ALAGAPPA UNIVERSITY

(Reaccredited with 'A' Grade by NAAC)

Karaikudi - 630 003, TAMILNADU

DIRECTORATE OF DISTANCE EDUCATION

(Recognized by Distance Education Council (DEC), New Delhi)

M.B.A
( Project Management)

Paper 3.4
411 Project Support System

Copyright Reserved for Private Use Only

ALAGAPPA UNIVERSITY
(Accredited with 'A' Grade by NAAC)
KARAIKUDI - 630 003, TAMILNADU

DIRECTORATE OF DISTANCE EDUCATION

MBA (PM)

Paper 3.4
Project Support System

Copy Right Reserved For Private use only

 •

AU/DDE/D2/Printing/Order 6/2015 Date: 17-02-15 500 Copies

POWERMAN PRINTERS, CHENNAI -21. Cell No. 9840823160
 Paper 3.4 PROJECT SUPPORT SYSTEM
UNIT 1
Project Support Facilities: Need for support system — Nature and types of
project supporting facilities — Incentives and subsidies — Role of Governmental
Departments: Department of Planning and Programme — GOI — Department of
Planning in the State Government — Department of Science and Technology — Indian
Investment Centre.
UNIT 2
Marketing support — Marketing plan — Marketing process — Market positioning
• — Marketing intelligence — Institutional support: NSIC, STC, MMTC, State Small
Industries Corporation — Export Trade Promotion Councils — Commodity Boards,
KVIC.
• ..ATIT 3
Technical Support: Know-how designing and development — Process designing
— Selection of machinery and equipment — Setting quality standards — Appropriate
technology — Licensing and registration — Pollution and effluent treatment —
Institutional support: Department of Science and Technology, CSIR, ITCOT, SISI,
STED & Steps, Productivity Councils, Project and Equipment Corporation of India.
UNIT 4
Financial Support — Estimating the project cost — Designing judicious financing
plan — Means of financing — Institutional support: Central and State level development
banks: IDBI, NABARD, SIDBI, SFCS, EXIM Banks — Commercial Banks — Leasing
companies and investment institutions — Role of international financial agencies:
World Bank, ADB and IBRD.
UNIT 5
Management, Consultancy and Training Support: Advisory services such as
legal, environmental, managerial and human aspects — Awareness training, motivation
training and management training.

UNIT VI
Institutional Support: District Industries Centre, Small Industries Service
Institute — Small Industry Extension Training Institute — SIDCO, FASSI, National
Science and Technology — Entrepreneurship Development Board — Management
consultancy organizations: Centre for Entrepreneurship Development —
Governmental Organisations.

REFERENCES:
1. Machiraju H R, Project Finance.
2. Pahwa H P S, Project Financing: Policies, Procedures and Practice.
3. Vasant Desai, Dynamics of Entrepreneurial Development and Management.

Course Material Prepared by —

Dr. P. Natarajan
Reader in International Business & Commerce
Al agafva University, Karai kudi.
 UNIT I

PROJECT SUPPORT FACILITIES

OBJECTIVES

The objectives of the Lesson on 'Project Support Facilities' are listed below:

- To highlight the available project support facilities to the entrepreneurs,

- To analyse the need for support system to projects.
- To discuss the incentives and subsidies provided by the Government to the
industries,
- To review the role of Central and State Governments in providing supports to the
industrial projects,
To ascertain the participatory role of Department of Science and Technology in
promoting entrepreneurship, and
- To study the services offered by Indian Investment Centre.

1.1 IYTRODUCTION

Project is a capital investment proposal for creating facilities to produce goods

and services. The World Bank has defined project as "an approval for a capital
investment to develop facilities to provide goods and services". Little and fvlirless has
defined project as "any scheme or a part of a scheme for investing resources which can
be reasonably analysed and evaluated as an independent unit. It may be an item of
investment activity which can separately be evaluated". The term project has been
defined by Gitinger as "the whole complex of activities involved in using resources to
gain benefits"

A proper analysis of resources used in the project and gain from the project
should be done while planning the project proposal. Cost-benefit analysis should be
applied for evaluation in all the stages of the project. Project is a capital investment
made for manufacturing/trading activity. Evaluation of capital investment becomes
essential to choose profitable project. There are different methods available tbr
evaluation of capital investment proposals such as Payback period, Net Present Value.
t Internal Rate of Return, Average Rate of Return, etc.
 Project is a one-shot, time limited, major undertaking, requiring the
commitment of varied skills and resources.

- Clifford Gray

A project is one time job that has defined starting and ending dates, a clearly
specified objective, or scope of work to be performed a predefined budget, and
usually a temporary organisation that is dismantled once the project is completed.

- James P. Lewis

An activity sufficiently self-contained to permit financial and commercial

analysis in most cases projects represent the expenditure of capital funds by
preexisting entities which want to expand or improve their operation.

- FAO General Guidelines

Project is an organisational unit dedicated to the attainment of a goal, the

successful competition of a development product in time, within budget, in
conformance with predetermined performance specifications.

- Encyclopaedia of Management by Dennis LOCK

Dr. Albert 0 Hirchman has expressed that "the development project can notes
purposefulness, some minimum size, a specific location, the introduction of something
qualitatively new, and the expectation that a sequence of further development moves
will be set in motion". Purpose, size, location, innovation and development process
are the essential features of a project. It is a time-bound task also. Every project
has two phases.

They are
(i) preparation and construction and
(ii) execution.

Vasant Desai has defined project as"a scientifically evolved work plan devised
to achieve a specific objective with a specified period of time". Project is a plan to
achieve the stipulated objective within the stipulated period of time. The objective
may be productivity, profitability, improving market share, modernising production
pi-ocess, mechanisation etc.
3
 L2 PROJECT SELECTION

Investment size, location, technology needed, machineries and equipments

req :1 ?.4:1 and marketing are the important factors considered while selecting a project.
Selection of the project and analysis should go hand in hand. Market analysis,
technical analysis, financial analysis, economic analysis and ecological analysis
are the tools of project analysis.

Market analysis attempts to assess the demand of the proposed product in future
and market share of the product. Market analysis reveals the consumption trend,
supply position, competition, demand elasticity, consumer behaviour, marketing
administration and other market related information.

Technical analysis deals with preliminary studies assesing viability of the project
in terms of raw materials, power and other inputs, scale of operation, production
process, equipment and machines utilisation, treatment of effluents, plant layout and
technology application.

Financial analysis discusses the financial viability of the project. Investment,

means of financing, expected return, break-even point, annual cash flow, financial
risk are the important factors taken into account in financial analysis

Economic analysis discusses the social cost and social benefit of the project. It
analyses the contribution of the project towards self-sufficiency, employment and
social responsibility.

Ecological analysis raises the question, what will be the likely damage caused
by the project to the environment9 and suggests the restoration measures to bring
down the damage to the environment.

1.3 NEED FOR SUPPORT SYSTEM TO PROJECTS

Project selection should be based on the systematic evaluation of available

investment alternatives. Entrepreneurs require support from various agencies
involved for the promotion of entrepreneurship in every st -,SZE of the project. Financial
institutions, marketing institutions, technological institutions and management
consultancy organisations have been established by the Government for providing
necessary assitance and support to the entrepreneurs for executing their projects
4
successfully. Support of the institutions assis.,.-, repreneurship promotes not
only entrepreneurial development but also reduces less in small scale enterprises
and revitalise the small scale units.

Entrepreneurs are expected to acquire the entrepreneurial qualities such as,

innovation, risk taking, self-confidence, hard work, goal setting and accountability
to succeed in their ventures. Systematic and scientific be:ravioural oriented training
and motivation programming are needed to inculcate such intrepreneurial qualities
to the entrepreneurs, particularly to the first generation entrepreneurs.

All the entrepreneurs may not be expertised in project preparatioi and

evaluation, They may be experts in their respective trade. They need some support
from outside agencies supporting project preparation and evaluation. Simi!arly
support is needed for technological upgradation of the project.

All the entrepreneurs may not be ready to invest the required capital for their
project. Technocrats are expertised in a particular technology oriented trade. They
are in need of financial resources to start technology oriented entrepreneurial activity.
Technocrats have technology. Application of technology in manufacturing activity
requires money.

Entrepreneurs need money for initial investment in their business. Financial

support system in needed to the entrepreneurs. After doing business for few years,
entrepreneurs will try to expand their business or diversify their business. Expansion
or diversification needs substantial investment. Investment support facilities must
be made available to them for expansion and diversification of their business. While
approaching the financial institutions for getting financial assistance, they review
the project and point out the intricacies and suggest the measures for suitable
modification in the project report. They provide not only financial support but also
review the project report to make it viable.

Environment pollution is an important issue today. They polluting industries

have to install effluent treatment plant for containing pollution. Here, entrepreneurs
are in need of support from the Government for solving the problem of environment
pollution.

