntary and not compulsory. But, its registration with the
State Directorate or Commissioner of industries or DIC’s makes the unit eligible for availing different
types of Government assistance like financial assistance from the Department of Industries, medium and
long terms loans from State Financial Corporations and other commercial banks, machinery on hire-
purchase basis from the National Small Industries Corporation, etc.

In the registration of SSI/MSME there are two types of certificates provided by the authorities, initially
provisional registration certificate is given to the companies which is valid for five years. It is given for
pre-operative period and after that a permanent registration certificate is given in perpetuity.

There are three slabs which are prescribed under MSME Act to define an enterprise:

Manufacturing Enterprises
Type of Service Industry
No. (Investment in Plant and
Enterprise (Investment in equipment)
Machinery)

Does not exceed Rs. 10

1. Micro Does not exceed Rs. 25 Lakh
Lakh

Exceeds Rs. 25 Lakh but does not Exceeds Rs. 25 Lakh but
2. Small
exceed Rs. 5 Crore does not exceed Rs. 5 Crore

Exceeds Rs. 5 Crore but does not Exceeds Rs. 2 Crore but
3. Medium
exceed Rs. 10 Crore does not exceed Rs. 5 Crore

The registration for a medium enterprise which is engaged in manufacturing is necessary to be registered
for other enterprises registration is optional.

PROCEDURE FOR REGISTRATION

Eligibility: All Micro & Small Enterprises which are registered with the Director of Industries
(DI)/District Industries Centre (DIC) as manufacturing/service enterprises or having Acknowledgement of
Entrepreneurs Memorandum (EM Part-II) are eligible for registration with NSIC under its Single Point
Registration Scheme (SPRS).

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Micro & Small Enterprises who have already commenced their commercial production but not completed
one year of existence. The Provisional Registration Certificate can be issued to such Micro & Small
Enterprises under Single Point Registration scheme with monitory limit, minimum amount of money to
be invested, of Rs. 5 Lacs which shall be valid for the period of one year only from the date of issue after
levying the registration fee and obtaining the requisite documents.

How to apply: Micro and Small enterprises could be applied through online application that is provided
by the prescribed state website(State website’s of thou are applying for registration) respective state in
which or by submitting the application form in duplicate which is to be submitted the concerned
Zonal/Branch Office of NSIC located nearest to the unit.

Procedure:

Step 1: Provisional Small Scale Industry (SSI) Registration

To obtain SSI registration you must apply for provisional SSI registration certificate. This certificate is
given when the unit is in pre-operative stage and helps SSI unit obtain term loans and working capital.
This license is given for five years.

One could apply for this certificate online through the state website or by applying in the concerned zonal
department.

Important Documents for Provisional SSI registration:

 Three passport size photographs of proprietors/partners/directors, as the case may be.

 Photocopy of the partnership deed in case of a partnership unit. It is not necessary that the
partnership should be registered under the partnership Act.
 Copy of the Memorandum and Articles of Association in case of Private Company along with
certificate of incorporation. Copy of the resolution of the company authorising one of the
Directors of the company to sign the application form and also appear for the interview.
 Proof of legal possession i.e. rent receipt, NOC from the landlord with proof of ownership,
the power load authorised by the connection holder to the applicant
 Provisional Registration would be allowed in approved Industrial areas only after the Unit has
obtained consent to establish from Delhi Pollution Control Committee
 Some of the documents may differ because each state has different requirements of
documents. Above given documents are minimum required documents which are to be
submitted

Benefits of Provisional SSI registration

 Material for construction of factory building : The material which is needed for construction of
the factory or building would be available to the factory at subsidized rates from government

 Apply for Municipal Corporation License & power connection. With the provisional registration
the company would be able to get all the clearances from the concerned authorities.

Step 2: Start the Business

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The next step towards having a permanent license is to start the business with SSI certificate. The owner
should start the production in the factory so that permanent licence could be given.

Step 3: Apply for Permanent SSI registration

After you have started the business you should apply for permanent SSI registration. This could be done
by applying online through state website or through the Zonal office or district office of the department.

