Ed 6

Entrepreneurship Development - 5 Semester, B.
com
UNIT- 6 STARTING UP A SMALL SCALE INDUSTRY
Introduction:
The SSI sector in India has made significant contribution to employment

generation and also for rural industrialization. This sector is ideally suited to
build on the strengths of our
TINY INDUSTRY
A unit is trade has a tiny enterprise where the investment in plant and
machinery those not exceed Rs 2.5million(Rs 25 lakhs) irrespective of the
location of the unit.
ANCILLARY INDUSTRIES
The process of ancillarization is one of the methods of encouraging new

entrepreneurs to set-up small- scale units.
In simple terms ancillary industries are those which manufacturing parts or

components for supply to other firms which manufacture assembled
products.
Asst. Prof. Vijay Dev Mclaren
VVFGC, Tumkur Page 1
Entrepreneurship Development - 5 Semester, B.com
COTTAGE INDUSTRIES
They are locatedusually at the homes of the producers, hence the name
cottage industry.
It refers to an industry where the creation of products and services is home-

based rather than factory- based.
SMALL SCALE INDUSTRY
An industrial undertaking in which the investment in fixed assets in plant and

machinery, whether held on ownership terms or on lease or by hire
purchase, does not exceed Rs. 100 lakhs as on march 31,2001, is to betreated
as a small scale industrial unit. The small scale units can get registered with
the Directorate of Industries Centre in the State Governmentconcerned.
MEANING OF SMALL SCALE INDUSTRY
In India the Ministry of Commerce and Industries defined a small scale

industry as a ‘unit with a capital investment of not more than Rs 5 lakhs
irrespective of the number of persons employed’.

ROLE OF SSIs IN THE DEVELOPMENT OF INDIAN ECONOMY - 15

marks
The role of small scale industries in India as follows:
1. Employment generation:
The basic problem that is confronting the Indian economy is
increasing pressure of population on the land and the need to
create massive employment opportunities.
2. Mobilisation of resources and entrepreneurial skill:

Small-Scale industries can mobilize a good amount of savings
and entrepreneurial skill from rural and semi-urban areas which
remain untouched from the clutches of large industries and put
them into productive use by investing in small-scale units.
3. Equitable distribution of income:
Small entrepreneurs Stimulate redistribution of wealth, income
and political power within societies in ways that are economically
positive and without being politically disruptive..
4. Regional dispersal of industries:
There has been a massive concentration in a few large cities
of different states of the Indian union. People migrate from rural
and semi urban area to these highly developed centres in search
of employment and sometimes to earn a better loving which
ultimately ideas to many evil consequences of over-crowding
pollution, creation of slums, etc.
5. Provides opportunities for development of

technology:
Small- scale industries have tremendous capacity to generate or
absorb innovations. They provide ample opportunities for the
development of technology and technology in return, creates an
environment conductive to the development of small scale units.
6. Indigenization:
Small- scale industries make better use of indigenous
organizational and management capabilities by drawing on a pool
of entrepreneurial talent that is limited in the early stages of
economic development.
7. Promotes export:
Small-scale industries have registered a phenomenal growth in
export over the years. The value of export of products of small-
scale industries has increased from Rs.393 crores in 1973-74 to
Rs. 71,244 crores in 2002-03.
8. Supports the growth of large scale Industries:
Small-scale industries play an important role in assisting bigger
industries and project so that the planned activity of
developmental work is facilitated.
9. Better Industrial relations:
Better industrial relations between the employer and employees
help in increasing the efficiency of employees and reducing the
frequency of industrial disputes.

IMPORTANCE OF SSI’s
The rationale of small scale industries so established can broadly be classified

into four arguments as discussed below.
1. Employment Argument:
In view of abundant labor and scarce capital resources, the most
important argument in favor of the SSI’s that have a potential to
create immediate large scale employment opportunities.
2. Equality Argument:
An important argument in favor of small-scale industries is that
they ensure a more equitable distribution of national income and
wealth. This is based on two major considerations:
Compared to ownership of large scale units, the ownership of
small-scale units is wide spread.
Their more labor- intensive nature and decentralization and
dispersal to rural and backward areas provide more employment
opportunities to the unemployed.
3. Decentralization Argument:
Big industries are concentrated everywhere in urban areas, but
small industries can be located in rural or semi- urban areas to
use local resources and to cater to the local demands. Hence it
promotes balanced regional development in the country.
4. Latent Resource Argument:
According to this argument, small enterprises are capable of
mapping up latent and unutilized resources like boarded wealth
and ideal entrepreneurial ability etc.
The various problems faced by SSI in India are as follows – 15 marks
1. External and internal problems: Problems faced by SSIs can

