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Unit 5 Micro Small and Medium Scale Industries (Msme) or Small Scale Industrial Undertakings Defination
Unit 5 Micro Small and Medium Scale Industries (Msme) or Small Scale Industrial Undertakings Defination
v Where an industrial undertaking is a subsidiary of, or is owned or controlled by, any other
industrial undertaking or undertakings in terms of sub-clauses (i); (ii); or (iii) and if the
total investment in fixed assets in plant and machinery of the first mentioned industrial
undertaking and the other industrial undertaking or undertakings clubbed together exceeds
the limit of investment specified in paragraphs (1) or (2) of this notification as the case
may be, none of these industrial undertakings shall be considered to be a small scale or
ancillary industrial undertaking.
Note 2-
(a) In calculating the value of plant and machinery for the purposes of paragraphs (1) and
(2) of this notification, the original price thereof, irrespective of whether the plant and
machinery are new or second hand, shall be taken into account.
(b) In calculating the value of plant and machinery, the following shall be excluded,
namely: -
i. The cost of equipments such as tools, jigs, dies, moulds and spare parts for
maintenance and the cost of consumable stores;
ii. The cost of installation of plant and machinery;
iii. The cost of research and development equipment and pollution control equipment;
iv. The cost of generation sets and extra transformer installed by the undertaking as per
the regulations of the State Electricity Board;
v. The bank charges and service charges paid to the National Small Industries
Corporation or the State Small Industries Corporation;
vi. The cost involved in procurement or installation of cables, wiring, bus bars, electrical
control panels (not those mounted on individual machines), oil circuit breakers or
miniature circuit breakers which are necessarily to be used for providing electrical
power to the plant and machinery or for safety measures;
viii. Transportation charges (excluding of sales tax and excise) for indigenous
machinery from the place of manufacturing to the site of the factory;
ix. Charges paid for technical know how for erection of plant and machinery;
x. Cost of such storage tanks which store raw materials, finished products only and are
not linked with the manufacturing process; and
i. Import duty (excluding miscellaneous expenses as transportation from the port to the
site of the factory, demurrage paid at the port);
Women Entrepreneurs
A Small Scale Industrial Unit/ Industry related service or business enterprise, managed by
one or more women entrepreneurs in proprietary concerns, or in which she/ they individually
or jointly have a share capital of not less than 51% as Partners/ Shareholders/ Directors of
Private Limits Company/ Members of Cooperative Society.
Investment Limits
The definition of small-scale industries has undergone changes over the years in terms of
investment limits in the following manner: -
YEAR INVESTMENT LIMITS A D D I T I O N A L
CONDITIONS
Less than 50/100
1950 Up to Rs 5 lacs in fixed
persons with
assets or without power
1960 Up to Rs 5 lacs in Plant & No condition
Machinery
1966 Up to Rs 7.5 lacs in Plant & No condition
Machinery
1975 Up to Rs 10 lacs in Plant & No condition
Machinery
1980 Up to Rs 20 lacs in Plant & No condition
Machinery
1985 Up to Rs 35 lacs in Plant & No condition
Machinery
1991 Up to Rs 60 lacs in Plant & No condition
Machinery
1997
Up to Rs 100 lacs in Plant &
(Dec)
Machinery
SSI Sector in India creates largest employment opportunities for the Indian population, next
only to Agriculture. It has been estimated that a lakh rupees of investment in fixed assets in
the small-scale sector generates employment for four persons.
According to the SSI Sector survey conducted by the Ministry and National Informatics
Center with the base year of 1987-88, the following interesting observations were made
related to employment in the small-scale sector.
Export contribution
SSI Sector plays a major role in India's present export performance. SSI Sector is
contributing 45%-50% of the Indian Exports. Direct exports from the SSI Sector account for
nearly 35% of total exports. The number of small-scale units that undertake direct exports
would be more than 5000.
Besides direct exports, it is estimated that small-scale industrial units contribute around 15%
to exports indirectly. This takes place through merchant exporters, trading houses and export
houses. They may also be in the form of export orders from large units or the production of
parts and components for use for finished exportable goods.
It would surprise many to know that non-traditional products account for more than 95% of
the SSI exports.
The export from SSI sector has been clocking excellent growth rates in this decade. It has
been mostly fuelled by the performance of garment, leather and gems and jewellery units
from this sector.
The lucrative product groups where the SSI sector dominates in exports are sports goods,
readymade garments, woolen garments and knitwear, plastic products, processed food and
leather products.
Opportunities
Small industry sector has performed exceedingly well and enabled our country to achieve a
wide measure of industrial growth and diversification.
