CHAPTER-4 INCENTIVES AND SUBSIDIES FOR SMALL UNITSdifferent types of subsidies are quite effective in removing all these constraints. » To Provide Competitive Strength and Growth: Some incentives are made available by the government at the time of promotion of business enterprises and some other incentives are available for a comparatively long period During this period, they are expected to improve their competitive strength with existing units. For example, reservation of items for small scale sector is meants for improving the competitive strength of SSI units working in the sector. Price preference, concessional finance etc. also help SSI units in improving their competitive strenath and growth. Advantage of Incentives and Subsidies 5 Advantage of Incentives and subsidies are as follows They motivates entrepreneurs to undertake new entrepreneurial activities, They stimulate the new and existing entrepreneurs to develop their units in backward area districts and zero industries districts. They ensure uniformity in the development process of all regions, They encourage first generation entrepreneurs to work for industrial development of the country. They improve the competitive capacity of entrepreneurs to face the competitive environment of the industry 76. They solve the problems of impediments and constraints generally available before the entrepreneurs. Problems of Incentives and Subsidies. Incentives and Subsidies create the following problems: 1. entrepreneurs generally develop bogus units to avail incentives and subsidies. Incentives encourage incompetencies in business units, They cover their inefficiency under the cover of incentives and subsidies, 3. Incentives and subsidies encourage unavailable use of resources employed in business units and they are just a drain on public exchequer. 4. Incentives and subsidies develop favourism and rampant corruption. 5. Incentives and subsidies have a demorali ng effect on other industrial units or efficient units. A. Government Assistance Following government entrepreneurs. ssistances are available to (Technical Assistance: The SIDO through Small Industries Service Institutes and Extension Centres Provides technical assistance and guidance to the existing small industrialists and the intending entrepreneurs. These institutes are manned by experts in different fields/trades/industries like mechanical, electrical, chemical engineering, electronics, foundry and forging, blacksmithy, leather technology, glass 78(ii) and ceramics, wood working and joinery, sports goods, industrial designing, industrial management and industrial economics. These experts are required to visit various small industries, study their problems on the spot and give technical assistance and guidance. The NSIC has established a Technology Transfer Centre (TTC) at Okhla (Delhi) to upgrade technology in the changed economic Seenario under economic reforms. At the enterprise level, the primary concern is to assist small scale enterprises in technology acquisition, adoption and upgradation through its technology information and promotion services Government has introduced the techno-economuic and managerial consultancy service scheme under which Small Industry Service Institute solves the technical problems of entrepreneurs. Industrial Extension service has also been introduced by the government to help small entrepreneurs. There been introduced by the government to help small entrepreneurs. There are 16 Service Institutes 5 Branch Institute and 64 extension centres who are extending technical assistance to the entrepreneurs. Raw Material Assistance: Earlier small units were offered assistance in the procurement of scarce and controlled raw materials by the Small Industries Development Organisation at the Central level and the Directorate of Industries at the state level. Now, District Industries Centre is authorized to Sponsor the SSI units for procuring scarce and controlled raw materials. Now it is obligatory for the small scale units to obtain registration certificate form the concerned 79Directorate of Industries for procuring essential raw materials. National Small Industries Corporation (NSIC) is also helping SSI units in (a) supply under the off-the-shelf basis; (b) import industries of raw materials; (c) providing Scarce raw materials on priority basis; (d) supplies through NSIC depots/ godowns. (iii) Cash Scheme: Government provides cash assistance under self-employment scheme to rural youths. Similarly, cash assistance is also made available to scheduled castes/scheduled tribes and women entrepreneurs Gy) Supply of Machinery and Equipment on Hire-Purchase Basi: An entrepreneur is required to purchase machinery etc. for launching new industrial units or for expansion of the existing plant. If his financial position permits, he Purchases