Requirements for applying PRC(Permanent Registration Certificate)

 You may apply for the PRC without an industrial license in case your unit is listed in Schedule-III
of the Industrial Licensing Exemption Notification. Other units must first acquire an industrial
license.

 The unit should have obtained all clearances from the pollution control board, drug control board
etc.

 The unit should not violate any locational restriction

 The original value of plant including machinery should be within prescribed limits for which you
are applying.

 The unit should not be a subsidiary, owned or controlled by another industrial undertaking.

Documents which are to be submitted for applying in

 Proof of ownership of premises i.e. allotment letter/possession letter/lease Deed/property tax

receipt. If the unit has a municipal corporation license in its own name or in the name of its
proprietor or one of the Partner/Directors as the case may be, then no other proof of legal
possession is required.

 In case premises are arranged on rental basis, unit should submit proof of Legal possession i.e. a
rent receipt and/or NOC from the landlord supported by the proof of land lord’s ownership. For
this purpose rent receipt/rent agreement with GPA (General Power of Attorney) is also accepted
provided the GPA is appointed by the owner/lessee through a Regd. deed.

 One photo copy of sale bill of each end product applied for.

 One photo copy of purchase bill of each raw material.

 Copy of partnership deed in case of partnership unit (this need not be registered.)

 Copy of Memorandum of Articles of Association with certificate of incorporation in case of

private limited company (in case of any change of Directors subsequently, copy of resolution and
intimation in form No.32)along with copy of resolution authorising one of the directors to sign
the application for grant of permanent SSI registration.

 Copy of the industrial license from Govt. of India in case the end products require such license
under Industrial Development and Regulation Act.1951.

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  An affidavit on Rs.10/- Non judicial Stamp Paper duly attested by Notary Public affixed with
proper notarial Stamp giving the status of the unit, machinery installed, power requirement etc. as
per the prescribed format

 Purchase bill of machinery installed.

 Photo copy of valid consent letter from pollution control committee of that state.

Benefits for having a permanent SSI registration

 Tax Benefits: Depending on your business, you may enjoyExcise Exemption Scheme as well as
exemption from certain Direct Taxes in the initial years of your business.

 Availability of raw material depending on existing policy: Raw material for production would be
given by the government in the initial years at subsidized rates.

 Benefits from Banks: All banks and other financial institutions recognise MSMEs and have
created special schemes for them. This usually includes priority sector lending, which means that
the likelihood of your business being sanctioned a loan is high, and lower bank interest rates.
There may also be preferential treatment in case of delay in repayment.

 Benefits from State Governments: Most states offer those who’ve registered under the MSMED
Act subsidies on power, taxes and entry to state-run industrial estates. In particular, there is a
sales tax exemption in most states and purchase preference on goods p

Time taken for SSI or MSME registration ranges between 5 to 20 days depending on the state in which
the industry is located in.

State website for Provisional SSI registration

Maharashtra:http://dcmsme.gov.in/publications/forms/SetingNewSSIForms/applyprv.html

Advantages of SSI

1. Potential for large employment: Small Scale Industries have potential to create employment
opportunities on a massive scale. They are labor intensive in character. They use more labor than other
factors of production. They can be set up in short time and can provide employment opportunities to more
number of people. This is important for a labor abundant country like India.

2. Requirement of less capital: Small Scale Industries require less capital when compared to large scale
industries. India is a capital scarce country and therefore Small Scale Industries are more suitable in the
Indian context. They can be started and run by small entrepreneurs who have limited capital resources

3. Contribution to industrial output: Products manufactured by Small Scale Industries form a

significant portion of the industrial output of the country. They produce a number of consumer goods as
well as industrial components in large quantities and satisfy the needs of consumers. The consumer goods
produced by Small Scale Industries are cheaper and satisfy the requirements of the poorer sections.

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4. Contribution to exports: Small Scale Industries contribute nearly 40 per cent to the industrial exports
of the country. Products such as hosiery, knitwear, hand loom, gems and jewellery, handicrafts, coir
products, textiles, sports goods, finished leather, leather products, woolen garments, processed food,
chemicals and allied products and a large number of engineering goods produced by the SSI sector
contribute substantially to India’s exports. Further products produced by Small Scale Industries are used
in the manufacture of products manufactured and exported by large scale industries. Therefore they
contribute both directly and indirectly to exports and earn valuable foreign exchange.