be divided into two major categories i.e. external and internal.
External problems results from factors beyond the control of the
entrepreneur. These relate to availability of finance, industrial and
financial regulation and the like.
2. Licensing: Obtaining license from the government is another
major hurdle. Corruption and bureaucracy are rooted in every
economy.
3. Finance: The finance for running the small enterprise is provided
by the entrepreneur himself as he cannot satisfy the surety
regulation of the banks and other specialized financial institutions.
4. Location: Location for establishing the small business units is
also a problem. Entrepreneurs may not get a place where there is
easy availability of financial resources, raw materials, labor,
power, transport system etc.
5. Raw material: Continuous supply of raw material at standard
price is again a problem for small enterprise. These are a chronic
problem in supplying raw materials.
6. Technology: Availing latest technology for manufacturing
purpose isa major problem. One of the major handicaps of the
small scale sector has been the absence of the latest technology
which alone canensure quality and high rate of productivity.
7. Marketing: Marketing the products of small units is a major
disturbing factor. Lack of standardization, poor designing, poor
quality, lack of quantity control, poor bargaining power are some
of the problems faced by small entrepreneurs.

8. Managerial inefficiency: The success of an industry is largely
determined by a satisfactory management of finance, inventory,
budgeting, marketing, accounting, and manpower.
9. Faulty planning: Faulty planning and inadequate appraisal of
project leads to failure of SSIs. No proper viability studies,
technical or economic are carried out before units or formed.
10. Lack of machinery and equipment: Small scale units
are striving hard to employ modern machineries and equipment in
their process of production in order to compete with large
industries.
11. Absence of adequate infrastructure: Indian economy is
characterized by inadequate infrastructure which is a major
problems for small units to grow.
12. Competition from large-scale units and imported
products: Small scale units find it very difficult to compete with
the products of large –scale units and imported products which
are comparatively ofbetter quality than small unit products.
13. Other problems: Beside the above problems, small-scale
units have been of constrained by a number of other problems
also. They include poor project planning, managerial
inadequacies,
MEASURES TO OVERCOME PROBLEMS OF SSI – 5 marks
1. Credit Facilities: The government should provide credit to small

and cottage industries at lower rates of interest.
2. Industrial Estate: The government has set up a number of
industrial estates in different cities. These areas have been

provided various facilities like roads, banking and transportation
facilities to encouragethe small scale industries.
3. Testing Laboratories: The government has established testing
laboratories to maintain prescribed standard of products for
cottage industries.
4. Publicity: The government has set up display centers and show
rooms in various cities in the country to increase the sale of
cottage industry products.
5. Facility of Raw Material: The government imports raw
materials for the cottage industries from abroad and provides
them at lower prices to encourage small scale industries.
6. Purchase of Cottage Industry Products: The government
also purchases finished products from small scale industries
and facilitates sales.
7. Protection against Foreign Competition: The government has
also provided protection to home industry by imposing heavy
duties on imports.
8. Establishment of Training Institutions: The government
has set up various institutions like industrial, vocational,
commercial and polytechnic institutions to provide qualified worker
to the cottage and small scale industries.
9. Handicraft Centers: Handicrafts development centers have
been set up to promote handicrafts in India by the government.
10. Advisory Services: The small scale industries advisory
services have been set up in each province to provide guidance
to new entrepreneurs in the small scale industry.

STEPS INVOLVED IN THE FORMATION OF A SMALL SCALE

VENTURES OR START UP ISSUES – 5 marks
Procedures followed and the documents to be furnished while starting a

SSI:
Having identified the business opportunity, the entrepreneur has to putthe

idea into action. The following issues need to be analyzed:
Location:
Selection of a location for establishing a business unit depends on various

factors such as availability of raw materials, nearness to market, availability
of finance, mobilization of required skilled labor,analysis of social feasibility
and technical feasibility, the nature of business and its adaptability to
proposed environment etc.
The process of selecting a suitable location for an enterprise involves

the following three different steps:
1. First Step: This step relates to selection of the region in which

the enterprise is to be suited. As per this step decision is to be
taken about the state or District where the organization is to be
located. For instance, with reference to India, the State in which
the plant is to be located may be Delhi, Punjab, West Bengal,
Rajasthan etc.
2. Second Step: After the selection of the region, the decision
relating to a, particular community, in which the plant is to be
located, is to be taken by the entrepreneur.
3. Third Step: This step pertains to the selection of the plant site
where the plant is to be situated.

Clearances and permits required:
Different types of clearances and permits have to be obtained from different

authorities. Following types of industries have to obtain provisional
registration from the respective District Industrial Centres.
SSIs (Investment in plant below Rs.1 crore)
Ancillary industries whose investment in plant and equipment isbelow Rs.