Management is an art. How to manage the enterprise successfully? How to

manage crisis? How to manage competition? How to reduce cost of promotion?
How to create conducive organisational climate? These require an indepth study of the
5
recent techniques developed in various functions of management. Entrepreneurs in
the normal situation do not awae ofthe management techniques. They need managerial
support to run their business efficiently and successfully Entrepreneurship
Development Institute, Management Institute, Financial Institutions and Academic
Institutions provide managerial support to the small scale industries

Marketing is the nucleus of any business enterprise. Large scale enterprises

have enough money to spend for advertisement and sales promotional activities for
marketing thier products and to increase their market share in the days to come.
They have brand value also.

Small scale industries are not in a position to compete with the large scale
industries or multinationals. Their arm length with regard to marketing is limited.
But labour-capital rates in small scale industries is larger than the large scale
industries. SSIs should be encouraged for societal development. They provide
vast employment opportunities and pave the way to solve the problem of
unemployment. SSI is a source of self-employment and wage employment. So we
should not let them sick due to lack of marketing Marketing support is needed for
the surivival of the small scale industries. Preference is given to the SSI in
Government Purchase Programme as a nurketing support.

Financial, Marketing, Managerial and technological support are needed to SSIs

not only for industrial development but also overall economic development of our
country. Export processing zones have been established with all infrastructural support
for encouraging export oriented units. It may be concluded that a well designed
support system is needed for the growth and development of small scale industry.

Nicholas Siropolis, in his book 'Entrepreneurship and Small Business

Management' has given a list of reasons why small business succeed or fail. The
reasons are given below:

i) Age: Younger people who start a business have a greater chance of failure
than older people do.

ii) Capital: Business that start with too little investment by owners have a greater
chance of failure than businesses with adequate investment by owners.

6
 iii) Economic Timing: Businesses that start during a recession have a greater
chance of failure than businesses that start during rrosperity.

iv) EducatiOn: People with no college education who start a business hake a
greater chance of failure than people with one or more years of college
education.

v) Experience: Businesses run by people without prior industry experience hake a

greater chance of failure than businesses run by people with prior industry
experience. Similarly businesses run by people without prior managerial
experience have a greater chalice of failure than businesses run by people with
prior managerial experience.

vi) Marketing: Business owners without marketing skills have a greater chance of
failure than others with marketing skills.

vii) Parents: Business owners whose parents did not own a business have a greater
chance of failure than owners whose parents did own a business.

viii) Partners: A business started by one person has a greater chance of failure than
a business started by more than one person.

ix) Planning: Businesses that do not prepare business plans hake a greater chance
of failure than businesses that do.

Nicholos Siropolis has concluded that adequate capital. economic timing of the
business, educational background and experience of the entrepreneurs in the specific
trade. marketing skills and business planning are the important factors influencing
success of a small scale industry.

Support system like entrepreneurial motivation camp and awareness camps are
required to the entrepreneurs to acquire skills with regard to marketing and preparing
result-oriented business plans. Adequate capital is an important aspect of a business.
Financial support system paves the way to get adequate capital for the business.
Economic timing of the business refers when to enter into the market. This requires
the details such as supply and demand analysis in the market, competition. number of
operators in the market, consumer behak iour etc.

7
 Entrepreneurial development programmes assist the entrepreneurs to ascertain
the above details and assess the economic timing of business.

Business plan is a foundation to start a business. Project support systems will

assist entrepreneurs to prepare their business plans.

Nicholas Siropolis has given 16 steps for preparing a business plan. They are
listed below:

i) Commit yourself
ii) Analyse yourself
iii) Choose product or service
iv) Research markets
v) Forecast sales revenue
vi) Choose site
vii) Develop production plan
viii) Develop marketing plan
ix) Develop organisational plan
x) Develop legal plan
xi) Develop accounting plan
xii) Develop insurance plan
xiii) Develop computer plan
xiv) Develop total quality management plan
xv) Develop financial plan
xvi) Write cover letter

All the above 16 steps regarding buSiness plan preparation are the core
objectives of the Entrepreneurship Development Programmes being organised by the
agencies functioning for the cause of promoting entrepreneurship.

Lecture-cum-demonstration sessions are organised with the assistance of

technocrats, experts in various fields of industries, Government departments officials,
bankers and academics in the entrepreneurship development programme for making
the entrepreneurs fit to learn the above 16 steps of business plan.

Entrepreneurship Development Programmes are organised by the Government

departments in collaboration with the financial institutions and academic institutions.
EDPs serve as a basic support system to the small scale enterprises.
 Project support systems such as financial, technical, marketing and manageria
. supports take steps for the growth and development of the small scale industries anc
try to contain their failures through project review and monitoring process and
1, revitalisation measures.

1.4 INSTITUTIONS PROVIDING SUPPORT TO THI: PROJECTS OF THE

ENTREPRENEURS:

NATURE AND TYPES

Institutions providing financial support to the industries

- Industrial Finance Corporation of India (IFO)

- Industrial Development Bank of India (IDB1)
- Industrial Credit and Investment Corporation of India (ICICI)
- National Bank for Agriculture and Rural Development (N.\BARD)
- Small Industries Development Bank of India (SIDBI)
- Industrial Reconstruction Bank of India (IRBI)
- Life Insurance Corporation of India (LIC)
- General Insurance Corporation of India (GIC)
- Export-Import Bank of India (EXIM Bank)
- State Industrial Development Corporations (SIDCs)
- State Small Industries Development Corporations (SSIDCs)
- State Financial Corporations (SFCs)
- Commercial Banks

Institutions providing marketing support to the industries

- Small Industries Development Ort.anisation (SIDO)

- National Small Industries Corporation (NSIC)
- Export Promotion Councils tFPCs
- Indian Institute of Foreign Trade (IIFT)
- Commodity Boards
- State Trading Corporation of India (STC)
- Projects and Equipment Corporations of India (PEC)
- Handicrafts and Handloom Exports Corporation of India (111 IEC
- Minerals and Metals Trading Corporation of India (MMTC)
- State Small Industries Corporations (SSIC)
- Khadi and Village Industries Commission

9
 itutions providing technical support to the Industries

apartment of Science andTechnology

►
:ouncil of Scientific and Industrial Research
industrial Technical and Consultancy Organisations
Small Industries Service Institutes
Science and Technology Entrepreneurship Parks (STEPS)
Science and Technology Entrepreneurial Development Schemes (STEDs)

Institutions providing Management, Consultancy and "[raining Support to Industries

- District Industries Centres •

- National Small Industry Extension and Training Institute
- Small Industry Development Organisation
- National Science and Technology Entrepreneurship Development Board
- Management Consultancy Organisations
- Centre for Entrepreneurship Development
- Non-Governmental Organisations

Small Scale Industries Associations appealed the new Government at the Centre
to provide the following support for the growth and development of small scale sector.

(published in The Economic Times, October 20. 1999, p.6).

i) Review and gradually phase out reservation policy in line with the Abid
Hussein Committee report.

ii) Redefine the SSI sector on the basis of employment size rather than investment
limit.

iii) If this is not immediately possible then reduce the investment limit for SSIs
from Rs. 3 crore to Rs. I crore in terms of the commitment made by the Prime
Minister.

iv) Facilitate the use of new tools such as e-commerce and enterprise resource
planning.

10
 v) Create separate national-level fund to support technology absorption by and
R&D efforts of SSIs on the lines of technology funds in Germany, Holland and
some other European Countries.

vi) Government should' not withdraw the price preference on purchases as this
mechanism exists even in the US and Korea.

vii) Maintain priority sector status for bank lending purposes.

viii) Promote private sector marketing societies and consortiums to take up the task
of promoting marketing efforts abroad.

ix) Encourage venture capital funds to invest in SSIs.

x) Set up a separate SSI ministry under a Cabinet Minister.

xi) Provide teeth to the Delayed Payment Act to remove bottlenecks faced by SSis
in receiving payments from large companies within 30 days.

According to a 1997 report of the informal study group of the Planning

Commission, capacity utilisation in SSI sector in India is an abysmal 30 percent. The
report calculated that this can easily be raised to 60 percent within 2-3 years with
realistic policy and fiscal support. All it requires is a realignment of priorities and
redeployment of funds into new priority areas. This will generate an additional
production of Rs. 400000 crore, export of Rs. 40000 crore, revenues of Rs. 70000
crore and employment of over 10 million. This also will solve the problem of fiscal
deficit and trade deficit and contribute to a double digit GDP growth and contain
inflation.

Mr. Sudhir Jalan. President of the Federation of Indian Chamber of Commerce

and Industry (FICCI), has stated that the policy of reserving items exclusively for the
SSI sector must be abolished in line with the suggestions of the Abid Hussein
Committee. He has further expressed that abolition of SSI reservation should be
accompanied by the availability of concessional finance, schemes to help technology
absorption and creation of forward and backward linkages to help the small scale
industries for their growth and development.