5. Earning foreign exchange: Small Scale Industries earn valuable foreign exchange for the country by
exporting products to different countries of the world. At the same time, their imports are very little and
so there is less foreign exchange outgo. Therefore Small Scale Industries are net foreign exchange
earners. For e.g. Small Scale Industries in Tiruppur contribute to a substantial portion of India’s textile
exports and earn valuable foreign exchange for the country.

6. Equitable distribution: Large scale industries lead to inequalities in income distribution and
concentration of economic power. But small scale industries distribute resources and wealth more
equitably. It is because income is distributed among more number of workers since it is labor intensive.
This results in both economic and social welfare.

7. Use of domestic resources: Small Scale Industries use locally available resources in a productive
manner which would have otherwise gone waste. Small amounts of savings which would have remained
idle is channelized into setting up of small enterprises. This increases capital formation and investment in
the economy.

8. Opportunities for entrepreneurship: Small Scale Industries provide opportunities for entrepreneurs
with limited capital. Setting up of an SSI requires less capital and lower investment in technology and
machines when compared to large scale enterprises. Therefore small entrepreneurs car start Small Scale
Industries easily and succeed. Japan which was devastated by the Second World War became a major
economic power because of many small entrepreneurs, who contributed greatly to the nation’s
development.

9. Cost efficiency: Small scale units can adopt lean production method. which offer better quality and
more variety at a lower cost. They can bi more cost efficient when compared to large scale units because
their expenses are lower.

10. Reducing migration: Migration happens when people living in rural areas are not able to find
employment and therefore migrate to urban areas seeking employment. Large scale migration puts
tremendous pressure on land, water and other resources in urban areas leading to poor quality of life.
Small Scale Industries use the skills and talents of rural craftsmen, artisans etc. They provide gainful
employment to those with inherited skills resulting in their economic upliftment. Thus Small Scale
Industries help in reducing migration.

11. Suitable for non-standardized products: Large scale enterprises are suitable for manufacturing
standardized products on a large scale whereas Small Scale Industries are more suitable for manufacturing
non-standardized products.

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12. Flexibility in operation: Small scale enterprises are more flexible. They can adapt themselves to
changing market requirements very fast and benefit from new opportunities.

13. Quick decisions: Since the enterprise is small and there is not much hierarchy, quick decisions.can be
taken. Quick decisions are helpful in solving problems in the initial stages and also to exploit market
opportunities.

14. Adaptability to change: Small Scale Industries can understand the changing requirements of the
customers and adapt themselves much quickly. They can change their procedures, methods and
techniques faster and cater to new requirements of their customers.

15. Small market size: In case the market size is small, producing products on a large scale would not be
feasible. In such cases, Small Scale Industries are more suitable since they produce limited quantities.

16. Customization: Today customers prefer products tailored to their specific needs. They demand
unique products. In such cases where products have to be customized to individual customer needs large
scale production would not be suitable. Small Scale Industries are better suited in case products have to be
customized.

17. Low social costs: In the case of large scale enterprises, society has to incur high social costs in terms
of air and water pollution and environmental degradation. But in the case of small enterprises, such social
costs are less.

18. Opportunity for talent: Small Scale Industries provide opportunity for talented individuals who do
not have huge funds, to start enterprises on a small scale. Dhirubhai Ambani of Reliance, Karsanbhai
Patel of Nirma, Brij Mohan Munjal of Hero Honda, Venugopal Dhoot of Videocon, Sunil Mittal of Bharti
Enterprises (Airtel), Narayanamurthy and his co-promoters of Infosys, Ramalinga Raju of Satyam are all
examples of entrepreneurs who started their business on a small,scale, and through intelligence,
determination and commitment have transformed their small companies into large world class players.

19. Lesser industrial disputes: In large scale enterprises workers are more organized and in many large
scale enterprises there are strong trade unions. The trade unions fight for the workers rights. If the
management fails to accept the demands of the trade unions, the trade unions gherao the management,
adopt go slow tactics and strike work. But in small scale enterprises, workers are not well organized and
union activity is less. So there is very little possibility of industrial disputes to occur.