By its less capital intensive and high labour absorption nature, SSI sector has made
significant contributions to employment generation and also to rural industrialization. This
sector is ideally suited to build on the strengths of our traditional skills and knowledge, by
infusion of technologies, capital and innovative marketing practices.
The opportunities in the small scale sector are enormous due to the following factors:
- Less Capital Intensive
- Extensive Promotion & Support by the Government
- Reservation for Exclusive Manufacture by small scale sector
- Project Profiles
- Funding
- Finance & Subsidies
- Machinery Procurement
- Raw Material Procurement
- Manpower Training
- Technical & Managerial skills
- Tools & Tools utilization support
- Reservation for Exclusive Purchase by Government
- Export Promotion
- Growth in demand in the domestic market size due to overall economic growth
- Increasing Export Potential for Indian products
- Growth in Requirements for ancillary units due to the increase in number of Greenfield
units coming up in the large-scale sector. So this is the opportune time to set up projects in
the small-scale sector. It may be said that the outlook is positive, indeed promising, given
some safeguards. This expectation is based on an essential feature of the Indian industry and
the demand structures. The diversity in production systems and demand structures will ensure
long term co-existence of many layers of demand for consumer products / technologies /
processes. There will be flourishing and well grounded markets for the same product/process,
differentiated by quality, value added and sophistication. This characteristic of the Indian
economy will allow complementary existence for various diverse types of units.
The promotional and protective policies of the Govt. have ensured the presence of this sector
in an astonishing range of products, particularly in consumer goods. However, the bug bear
of the sector has been the inadequacies in capital, technology and marketing. The process of
liberalization will therefore, attract the infusion of just these things in the sector.
Economic Indicators
The Small Scale Industry today constitutes a very important segment of the Indian economy.
The development of this sector came about primarily due to the vision of our late Prime
Minister Jawaharlal Nehru who sought to develop core industry and have a supporting sector
in the form of small-scale enterprises.
Small Scale Sector has emerged as a dynamic and vibrant sector of the economy.
Today, it accounts for nearly 35% of the gross value of output in the manufacturing sector
and over 40% of the total exports from the country.
In terms of value added this sector accounts for about 40% of the value added in the
manufacturing sector.
The sector's contribution to employment is next only to agriculture in India. It is therefore an
excellent sector of economy for investment.
• Export Promotion
• General
o Policies
♣ Policy of Reservation
♣ Labour Policies
o Schemes
♣ Single Window Scheme
♣ Industrial Estates
• Priority Sector
o Policies
♣ Policy for Tiny Sector, Cottage & Village Industries, Handicrafts,
o Schemes
♣ Prime Minister's Rozgar Yozna
♣ Equity Participation
♣ OTC Exchange
o Schemes
♣ Excise Exemption Scheme Tax Holiday
♣ Venture Capital
♣ Factoring Services
♣ NSIC Schemes
o Schemes
♣ Technology Development Fund Schemes
♣ Testing Centers
♣ Training Infrastructure
♣ Growth Centers
♣ Environmental Control
o Schemes
♣ Pollution Control Schemes
Status Holder exporters namely Export Houses, Trading Houses etc. They would be
eligible to get MDA through FIEO.
Small Exporters who are not status holders but are eligible to get the Special Import
License (SIL) under Para 11.11 (a&b) of the Hand Book of Procedures 1997-2002. Such
exporters would be eligible to get MDA through their respective EPCs/Commodity
Boards.
(iii) Quantum of Assistance: -
• Sales-cum-Study Tour(s) abroad: -
MDA would be limited to 90% of the actual fare for SSI Exporters and 75% for other
than SSI exporters with upper ceiling of Rs. 60,000/- in all cases for travel in
economy class.
Participation in Fairs/Exhibitions abroad: -
• MDA would be available on actual fair in economy class and space rent including
decoration, electricity, water etc. Only and would be limited to 90% of the total
expenditure on above mentioned items for SSI exporters and 75% for other than SSI
exporters with combined upper ceiling of Rs.90, 000/- in all cases.
(iv) Number of activities permissible: -
Second activity in a financial year of either of the activities indicated at sub-para (I)
above would be permissible only to those exporters who have achieved a minimum 5%
export growth in their global exports during the preceding financial year. One additional
sale-cum-study tour or participation fairs/ Exhibition in Latin American Countries (LAC)
Region would be permissible without any minimum export growth restriction in a
financial year to Status Holder's exporters only.
NOTE: Ministry of Commerce, MDA Section may be approached for other conditions/
guidelines, payment terms, documents to be submitted etc. Their Circular No. 1(3)/99-
MDA dated 28/4/1999 refers.