,- Mr. Salil De, President of the Federations of Small and Medium Industries
(FOSMI) has expressed that reservations. for SSIs should continue and the

11
 wernment should immediately issue a notification reducing the SSI investment limit
Rs. 1 crore and the Central Government should honour its 1999-2000 Budget
edge to introduce a Rs. 20000 crore credit insurance scheme for export oriented
mall scale units.

Mr. V.S.Narasimhan, President of the Federation of Associations of Small

industries in India (FASII) has suggested to reclassify the industrial units on the basis
of their investments in plant and machinery. Units having an investment of upto Rs. 15
lakh in plant and machinery should be classified as tiny units while those with
investments of between Rs. 15 lakh and Rs. 65 lakh should be termed SSIs. Medium
scale industries should have investments of more than Rs. 65 lakh but upto Rs. 10
crore and bigger companies should be classified as large scale.

Mr. Dadi E. Mistry, Chairman of the Small Industry Committee of the

Confederation of Indian Industry (C11) has opined that the need of the hour is a
separate policy for Tiny and Small Sector Service/Business Enterprises, which account
for 95 percent of all small scale units in the country. He has insisted to initiate cluster
development measures to address the special needs of the tiny units in areas like
technology upgrade, skill enhancement, information dissemination and entrepreneurial
value addition.

Mr. Bhaskar, President of the Bengal National Chamber of Commerce and

Industry has appealed to the Government to promote incentive-oriented R&D schemes
ftir SSIs. He wants the new Government to evolve a new banking policy to ensure
greater funds flow to SSIs.

Mr. Mukesh Patel, President, Gujarat Chamber of Commerce and Industry has
said that one of the biggest problems of SSIs which the new Government needs to
tackle on a priority basis is the access to finance. We currently have a situation where
banks are flush with funds but are extremely conservative in lending to SSIs. Last
year, the Finance Minister, Mr. Yeshwant Sinha, had talked of an insurance guarantee
scheme for bank lending to the SSI Sector, which would be funded by a consortium of
financial institutions. Insurance guarantee scheme needs to be implemented. It will
greatly ease the problems of the small scale sector.

Support needed to Foundries

Mr. S.C.Dugar, Vice-President, Indian Foundry Association has appealed to

the Central Government to implement the recommendations of the' Raia Chellialv

12
 Committee regarding clubbing of excise duty and sales tax. He has opined that the
proposed combined duty should be pegged at lower level and slapped on single point.
If this is done, foundry units will get relief from the excise and sales tax burden which
altogether works out to 23-24 percent, including 16 percent excise and 4 percent sales
tax along with a 10 percent surcharge on sales tax on cast iron castings.

Bank interest rate should be reduced to 12 percent against the existing rate of 16
percent in compliance with the international trend.

• Start work immediately on improving infrastructure, particularly in the fields of

communication, surface transport and power sectors.

• Support needed to Leather Industry

Mr. Nan Kalwani, Chairman, Leather Goods Panel and Advisory Committee of
Council of Leather Exports has stated the following as the support system needed
immediately to the leather industry for its growth and development:

The Essential Commodities Act should be extended to the export sector to ban
labour unrest, strike or disruptions in production in any manner to ensure
continuous production for export.

Immediate release of Rs. 1100 crore Tanneries Modernisation Fund by the

Industry Ministry.

- Council of Leather Exports should be allocated composite fund equivalent to 10

percent of annual leather exports earnings atleast for a period of five years for
overseas market promotion and exploration of new markets.

A new Cabinet rank ministry, independent of the Commerce Ministry should be

formed only for boosting exports.

Cheaper export credit at an international rate of 7 percent.

India's Seaports to be upgraded on the line of Hong Kong Ports. For this the
Government should create facilities with foreign collaboration.

rr 13
Support needed to Rubber Industry

Mr. S.K.Sarkar, Chairman, Eastern Regional Committee of All India Rubber

Industries Association has expressed that the Government should abolish anti-
dumping duties on import of essential raw materials, liberalise import of machinery
and equipment including second hand machinery, provide incentives on cost of
modernisation and technological upgrade, reduce number of tariff slabs and revise
labour laws.

1.5 INCENTIVES AND SUBSIDIES

Incentives and subsidies are provided to encourage the entrepreneurs to enter

into business. It motivates the entrepreneurs to take a right decision regarding setting
up of small scale enterprises and act upon it. Subsidy is a single lump sum given by
the Government through financial institutions to the entrepreneurs for a specific
3roject. Incentive is also a monetary benefit that will be eiven continuously to the
entrepreneurs to the same project.

The objectives of providing incentives and subsidies are'

(i) to create regional balanced industrial development,
(ii) to promote entrepreneurship,
(iii) to motivate the first generation entrepreneurs to enter into new
ventures,
(iv) to provide competitive strength to the small scale industries and
(v) to serve as a stimuli for industrial development.

Vasant Desai in his Book 'Dynamics of Entrepreneurial Development' has listed

the schemes of Incentives and Subsidies in operation.

1.5.1 Incentives in operation for Industrial Development

i) Interest free loans

ii) Exemption from property tax
iii) Incentives to NRIs
v) Special incentives to women entrepreneurs
✓) Interest free sales tax loans
✓i) Sales tax exemption
Land and Buildings at concessional rate
iv) Price preference to SSI units

14
 ix) Exemption from stamp duty
x) Provision for seed capital
xi) Allotment of developed/constructed sheds in industrial estates
xii) Allotment of controlled or subsidised raw materials
xiii) Excise concessions

1.5.2 Subsidies in operation for Industrial Development

i) Export/Import subsidies
ii) Subsidy for R&D works
iii) Capital investment subsidy
iv) Transport subsidy
v) Interest subsidy
vi) Subsidy for power generations
vii) Subsidies to artisans and traditional industries including handlooms
viii) Subsidy for procuring testing equipments
ix) Subsidising the cost of market survey
x) Subsidising the cost of undertaking feasibility studies
xi) Subsidy for quality standards

1.53 Incentives to Exporters

i) Concessional export finance

ii) Duty drawback
iii) Duty exemption scheme
iv) Excise rebate
v) Marketing development assistance
vi) Export promotion of capital goods scheme
vii) Income tax exemption

1.5.4 Incentives and Subsidies provided by the Government of Tamil Nadu to the
Industries

With the objective of fostering the pace of industrialisation, Government of

Tamil Nadu has launched its New Industrial Policy in January, 1992. In the new era of
economic liberalisation encompassing the entire gamut of industrial development.
Government of Tamil Nadu offers a range of incentives as given below: (The doctoral
dissertation on 'NRI Investments by P.K.Muthappan is the main source for this part of
lesson).

15
 1.5.4.1 Capital Investment Subsidy

(a) Investment subsidy will be given at the rate of 20% on fixed assets subject to a
maximum of Rs. 20 lakhs for all new industries set up in the 31 most backward
taluks.

(b) Investment subsidy will be given at the rate of 15% on fixed assets subject to a
ceiling of Rs. 15 lakhs for new industries set up in 82 backward taluks of the State
and in all industrial estates and complexes developed by the government agencies.

(c) A higher rate of investment subsidy will be extended to certain thrust industries
located anywhere in the State.
Electronics: 20% of fixed assets subject to a maximum of Rs. 35 lakhs
Leather: 20% on fixed assets subject to a maximum of Rs. 20 lakhs.

(d) A special capital subsidy of 10% of fixed assets subject to a ceiling of Rs. 15 lakhs
will be extended to medium and large industries set up anywhere in the state in the
following categories; Automobile spare parts, Drugs and Pharmaceuticals, Solar
energy, Pollution control equipment, Export oriented gold jewellery and diamond
processing units, Jute industries, Sports goods and accessories. Food processing
industries and, Cost effective building materials.

Small scale industrial units in the above thrust industry groups are eligible for
the above special capital subsidy at a higher rate of 20% of fixed assets subject to a
maximum of Rs 15 lakhs. irrespective of their location.

(e) Tourism and related industries are eligible for various concessions, incentives and
subsidies as applicable to other industries. New tourism projects will be extended a
capital subsidy at the rate of 10% of total investment excluding cost of land subject
to a maximum of Rs.10 lakhs per project. Besides, capital subsidy at 15 % for
purchase of generators to be installed in new tourism project with a seperate
ceiling of Rs.5 lakhs is also given.

(f) New industrial units which employ more than 30% women in their work force will
be eligible for an additional subsidy of 5% upto a ceiling of Rs. 5 lakhs.

(g) A pioneer industry capital subsidy of Rs. 5 crores in a single project proposed,
being set up as a first unit declared backward and most backward areas.

r-
16
 Nclx units with capital investments in eligible fixed assets in a single project
proposed exceeding Rs. 25 crores being set up anywhere in Tamil nadu as also
existing industrial units expanding and/or diversifying with an additional fixed capital
investment in a single project proposed exceeding Rs.25 crores will be eligible for
higher capital subsidy of Rs.25 lakhs.