machinery on his own, otherwise he can procure it from the National Small Industries Corporation or State level Small Industries Corporations. These corporations ensure supply of indigenous and imported machinery (the value of which would not exceed Rs. 3crore inclusive of the value of machinery and equipment already installed) on easy financial terms, mainly targeted at first generation entrepreneurs, women entrepreneurs, weaker sections, the handicapped and ex-servicemen, Besides, they also arrange machinery and equipments on lease basis. They Provide100% finance to facilitate SSIs in diversification and technology upgradation. Entrepreneurs can also avail tax rebate on full year rentals 80(¥) Marketing Assistance: The success of small entrepreneurs is generally governed by the ability and efficiency of these units in marketing their products, For the Purpose of marketing assistance, small units are required to get registered themselves with the NSIC. The objectives of the marketing programme of NSIC are as under: (a) ensure fair margin to producers of goods; (b) standardization and quality control with testing facilities: (c) market products under common brand name;(d) provide Publicity to SSI Products; (e) upgrade technology by supplying Sophisticated machinery and equipment. Besides, for the supply of goods of government and public enterprises, SSIs registered under the single point registration scheme with NSIC are given the following facilities: (a) issue of tender forms/Sets free of cost; (b) advance intimation of tenders issued by DGS &D; (c) exemption from Payment of earnest money; (d) waiver so security deposit upto the monetary limits for which the units is registered: (©) issue of Competency certificate in case the value of an order exceeds the monetary limit after due verification. (i Assistance to Small Entreprenuers: ‘The NSIC has developed five financial centres at New Delhi, Mumbai, Ahamadabad, Banglore and Goa to provide finance to small entrepreneurs for activities relating to marketing bills discounting, raw materials purchases and exports, To train and equip the first generation entrepreneurs, government has developed various training institutes in the field of entrepreneurial activities/ entrepreneurship development atProgrammes. The NISIET (Hyderabad), NIESSBUD(New Delhi) and integrated Training Centre( Industries) (Nilokhert) are the main training institutes which function under the administrative control of SIDO. (Rural Industrial Project Assistance: The SIDBI has assigned a very crucial role in the identification of viable and self-sustaining SSIs in rural and semi-rural areas. These units are expected to provide an intensive thrust to address the problems of rural unemployment, urban migration, under-utilisation of physical resources and skills of the rural areas. The Rural Industries Programme (RIP) of SIDBI Provides a cohesive and integrated package of basic inputs like information, motivation, training and credit, backed by appropriate technology and market linkages. For the purpose, SIDBI has identified implementing agencies such as NGOs, development professionals, technical consultancy organizations (TCO), and these are assigned the task of developing RIP at a fee given by the bank. The implementing agency either by itself or by networking with appropriate agencies provides the following professional services; (a) identification and motivation of potential entrepreneurs in the rural areas; (b) identifying potential investment opportunities for these entrepreneurs; (c) facilitating skill upgradation: (d) assisting in securing finance from banks and other lending institutions; (¢) helping entrepreneurs in selection, sourcing, installation and operation of machinery; (f) arranging market support wherever necessary and (g) guiding 82entrepreneurs till their units commence commercial production. SIDBI meets part of the manpower costs of the implementing agency, mainly in the form f performance fee which is linked to units actually grounded by identified ural entrepreneurs. in deserving cases, the Bank even Provides startup expenses. Further, the Bank extends credit Support by way oif refinance through PLIs. B. Government incentives @ (ii) Following are the incentives available to the small units: Subsidy Relating to Investment: Government has initiated different scheme of investment subsidy for the benefits of so that they may be encouraged to establish more and more SSI units. These schemes are capital investment subsidy, transport’ subsidy, power generators subsidy, special investment schemes for women entrepreneurs, provision for Seed capital, subsidy for technical/ feasibility study ete. Besides, being an apex bank for SSI sector, the SIDBI is also arranging equity type assistance scheme e.g. seed capital scheme, National