20. Personal contact with employees: Businesses engaged in small scale production have less number of
employees. It is easy to maintain personal contact with employees. Grievances and problems would be
known immediately and solved. Therefore there is very little possibility of any industrial dispute.

21. Personal contact with customers: The number of customers is limited and the small scale
entrepreneur would be directly involved in the business. Personal contact can be maintained with
customers. Their needs and requirements can be understood and satisfied. This results in satisfied
customers leading to stable demand.

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22. Self interest: Small business is generally run by the sole proprietor of the business. He earns all and
risks all. Self interest act as a strong motivator. Therefore he would put in his best efforts to make the
business a success.

Problems faced by SSI in India

Small Scale Industries do not enjoy much of the advantages enjoyed by large scale enterprises because of
their nature and size. Though they have made significant contribution to economic development, they
have not realized their full potential. They face many problems in their functioning and many Small Scale
Industries are sick.

The government had reserved certain items for exclusive production by Small Scale Industries. Large
scale enterprises were not allowed to produce the items which were reserved for the SSI sector. With the
opening up of the economy and following the principles of liberalization and globalization, many items
have been successively De-reserved. Therefore Small Scale Industries have to now counter the twin
forces of competition from Indian large scale enterprises as well as foreign competitors.

PROBLEMS FACED BY SMALL SCALE INDUSTRIES

The following are the problems faced by Small Scale Industries:

1. Poor capacity utilization: In many of the Small Scale Industries, the capacity utilization is not even
50% of the installed capacity. Nearly half of the machinery remains idle. Capital is unnecessarily locked
up and idle machinery also occupies space and needs to be serviced resulting in increased costs.

2. Incompetent management: Many Small Scale Industries are run in an incompetent manner by poorly
qualified entrepreneurs without much skill or experience. Very little thought has gone into matters such as
demand, production level and techniques, financial availability, plant location, future prospects etc.
According to one official study, the major reason for SSI sickness is deficiency in project Management
i.e., inexperience of promoters in the basic processes of production, cash flow etc

3. Inadequate Finance: Many Small Scale Industries face the problem of scarcity of funds. They are not
able to access the domestic capital market to raise resources. They are also not able to tap foreign markets
by issuing ADR’s (American Depository Receipts) GDR’s (Global Depository Receipts) etc because of
their small capital base. Banks and financial institutions require various procedures and formalities to be
completed. Even after a long delay, the funds allocated are inadequate.

Bank credit to the small scale sector as a percentage of total credit has been declining. It fell from 16% in
1999 to 12.5% in 2002. Small Scale Industries are not able to get funds immediately for their needs. They
have to depend on private money lenders who charge high interest. Finance, as a whole, both long and
short term, accounts for as large as 43% of the sector’s sickness.

4. Raw material shortages: Raw materials are not available at the required quantity and quality. Since
demand for raw materials is more than the supply, the prices of raw materials are quite high which pushes
up the cost. Scarcity of raw materials results in idle capacity, low production, inability to meet demand
and loss of customers.

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5. Lack of marketing support: Small Scale Industries lack market knowledge with regard to
competitors, consumer preferences, market trends. Since their production volume is small and cannot
meet demand for large quantities their market is very restricted. Now with the process of liberalization
and globalization they are facing competition from local industries as well as foreign competitors who sell
better quality products at lower prices. For e.g. heavily subsidized but better quality imports from China
has made most of the Indian SSI units producing toys, electronic goods, machine tools, chemicals, locks
and paper etc., unviable.

6. Problem of working capital: Many Small Scale Industries face the problem of inadequate working
capital. Due to lack of market knowledge their production exceeds demand, and capital gets locked in
unsold stock. They do not have enough funds to meet operational expenses and run the business.

7. Problems in Export: They lack knowledge about the export procedures, demand patterns, product
preferences, international currency rates and foreign buyer behavior. Small Scale Industries are not able to
penetrate foreign markets because of their poor quality and lack of cost competitiveness. In countries like
Taiwan, Japan etc. products produced by Small Scale Industries are exported to many foreign countries.
But in India not much thought and focus has gone into improving the export competitiveness of Small
Scale Industries.