One crore.
Tiny industries (investment below Rs.25 lakhs in plant andmachinery).
Women entrepreneurs where one or more women entrepreneurs have not

less than 51%financial holding.
Other Clearances:
Land/Location:
Environmental clearances from GOI.
NOC from pollution control board.
Change of land use from district collector/Govt. in Municipal administration

and Urban Development through Director/Townand Country planning/Urban
development Authority.
Exemption from urban land ceiling.
Building: Permission for building layout needs to be taken from gram

panchayat /Municipality/Town and country planning department/urban
development authority.
Plant and machinery: Approval of layout needs to be from the department

of factories/boilers.
Raw material: Permission for scarce raw material like Coal, Molasses, alcohol
and paraffin wax etc if required from Industriesdepartment.
Power:
Power feasibility from State Electricity Board
Agreement with private power producers to purchasepower from private

generating stations.
Water:
Own captive source.
Public supply.
Supply from state government authority in case of industrialparks.
Supply from state irrigation department for bulkconsumption.
Licensing:
The Government has reserved certain items for exclusive manufacture in the
small scale sector. Non-small scale units can undertake the manufacture of
items reserved for small scale sector only after obtained an industrial license.
Registration Procedures:
Registration of an existing or proposed small scale enterprise is voluntary and

not compulsory. It has no statutory basis. But, registration is beneficial for
the enterprise itself because it makes the unit eligible for availing the
benefits given by the Central or State Governments for the promotion of
SSIs. power tariff subsidies; exemptions under tax laws etc.
FINANCIAL ASSISTANCE AVAILABLE TO SSIs
STATE FINANCIAL CORPORATIONS (SFCS)
The state Financial Corporation Act was passed by the Parliament on

September 28, 1951 under which the State Financial Corporation’s (SFCs)
could be set up. The authorized capital of a SFC is fixed by state Government
within the minimum and maximum limit of 15 lakhs and 5 crores
respectively.
Functions of SFC’s
The SFC’s provide the following types of assistance to industrial units in their
respective states:
1. The SFC’s while giving loans to industrial units see to it that loans
are secured by a Pledge, Mortgage, Hypothecation of movable
and immovable property or other tangible assets or guarantee by
the state government or scheduled commercial bank, they also
accept personal pledge by the entrepreneur. SFC’s don’t give
loans on the basis of second mortgage.
2. Grant loans or advances to industrial concern repayable within a
period not exceeding 20years.
3. Providing guarantee for loans raised by industrial units from
commercial banks and state cooperative banks.

4. Providing guarantee for deferred payments in cases where

industrial units have purchased capital goods on a deferred
payment basis.
5. Guarantee loans raised by industrial concerns which is re-payable
within a period not exceeding 20years and which are floated in
the public market.
6. SFC’s grant loans to industrial units for the purchase of fixed
capital assets like land, machinery.
a. SFC’s provide loans in foreign currency for the import of
machinery and technical know- how, under the IDA(
International Development Association) and World Bank tie
up.
7. SFC’s however are prohibited from subscribing directly to the
shares or stock of any company having limited liability except for
underwriting purposes and granting any loans or advance on the
security of its own shares.
KARNATAKA STATE FINANCIAL CORPORATION (KSFC)
Karnataka State Financial Corporation was established in March 1959under

section 3(1) of the state Financial Corporations Act, 1951 with the main
objectives of promoting and developing industrial growth in the state of
Karnataka by providing financial assistance in the form of term loans, equity
participation, equipment leasing etc.
Its area of activities is focused on the following:
1. Assistance to backward areas.

2. Assistance to the small scale sector.

3. Assistance to artisans, tiny village and cottage industries.
4. Assistance to medium scale industries.
5. Assistance to local entrepreneurs.
6. Assistance to special segments of society.
SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI)
Financial being a major problem faced by small and tiny industrial

undertakings; there was a strong demand from them that there be an apex
bank for them. The industrial policy Statement 1977 recommended the
setting up of a separate wing under the IDBI to deal exclusively with the
credit requirements of the small-scale sector.
The important functions of SIDBI are as follows:
1. To initiate steps for technological up gradation and modernization

of existing units.
2. To expand the channels for marketing and products of SSI sector
in domestic and international markets.
3. To promote employment oriented industries especially in semi-
urban areas to create more employment opportunities and thereby
checking migration of people to urban areas.
4. Refinancing of loans and advances.
5. Discounting and rediscounting of bills.
6. Extension of seed capital-soft loans assistance under national

equity fund, Mahila Udyannidhi and Mahila Vikas Nidhi.