(h) In order to encourage units to have reliable power supply, subsidy for installation
of new generation for captive use to the extend of 15% of cost upto a ceiling of Rs
5 lakhs is also extended.

(i) To attract mega projects into the State, attractive capital subsidies have been
introduced as hereunder to industries set up anywhere in the State;

For projects with an investment of Ks. 50 crores and above but below
Rs.100 crores - Rs 25 lakhs.

For projects with an investment of Rs. 100 crores and above but below
Rs.200 crores - Rs.50 lakhs.

For projects with an investments of Rs 200 crores and above- Rs. 1 crore.

(j) A power subsidy with following tariff concessions has been introduced for nee✓
industries set up in Tamil Nadu;

1st Year - 40%; 2nd Year - 30%; and 3rd Year - 20%.

(k) A special subsidy of 10% of the value of assets created towards setting up of
effluent treatment plant with a ceiling of Rs. 2 lakhs will be made available for
installation of effluent treatment plant by the existing tanneries. The above subsidy
is also extended to existing industries, industries undertaking
expansion/diversification/modernisation.

1.5.4.2 Sales tax Concessions

(a) New units set up in 31 most backward taluks in the State are eligible for full
• waiver of sales tax dues for a period of 5 years or deferral for 9 years subject to a
ceiling of total investment made in fixed assets.

17
 b) Existing industrial units undertaking expansion in most backward taluks and above
industrial esiatesicomplexes are also eligible for the above concessions of
waiver/deferment.

(c) New industrial units set up in 82 backward taluks are eligible for sales tax deferral
for a period of 9 years subject to a ceiling of 100% investments made in eligible
fixed assets.

(d) Existing units in the 82 backward taluks undertaking expansion/diversification are

eligible for deferral of sales tax for 9 years subject to a ceiling of 80% of the
additional investment made in fixed assets.

(e) New units set up in other areas (industrially forward) will be eligible for deferral
of sales tax for 5 years, subject to a maximum of 60% of total investment made in
fixed assets. Existing units undertaking expansion in other areas (industrially
forward) are eligible for deferral of sales tax for 5 years upto 50% of the additional
investment in fixed assets made.

Small scale industries have been getting excise exemption or concession. Till
1997-98 any SSI unit whether registed or unregistered was entitled to full exemption
from duty upto the annual turnover of Rs. 30 lakhs and concessional duty upto the
turnover of Rs. 100 lakhs. For the first time in 1997-98 concessional duty at flat rates
of 3% upto the turnover of Rs. 50 lakhs and 5% between Rs. 50 lakhs to Rs. 100 lakhs
was prescribed.

1.5.4.3 Subsidy by Tamilnadu Industrial Investment Corporation (TIIC)

Area Subsidy

The Government of Tamilnadu has declared 82 taluks as backward taluks and

31 taluks as most backward taluks. All industrial projects in the 31 most backward
taluks are eligible for a 20% investment subsidy subject to a maximum of Rs. 20.00
lacs. All industrial projects set up in the 82 backward taluks are eligible for a 15%
investment subsidy subject to a maximum of Rs. 15.00 iacs. in addition to the above, a
capital subsidy of 15% subject to a maximum of Rs. 15.00 lacs is extended to all
industrial projects set up in industrial estates developed by SIPCOT, SIDCO, MEPZ,
MMDA. Directorate of Industries and Commerce and other Cooperative industrial
estates recognised by the Government of Tamilnadu.

18
 An industrial project. however, can not mail both area subsidy and as well as
product subsidy.

Ineligible industries

The following types of power intensive industries under Small Scale Sector are
not eligible for subsidy:

a) Iron and Steel Industry

b) Aluminium Smelting
c) Calcium Carbide etc.

The following resource based and power intensive industries under

Medium/Major industries are not eligible for subsidy.

(a) Granite Poisoning

(b) Textile processing, texturising and crimpting etc.

(c) Cement, sugar. textiles, flour mills, edible oils and solvent extraction units, rice
mills, miningiquarrying, distilleries, breweries and malt extraction.

(d) hotel projects with investment above Rs. 100 lacs and those set up within the
Corporation limits of Madras, Madurai and Coimbatore.

(e) Ceramic manufacturing and

(f) Power intensive industries as declared by INEB.

Locational Policy Restrictions

Normally steel capital subsidy for backward areas is not available for
medium/large industries within 50 KMs radius of Madras city limits. 15 KM radius of
Madurai and Coimbatore City limits or within the Municipal limits of other
Municipalities/ Municipal Townships. The above locational policy restrictions will not
be applicable to industries set up in industrial estates promoted by Government
Agencies including SIDCO, MMDA, MEPZ, SIPCOT complexes, recognised Co-
operative industrial estates, estates promoted by Directorate of Industries and
Commerce even if they fall within the 50 KMs radius of Madras and 15 KMs of

19
Madurai and Coimbatore. The above lccational policy restrictions will not apply to
SSI units.

Product Subsidy

To encourage development of thrust industries, special product subsidy is

available to selected products/industries set up anywhere in Tamilnadu. The following
are the details.

i) Electronic Industries

All Electronic units are eligible for special subsidy of 20% subject to a ceiling
)f Rs. 35.00 lacs.

ii) Leather Industries

All leather units are eligible for a special subsidy of 20% subject to a maximum
of Rs. 20.00 lacs.

iii) Special Subsidy for Selected Industries

Medium and Major

A special subsidy of 10% on fixed assets and subject to a maximum of Its.

15.00 lacs will be available to medium and major industries for following selected
categories of thrust industries set up anywhere in Tamilnadu.

i) Automobile -.pare parts;

ii) Drugs and Pharmaceuticals;
iii) Solar energy equipments and other non-conventional energy devices;
iv) Export oriented gold jewellery making and diamond processing units;
v) Pollution Control equipments;
vi) Jute industry• in 6 selected taluks; viz., Ambasamudram (Nellai Kattabomman
District), Madurai (Madurai District), Musiri (Trichy District), Kumbakonam
(Thanjavur District), Panruti (South Arcot District) and 'Chengalpattu (Chengai MGR
District);vii) Sports goods and accessories;
viii) Food processing industry and
ix) Cost effective building materials like aluminium or PVC doors and windows,
window frames, etc.

20
 If the above selected categories of thrust industries fall under SSI
limit, they are
_iigible for a higher special subsidy of 20% subject to a maximum of Rs. 15.00 lacs
set up anywhere in Tamilnadu.

Tourism Projects

New tourism projects in the following categories will be extended a capital

subsidy of 10% of the total investment (excluding cost of land) subject to a maximum
of Rs. 10.00 lacs per project.

a) One star, two star and three star hotels with investment less than Rs. 100 lacs to
be set up in Tamilnadu, excluding the Corporation limits of Madras, Coimbatore and
Madurai.
b) Amusement Parks.
c) Approved Tour Operators (For A/c Coaches).
d) Golf Courses;
e) Restaurants approved by Government of India/Govt. of Tamilnadu.

Generator Subsidy

New gener.t:ors purchased for captive use will be granted subsidy of 15% with a
monetary ceiling of R,. 5.00 lacs. This subsidy will be available to existing industries
irrespective of the:r location. This generator subsidy will not be available for
conventional resource based industries and power intensive industrial units.

Special Subsidy for Effluent Treatment Plants

A special subsidy of 10% subject to a monetary ceiling of Rs. 2.00 lacs will be
available for installation of effluent treatment plants by the existing industries.

Subsidy for Employing Women Workers

New industrial units which employ women workers more than 30% of their total
workers' strength are eligible for additional capital subsidy of 5% of investment in
fixed assets subject to a ceiling of Rs. 5.00 lacs. This subsidy is available to all small
s-ale/medium/major industrial units irrespective of their location.

This subsidy will be available for following industries:

21
 1) Matches
2) Garments
3) Leather Goods
4) Hosiery and
5) Food processing.

SALES TAX CONCESSION

New Units

New small/medium/Major industries set up in 31 notified most industrially

hackward taluks, SIPCOT industrial complexes at Pudukottai, Manamadurai and
luticorin and Dr. Vikram Sarabhai Electronic Estate and Electronic City at
Sholinganallur in Chengai MGR District are eligible for full waiver of sales tax dues
for a period of five years upto the ceiling of total investment made in fixed assets.
Alternatively, the industrial units can avail deferral of sales tax payment for 9 years to
the full extent of total investment made in fixed assets.

New small, medium and major industries set up in 82 notified industrially

backward taluks, other industrial estates promoted by SIDCO, SIPCOT, MMDA,
MEPZ and Co-operative Industrial Estates promoted by Directorate of Industries are
eligible for deferral of sales tax for 9 years to the full extent of total investment made
in fixed assets.