8. Lack of technology up-gradation: Many Small Scale Industries still use primitive, outdated
technology leading to poor quality and low productivity. They do not have adequate funds, skills or
resources to engage in research and development to develop new technologies. Acquiring technology
from other firms is costly. Therefore Small Scale Industries are left with no choice but to continue with
their old techniques.

9. Multiplicity of labor laws: One of the merits of Small Scale Industries are that they are labor intensive
and can provide employment to a large number of people. But the multiplicity of labor laws, need to
maintain several records (PF, ESI, Muster Rolls etc), fines and penalties for minor violations etc place
Small Scale Industries at a great disadvantage.

10. Delayed payments: Small Scale Industries buy raw materials on cash but due to the intense
competition have to sell their products on credit. Buying on cash and selling on credit itself places a great
strain on finances. The greater problem is payments are delayed, sometimes even by 6 months to one
year. It is not only the private sector but even government departments are equally guilty. Delayed
payments severely impact the survival of many Small Scale Industries.

11. Poor industrial relations: Many Small Scale Industries are not able to match the pay and benefits
offered by large enterprises, because their revenues and profitability are low and also uncertain. This
leads to labor problems. Employees fight for higher wages and benefits which the SSI is not able to
provide. This may lead to strikes, resulting in damage to property in case of violence by employees,
production losses etc.

12. Lack of awareness: The government has set up many organizations to support and provide assistance
to Small Scale Industries. But, many of the entrepreneurs running Small Scale Industries are not aware of
the various support services.

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Institutional support to SSI

The Indian government has been supporting and developing small unit sectors. India is focusing on rural
industries and cottage industries. According to layman’s language, a small business is a project or venture
that requires a small budget or is run by small group of people.

Both central and state government have been emphasizing more on self-employment opportunities in
rural sectors by providing help and support in financing in terms of loans, training in terms of programs,
infrastructure, raw materials and technology.

The core purpose of the government is to utilise the local manpower and locally available resources.
Which are further transformed into action by local departments, agencies, corporations, etc. The support
of small industries include:

Institutional Support

1. National Bank for Agriculture and Rural Development (NABARD)

NABARD established by the government in 1982 to give action and to promote the rural industries. It has
adopted multi-purpose strategies in promoting in rural business in India. It supports small industries, rural
artisans, rural industries, cottage industries along with agriculture. Also, it sets up training and
counselling plus it gives development programmes for rural entrepreneurs.

2. A Rural Small Business Development Centre (RSBDC)

RSBDC is a government centre sponsored by NABARD for micro, small and medium businesses which
is set up by world organization. The primary purpose of RSBDC is to work for socially and financially
disadvantaged people and groups. RSBDC does many programmes on skill up gradation,
entrepreneurship, awareness, counselling and training.

These programmes motivate various unemployed youth and young women learn different trades and
introduce them to other good benefits from it.

3. National Small Industries Corporation (NSIC)

NSIC was set up in 1995 by the government to popularize and support small businesses focusing on
commercial aspects. The important functions of NSIC are:

 Supply imported goods and machine on hire purchase agreement.

 Procurement of supply imported indigenous raw materials.
 Developing small business by importing their products.
 Supervising services.
 Awareness on technical up gradation.

Also, a new scheme called performance and credit rating for small units have been started by NSIC, this
ensures that the more their credit rating, the more their financial assistance for their investment and
capital requirement.

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4. Small Industries Development Bank of India (SIDBI)

It is a top government bank to provide direct and indirect financial support under various schemes to meet
credit requirements of various small businesses.

5. The National Commission for Enterprises in the Unorganised Sector (NCEUS)

NCEUS was formed in the September 2004 by the government with objectives:

 Measures to improve the productivity of small industries in the informal sector.

 Generation of employment in the rural sector.
 Creating links between small sector and finance, infrastructure, raw materials and technology.
 To create public and private partnerships for engagement in imparting skills for the informal
sector.
 Providing micro-finance for the informal sector.
 Providing social security for the informal sector.
 To introduce competition of small scale in a global environment.