7. Providing services like factoring and leasing.
STATE INDUSTRIAL DEVELOPMENT CORPORATIONS (SIDC’S)
The State Industrial Development Corporations (SIDCs) were established

under the companies Act, 1956 as wholly owned undertaking of the state
governments with the specific objectives of promoting and developing
medium and large industries in their respective states/union territories.
Functions of State Industrial Development Corporations:
The various functions of State Industrial Development Corporations areas

follows:
1. State Industrial Development Corporations Provide the financial

assistance to the state level organizations to develop the
organizational activities
2. There are involved in developing industrial infrastructure like
industrial estate, industrial parks and setting up industrial projects
either on their own or in the joint sector in collaboration with private
entrepreneurs or as wholly owned subsidiaries.
3. SIDCs exist in all the States and have developed industrial
infrastructure facilities to enable prospective entrepreneurs to set
up their industries in the states.
4. These corporations render technical assistance to the

entrepreneurs in the formulation of the project reports and also

provide common facilities in the industrial estates.
5. The corporations provide loans and advances to the industrial
units in the medium and large sectors to the maximum of Rs 400
lakhs.
6. State Industrial Development Corporations ensures the interest
rate ranges between 13.5% to 17% depend upon the size of the
loan.
Definitions of Commercial Bank
According to Crowther, “A Commercial bank is an institution which collects

money from those who have it to spare or who are saving it out of their
income and lends this money out to those who require it”.
Significance of Commercial Banks
Banks play a vital and dynamic role in the economic life of the nation as they
keep the wheels of trade, commerce and industry always revolving.They
mobilize the dormant funds into a productive channel. The economic
importance of the commercial Banks can be summarized as follows:
1. Capital formation: Banks facilitate capital formation by

promoting savings.
2. Innovation: Banks credit enables the enterprises to innovate and
invest and thus uplift economic activity.
3. Monetary policy: A well developed banking system is required o
promote economic development by controlling a period of inflation
4. Credit creation: Credit creation enables the expansion of

business and mitigation of unemployment and raises production.
5. Encouragement of trade and industry: Banking system
encourages trade and industry by providing long-term loans to
traders and industrialists at low rates.
6. Promotion of habit of thrift: Banks encourage savings habit
by accepting, deposits and giving interests on it.
7. Volume of production: Production volume can be increased by
expansion of credit by banks. Banks expand credit during the
process of credit creation.
ORIGINOF KSIDC
Formed in 1961 with the objective of promoting, stimulating, financing and

facilitating the development of large and medium scale industries in Kerala,
KSIDC acts as a promotional agency involved in catalyzing the development
of physical and social infrastructure required for constant growth of industry
in the state.
Functions of KSIDC:
1. The important functions of KSIDC are:

2. Identification of Investment Ideas.
3. Translating ideas into concrete proposals.
4. Feasibility Study, Project Evaluation.
5. Financial Structuring, loan Syndication.
6. Assisting in Central and State Govt. Clearances.
7. Development and Administration of growth Centers.

8. Industrial and Infrastructure development.
KARNATAKA STATE SMALL INDUSTRIES DEVELOPMENT

CORPORATION (KSSIDC):
The Corporation’s principle objective is the promotion and development

small industries in the state. Construction and utilization of infrastructure,
especially in backward areas, procurement and marketing of Raw Materials,
technical support and assistance are a means to reach the goals.
Origin of KSIIDC
Established in 1964, Karnataka State Industrial & Infrastructure Development

Corporation Limited has been greatly instrumental in theindustrialization of
the
State, especially in the large and medium sector, KSIIDC has assisted 135
start up ventures through equity participation to the extent of Rs. 118.28
crores spread over the length and breadth of the State.
Functions of KSIIDC
1. Identification of lands suitable for establishment of Gems &

Jewellary Parks, Apparel parks, Comprehensive Industrial
Estates, and Housing establishment for industrial workers.
2. Establishment of functional industrial estates throughout the sale.
3. To set up permanent industrial exhibition and convention centers
in and around Bangalore.

4. Marketing vacant properties throughout the State of Karnataka.

5. Identification of ideal locations and suitable lands for establishing
projects of the Corporation.
6. Preparation of Project report for the various projects.
7. Negotiations with Banks/Financial Institutions for arranging
finance and for completion of the projects of the Corporation.
8. Negotiations with statutory and other agencies for implementation
of the projects.
9. Evaluating tenders from construction agencies and preparing a
detailed report for the consideration of the Managing Director.
10. Arranging for joint ventures with land owners/ investors.
INDUSTRIAL FINANCE CORPORATION OF INDIA (IFCI)
It was established in the year 1948 with the objective of providing medium
and long term credit to industrial concerns in India. IFCI has been converted
in to a public limited company under the companies Act, 1956. The Board of
Directors consists of a whole time chairman and 12 directors.The chairman is
appointed by the central government order by IDBI and 6 directors are
elected by share holders.
Functions of IFCI:
1. The corporation performs functions like:

2. It extends financial assistance to the industrial sector through
rupee and foreign currency loan.
3. It guarantees loans raised by the industrial concerns from the
schedule bank.
4. Underwriting of shares and debentures issue.
5. Direct subscription to equity.
6. Financial services for procurement of equipment suppliers credit,
equipment leasing and hire purchase.
INDUSTRIAL DEVELOPMENT BANK OF INDIA (IDBI)
The Industrial Development Bank of India (IDBI) was established on 1July 1964
under an Act of parliament as a wholly owned subsidiary of the Reserve Bank
of India. In 16 February 1976, the ownership of IDBI was transferred to the
Government of India and it was made the principalfinancial institution for
coordinating the activities of institutions engaged infinancing, promoting and
developing industry in the country.
Function of Industrial Development Bank of India
The IDBI has been established to perform the following functions:
1. Co-ordination, regulation and supervision of the working of other

financial institutions such as IFCI, ICICI, UTI, LIC, Commercial
Banks and SFCs.
2. Supplementing the resources of other financial institutions and
thereby widening the scope of their assistance.
3. Planning, promotion and developing of key industries and
diversifications of industrial growth.
4. Devising and enforcing a system of industrial growth that
conforms to national priorities.

5. It grants loans and advances to IFCI, SFCs or any other financial
institution by way of refinancing of loans granted by such
institutions which are repayable within 25year.
6. It grants loans and advances to scheduled banks or state co-
operative banks by way of refinancing of loans granted by such
institutions which are repayable in 15 years.
7. It contributes loans and advances to IFCI, SFCs, other institutions,
scheduled banks, state co-operative banks by way of refinancing
of loans granted by such institution to industrial concerns for
exports.
8. It ensures discount or rediscount bills of industrial concerns.
9. It underwrites or to subscribes to shares or debentures of
industrial concerns.
10. It subscribes to or purchase stock, shares, bonds and
debentures of other financial institutions.
11. It grants line of credit or loans and advances to other
financial institutions such as IFCI,SFCs etc.
12. It ensures the planning, promoting and developing industries
to fill up gaps in the structure in India.
INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA

(ICICI)
ICICI Bank promoted in 1994 by ICICI Limited, an Indian financial institution

and was its wholly-owned subsidiary. ICICI was formed in 1955 atthe initiative
of the World Bank, the Government of India and representativesof Indian
industry. The principal objective was to create a development financial

institution for providing medium-term and long-term project financing to
Indian businesses.
Functions of ICICI
The various functions of the ICICI are:
1. It provides long-term loans in rupees foreign currencies.

2. It participates the equity capital of the industrial concerns.
3. It underwrites new issues of shares and debentures.
4. It guarantees loans raised by private concerns from other sources.
5. It provides technical, managerial and administrative assistance to
industrial concerns.
LIFE INSURANCE CORPORATION OF INDIA (LIC)
Life Insurance Corporation of India (LIC) was established under the LIC Act in
1956 as a wholly-owned corporation of the Government of India, on
nationalization of the life insurance business in the country.
Functions of Life Insurance Corporation
The various functions of a Life Insurance Corporation are given below:
1. Life Insurance Corporation carries on capital redemption

business, annuity certain business or reinsurance business in so
far as such reinsurance business relating to life insurance
business;
2. It invests the funds of the Corporation in such manner as the
Corporation may think fit and to take all such steps as may be
necessary or expedient for the protection or realization of any
investment; including the taking over and administering any
property offered as security for the investment until a suitable
opportunity arises for its disposal;
3. It acquires, hold and disposes of any property for the purpose of
its business;
4. It transfers the whole or any part of the life insurance business
carried on outside India to any other person or persons, if in the
interest of the Corporation it is expedient so to do;
a. It advances or lends money upon the security of any
movable or immovable property or otherwise;
5. It borrows or raises any money in such manner and upon such
security as the Corporation may think fit;
6. It carries on either by itself or through any subsidiary any other
business in any case where such other business was being
carried on by a subsidiary of an insurer whose controlled business
has been transferred to and vested in the Corporation by this act;
7. It carries on any other business which may seem to the
corporation to be capable of being conveniently carried on in
connection with its business and calculated directly or indirectly to
render profitable the business of the Corporation.
UNIT TRUST OF INDIA (UTI)
This was established under an Act of Parliament in 1964. UTI mobilizes

savings of small investors through sale of units and channelizes them into
corporate investments. Over the years, the UTI has introduced a variety of