New units set up in other areas other than mentioned above will be eligible for
deferral of sales tax for five years subject to a 'maximum of 60% of the total
investment made in fixed assets.

Expansion/Diversification

Existing industries undertaking expansion/ diversification in the most backwa_i

taluks are eligible for full waiver of sales tax which is considered for a period of five
years or deferral upto 9 years subject to ceiling of additional investment under
expansion/diversification.

Existing units located in industrially backward taluks and in estates developed

by Government agencies including MEPZ, MMDA, Co-operative industrial estates
rromoted by Directorate .3f Industries are eligible for deferral of sales tax for 9 years

S
 and th total amount thus given shall not exceed 80% of the additional investment
• made in fixed assets.

Existing units located in "other areas" will be eligible for deferral of sales tax
for five years upto 50% of additional investment in fixed assets made in the case of
expansion/diversification of the existing industries.

Tourism Projects

Deferral of Sales Tax for a period of five years on restaurant sales is given to
eligible hotels and restaurants ie., one star, two star and three star hotels with an
investment of less than Rs. 100 lacs to be set up in Tamilnadu excluding the
Corporation limits of Madras, Coimbatore and Madurai and restaurants approved by
Government of India and Government of Tamilnadu.

1.6 PROJECT SUPPORT SYSTEM: ROLE OF GOVERNMENT

DEPARTMENTS.

Project support system refers to the assistance (financial, technical, marketing

and managerial) provided by individuals and organisations to the entrepreneurs for the
industrial development in our country. The government departments play a significant
role in promoting industrial development, particularly development of small scale
industry.

Union industry ministry has been set up at the central Government for creating
necessary infrastructure for the development of industry. Industry ministry has been
created at state level for taking necessary steps to support the industrial development.
District Industry centre has been established at District level for providing necessary
support to industria:ise the entire district and to bridge the gap between urban and
rural through industrialisation.

Union Industry Ministry announces trade policy periodically. It introduces new

schemes providing necessary support to the industries in various sector of cur
economy . State Governments announce various types of assistance to the industries in
their budgets.

Of late, the concerned government department is treated as a partner to the

business. Incentives such as, subsidy for purchase •of know-low,interezt free loans,
interest free sales tax loan, sales tax exemption, provision of seed capital, exemption

23
 from stamp duty, excise concessions. land and buildings at concessional rates are
provided by the state Government for the cause of entrepreneurship development.
..Interest subsidy, subsidy for R&D works, transport subsidy, subsidy for power
generation, subsidy to artisans and other traditional industries, subsidy for conducting
market survey, feasibility studies and availing consultancy services are the various
types of subsidies provided by the central and state Government to the industrial
enterprises

The Government departments concentrate on creating infrastructural facilities

and concessional and timely finance for industrial development. In Tamil Nadu, small
Industries Development corporation, State Industries promotion corporation of
Tamilnadu provide necessary infrastructure for industrial department.

The two organisations have established industrial estates wit!, all

infrastructural facilities in various parts of the state for the benefit of the
entrepreneurs. The Tamilnadu Industrial Investment Corporation (TIIC) provides
financial assistance to the various types of projects. The Industrial and Technical
consultancy Organisation of Tamilnadu provides technical support needed to the
industries.

The role of Government departments in the support system of the industrial

projects is given in the Diagram.I

There are two departments functioning under the Ministry of Industry. They
are Directorate of Industries and Small Scale Industry Board. National Small
Industries Corporation is also functioning under the Ministry of Industry. The support
provided by the Directorate of Industries are, raw material quota, training facilities,
establishing industrial estates. technical services, import regulation and financial
assistance. District Industries Centres are also functioning under the control of
Directorate of Industries.

Small Scale Industries Development Organisation (SIDO) is headed by the

Development Commissioner provides technical support, training facilities, financial
support and establishes industrial estates for the benefit of entrepreneurs. SIDO has
established Small Industries Service Institute in all the States for extending technical,
managerial and marketing suppor: for the growth and development of small scale
industries. Extension centres and branch institutes are also set up under small
industries service institute for providing necessary• support to the small scale sectoi.

24
 SUPPORT SYSTEM (GOVERNMENT)

CENTRAL
GOVERNMENT
DIRECTORATE SMALL SCALE MINI TRY OF
OF INDUSTRIES IND. BOARD COMMERCE &
INDUSTRY
STATE COOP. &
BANKS DEV. COM. S.S.I MINISTRY OF
SIET TECH SERVICE INDUSTRY
I. RAW MAT. INST. ECO. INVESTIGATION
QUOTA BUSINESS MGT. NATIONAL
2. IMPORT TRG. IND. ESTATE SMALL
3. TRAINING FINANCE (COOP)
4. INDUSTRIAL IND. CORP.
HIRE
ESTATE
PURCHASE
5. TECHNICAL S.I.S.I. TECH. SERVICE OF M/C
SERVICE ECO. INVESTIGATION
6. IND. CORP. MARKET RESEARCH AID
7. FINANCE SURVEY GOVT.
DEVELOPMENT LIASION R.M
DIST. INDL. INFORMATION SUPPLY
CENTRES SERVICE TRAINING
CERTIFICATION REGIONAL
FOR GT BRANCHES
PROTOTYPE
EXTN. CENTRE CENTRES
BR. INTr

25
 SUPPORT SYSTEM (NON-GOVERNMENT)

DIST. IND. S.I.S.I. BANKS & STATE RESEARCH

CENTRE BRANCH CORP. CENTRE

VOLUNTARY ORGANISATION
OR INSTITUTION

TRAINING

COORDINATION BETWEEN DIFFERENT ORGANISATIONS

MANAGEMENT & TECH. CONSULTANCY, FOLLOW UP

FEED BACK

LINKAGE AGENCY

PRE-TRAINING MOTIVATION IDENTIFICATION, FOLLOW-UP

ENTREPRENEURS

Source: Vasant Desai, Dynamics of Entrepreneurial Development

Diagram .1

1.7 PROJECT SUPPORT:

ROLE OF STATE GOVERNMENT

Here the support provided by the Government of Tamil Nadu for promoting
various projects of the entrepreneurs is discussed in detail. The similar support is
attempted in other State Governments.

To assist domestic and overseas entrepreneurs, Tamil Nadu Government has

established several industrial promotion agencies. Information and guidance regarding
project ideas, incentives, market facilities and procedure for starting industries in
Tamil Nadu are provided in a friendly atmosphere. Assistance regarding identification
and acquisition of land, water and power is also available. A brief account of support
provided by the industrial promotion agencies in Tamil Nadu is presented here.

26
 1.7.1 Tamil Nadu Indiari,it Guidance and Export Promotion Bureau (Guidance)

This is a sinQle window agency for investors in Tamil Nadu promoted by the
Government of Tamil Nadu. GUIDANCE is a nodal agency for dealing with all
matters relating to NRI and Direct Foreign Investment in the State. It serves as an
effective interface between promotional agencies and investors. It presents reports and
recommendations to the government on policy matters to encourage the investing
community.

The most basic service from GUIDANCE is information dissemination. It is a

store house of all industry-related information including specific project opportunities,
procedures involved in setting up projects and the incentives available. GUIDANCE
also identifies focussed opportunity areas and location, specific projects and provides
information on markets, processes and sourcing of technology. It employs the services
of professional consultancy firms to upgrade the quality of its services and to address
diverse industry needs.

1.7.2 STATE INDUSTRIES PROMOTION CORPORATION OF

TAMIL NADU (SIPCOT)

SIPCOT, an establishment of Government of Tamil Nadu has been a catalyst in

the development of medium and large scale industries in Tamil Nadu. It has helped to
foster industrial development in backward and underdeveloped areas. SIPCOT also
provides institutional finance with refinance assistance from Industrial Development
Bank of India and Small Industries Development Bank of India for meeting fixed
capital investments in industry.

SIPCOT mainly caters to the medium and large scale industries. Its activities
comprise the following:

(I) Provision of financial assistance to medium and major industries under

reference from IDBI/SIDBI.
(ii) Channclizing incentives from the State Government to industries.
(iii) Construction of industrial complexes to act as growth centres.
(iv) Monitoring of letter of intents and providing escort services to medium and
large industries.

SIPCOT's financial assistance to medium and large industries is in the form of:

27
 147.2.1 Normal Term Loan Scheme

SIPCOT extends term loan assistance to new units'

expansion/diversificationimodemisation schemes as well as for purchase of balancing
equipment. SIPCOT can extend long term loans upto Rs. 15 million for project outlay
not exceeding Rs. 50 million.