6. Rural and Women Entrepreneurship Development (RWED)

This is a government organisation that focuses to raise the business environment for women and to
support women’s business initiatives. It provides manual for training in entrepreneurship and renders
advisory services.

7. World Association for Small and Medium Enterprises (WASME)

WASME is an international body that is nongovernmental organisation of micro, small and medium
business units in India which establish an international committee and focus on rural development and
apply action plan model for sustained growth of rural industries.

8. Scheme of Funds for Re-generation of Traditional Industries

From 2005, the government established a fund to support these traditional small industries and to
facilitate higher productivity and to enhance their growth and development.

Government Policies for Development and Promotion of Small-Scale Industries in India

Some of the Government Policies for development and promotion of Small-Scale Industries in India are:
1. Industrial Policy Resolution (IPR) 1948, 2. Industrial Policy Resolution (IPR) 1956, 3. Industrial Policy
Resolution (IPR) 1977, 4. Industrial Policy Resolution (IPR) 1980 and 5. Industrial Policy Resolution
(IPR) 1990.

Since Independence, India has several Industrial Policies to her credit. So much so that Lawrence A. Veit
tempted to say that “if India has as much industry as it has industrial policy, it would be a far well-to-do
nation.” With this background in view, in what follows is a review of India’s Industrial Policies for the
development and promotion of small-scale enterprises in the country.

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1. Industrial Policy Resolution (IPR) 1948: The IPR, 1948 for the first time, accepted the importance of
small-scale industries in the overall industrial development of the country. It was well realized that small-
scale industries are particularly suited for the utilization of local resources and for creation of employment
opportunities.

However, they have to face acute problems of raw materials, capital, skilled labour, marketing, etc. since
a long period of time. Therefore, emphasis was laid in the IPR, 1948 that these problems of small-scale
enterprises should be solved by the Central Government with the cooperation of the State Governments.
In nutshell, the main thrust of IPR 1948, as far as small-scale enterprises were concerned, was
‘protection.’

2. Industrial Policy Resolution (IPR) 1956: The main contribution of the IPR 1948 was that it set in the
nature and pattern of industrial development in the country. The post-IPR 1948 period was marked by
significant developments taken place in the country. For example, planning has proceeded on an
organised manner and the First Five Year Plan 1951-56 had been completed. Industries (Development
and Regulation) Act, 1951 was also introduced to regulate and control industries in the country.

The parliament had also accepted ‘the socialist pattern of society’ as the basic aim of social and economic
policy during this period. It was this background that the declaration of a new industrial policy resolution
seemed essential. This came in the form of IPR 1956.

The IPR 1956 provided that along with continuing policy support to the small sector, it also aimed at to
ensure that decentralised sector acquires sufficient vitality to self-supporting and its development is
integrated with that of large- scale industry in the country. To mention, some 128 items were reserved for
exclusive production in the small-scale sector.

Besides, the Small-Scale Industries Board (SSIB) constituted a working group in 1959 to examine and
formulate a development plan for small-scale industries during the, Third Five Year Plan, 1961-66. In the
Third Five Year Plan period, specific developmental projects like ‘Rural Industries Projects’ and
‘Industrial Estates Projects’ were started to strengthen the small-scale sector in the country. Thus, to the
earlier emphasis of ‘protection’ was added ‘development.’ The IPR 1956 for small-scale industries aimed
at “Protection plus Development.” In a way, the IPR 1956 initiated the modem SSI in India.

3. Industrial Policy Resolution (IPR) 1977: During the two decades after the IPR 1956, the economy
witnessed lopsided industrial development skewed in favour of large and medium sector, on the one hand,
and increase in unemployment, on the other. This situation led to a renewed emphasis on industrial
policy. This gave emergence to IPR 1977.

The Policy Statement categorically mentioned:

“The emphasis on industrial policy so far has been mainly on large industries, neglecting cottage
industries completely, relegating small industries to a minor role. The main thrust of the new industrial
policy will be on effective promotion of cottage and small-scale industries widely dispersed in rural areas
and small towns. It is the policy of the Government that whatever can be produced by small and cottage
industries must only be so produced.”