schemes to meet the need of diverse sections of investors. The UTI also
provides assistance to the corporate sector by way of term-loans and
underwriting /direct subscription to shares/debentures.
STATE INDUSTRIAL DEVELOPMENT CORPORATIONS (SIDCS)
These were incorporated under the companies Act,1956, in thesixities

and early seventies as wholly-owned State Government Undertakings for
promoting industrial development. The main functions ofSIDCs are to
provide assistance in the form of term-loans, underwriting direct
subscription to shares/debentures and guarantees.
NON FINANCIAL ASSISTANCE AVAILABLE TO SSIs
DISTRICT INDUSTRIES CENTRE (DICS)
This program was started on May 8, 1978 with a view to provide integrated
administrative framework at the district level for promotion of small-scale
industries in rural areas.
The DICs role is mainly promotional and developmental. To attain this,
they have performed the following main functions:
1. To conduct industrial potential surveys keeping in view the

availability of resources in terms of material and human skill,
infrastructure, demand for product etc.
2. To prepare an action plan to effectively implement the schemes
identified.
3. To guide entrepreneurs in matters relating to selecting the most
appropriate machinery and equipment, sources of its supply and

procedure for procuring imported machinery, if needed, assessing
requirement for raw materials etc.
4. To appraise the worthiness of the various proposals received from
entrepreneurs.
5. To assist the entrepreneurs in marketing their products and asses
the possibilities of ancillarization and export promotion of their
products.
6. To undertake product development work appropriate to
small industries.
7. To conduct artisan training programs.
8. To function as the technical arms of DRDA in administering IRD
and TRYSEM programs.
SMALL INDUSTRIES SERVICE INSTITUTES (SISI)
These are set up to provide consultancy and training to small entrepreneurs-

both existing and prospective. The activities of SISIs are coordinated by the
industrial management training division of the DCSSI’s office. There are 28
SISIs and 30 branch SISIs set up in the state capital and other places all over
the country.
The main functions of SISIs include:
1. To serve as an interface between central and state governments.

2. To render technical support services.
3. To conduct entrepreneurship development programmers.

4. To initiate promotional programs.
ENTREPRENEURSHIP DEVELOPMENT INSTITUTE OF INDIA (EDI)
Entrepreneurship Development Institute of India (EDI), an autonomous and

not-for profit institute, set up in 1983, is sponsored by theIDBI Bank Ltd., IFCI
Ltd., and State Bank of India (SBI). The government of Gujarat pledged
twenty-three acres of land on which stands the EDI campus. EDI has helped
set up twelve state-level exclusive entrepreneurship development centers
and institutes.
SMALL INDUSTRIES DEVELOPMENT ORGANIZATION (SIDO)
This is a subordinate office of the department of SSI and ARI. It is an apex

body and nodal agency for formulating, co-ordinating and monitoringthe
policies and programs for promotion and development of small- scale
industries. Development Commissioner is the head of SIDO. He is assisted by
various directors and advisors in evolving and implementing various
programs of training and management consultancy, industrial investigation
possibilities for development of different types of small-scaleindustries,
development of industrial
ASSOCIATION OF WOMEN ENTREPRENEURS OF KARNATAKA

(AWAKE)
AWAKE is a not-for profit, non-Governmental organization,established in

1983, with the machine of ‘empowering women through entrepreneurship
for economic development’. It is an ISO 9001 -2008 accredited organization,

totally devoted to entrepreneurship development among women both in
rural and urban areas of India.
TECHNICAL CONSULTANCY ORGANIZATIONS (TCO)
Technical consultancy organization (TOCs) were created for facilitating

technical consultancy for industrial projects. These organizations were
established by the All India Financial Institution (IDBI, ICICI, IFCI, etc) in
collaboration the state level financial/development organizations and
commercial banks. There are in all 18 states –level TOCs across India. TECSOK
has been considered by the Government of Karnataka, Government of India,
state &central Financial Institutions, Commercial Banks, Asian Development
Bank and a host of other institutions of the Government and private as the
recognized consultancy agency.
Functions of TCO
1. Some of the functions of TCOs or specific products. Be summed

up as below:
2. Development of Industry Clusters.
3. Conducting Industry potential Survey/Techno-Economic Viability
(TEV) studies.
4. Infrastructure Planning.
5. Energy and Environment Research and Management.
6. NPA Resolution.
7. Vocational training

8. Technology Facilitation /Preparation of Project Profiles.

9. Conducting Entrepreneurship Development Programs.
10. Carrying out Market Research for specific products.
11. Offering Merchant Banking Services.
TECSOK(TECHNICAL CONSULTANCYSERVICES ORGANIZATION

OF KARNATAKA (KARNATAKA, INDIA)
Technical Consultancy Services Organization of Karnataka (TECSOK), is a

multidisciplinary technical, industrial and management consultancy
organization set up.
It was established in the year 1976 by the Government ofKarnataka. The

primary objective of founding TECSOK was to provide reliable consultancy
support for entrepreneurs to start up self employment ventures in
Karnataka, India.
Functions of the TECKSOK
1. Location Specific identification of investment opportunities.

