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Capacity Building for Micro Enterprises

Conference Paper · March 2012

DOI: 10.13140/RG.2.1.4329.9929

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Dr.E. BHASKARAN
Government of Tamil Nadu.
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 CAPACITY BUILDING FOR MICRO ENTERPRISES
Dr. E. Bhaskaran.B.E., M.B.A., Ph.D., M.I.E.,(D.Sc).
Deputy Director of Industries and Commerce,
Government of Tamil Nadu, Chennai 600 005.
E-Mail: e_baskaran@vsnl.com, e.bhaskaran19@gmail.com
Phone: 9444113605

________________________________________________________________________

1. INTRODUCTION

The Micro, Small and Medium Enterprises Development Act, 2006 defines Micro
Manufacturing Enterprises as one whose plant and machinery value does not exceed Rs.
25 lakhs, Small Manufacturing Enterprises as one whose plant and machinery value does
not exceed Rs. 5 crores and Medium Manufacturing Enterprises is one whose plant and
machinery value does not exceed Rs.10 crores. Likewise Micro Service Enterprises as
one whose equipment value does not exceed Rs. 10 lakhs, Small Service Enterprises as
one whose equipment value does not exceed Rs. 2 crores and Medium Service
Enterprises is one whose equipment value does not exceed Rs.5 crores.
MSME sector occupies a significant role in the total manufacturing sector of India
and Tamil Nadu in particular. Tamil Nadu has been in the forefront, with a proactive
policy to stimulate the growth of this sector. Encouraging the development of a sound
industrial base without losing focus on the Micro, Small and Medium enterprises sector
has been one of the unique features of Tamil Nadu’s balanced industrial policy. The
importance of Micro, Small and Medium Enterprises sector can be seen by the fact that it
accounts for 95% of Industrial units, 40% of value addition in manufacturing sector and
40% of exports.

2. LITERATURE SURVEY
As per fourth all India census of MSME with reference to the year of 2006-07, there
are about 2.34 lakhs of registered enterprises spatially distributed thorough the length and
breadth of the State with a total investment of Rs. 19364 crores which have provided
employment to more than 39.46 lakh persons. Like a few Indian States viz., Gujarat,
Maharastra and Haryana, Tamil Nadu has been a front-runner in the industrial
development. In the year 2006-07, the manufacturing sector has contributed 20.23
percent to the Tamil Nadu’s Gross Domestic Product. Tamil Nadu stands for (1) The
Largest Number of Micro, Small and Medium Enterprises (MSMEs) in the Country:
15.07%, (2) The Largest Number of Micro Enterprises in the Country: 15.33 %.( 3) The
2nd Largest Number of Medium Enterprises in the Country: 12.51% (4) The 3 rd Largest
Number of Small Enterprises in the Country: 9.97%. (5) The Largest Number of
Employment Generation in the Registered MSMEs in the Country: 15.07%.
However, there is need for the study on the capacity building of Micro Enterprises
after the implementation of MSMED Act, 2006 of Government of India and recently
announced Micro, Small and Medium Industries Policy, 2008 of Government of Tamil
Nadu.

3. OBJECTIVES OF THE STUDY

The objectives are:
1. To study on the Capacity Building for Micro Enterprises under UYEGP
Scheme of Government of Tamil Nadu.
2. To study on the Capacity Building for Micro Enterprises under PMEGP
Scheme of Government of India.
3. To study on various Capacity Building measures taken for Micro Enterprises
and give suggestions on the Capacity Building for Micro Enterprises in future.

4. METHODOLOGY: The data structure for the study is based on official publications
of the Directorate of Industries and Commerce of the Government of Tamil Nadu
and other reports on industrial statistics (References 1 to 5). The data were analyzed
using Data Envelopment Analysis (DEA) of Banker Charnes- Cooper-(BCC)
Model.

5. STATISTICAL ANALYSIS

5.1. Prime Minister’s Employment Generation Programme (PMEGP)

 Govt. of India sponsored scheme.
 Project cost upto Rs.25.00 lakhs for manufacturing sector and Rs.10.00 lakhs for
Service sector enterprise are eligible for assistance
 Age limit 18 and above
 Promoters' contribution is 10% (5 % for Special Categories like Women, SC/ST,
Minorities, OBC, Ex-servicemen, Physically handicapped, NER, Hill and Border
areas etc.)
 Margin money assistance upto 35% of the Project is available as subsidy from
Govt. of India.
 3 days and 14 days EDP training will be given to the beneficiaries.
 Scheme is being operated by District Industries Centre (DIC), Khadi and Village
Industries Commission (KVIC) & Khadi and Village Industries Board (KVIB).