Equity Fund scheme, single window scheme to provide both term loan and working capital, Venture capital fund with a corpus of Rs. 80 crores etc. to accelerate the pace of investment in small scale sector. Export/Import Subsidies and Boundaries: 100 percent export-oriented units (EOUs) and units in the export Processing zones (EPZs) enjoy a package of incentives and facilities, which include duty free imports of all types of 83(iv) Ww) capital goods, raw material, and consumables in addition to tax holidays against export. As per the Budget 2000-2001 under section 10-A of the Income-tax holiday, for a 10 year period. Similarly, Section 10-B of the Income-tax provides for a ten-year tax holiday in respect of newly established hundred percent export-oriented units. Subsidy Relating to Research and Development: To encourage continuous research and development activities in the small scale sector, government provides subsidy. A Provision of Rs. 50 crores has been made in the budget 2000- 91 for Technology Information Forecasting and Assessment Council. Besides, another provision of Rs. 50 crores has also been made in the budget for launching New Millennium Indian Technology Leadersiup Initiative. The Government has already approved a modernisation project of Rs. 75 crores for the patent office and strive to remove all impediments related with the project. Subsidy Relating to Taxes: Central Government as well as State Government are trying to encourage entrepreneurs through tax subsidy schemes enabling them to accelerate the Pace of establishment of Industrial units. These are exemption from estate duty, tax relief to NRIs, rebate in income-tax, interest-free sales tax loan, sales tax subsidy exemption from sales tax etc. Subsidy Relating to Resources: Small Industries need infrastructural facilities and government is trying to provide these facilities at subsidised rates. Subsudy for purchase of 84wi) testing tools, subsidy for industrial estates and parks, allotment of land and bi\uildings at concessional rates, supply of water at concessional rated, arrangement of developed or constructed production sheds, arrangement of raw materials at concessional rates or controlled rates are some of the important subsidies which are available to the small scale units. Capital subsidy Scheme for Technology Upgradation: In November,2000, the Central Government has introduced a capital subsidy scheme for small scale industries styled “credit linked capital subsidy scheme for technology upgradation of the small scale industries” a 12 percent back ended capital subsidy will be admissible on loans and advanced to SSI units by the scheduled commercial banks/ designated state financial corporations. The scheme would be in operation for five years beginning October!, 2000 to September 30,2005 or till the Sanction of capital subsidy by the nodal agency SIDBI reached Rs. 600 crore whichever was earlier. The scheme tate technology upgradation by induction of Proven technologies in respect of specified products/sub- Sectors. This would apply to the introduction of the latest technology, improvement of _ productivity, quality of Production and environmental conditions and included installation of improved techniques as well as anti-pollution measures and energy conservation. However, replacement of the existing equipmenttechnology with the same equipment or technology would not qualify for the scheme and it was 85also not applicable to units going for upgradation with second hand machinery. Entrepreneurs availing of this scheme should not avail of any other benefit including interest subsidy under any other scheme of the Central Government and should have Competent management to carry out the upgradation Programme and manage the unit subsequently. For calculation of subsidy, a maximum loan amount of Rs. § lakh Should be considered for tiny units with investment in plant and machinery of less than Rs. 10 lakhs. Similarly, a maximum loan ceiling of Rs. 20 lakhs is allowed for subsidy calculation for tiny units with investment in plant and machinery ceiling for calculation of subsidy would be Rs. 40 lakhs for investment in plant and machinery above Rs 25 lakhs. However, the maximum amount for calculation of Subsidy would be limited to the actual investment if it is less than the ceiling specified for calculation of subsidy. Some of the sectors covered by the scheme are leather and leather Products, including footwear and garments, food processing. IT (hardware), drugs and pharmaceuticals, auto-parts and components, toys, dyes and intermediaries, handtools and foundries, ferrous and cast-iron. Excise Duty Exemption: The most important incentive for Small Scale units is the excise duty concessions. However, it Was watered down by MODVAT (modified value added Tax) and the reduction in in