1.7.2.2 Equipment Refinancing

Assistance under this scheme is available to the existing industrial concerns for
purchase of identifiable equipment. The existing unit should have been in operation at
least for four years and should have made profits at least during the preceding two
financial years. The promoters are expected to raise a contribution of minimum 30%
and the loan component will not exceed 66% of the total outlay in normal case and
60% in respect of projects like hotels, textiles, hospitals and solvent extractions. The
application for assistance has to be submitted along with an investigation fee of 0.25%
of the term loan applied subject to a minimum of Rs. 5,000 and with a ceiling of Rs.
35.000.

SIPCOT offers guidance to medium scale entrepreneurs for selecting a suitable

venture. Further, it offers services to enable the entrepreneurs to ohtain consents and
clearances for their respective projects.

1.7.3 TAMIL NADU INDUSTRIAL INVESTMENT CORPORATION

LIMITED (TIIC)

TIIC was incorporated in 1949 as a Company under the Companies Act, to

foster industrial development of Tamilnadu. It provides financial assistance to Small
Scale and Medium Scale Industrials unit mainly for the creation of fixed assets.

Types of Assistance

TUC offers long and medium term financial assistance in the following forms:

a) Term Loans
b) Term Loan and working capital assistance under the Single Window Scheme.
c) Lease financing for machinery/equipments
d) Hire Purchase financing for machinery/equipments
e) Merchant Banking Services

28
 Various Schemes of the Corporation for Financial Assistance

i) General Scheme

Under the general scheme, term loan assistance is provided for small and
medium scale industrial units to set up new industries and also for expansion,
modernisation and diversification of existing units.

ii) Nursing Home Scheme

The Corporation provides assistance for construction of nursing homes and

purchase of electromedical equipments in all areas including metropolitan/Corporation
areas with a minimum bed strength of 20. Non-medical personnel are also eligible for
assistance under this scheme.

iii) Transport Scheme

The Corporation provides loans for purchase of Transport vehicles viz., delivery
vans, lorries, trailers, tempos etc., for transportation of goods. it also finances the
purchase of autos, tourist taxis, pickup vans and passenger buses having route permits.

iv) Generator Scheme

Assistance is given for installation of power generating units for captive use
the industrial units. of

v) Equipment Refinance Scheme (E.R.S)

If an industrial unit is a well established with good Nkorkine results and a high
reputation and is in urgent need of funds for the purchase of equipments/machinery
(indigenous or imported), term loans can be considered expeditiously under
scheme. this

For eligibility, units should:

i) Have been in operation for atleast 4 years;

ii) Have earned profits and/or declared dividend on equity shares during the
preceeding two financial years, and;

29
 iii) Not be in default to any Institution or Bank.
iv) Hotel Scheme

Financial assistance is considered for setting up of hotels/motels/restaurants in

order to promote tourism and also for expansion and renovation of the existing hotels.

vii) Single Window Scheme

All eligible small scale units including tiny units, whose project outlay is within
Rs. 50.00 lacs would be eligible for both term loan and working capital assistance
under the scheme.

viii) Ex-Servicemen Scheme

A special scheme is being operated in collaboration with SIDBI and Ex-

Servicemen Board. The total cost of the project under the scheme shall not exceed Rs.
15.00 lacs. Promoter's capital under the scheme shall range from 10% to 18.5% and
soft loan upto 15% is considered. The applications shall be routed through the Ex-
Servicemen Board.

ix) Quality Control Scheme

The Corporation provides assistance upto a maximum of Rs. 7.50 lass per
project on soli terms to SSI units to establish facilities for testing and quality control.

x) Hire Purchase Scheme

Existing and financially viable SSI/MSI units with good proven track record can
avail H.P. for purchase of machinery equipments and route buses. New units floated
by existing reputed group of companies will also be considered for assistance on case
to case basis. Assistance shall range from a minimum of Rs. 5.00 lacs to a maximum
of Rs. 250.00 lacs.

xi) Lease Financing Scheme

Existing and financially viable SSI/MSI units with good proven financial track
record and new units in deserving cases are eligible for financial assistance under the
scheme. Assistance shall range from a minimum of Rs. 5.00 lacs to a maximum of Rs.
250.00 lacs.

30
 xii) Merchant Banking Division

TUC has drawn up plans to provide Merchant Banking Services for offering
various other financial services, like Syndication of Debt/Equity investments,
underwriting of shares, Listing of securities in S.E.I., OTCEL, etc.,

Promoter's contribution to Project Cost (PC)

The minimum Promoter's Contribution prescribed is 25% of project cost.

However wherever subsidy is not available, then minimum Promoter's Contribution
shall be 33 1/3%.

1.7.4 TAMIL NADU INDUSTRIAL DEVELOPMENT CORPORATION

LIMITED (TIDCO)

TIDCO has been established by the Government of Tamil Nadu with the
following objectives:

(i) Identification of new industrial opportunities in Tamil Nadu.

(ii) Formulation of the nPw project concepts based on the available resources and
the needs of the State.

(iii) Identification of technology both indigenous and foreign for successful

implementation of the projects.

(iv) Assisting the private promoter in obtaining various government approvals.

(v) Offerine further assistance after commissioning for trouble shooting and
stabilization to reach profitable operations.

TIDCO offers the following schemes of assistance:

(i) Joint sector scheme provides for TIDCO's participation of 26% of equity
share capital of a new venture against private promoters' equity of 25%.
In (ii) Associate sector schemes pro-
1 for TIDCO's participation of 11% of equity
eft share capital of a new venture, against private promoters' equity of 40%. In
ye• these schemes, 49% of equity share capital is offered to public. Long term
...:
Cl)
31
 loans and subsidies complete the project financing. Eligible project should
have a minimum capital outlay of Rs. 50 million.

(iii) Under the Escort sector scheme. TIDCO assists the entrepreneurs in securing
various clearances from the State and Central Government agencies. This is
purely a service function. TIDCO subscribes for I% of the equity capital of
the project but will not participate in the management of the project as done
in the case of joint and associate sectors.

TIDCO has been implementing projects in diversified areas such as manufacture

of cement, steel, fertilizers, chemicals, petrochemicals, drugs and formulations,
engineering goods, finished leather and shoes, industrial explosives, T.V. sets and
watches, and helped a long way in accelerating industrial growth in the State
especially in backward areas.

1.7.5 ELECTRONIC CORPORATION OF TAMIL NADU (ELCOT)

The Electronic Corporation of Tamil Nadu (ELCOT) has been set up to nurture
and stimulate the growth of the electronics industry in Tamil Nadu. Towards this
objective, ELCOT has been promoting joint ventures, mainly with technocrat
entrepreneurs. ELCOTs role extends from identification of projects to formulation of
proposals to financial participation and provision of infrastructural, marketing and
managerial support. ELCOrs stake in the equity is limited to 26%.

ELCOT also has its own manufacturing division for the manufacture of wireless
communication equipment. An in-house Technology Development Centre provides a
database on technology development to foster product development. The product
range of the joint ventures covers components, industrial products, communication
products, computer software and hardware.

1.7.6 TAMIL NADU CORPORATION FOR INDUSTRIAL

INFRASTRUCTURE DEVELOPMENT LIMITED (TACID)

TACID has been set up by the Government of Tamil Nadu primarily to provide
infrastructural facilities to industries. Industries require power, water and land. TACID
can help to serve these. TACID constructs and maintains common facilities on a co-
operative basis, e.e. effluent treatment plants, schools and colleges, recreational
facilities, commercial complexes and so forth. TACID also acquires blocks of land to
dev,elop industrial complexes with infrastructural facilities.

32
 1.7.7 TAMIL NADF SMALL INDUSTRIES DEVELOPMENT
CORPORATION LIMITED (SIDCO)

Area of operation of SIDCO are as under:

(i) Provision of infrastructural facilities for setting up small scale industries.

(ii) Distribution of key raw materials to small scale industries.
(iii) Marketing assistance to small scale industries.
(iv) SIDCO participates in tenders floated by Government Departments and
undertakings on behalf of small scale industrial (SSI) units.

(v) SIDCO arranges to supply SSI products on rate contract basis to Government
department and undertakings.

(vi) SIDCO organises buyer-seller meet between Government department and SSI
from various disciplines.

SIDCO manages more than 60 estates and provides industrial sheds of

various dimensions and also developed plots in rural and backward areas.

Under marketing assisting scheme, SIDCO helps the SSI units to market their
products to departmental and other agencies of the government under this scheme.
SIDCO has been given Export House Status to assist entrepreneurs in export
marketing.

SIDCO assesses the demand for industrial infrastructure like developed plots
and work sheds from prospective entrepreneurs through various ways such as on the
spot study, detailed enquiry of the officers of the corporation and also through
advertisements. During the VII and IX Five Year Plan period (1999-2000). SIDCO
proposes to construct a minimum of 1,375 work sheds costing nearly Rs. 515 million.