2. Assistance in obtaining statutory and procedural clearances.
3. Feasibility studies and environment impact studies.
4. Preparation of detailed project reports as per investment norms
and financial norms..

5. Market survey and research.

6. Project implementation and turnkey assistance.
7. Reorganization and restructuring of enterprises.
8. Valuation of assets, man power planning and budgetary control
system.
9. Energy management and audit, corporate plan, technology
transfer.
10. Diagnostic studies and rehabilitation of sick industries.
11. Designing and organizing training programs.
12. Since its inception, TECSOK has catalyzed a large
number of industries throughout the province.
KHADI AND VILLAGE INDUSTRIES COMMISSION (KVIC)
The development of khadi and village industries provides opportunityto

reduce rural unemployment and underemployment. With this end in viewthe
khadi and village industries commission was established in April 1957, under
the Khadi and village industries commission Act-1956, The khadi programe
was thus closely linked with struggle for freedom.
Functions of KVIC
1. To promote the sale and marketing of khadi products.

2. Encourage and promote research in the production techniques
and provide facilities for the study of problems relating to each.

3. KVIC was entrusted with the task of providing fund assistance.
4. It takes step s to ensure genuineness of the products and set-up
standard of quality and ensure that the products confirm to the
standards.
5. It also undertakes directly or through other agencies studies
concerning the problems of khadi and village industries.
6. KVIC is authorized to establish and maintain separate
organizations for the purpose of carrying out any or all or all of the
above matters besides carrying out any other matters incidental to
its activities.
NATIONAL SMALL INDUSTRIES CORPORATION LIMITED (NSIC)
The national small industries Corporation Ltd (NSIC) an enterprise under the
union ministry of industries, was set up in 1955 to promote, aid and foster
the growth of small scale industries in the country. NSIC provides a wide
range of services, predominantly promotional in character to small scale
industries.
Functions of NSIC
Its main functions are:
1. To provide machinery on hire- purchase scheme to small scale

industries.
2. To provide equipment leasing facility.
3. To help in export marketing of the products of small scale
industries.
4. To participate in bulk purchase program of the Government.

5. To develop prototype of machines and equipments to pass on to
small scale industries for commercial production.
6. To distribute basic raw material among small scale industries
through raw material depots.
7. To help in development and up gradation of technology and
implementation of modernization programs of small scale
industries.
8. To impart training in various industrial trades.
9. To set up small scale industries in other developing countries on
turn-key basis.
10. To undertake the construction of industrial estates.
SMALL SCALE INDUSTRIES BOARD (SSIB)
The Government of India constituted a board, namely, Small Scale industries

board (SSIB) in 1954 to advice on development of small scale industries in the
country. The SSIB is also known as Central Small Industries Board. The range
of developmental work in small scale industries involves several
departments/ministries and several organs of the Central / State
Governments. Hence, to facilitate co-ordination and inter -institutional
linkages, the small-scale industries has been constituted.
STATE SMALL INDUSTRIES DEVELOPMENT CORPORATIONS (SSIDC)

These were set up in various state under the companies act, 1956,as state
government undertakings to cater to the primary developmental needs of
the small, tiny and village industries in the state/union territories under their
jurisdiction under the companies act has provided SSIDCs with greater
operational flexibility and wider scope for undertaking a variety of activities
for the benefit of the small sector.
The important functions performed by the SSIDCs include:
1. To procure and distribute scare raw materials

2. To supply machinery on hire purchase system
3. To provide assistance for marketing of the products of small-scale
industries.
4. To construct industrial estates/sheds, providing allied
infrastructure facilities and their maintenance.
5. To extend seed capital assistance on behalf of
the state government concerned.
6. Provide management assistance to production units.
Subsidy
Subsidy is a lump sum financial assistance given by the government to the

industries at one time. Subsidies, incentives and bounties are given in the
interests of industrializing the country. These are motivational forces that
influences the entrepreneurs to decide in favor of starting an industry. Which
are generally given in the form of cash \ subsidies tax concessions, purchase
of raw materials and allotment of industrial sheds, concessional finance etc,

such incentives play vital role in designing entrepreneurship development in

the developing countries.
Tax holiday
A period when people or companies do not have to pay any tax or not as
much tax as usual on goods, services or profits. The country has said it is
reviewing the five year tax holidays that many foreign firms currently enjoy.
A tax holiday is government incentive that temporarily reduces or eliminates