excise duty rates. In the era of 86Protection, large companies had to pay very high levels of duty and excise weaivers and concessions afforded small firms in automatic price advantage over large firms, As a sresult of the fall in excise duty rates and MODVAT the relative difference in the tax burden for large and small companies has declined \. Large companies can claim MODVAT benefits on inputs and capital goods so that the casting effect of excise duty taxation is factored out, For many commodities, especially consumer goods, the rates of excise duty have also fallen. In this liberalization process, small firms were the losers on this account. Now, the Government has increased the excise duty &xemption limit from Rs. 50 lakhs to Rs. 1 crores, This is the second increase in excise exemption limit since 19980 when the Government increased the limit from Rs. 30 lakh. In Practice, the government will incur some losses due to increased exemption limit but it is worth it, However, due to this modification, any small scale unit where the inputs do not attract excise duty would find itself Priced out of the market once its sales exceed Rs. 1 crore Consequently, if a small scale unit wishes to utilize its idle Plant capacity beyond the turnover of Rs. 1 crore, it would have no option but to undertake clandestine sales fro which the puts would also have to be procured from the parallel Sconomy. The policy effectively prohibits any incentive for the growth of the unit 87Indigenous manufacturers of raw materials (especially in the small scale sector) would find themselves at a disadvantage since the reduction of duty on imports would render them non- competitive. A small unit which sells its products to a large seale unit and therefore has a derived demand for its products, does not enjoy any price advantage on account of excise exemption since large scale units are also covered under the MODVAT-Scheme. Similarly, the practice of multiple sourcing by the parent unit may make it impossible for the ancillary unit to achieve sales of Rs. 1 crore if the parent unit is the lone buyer and in the case the ancillary unit does not have a multiple product mix. If it does, then the product meant for the market may not be saleable on account of incidence of excise duty which is linked to the total sales Fiscal Incentives for small Scale Industries in Budget 2000-2001 For the betterment of SSI sector, Government has made the following provisions in the Budget 2000-2001: 1 The requirement of providing coillateral security is a major bottleneck to the flow of bank credit to very small units. RBI has recently issued instructions to dispense with the collateral requirement for loans up to Rs. | lakhs. The limit is further increased for the tiny sector from Rs. I lakhs to Rs. 5 lakh. The existing composite !oan scheme of SIDBI and banks helps small borrowers by providing working capital and term loans through a single window. To promote credit flow to small borrowers, the composite loan limit is being increased from Rs. 5 lakh to Rs. 10 lakh, 88Public sector banks have been instructed to accelerate their programme of SSI branch to ensure that every district and SSI clusters within districts are served by at least one specialized SSI bank branch. Furthermore, to improve the quality of banking services, SSI branches are being asked to obtain ISO certification. A new central scheme with regard to credit guarantee scheme for SSI has been formulated and a provision for Rs. 100 crore has been made in the budget The scheme will be implemented through SIDBI and will cover loans uptp Rs. 10 lakhs from the n\banking sector. The guaranteed loans will be scrutanised and will be tradeable in the secondary debt market, SIDBI operated the National Equity Fund Scheme under which equity support is provided for projects upto Rs. 15 lakh. To further help SSI entrepreneurs, this limit is raised fro Rs. 15 lakh to Rs. 25 lakh, SIDBI is presently administering the technology development modernisation fund scheme for assisting _ technology development and modernisation of SSI. units. The scheme has certain coincessional features including interest at prime lending rate for direct assistance and refinancing at 2% below Prime rate for indirect finance. The operation of this scheme is being extended by another 3 years. The Khadi and Village Industries Commission (KVIC) has been playing a very important role as an instrument to generate large scale employment in the rural areas with low 89become more competitive. For intensifying marketing efforts, the KVIC will introduce a common brand name for its Products and also setup a professionally managed marketing company for domestic as well as export marketing. New Incentives and Sub: ies for Small Scale Sector The primary responsibility to develop village and small