1.8 DIRECTORATE OF INDUSTRIES AND COMMERCE

The Directorate of Industries and Commerce attends to the planning and

implementation of schemes for the promotion of industries in general, and small scale
industries in particular in the State. The directorate provides various forms of
assistance to the existing and new industries through the network of District Industries
Centre.

33
 The Directorate concentrates on the following activities:

(i) Counselling and guidance for the new industries.

(ii) Registration of small scale industries and promotion of industrial co-operative
societies. This enables SSI units to obtain assistance from banks and financial
institutions.
(iii) Conducting Entrepreneurship Development Programmes.
(iv) Disbursement of State's capital, generator and other subsidies.
(v) Dissemination of industrial information and market intelligence.
(vi) Conducting techno-economic surveys at district levels.
(vii) Providing escort services to first generation entrepreneurs.
(viii) Rendering of analysis and testing facilities to various types of industries.
(ix) Implementation of centrally sponsored schemes and self employment programme-
for the educated unemployed youth.
(x) Rehabilitation of sick small industries.

1.7.9 Sanctions and Approvals

The identified growth centres in Tamil Nadu (Refer to G.O.MS.No.754) are

divided into
(i) Industrial Zone and
(ii) Non-Industrial Zone.

In Madras Mentropolitan Area (MMA) industries are to be set up basically in

Industrial Zones. There are 3 types of zones in MMA.

(A) Light industrial zone - permitting industries using upto 200 HP power with
sufficient precautions against dangerous effluents for those using more than 130
HP.
(B) Special and Hazardous Industrial Zones - permitting special/Hazardous industries.
(C) General Industrial Zones - permitting all industries not considered in (A) and (B).

Tamil Nadu Small Industries Development Corporation (SIDCO) offers built

up sheds, worksheds in Industrial Estates on hire purchase basis and developed plots at
various growth centres for small scale industries.

Industrial desirous of availing of various incentives offered by State/Central

Government have to get their units registered. Provisional Registration is issued first
to enable the entrepreneur to initiate the steps for setting up SSI unit. Final registration
is issued only after commencement of production. The table overleaf gives details of
the authorities concerned for temporary and permanent registration. Sales tax and
Excise registration, are to be done prior to the commencement of production on
commercial scale.

1.7.9.1 Registration

Subject of Authority concerneJ Authority from which

clearnance presecribed form
is available
(1 ) (2) (3)
a) Provisional / i) In districts (Outside
Final Madras City)
Registration General Manager General Manager
District Industries DIC
Centre
ii) For South Madras Assistant Director
and North Madras Industries and Commerce
Assistant Director, Department,
Industries and 'Mecco House'
Commerce Department 47, Anna Salai,
Madras - 600 002.
iii) For Central Madras
Assistant Director,
Industries and
Commerce Department
b) Sales Tax Commercial Tax Officer Commercial Tax Officer
Registration Assessment Circle
Cencerned Taluk

c) Central Excise Collector of Central Superintendent of

Registration Excise, Madras Central Excise,
or concerned area
Collector of Central
Excise, Madurai
or
Superintendent of
Central Excise,
concerned area.

35
L7.9.2 Selection of Site: Land/Shed and other Infrastructure

The authorities to be contacted for allotment of plots and sheds in various

industrial estates are given in following:

a) Allotment of Developed Plots The Tamil Nadu Small Industries

as well as constructed sheds
of different sizes on rental
or hire purchase basis in
Industrial Estates set up in
various places of the state.
Development Corporition Ltd.,
(SIDCO), 5, Greams Road,
Madras - 600 006.

b) Allotment of shed at Director of Industries and

Electronic and Instronics Commerce, Chcpauk,
Industrial Estate at Adyar Madras - 600 005.
in Madras
Hosur and Tiruchirapalli on
Hire Purchase Basis.

c) Allotment of Developed Plots State Industries Promotion

in Industrial Complexes of Corporation of Tamil Nadu Ltd.,
Ranipet, Hosur and 51 and 52, Greams Road,
Manamadurai (being set up) Madras - 600 006.

The Tamilnadu Small Industries

Development Corporation Ltd.,
(SIDCO)

Plots are of about half an acre area each and sheds alloted under Hire Purchase
arc generally 100 feet x 40 feet or 80 feet x 40 feet or 60 feet x 40 feet. On application
and payment of Earnest Money Deposit, provisional allotment order for plots/sheds
are issued. Regular allotment order will be issued after receipt of viable project report
along with information on financial and other assistances received by the entrepreneur.

On receipt of regular allotment of plot, entrepreneur has to pay 25% of the cost
of plot plus 3% service charges within 30 days. Balance amount is payable at 13.5%
interest in 3 annual instalments. For sheds 10% of the cost of land and building plus
3% service charges are to be paid on regular allotment. Balance amount is payable at

36
 13.5% interest in 16 half yearly instalments with 2 }ears moratorium. The rates of
interest vary from time to time. For further details contact the General Manager.
SIDCO or respective Development Officers at the branch offices.

ii) The table below gives the details of various authorities from which direct
clearances are to be taken by SSI-units.

1.7.9.3 Direct Clearance

Subject of Authority concerned Authority from which

clearnance presecribed form
is available
(2)

A) COMPANY FORMATION

i) Registration The Registrar of firms The Registrar of Firms

as a firm Chennai Inspector General of
Registration, Rajaji
Road, Chennai -600 001.
ii) Registration The Registrar of The Registrar of
as a company company companies. Block 5 &6,
1 Floor. Shastri
Bhavan, I laddows Road.
Chennai - 600 006.

B) FACTORY CONSTRUCTION

i) Permiss:on for Directorate of Town Dirccziwate of Town

Industrial use -and_Country Planning and Country Planning
(not required
for Industries
in Central and
primary villages;
Industries in
growth centre/
service centre

37 •
 using upto 25HP
machinery in
industrial zones
and in
industrial areas)

ii) Building & Local authority and Local authority and

Machinery Deputy Chief Inapector Deputy Chief lnspecto
installation of Factories of Factories
licence concerned area (for concerned area
units with less than or
100 workers) Chief Inspector of
or Factories, Madras
Chief Inspector of
Factories, Madras
(for units with 100
or more workers)

C) TRADE LICENCE/RUNNING LICNECE

Executive Officer, Executive Officer,

Village Panchayat Village Panchayat
Union Union
or or
Executive Officer, Executive Officer,
Township Township
or Or
Commissioner, Commissioner,
Municipality Municipality
or or
Commissioner/Mayor Commissioner/Mayor
Corporation Corporation

D) WATER

i) Permission to Municipal Authorities Municipal Authorities

draw from
Municipality

38 .1
 ii) Lonnectiow
supply in SIDCO SIDCO
Industrial Estate

E) POWER

Power supply Superintending Engineer Superintending Engineer

Tamil Nadu Electricity Tamil Nadu Electricity
Board (TNEB) Board (TN EB)

F) EFFLUENTS TREATMENT

Effluents Treat- District Health District Health

ment & disposal Officer, Department of Officer, Department of
licence(only for Public Health concerned public concerned
14 types of district district
industries or or
listed as Director of Public Director of Public
hazardous vide Health and Preventive Health and Preventive
G.O.No.291). Medicine, Chennai. Medicine, Chennai.

G) NEED BASED APPROVALS*

i) Undertaking of Deputy Director Deputy Director

food processing, Office of the Food and (Food and Vegetables
canning Nutrition Board Preservation), Office
including canned and of the Food and
fruits/fishes Municipal Officer, Nutrition Board,
Municipality Ministry of Agri-
or culture and Irrigation
District Health Officer Shastri Bhavan
concerned district 35 Haddows Road.
(for non-urban area) Chennai - 600 006
and
Health Officer
Municipal Officer /
District Health Officer

4. •

39
 ii) Permission to Joint State Drug Joint State Drug
manufacture Controller, Chennai Controller, Directorate
Drugs/Cosmetics of Health service and
Family Planning,
78/82, Anna Salai,
Teynapet,
Chennai-600006.
iii)Use/Storage of Controller of Controller of Explosives
explosives explosives South Circle Shastri Building,
35, Haddows Street
Chennai - 600 006.

SIDCO assists SSI units in procurement of scarce and key raw materials.
SIDCO tenders to Government and Quasi Government Organisations on behalf of the
small scale industrial units based on negotiated rate finalised with SSI units.

The Corporation also pursues necessary action to ensure that 15% price
preference, ordered by Government, is given to SSI unit concerned. All SS1 units
desirous of availing of the Marketing Assistance Scheme have to enrol with SIDCO
on payment of an enrolment fee of Rs.100/-.

1.8 DEPARTMENT OF SCIENCE AND TECHNOLOGY (DST)

Department of Science and Technology (DST) was established in May 1971

with the important objective of promoting new areas of Science and Technology and
to be a nodal department for coordinating areas of science and technology in which a
number of institutions and departments have interests and capabilities. Thus the
department has a unique role in promoting research and development in the country.