taxes for consumers or businesses. The objective of a tax holiday is to
encourage economic activity and foster growth. Tax holidays may also be
offered to businesses as an investment incentive.
MEANING OF INDUSTRIAL ESTATES – 2 marks
Industrial estate is a place where necessary infrastructural facilitiesare made

available to entrepreneurs. Industrial parks, industrial zone, industrial area,
Industrial Township are some of the other terms used to denote industrial
estates.
OBJECTIVES OF INDUSTRIAL ESTATES
1. To provide infrastructure and accommodation facilities

to the entrepreneurs.
2. To encourage the development of small-scale industries in the
country.
3. To decentralize industries to the rural and backward areas.
4. To encourage ancillarization in surrounding major industrial units.
5. To develop entrepreneurship by creating a congenial climate to
run the industries in these estates/areas/townships etc.
On the basis of functions
1. General type industrial estates: These are all so called as

conventional or composite industrial estates. These provide
accommodation to a wide variety and range of industrial concerns.
The Indian industrial estates are mainly of this type.
2. Special type industrial estates: These types of industrial
estates are constructed for specific industrial units, which are
vertically or horizontally interdependent.
3. On the basis of organizational set-up
a) Government Industrial Estates
b) Private Industrial Estates
c) Co-operative Industrial Estates and
d) Municipal Industrial Estates
On the basis of other variants
1. Ancillary Industrial Estates: In these only those small-scale

units are housed which are ancillary to a particular large industry.
2. Functional Industrial Estates: Industrial units manufacturing
the same product are usually housed in these industrial estates.

These industrial estates also serve as a base for expansion of
small units into larger units.
3. Workshop-bay: Such types of industrial estates are constructed
mainly for very small firms engaged in repair work.


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Entrepreneurship Development - 5 Semester, B.

UNIT- 6 STARTING UP A SMALL SCALE INDUSTRY

The SSI sector in India has made significant contribution to employment

The process of ancillarization is one of the methods of encouraging new

In simple terms ancillary industries are those which manufacturing parts or

It refers to an industry where the creation of products and services is home-

SMALL SCALE INDUSTRY

An industrial undertaking in which the investment in fixed assets in plant and

MEANING OF SMALL SCALE INDUSTRY

In India the Ministry of Commerce and Industries defined a small scale

Asst. Prof. Vijay Dev Mclaren

ROLE OF SSIs IN THE DEVELOPMENT OF INDIAN ECONOMY - 15

The role of small scale industries in India as follows:

2. Mobilisation of resources and entrepreneurial skill:

5. Provides opportunities for development of

Asst. Prof. Vijay Dev Mclaren

The rationale of small scale industries so established can broadly be classified

and ideal entrepreneurial ability etc.

The various problems faced by SSI in India are as follows – 15 marks

1. External and internal problems: Problems faced by SSIs can

of the problems faced by small entrepreneurs.

MEASURES TO OVERCOME PROBLEMS OF SSI – 5 marks

1. Credit Facilities: The government should provide credit to small

industrial estates in different cities. These areas have been

Asst. Prof. Vijay Dev Mclaren

STEPS INVOLVED IN THE FORMATION OF A SMALL SCALE

Procedures followed and the documents to be furnished while starting a

Having identified the business opportunity, the entrepreneur has to putthe

Selection of a location for establishing a business unit depends on various

The process of selecting a suitable location for an enterprise involves

1. First Step: This step relates to selection of the region in which

Asst. Prof. Vijay Dev Mclaren

Clearances and permits required:

Different types of clearances and permits have to be obtained from different

SSIs (Investment in plant below Rs.1 crore)

Ancillary industries whose investment in plant and equipment isbelow Rs.

Tiny industries (investment below Rs.25 lakhs in plant andmachinery).

Women entrepreneurs where one or more women entrepreneurs have not

Environmental clearances from GOI.

NOC from pollution control board.

Change of land use from district collector/Govt. in Municipal administration

Exemption from urban land ceiling.

Building: Permission for building layout needs to be taken from gram

Plant and machinery: Approval of layout needs to be from the department

Power feasibility from State Electricity Board

Agreement with private power producers to purchasepower from private

Own captive source.

Supply from state government authority in case of industrialparks.

Supply from state irrigation department for bulkconsumption.

Registration of an existing or proposed small scale enterprise is voluntary and

FINANCIAL ASSISTANCE AVAILABLE TO SSIs

STATE FINANCIAL CORPORATIONS (SFCS)

The state Financial Corporation Act was passed by the Parliament on

Asst. Prof. Vijay Dev Mclaren

4. Providing guarantee for deferred payments in cases where

KARNATAKA STATE FINANCIAL CORPORATION (KSFC)

Karnataka State Financial Corporation was established in March 1959under