industries in the ‘States/UTs rests with the Tespective State/UT Governments. However, the Government of India announces, from time to time, various incentive scheme/eoncessions and support Services for promotion of industries, Particularly in industrially backward areas and other special regions with the intention of reducing regional imbalances. The Package of incentives and facilities currently available from the Central Government are discussed hereunder. Fiscal incentives are provided in the form of exemptions, rebate, refund or postponement ofddirect or indirect taxes leviable on Production of profits, besides special tax concessions. Such Excise duty (iv) Exemption from Sales Tax (¥) Tax holiday for new 1. Tax incentives/Concessions/Deduction from profits and gains @ IT Section 80-HH-20 per cent for 10 years for industries to be set up under the Factories Act in backward areas, 80(ii) (iii) (iv) (wv) IT Section 80-HHA-20 Per cent for lo years for SSI units to be set up in rural accas IT Section 80-1- 20 per cent for 7 to 9 years for SSI units to be set up under Factories Act, 25 per cent for 11 years in case of cooperative societies, 35 percent for companies. IT Section 80-14-25 per cent for 10 years for industries to be set up under Factories Act, 100 per cent for $ years and 25 percent of their profits(30 per cent for Companies) for a period of 10 years, IT Section 80-IB-the small scale units commencing Production between April 01, 1995 and March 31,2000 are allowed a deduction of 25 percent of their Profits(30 Per cent for Companies) for a period of 10 years, 2. Incentives for exports including duty drawbacks The following tax incentives on exports are offered by the Government : (i) Gi (iii) (iv) (vy) Deduction in respect of profits and gains from projects Outside India (Section 80-HHB) Peduction in respect of earnings in convertible foreign exchange (80-HHD). deduction for consultancy exports (80-0). Ten Year Tax Holiday for newly established industrial undertaking in the Free Trade Zones, or Electronic 91Hardware Technology Parks and Software Technology Parks (See. 10-A). (vi) Ten Tear Tax Holiday for newly established 100 percent Export Oriented Undertaking ( Section 10-B), (Wii) Duty drawback facilities are provided in two ways: G) Drawback of the Whole of import duty on imported articles, components and raw materials, and excise duty paid on exisable components used in the manufacture of the product when it is exported. Gi) Drawback of 90percent of duty paid on imported article when it is exported, 3-Exemptions and preferential treatment from excise duties For SSIs having clearances in the preceding financial year not exceeding Rs. 30 million, the present rates of excise duty are as under : Clearances Rates ofDuty for} Rates ofDuty for | | SSIs Avail SSIs Avail Modvat MOdvat Credit Credit Not exceeding Rs. 10 Nil | 80% of Normal | Million | tare Rs. 10t0 30 million | Normal Normal | Pn 4 _ a=) [Goods for capital Nil Nil consumption | | Note: Commodity specific exemption for small scale units namely, articles of plastics/cosmetics and toilet preparation, tread rubber, air conditioning and refrigeration machinery and /Parts have been merged with the General Seq Exemption | Scheme with effect from April 01.2000, | ba 924. Modvat Credit Modvat credit is allowed at the rate if 100 per cent of duty paid on inputs, be it excise duty or special duty or additional duty of customs. It also covers capital goods purchased and used by the manufacturers, 5. Exemption from Sales Tax @ No liability under State Sales Tax, Law for import of the goods into or export of goods out of the territory of India. (i) Export Sales have been exempted from levy of sales tax under Central Sales Tax Act,1957. 6. Other Incentives (a) Capital Investment Subsidy Capital Investment Subsidy Scheme 1957 has been notified on June 01,1998 under the Prime Minister's new initiatives for the North Eastern Region. Under the Capital Investment Subsidy Scheme, subsidy at the rate of 15 percent investment in plant and machinery subject to a maximum ceiling of Rs. 3 million is payable ‘o industry located in the growth centres and to new industrial units and or their substantial expansion in other identified areas in the North Eastern Region. The Scheme is operated through the respective State Governments. (b) Transport Subsidy The transport Subsidy Scheme was introduced in July 1971 to Promote industries in hilly, remote and inaccessible areas. The Scheme is applicable to the State of Himanchal Pradesh & K the North Eastern Strates, Sikkim. Union Terrutories of Andman & 93Nocobar Island and Lakshadweep. Darjeeling District ofWest Bengal and eight hill districts of the Uttar Pradesh(which now fall in the newly created Uttaranchal State) Comprising Almora, Chamoli, Dehradun, Nainital, Pauri