The IPR 1977 accordingly classified small sector into three broad categories:

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1. Cottage and Household Industries which provide self-employment on a large scale.

2. Tiny sector incorporating investment in industrial units in plant and machinery up to Rs. 1 lakh and
situated in towns with a population of less than 50,000 according to 1971 Census.

3. Small-scale industries comprising of industrial units with an investment of upto Rs. 10 lakhs and in
case of ancillary units with an investment up to Rs. 15 lakhs.

The measures suggested for the promotion of small-scale and cottage industries included:

i) Reservation of 504 items for exclusive production in small-scale sector.

ii) Proposal to set up in each district an agency called ‘District Industry Centre’ (DIC) to serve as a
focal point of development for small-scale and cottage industries. The scheme of DIC was
introduced in May 1978. The main objective of setting up DICs was to promote under a single
roof all the services and support required by small and village entrepreneurs.

What follows from above is that to the earlier thrust of protection (IPR 1948) and development (IPR
1956), the IPR 1977 added ‘promotion’. As per this resolution, the small sector was, thus, to be
‘protected, developed, and promoted.’

4. Industrial Policy Resolution (IPR) 1980: The Government of India adopted a new Industrial Policy
Resolution (IPR) on July 23, 1980. The main objective of IPR 1980 was defined as facilitating an increase
in industrial production through optimum utilization of installed capacity and expansion of industries.

As to the small sector, the resolution envisaged:

i) Increase in investment ceilings from Rs. 1 lakh to Rs. 2 lakhs in case of tiny units, from Rs. 10
lakhs to Rs. 20 lakhs in case of small-scale units and from Rs. 15 lakhs to Rs. 25 lakhs in case of
ancillaries.
ii) Introduction of the concept of nucleus plants to replace the earlier scheme of the District Industry
Centres in each industrially backward district to promote the maximum small-scale industries
there.
iii) Promotion of village and rural industries to generate economic viability in the villages well
compatible with the environment.

Thus, the IPR 1980 reimphasised the spirit of the IPR 1956. The small-scale sector still remained the best
sector for generating wage and self-employment based opportunities in the country.

5. Industrial Policy Resolution (IPR) 1990: The IPR 1990 was announced during June 1990. As to the
small-scale sector, the resolution continued to give increasing importance to small-scale enterprises to
serve the objective of employment generation.

The important elements included in the resolution to boost the development of small-scale sector
were as follows:

(i) The investment ceiling in plant and machinery for small-scale industries (fixed in 1985) was raised
from Rs. 35 lakhs to Rs. 60 lakhs and correspondingly, for ancillary units from Rs. 45 lakhs to Rs. 75
lakhs.

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(ii) Investment ceiling for tiny units had been increased from Rs. 2 lakhs to Rs. 5 lakhs provided the unit
is located in an area having a population of 50,000 as per 1981 Census.

(iii) As many as 836 items were reserved for exclusive manufacture in small- scale sector.

(iv) A new scheme of Central Investment Subsidy exclusively for small-scale sector in rural and
backward areas capable of generating more employment at lower cost of capital had been mooted and
implemented.

(iv) With a view, to improve the competitiveness of the products manufactured in the small-scale sector;
programmes of technology up gradation will be implemented under the umbrella of an apex Technology
Development Centre in Small Industries Development Organisation (SIDO).

(v) To ensure both adequate and timely flow of credit facilities for the small- scale industries, a new apex
bank known as ‘Small Industries Development Bank of India (SIDBI)’ was established in 1990.

(vi) Greater emphasis on training of women and youth under Entrepreneurship Development Programme
(EDP) and to establish a special cell in SIDO for this purpose.

(vii) Implementation of delicencing of all new units with investment of Rs. 25 crores in fixed assets in
non-backward areas and Rs. 75 crores in centrally notified backward areas. Similarly, delicensing shall be
implemented in the case of 100% Export Oriented Units (EOU) set up in Export Processing Zones (EPZ)
up to an investment ceiling of Rs. 75 lakhs

Compiled by Ca. A.N. Arsiwala Page 13