Promotional Schemes
To meet the challenges of international competition and to promote exports of SSI
products, following promotional schemes are also being implemented.
(i) Technology Development and Modernization Fund Scheme
Small Industries Development Bank of India (SIDBI) has been implementing a scheme of
technology development and modernisation of SSI units with effect from April, 1995.
Under this scheme assistance is available for meeting the expenditure on purchase of
capital equipment, acquisition of technical know-how, upgradation of process technology
and products with thrust on quality improvement, improvement of packaging and cost of
TQM and acquisition of ISO-9000 series certification. The coverage of the scheme has
been enlarged from export-oriented units to non-exporting units also in September 1997.
Under this Scheme a sum of Rs. 152 crores has been sanctioned for 245 units by April
1999.
(ii) Quality Awareness Scheme
Small Industries Service Institutes organising Workshop on ISO-9000 certification and
awareness about quality.
(iii) Subsidy for obtaining ISO-9000 quality Certification
Under the scheme of promoting ISO-9000 certification SSIs are given financial support
by way of reimbursing 75% of their expenditure to obtain ISO-9000 certification subject
to a maximum of Rs.75, 000/-. Till 1998-99, number of units assisted is 381 and amount
released is Rs. 207.5 lakhs. The scheme is being continued during Ninth Plan.
(iv) Other Schemes for technology improvement
Tool Rooms:
Tool Rooms provide tooling, dies, moulds and fixtures to small scale units at a very low
price to enable them to produce quality goods to meet the requirements of supplies of
components to large units as well as produce quality goods for direct sale. This enhances
their competitiveness and export potentials. There are 10 Tool Rooms established in
various parts of the country.
Process-cum-Product Development Centres:
There are 7 Process-cum-Product Development Centres. These Centres take up jobs from
SSIs for specific product development as well process development to improve the
quality of products, reduce cost of product and enhance marketability of goods. These
Centres deal with specific product groups.
UPTECH:
A new scheme for technology upgradation for industrial clusters has been started recently.
10 clusters of industries producing different groups in various parts of country have been
selected. The scheme aims at diagnostic study of the clusters, identification of
technological needs, technological intervention and wider dissemination of information
and technology within the clusters. The expenditure involved on pilot plants etc. Is to be
met on 50:50 cost sharing basis by the Government and the concerned Industry
Association of the clusters. The scheme is flexible and provides for smooth sourcing of
technology even from abroad.
SSI FINANCE
State Financial Corporations (SFCs)
In pursuance of the SFCs Act, 1951, SFCs were set up mainly to finance small and medium
scale units. Their area of operation is generally restricted to the concerned States. SFCs also
assist small-scale units for their modernisation and technology upgradation programmes by
providing soft loans, restructuring the sick small-scale units through rehabilitation schemes
and through equity type assistance under SIDBI's seed capital scheme.
At present, there are 18 SFCs (including TIIC which was set up as a company) in existence
for more than 40 years and operate as Regional Development Banks. The SFCs have played
an important role in the evolution and growth of small and medium scale industries in their
respective states. They provide financial assistance to industrial units by way of term loans,
direct subscription to equity, guarantees, etc. Over the years SFCs have expanded their
activities and coverage of assistance.
One-Man Committee set up by RBI under the Chairmanship of former Secretary, SSI&ARI,
to look into various problems regarding credit flow to SSI sector and support appropriate
measures for their redressal has given the following recommendations in its report submitted
to RBI which are being processed by them: -
- Funds for lending under Single Window Scheme by SFCs should be placed by SIDBI with
the SFCs in adequate measures.
- Each SFC should get into an MOU with one or two Public Sector banks and participate in
joint lending in which both term loan and working capital is provided jointly. For example,
80 per cent of the term loan could be given by SFC and 20 per cent by bank. In case of
working capital which may be sanctioned at the same time as term loan, the proportion could
be reversed, i.e., 80 per cent by bank and 20 per cent by SFC. However, the working capital
account be managed and supervised by the bank through its specialised SSI branches.
- SIDBI should sign MOUs with the State Governments to provide some assistance to SFC
prior to the approval of assistance packages by the Government of India/SIDBI.
- The staff of SFCs has to be adequately trained and SIDBI may be asked to make
arrangements for this purpose.
SIDBI was set up by an Act of Parliament, as an apex institution for promotion, financing and
development of industries in small-scale sector and for coordinating the functions of other
institutions engaged in similar activities. It commenced operations on April 2, 1990. SIDBI
extends direct/indirect financial assistance to SSIs, assisting the entire spectrum of small and
tiny sector industries on All India basis.