The performance of District Industries Centre is high when compared to KVIC and
KVIB.
Figure 1 gives the agency wise technical efficiency of PMEGP by taking Target of
no. of units, MM release and employment as an input data and achievement as an output
data and analyzing using window analysis of BCC Model.

Fig.1: Agency Wise Technical Efficiency of PMEGP

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Source: Performance Budget 2010-11 and 2011-12, MSME Dept. and Computed Data

The target nos, Margin Money and Employment is taken as input variable and
Achievement nos, Margin Money and Employment is taken as output variable and
analysed using BCC Model. The technical efficiency of all the three agencies increases
after the global meltdown.

5.2. UNEMPLOYED YOUTH EMPLOYMENT GENERATION PROGRAMME

(UYEGP)
 Govt. of Tamilnadu sponsored scheme
 Project cost upto Rs. 5.00 lakhs for manufacturing sector , Rs.3.00 lakhs for
Service sector and Rs. 1.00 lakhs for Business enterprise
 Age limit 18 -35 for General Category and upto 45 years for special category like
women / scheduled castes / scheduled tribes / backward classes / Most Backward
Classes / Minorities / Ex-servicemen / Physically Challenged / Transgender.)
 Minimum Education Qualification: Pass in 8th Std.
 Family income shall not exceed Rs.1,50,000/- per annum
 Promoters' contribution is 10% for General Category and 5 % for Special
Categories
 15% of the Project cost is available as subsidy from Govt. of Tamilnadu
 7 days EDP training will be given to the beneficiaries.
 Scheme is being operated by DICs.

Table 1 gives the performance of newly launched scheme UYEGP. Total Project Cost
of Rs.100 crore is fixed as target for the year 2011-12.

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 Table-1Performance of UYEGP for the year 2011-12

Target Achievement % Subsidy Subsidy %

Nos Nos Achievement Target for Achievement Achievement
2011-12 as on 22-3-
2012.
6760 4054 60.00% 15 Crores. Rs.11.54 77.00%
Crores

Source: Industries and Commerce, Government of Tamil Nadu

The achievement in terms of nos and margin money will be improved further as
there is still time limit.

5.3 OTHER FACILITIES FOR MICRO ENTERPRISES GIVEN BY

GOVERNMENT
 Reimbursement of 50% on stamp duty and registration charges to Micro and
Small Enterprises for purchase of plot in industrial estates /industrially backward
areas.
5.3.1 Incentive Schemes
Exclusive package for Micro manufacturing enterprises set up anywhere in the State
 15 % Capital Subsidy on Plant and Machinery subject to a ceiling of Rs.3.75
lakhs.
 20 % Power Tariff Subsidy for the first 3 years.
 100 % Subsidy on the assessed Value Added Tax (VAT) for the first 6 years.
 Stamp duty exemption on mortgaged and pledged documents.

5.3.2 Subsidy schemes for MSMEs in backward areas

& Agro based Industries in all blocks

 15 % Capital Subsidy on the value of Plant and Machinery, subject to a ceiling of

Rs.30 lakhs.
 5 % Additional Employment Intensive Subsidy for giving employment to 25
workers for 3 years, subject to a ceiling of Rs.5 lakhs.
 5 % Additional Capital Subsidy for units set up by Women, SC/ST, Physically
disabled and Transgender entrepreneurs. Subject to a ceiling of Rs.2 lakhs.
 25 % Additional Capital Subsidy on the value of plant and machinery installed to
promote cleaner and environment friendly technologies, subject to a ceiling of
Rs.3 lakhs.
 20 % Power Tariff Subsidy for the first 3 years.

5.3.3 Special Capital Subsidy for Thrust Sector Industries

15 % Special Capital Subsidy on Plant and Machinery for 13 Thrust Sector Industries
set up anywhere in the State like Electrical and Electronic Industry, Leather and Leather

4
goods, Auto parts and components, Drugs and Pharmaceuticals, Solar Energy Equipment,
Gold and Diamond Jewellery for exports, Pollution Control equipments, Sports Goods
and Accessories, Cost effective building materials, Readymade Garments, Food
Processing, Rubber products and Plastic products.