Garhwal, Pithoragarh, Tehri Garhwal and Uttar Kashi, Under the scheme, a subsidy ranging from 50 percent to90 per cent is admissible on transport costs incurred on the movement of raw materials and finished goods from designated rail heads/parts upto the location of the industrial units and vice-versa. The Scheme has been extended upto March 31,2007 (©) Incentives for Electronics and Information Technology @ The electronics industry, except aerospace and defence electronics, has been fully delicensed, (i) Export earnings from information ‘Technology (aT) products not to be taxed. (ii) Depreciation of IT products to be allowed at 60 per cent. Gv) Unites located in Electronics Hardware Technology Parks (EHTP) and Software Technology Parks (STP) have been exempted from payment of corporate income tax for 10 years, (¥) Income derived by foreign companies as divided and interest would be taxed at the rate of 20 per cent (vi) The payment in the form of royalty and technical service fee to be taxed at 30 per cent (vil) Under section 8-HHE of the Income Tax Act, definition of Computer Software has been widened to include transmission of data. 94(viii) (ix) Exemption of withholding tax on interest on external commercial borrowings has been extended to the It sector, The tariff levels are being brought in line withy the average international levels in a [phased manner. Fiscal incentives announced in the Union Budget 2001-02 (i) (ii) (ii) (iv) (vy) (vi) (vii) The Central Value Added Tax (CENVAT) retained at 16 per cent. Three rates of special excise duty, i.e. 8 per cent, 16 per cent and 24 per cent reduced to a single rate of 16 per cent. 8 per cent special excise duty abolished In glazed tiles, mattresses and articles of bedding carpets and floor coverings, painted convas, studio back cloth ete. linoleum and textiles wall covering etc. scooters and motorcycles and taxies, The special excise duty on aerated soft drinks, soft drink concentrate reduced to 16 per cent, Products of SSI units exempted from excise duty upto Rs. 10 million. Excise duty exemption withdrawn in respect of cotton yarn, ball or roller bearings, arms and ammunition for Private use. Excise duty rates rationalized on matches 50 paise for band made sector Rs. | middle sector, Rs. 2 for semi 95mechanized sector and Rs. 3 for mechanized sector per 100 boxes of 50 sticks each. (vili) Accelerated depreciation at the rate of 56 per cent on plant and machinery purchased under the technology upgradation fund scheme announced for weaving Processing and government sector of textile industry (ix) Basie customs duty on specialized textile machines reduced to 5 per cent and on silk waste, cotton waste and flax to 15 per cent Measures taken for development of North Eastern Region In order to accelerate the setting up of SSI units in North Eastern Region, several steps have been taken by the government. These special incentives for the NER are given annexure 3.3. Incentives and Subsidies Policies at State Level The State Government formulate their respective policies for development of industries in general and small scale industries in particular and also implement the incentive schemes through the District Industries Centres and other Departments and Corporations set up for this purpose, They provide technical and other support services to SSIs. The main areas of support and facilities are listed below. @ Respective Industrial Development and Investment Corporations to develop and manage industrial areas Gi) Finaneial support services by State Financial Corporations. 96(ii) Technical guidance by technical Consultancy Organisations (iv) Infrastructure development through Training Institutions. (¥) Infrastructure development by the concerned corporation. (vi) Export promotion by small Industries and Export Corporations. (vii) Single window assistance by District Industries Centres. Apart from these, the State governments also offer a range of incentives for providing an impetus to industrialization. Incentives to SSI are provided mainly by way of provision of land and developed plots/sheds in industrial estates on easy terms, capital subsidy on investment(in selected areas), subsidy on power generating sets, exemptions/ deferment on sales tax and stamp duty, water supply at reduced rates, seed capital assistance, relief on electricity duty, Interest’ subsidy, financial assistance for preparation ofproject reports, subsidy for obtaining technical know-how, subsidy for testing the products in approved test houses, etc. All these Concessions are not uniform in all the States/Uts; their nature, contents, quantum and periodicity vary from State to State Development Scheme for Industrially Backward Areas The Department of Industrial Policy and Promotion, Ministry of Commerce and Industry is implementing the following important schemes for the development of industrially backward areas in the country. 