The range of assistance comprising financing, extension support and promotional, are made
available through appropriate schemes of direct and indirect assistance for the following
purposes: -
• Export promotion.
SIDBI directly assists SSIs under Project Finance Scheme, Equipment Finance Scheme,
Marketing Scheme, Vendor Development Scheme, Infrastructural Development Scheme,
ISO-9000, Technology Development & Modernisation Fund, Venture Capital Scheme,
assistance for leasing to NBFCs, SFCs, SIDCs and resource support to institutions involved
in the development and financing of small-scale sector.
These Schemes are mainly targeted at addressing some of the major problems of SSIs in
areas such as high tech project, marketing, infrastructural development, delayed realisation of
bills, obsolescence of technology, quality improvement, export financing and venture capital
assistance.
Indirect Assistance Schemes
Under its indirect schemes, SIDBI extends refinance of loans to small scale sector by Primary
Lending Institutions (PLIs) viz. SFCs, SIDCs and Banks. At present, such refinance
assistance is extended to 892 PLIs and these PLIs extend credit through a network of more
than 65,000 branches all over the country.
All the Schemes of SIDBI both direct and indirect assistance are in operation in all the States
of the country through 39 regional/branch offices of SIDBI.
Promotional and Development Activities
SIDBI is actively involved in promoting tiny and small scale industries by means of its
promotional and developmental activities through suitable professional agencies for
organising Entrepreneurship Development Programmes, Technology Upgradation &
Modernisation Programmes, Micro Credit Schemes and assistance under Mahila Vikas Nidhi
to bring about economic empowerment of women specially the rural poor by providing them
avenues for training and employment opportunities.
Performance
SIDBI's efforts have resulted in increased flow of credit to SSI sector since inception as
indicated below:
(i) Tiny Units - about 89.2 per cent of the number of projects assisted under Refinance
Scheme during 1996-97 were tiny, receiving assistance up to Rs. 5 lakh per project. The
sanctions for such projects accounted for 39.6% of the total amount of sanctions in 1996-97
as against 36.0% during the previous year.
(ii) Women entrepreneurs - under various schemes assistance amounting to Rs. 19.07 crores
was given to 1067 women entrepreneurs during 1996-97.
(iii) Backward areas - during 1996-97, projects enanating from backward areas received
assistance to the tune of Rs. 775 crores of sanction that accounted for 37% of total assistance
under Refinance Scheme of SIDBI.
To fill the gaps in the existing structure of credit delivery mechanism to the small-scale
sector, Small Industries Development Bank of India (SIDBI) keeps on effecting
simplification of procedures, liberalization of new schemes and introduction of new schemes.
Endeavor of SIDBI is to ensure that no worthwhile proposal is denied credit for want of
funds.
Norm’s lay down by Reserve Bank of India and Government of India are followed by SIDBI
for granting assistance to SSI units.
Liberalisation effected
(i) Enhancement in the ceiling on loan amount of the Composite Loan Scheme to Rs. 2 lakh
from the earlier ceiling of Rs. 50,000/- to ensure timely availability of term loan and working
capital to the small units. The scheme was also liberalised to include units in all areas other
than metropolitan areas.
(ii) Scope of Technology Development & Modernisation Fund Scheme and Refinance
Scheme for Technology Development & Modernisation has been expanded to cover non-
exporting SSIs/ancillary units graduating out of SSI sector for assistance under the scheme.
(iii) Scope of Single Window Scheme has been enlarged to cover modernisation, technology
upgradation in addition to new SSI units. Project outlay under the scheme has been gradually
raised from s. 30 lakhs to Rs. 100 lakhs. Simultaneously, the sub-limits for working capital
and term loan components have been done away with.
A brief summary of the Schemes available with SIDBI. More details are available under the
Section Policies & Schemes.
National Equity Fund Scheme, which provides equity support to small entrepreneurs setting
up projects in Tiny Sector.
Single Window Scheme to provide both term loans for fixed assets and loan for working
capital capital through the same agency.
Composite Loan Scheme for equipment and/or working capital and also for work sheds to
artisans, village and cottage industries in Tiny Sector.
Mahila Udyam Nidhi (MUN) Scheme provides equity support to women entrepreneurs for
setting up projects in Tiny Sector.
Scheme for financing activities relating to marketing of SSI products which provides
assistance for undertaking various marketing related activities such as marketing research,
R&D, product upgradation, participation in trade fairs and exhibitions, advertising branding,
establishing distribution networks including show room, retail outlet, wears-housing facility,
etc.