5.3.4 Generator Subsidy for MSMEs

Generator Subsidy to manufacturing MSMEs anywhere in the State, at 25% of the
cost of Generator upto 125 KVA capacity, subject to a maximum of Rs.1.50 lakhs.

5.3.5 Technology Development

• 3% Back Ended Interest Subsidy (BEIS) for loans sanctioned under Technology
Upgradation / Modernization (TU/M) schemes subject to a ceiling of Rs.10 lakhs
per enterprise over a period of five years.
• 50% subsidy on the cost of filing a Patent Application and for Trade Mark
Registration.
• Assistance upto Rs.50 Lakhs for creation of Centres of Excellence and
Technology Business Incubators for introduction of new production techniques
and design development.
• Financial support to take up studies 50% of the project cost upto Rs. 2.50 Lakhs
per project for evolving cleaner / energy efficient / IT enabled technologies by
MSME Associations under Technology Development Fund.
. Funds Availability (FA) is taken as input variable and Funds Utilized (FU) is taken
as output variable and analysed using CCR model. There is increase in technical
efficiency from 49% for the year 2008-09 to 83% for the year 2009-10.

5.3.6 Human Resource Development

Reimbursement of 50% of the tuition fees on short term training courses for
Entrepreneurship and Skill Development Training Programmes taken up by Industrial
Associations.

5.3.7 Marketing support

 15 % Price preference in Government purchase for goods manufactured by micro

and small enterprises.
 Purchase preference for items reserved for purchase from micro and small
enterprises.
 Waiver of Earnest Money Deposit for participation in tenders.
 50 % grant on hall rent for trade fairs/exhibitions conducted by Industrial
Associations

5.3.8. E-GOVERNANCE INITIATIVES FOR ENTREPRENEURS

 The Entrepreneurs Memorandum-Part I (before commencement of production) &
Part II (after commencement of production) can be filed by entrepreneurs on-line
through internet by logging into the web-site
http://www.msmeonline.tn.gov.in
 Subsidy Applications can be filed Online.

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  “Subsidy Eligibility Status” can be ascertained online.
 Payment of subsidy to enterprises has been made through ECS.

6. FINDINGS AND CONCLUSION

 The study has been carried out to measure the capacity building for Micro
Manufacturing and Service Enterprises.
 The performance of DIC and KVIC is high in respect of credit schemes like
PMEGP whereas the performance of KVIB needs improvement. Even though the
target of 30% fixed for women entrepreneurs is not achieved in the year 2008-09;
it was exceeded in the year 2009-10.
 There will be substantial improvement under the UYEGP scheme as it is launched
recently by the Government of Tamil Nadu.
 The study reveals that the overall technical efficiency of the incentive schemes is
increased from 2008-09 to 2009-10.
 The study reveals that the there is more number of online filing of EM Part I and
Part II and the E-Governance Initiatives taken by Government is successful.
 From the foregoing analysis it is seen that Tamil Nadu Micro and, Small
Enterprises has exhibited a good performance in the recent years. However the
entrepreneurs, who are doing similar products, should make use of the
Government of India scheme called Micro and Small Enterprises Cluster
Development Programme (MSE-CDP) under Public Private Partnership
Concept. They can form Interrelationships in Infrastructure, Technology,
Procurement, Production and Marketing as it was already done by many clusters
in Tamil Nadu.
 In view of this one can conclude that Micro manufacturing and service sector will
be constrained to meet the expectations of the planners in future years, as far as
employment generations is concerned and also the policy interventions should be
based on infrastructure support, direct catalytic subsidy support, technical support,
information and marketing support.

Reference
1. Quick Results: Fourth All India Census of Small Scale Industries 2006-07,
Ministry of Micro, Small and Medium Enterprises, Government of India.
2. The Micro, Small and Medium Enterprises Development Act, 2006, Ministry of
Micro, Small and Medium Enterprises, Government of India.
3. The Micro, Small and Medium Industries Policy, 2008, Micro, Small and
Medium Enterprises Department, Government of Tamil Nadu.
4. Performance Budget 2010-11, Micro, Small and Medium Enterprises Department,
Government of Tamil Nadu.
5. Website of Department of Industries and Commerce, Government of Tamil Nadu.
www.indcom.tn.gov.in

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