1. Growth Centre Scheme: Under this scheme 71 growth centres are to be developed throughout the country 97which would be provided with basic infrastructure facilities like power, water, _tele-communication, sewage efficient disposal etc. enabling them to attract industries. The growth centres approved by the Government of India are to be developed by the State Governments with a central assistance component of Rs. 10 crore per acre (Rs. 15 crore in the case of North Eastern Region). 68 growth centres have been approved so far. The scheme introduced in 1988 has been extended to the 9"" five-year Plan period. Transport Subsidy Scheme : This scheme was introduced in July,1971 to promote Industries in hilly, remote and inaccessible areas. Under the scheme, subsidy ranging from 50%-90% is admissible on transport cost incurred on movement of raw materials and finished goods from designated rail heads/ ports upto the location of the Industrial units and vice-versa for a period of five years from the date of coOmmencement of commercial production. The scheme is applicable to all industrial units (except plantations, refineries and power generation units) irrespective of their size, located in the North Eastern region. Capital Investment Subsidy Scheme: Under this scheme, a subsidy @ 15% of the investment in plant and machinery subject to maximum of Rs. 30 lakh would be admissible to industries located in the growth centres and in new industrial units and/ or their 98substantial expansion in other identified areas in the North-Eastern Region. The scheme is operated through the agency of the State Government. The North Eastern Development financial Corporation (N FC) has been designated as the nodal agency to release subsidy to the eligible units on basis of recommendations of the state level committee/ State Government. The Scheme was notified in 1998, Central Interest Subsidy Scheme: Under this scheme, notified on 19-2-99, interest subsidy @ 3% on the working capital loan would be payable to the new industrial units in the north eastern Region for a period of 10 years after the unit goes into production. Comprehensice Insurance Scheme: This scheme notified on 14-7-99 envisages reimbursement of insurance premium to all industrial units set up in the North-Eastern regions after 24" December 1997 and included in fire policy (as per All India 2Fire Tariff( The insured party shall pay initial premium which shall be reimbursed by the nodal insurance company out of revolving fund maintained by the company. funds for this revolving fund shall be contributed by the Department of Industrial Policy & Promotion. The scheme will remain effective for a period of 10 years i.e. upt0 13.7.2009, Integrated Infrastructure Development Scheme The office of the Development Commissioner(Small 99Seale Industries), Ministry of Small Scale Industries &Agro and Rural Industries is also implementing the Integrated Infrastructure Development scheme(IID). The Scheme introduced in 1994 envisages development of infrastructural facilities for location of industries in rural/ backward areas. Under the scheme 52 IID centres have been sanctioned in various states. State Policies for Assistance ana Incentives The very size and dispersed nature of the small sector implies that the onus of promotion and development rests mainly on State Governments and institutions. The central policy framework act as a Suiding principle in this rgard. Small units are encouraged to register with the District Industries Centre which helps them avail of the various incentives and direct support programmes of the central and State Governments. The important aspects of state policies are: ai). Gi) (iii) (iv) Development and management of industrial areas by the industrial development and investment corporations. Capital investment subsidy ranging from 15 to 25 percent on fixed investment subject to an outer ceiling) to new units. Sales tax exemptions/deferment to units for 5 to 10 years, limited by fixed capital investment as well as tax liabilities. Incentives/subsidies for using power derived from alternative energy sources 100(vy) (vi) (vii) (viii) (ix) (x) Special assistance programme for women and weaker sections. Seed capital/margin money assistance scheme on soft terms, Underwriting costs on feasibility studies/consultancy for modernisation, technology ungradation. Empowered commiices at the districv/state level tp accord clearances and settle disputes. Higher incentives to set up pioneer units in backward/zero industry districts Equity participation by state corporations in joint/assisted sector projects In this way incentives and subsidies have been playing a crucial role in the development of small scale sector in India. seeker 101