Equipment Finance Scheme for acquisition of machinery/equipment including Diesel
Generator Sets, which are not related to any specific project.
Venture Capital Scheme to encourage SSI ventures/sub- contracting units to acquire capital
equipment, as also requisite technology for building up of export capabilities/import
substitution including cost of total quality management and acquisition of ISO-9000
certification and for expansion of capacity.
ISO 9000 Scheme to meet the expenses on consultancy, documentation, audit, certification
fee, equipment and calibrating instruments required for obtaining ISO 9000 certification.
Micro Credit Scheme to meet the requirement of well managed Voluntary Agencies that are
in existence for at least 5 years; have a good track record and have established network and
experience in small savings-cum-credit programmes with Self Help Groups (SHGs)
individuals.
New Schemes
SIDBI has set up Technology Development & Modernisation Fund (TDMF) scheme for
direct assistance of small sale industries to encourage existing industrial units in the sector, to
modernise their production facilities and adopt improved and updated technology so as to
strengthen their export capabilities. Assistance under the scheme is available for meeting the
expenditure on purchase of capital equipment acquisition of technical know-how, upgradation
of process technology and products with thrust on quality improvement, improvement in
packaging and cost of TQM and acquisition of ISO-9000 series certification.
SIDBI in July 1996 had permitted SFCs and promotional banks to grant loans for
modernisation projects costing up to Rs. 50 lakhs. The Coverage of the TDMF scheme has
been enlarged w.e.f. 1.9.1997. Non-exporting units and units which are graduating out of SSI
sector are now eligible to avail assistance under this scheme.
National Equity Fund (NEF) under Small Industries Development Bank of India (SIDBI)
provides equity type assistance to SSI units, tiny units at one per cent service charges. The
scope of this scheme was widened in 1995-96 to cover all areas excepting Metropolitan areas,
raising the limit of loan from Rs. 1.5 lakhs to Rs. 2.5 lakhs and covering both existing as well
as new units:
(a) The following are eligible for assistance under the scheme: -
ii. Existing tiny and small-scale industrial units and service enterprises as mentioned
above (including those which have availed of NEF assistance earlier), undertaking
expansion, modernisation, technology upgradation and diversification irrespective of
location (except in Metropolitan areas).
iii. Sick units in the tiny and small-scale sectors including service enterprises as
mentioned above, which are considered potentially viable, irrespective of the location
of the units (except for the units in Metropolitan areas).
iv. All industrial activities and service activities (except Road Transport Operators).
(b) Project cost (including margin money for working capital) should not exceed Rs. 10 lakhs
in the case of new projects in the case of existing units and service enterprises, the outlay on
expansion/modernisation/technology upgradation or diversification or rehabilitation should
not exceed Rs. 10 lakh per project.
(c) There is no change in the existing level of promoters' contribution at 10% of the project
cost. However, the ceiling on soft loan assistance under the Scheme has been enhanced from
the present level of 15% lakh per project to 25% of the project cost subject to a maximum of
Rs. 2.5 lakh per project
Bills drawn by small scale units for the supplies made to the reputed and well established
enterprises and duly accepted by them will be financed / discounted by NSIC for a maximum
period of 90 days.
Finance for augmenting working capital of viable and well managed units, on selective basis
in case of emergent requirements, to enable them to payoff their purchases of consumable
stores and spares and production related overheads particularly electricity bills, statutory
dues, etc.
Export Development Finance
Finance for export development to export oriented units for meeting their emergent
requirements. Pre and post shipment finance shall also be provided to such units at usual
terms & conditions.
The object of the Leasing Scheme is to assist SSI Units to procure industrial equipment for
modernisation, expansion and diversification of their industries.
ELIGIBILITY
exclusively for existing && financially viable SSI units including ancillary units, duly
registered as SSI units with the Directorate of Industries.
BENEFITS
100% financing at very liberal terms with easy repayment schedule.
Repayment as lease rental at the rate of Rs.24 per Rs.100 per month of the cost of machine.
There is no separate interest.
The unit will have to pay the following before the order for equipment can be placed on the
supplier: -
Amount equal to three months rental (six months rental for special equipment) and
Approximately 7% cost of the equipment (8% for Imported equipment) to cover the
insurance charges of the machinery for the period of lease i.e. 5 years and administrative
charges of the Corporation.
The unit/party must carefully read the terms and conditions and also the list of the documents
to be furnished along with the application as printed on the application form.
The party will have to execute an Agreement Bond before delivery of machine.
Payment of lease rental will start after three months of delivery of machine.
The application can be submitted to NSIC Branch Office/Regional Office of the area in
which the unit is located.