A large number of universities, academic institutions and national laboratories

are supported by DST and their strengths brought out in the national mainstream. DST
fulfils a major task of interacting with socio-economic ministries on matters of science
and technology and these ministries are increasingly seeking advice and active
participation of DST in deciding on the S & T inputs to their programmes and
activities. The important activities of the DST are summarised below:
 1.8.1 Activities of DST

Formation of policy statements and guidelines on science and

identification of frontier areas. technology; and

Providing meteorological services to agriculture; water resources management,

disaster warning. civil aviation as well as providing
seismicity data through the
India Meteorological Department and Medium Range
through the NCMRWF. Weather Forecasting

Providing scientific services in terms of surveying and maps for defence. External
affairs, State Governments and several other developmental agencies through the
Survey Of India (S01).

- Creation of a National S &T Data Management and Information System

Accreditation of testing
to 13 autonomous high quality research institutions
specializing in different areas ranging from medical research, materials to
astronomy.

Fostering international co-operation and establishment of special joint

centres/projects.

- Catalysing and providing support to socially oriented S&T interventions.

- Entrepreneurship Development Programmes to create self-employment

opportunities, specially for those with S&T background.

Popularisation of science and technology among the people and stimulation of a

scientific temper among our citizens.

Provide support to basic and applied research in national institutions throughout

the country and create infrastructural facilities for testing and instrumentation.

Identify and provide support to critical technology programmes.

The approach which the Department has taken in implementing its major
responsibilities is based on the following guiding principles:

41
• Promotion of research is emerging areas
• Contribution to technology development and its for future
commercialisation or large scale applications.
• Integration of scientific areas based on review, analysis and generation
• Focus on programmes based on developmental needs.
• Societal relevance
• Linkages with S&T institutions, industry and other users.
• Joint S&T projects/centres with other countries.

1.8.2 Societial Programmes of DST

The Societal Programmes of the DST are given below:

i) Science & Technology application for weaker sections

ii) Science & Technology for women
iii) Long-term programmatic support
iv) Young scientists in societal programmes
v) Scheme for application of S&T for the development of scheduled castes
vi) Integrated waste management
vii) Science communication and popularisation
viii) S&T entrepreneurship Development and employment generation
ix) Natural resources data management system.

National Science Technology Entrepreneurship Development Board

(NSTEDB) established by the Government of India in 1982 in the Department of
Science & Technology has been following entrepreneurship among Science &
Technology persons with a view to generating income, creating employment and
mobilising resources.

1.&3 Promoting, Entrepreneurship by DST

The following programmes are sponsored by the DST for promoting

entrepreneurship among Science & Technology persons:

42
 1.83.1 Entrepreneurship Awarenes Camps

In order to create an awareness about various facet of entrepreneurship as an

alternative career option among students and faculty of eneineering and science
courses, entrepreneurship awareness camps of 2-3 days duration are sponsored by
NSTEDB.

1.8.3.2 Enterpreneurship. Development Programmes

Entrepreneuship Development Programme aims at exposing S&T

graduates/Diploma holders to the essentials of conceiving, planning, initiating and
successfully propagating an economic activity through classroom and field training
besides inculcating entrepreneurial ability in them using motivational inputs.

1.8.3.3 Science and Technology Entrepreneurhsip Development Scheme

With a view to identifying and documenting specific opportunities, primarily

for effective utilisation of local resources in backward districts of the country, the
S&T Entrepreneurship Development Scheme was launched in 1985-86. This scheme
aims at identifying location specific entrepreneurial opportunities for S&T persons.

1.83.4 Science and Technology Entrepreneurs Parks

This scheme envisages establishment of STEPs in and around select

educational and research institutions in the country after identifying their expertise and
available infrastructure. STEPs bridges the gap between the industry and academic
institutions.

The concept of STEP was evolved by NSTEDB to provide the 'missing links'
among university, research institute and industry. Necessary facilities are developed in
the STEP premises and made available for the benefit of existing and potential
entrepreneurs. STEPs are jointly sponsored by DST, Financial Institutions, State
Governments, Commercial banks, Parent institutions and Industry.

1.8.3.5 Entrepreneurship Development Cells

The concept of entrepreneurship development cells (EDC) was evolved by

NSTEDB to institutionalise entrepreneurship. The EDCs in S&T institutions are
•

43
initially supported by NS1EDB and later arc expected to he treated as an independent
department of the parent college/university.

1.8.3.6 Employment Generation

A new scheme called Mass Employment Generation through science &

technology was launched in 1990-91 as an experimental project. This programme aims
at evolving a mechanism for job generation through S&T methods and by organising
scientifically designed skill Development Training Programmes for unemployed youth
after identification of opportunities in both wage as well as self employment avenues.

The DST under its scheme on 'Drugs and Pharmaceuticals Research' supports
collaborative research and development projects jointly submitted by drug companies
and the academic/national institutes.

The Technology Development Board of the DST provides financial assistance

to industries and other agencies for attempting development and commercial
application of indigenous technology to wider domestic application.

The projects include drugs and pharmaceuticals, engineering and electronics,

chemicals and lubricants, bio-fertilizers and bio-pesticides, telecommunications etc.
and technology providers for these projects include national laboratories, academic
institutions and in-house R&D units in the industry recognized by the Government.

The DST through its scheme of development of State Councils for Science
and Technology initiated during the Sixth Plan has been assisting the states and union
territories for the purpose of using science and technology for their economic and
social development and strengthening R&D base.

1.9 Indian Investment Centre

The Indian Investment Centre (IIC) was established in the year 1961 at
New Delhi with a branch office in New York, to facilitate foreign investment. It
undertakes preparing analytical studies regarding the scope for foreign investment in
the specific industrial field.

This type of studies are based on primitives and specific case studies of joint
venture. IIC conducts international seminars/conferences periodically. Industrial and
business heads of various countries "will participate in seminars and discuss the kev

44
 issues of global trade and investment. It creates a platform to the Indian entrepreneurs
to discuss with the overseas industrialists about the market potentials and opportunities
of Indian products in the overseas market.

Overseas entrepreneurs will find investment and market opportunities in India.

Indian Investment Centre takes steps to open its office in Europe to have liaison with
EEC countries. Indian Investment Centre provides advisory .services to Indian
industries regarding foreign investment, joint venture and technical collaboration.

REVIEW QUESTIONS

1. What do you understand by project support system? What are the project support
facilities available to entrepreneurs?

2. Discuss the need for project support system.

3. Explain the incentives and subsidies provided by the Government for the growth
and development of small scale industries.

4. Explain the role of Government Departments in providing various support required

to the projects.

5. What are the services provided by the department of science and technology in
promoting entrepreneurship?

6. What are the services of Indian Investment Centre to the Industrial Sector?

REFERENCE BOOKS

1. Vasant Desai, 'Dynamic of Entrepreneurial Development and Management',

Himalaya Publishing House, Bombay.
2. C.B.Gupta and N.P.Srinivasan, 'Entrepreneurial Development', S.Chand & Sons,
New Delhi.
3. Nicholas Siropolis, 'Entrepreneurship and Small Business Management', Houghton
Mifflin Company, Boston, New York.
4. Gopalakrishnan P, Ramamoorthy V.E., Text Book of Project Management',
MacMillan Indian Limited, Net,/ Delhi.

45
 UNIT II

MARKETING SUPPORT

The objectives of this lesson are to present

i) Importance of marketing plan, marketing process and market positioning in

market promotion.
ii) Role of marketing intelligence in maximising market share
iii) Functions of marketing support institutions such as,
National Small Industries Corporation
State Trading Corporation
State Small Industries Development Corporation
Export Promotion Councils
Commodity Boards and
Khadi and Village Industries Commission

2.1 INTRODUCTION

Marketing facilitates the flow of goods and services from manufacturers to

consumers in the process of distribution. Marketing is a process that translates
consumer needs and desires into products and services and creates demand for such
products and services through continuous sales promotional activities.

Sherlekar S.A., in his book 'Marketing Management' has defined marketing as

"the ongoing or continuous process of defining, anticipating and creating customer
needs and wants and of organising all the resources of the enterprises to satisfy
customer demand at the desirable profit to the firm and also to the customer".

Marketing attempts to ascertain, create and satisfy the customer wants.

Satisfying consumers' needs and wants is the basic objective of marketing. Of late,
marketer tries to create demand for his new products, and fulfils the demand for the
purpose of expanding his market. Marketer should satisfy the needs of the consumers
to earn their loyalty towards the products and such loyalty will keep the marketer in
the market for a long time.

The American Marketing Association defines marketing as "the performance

of business activities that direct the flow of goods and services from producer to
consumer or user. This definition emphasises physical distribution of goods and
services from producer to users. But marketing involves product decisions, pricing
decisions, promotion decisions and marketing research to identify market potentials
and prosperity. Marketing decision precedes production decisions and investment
decisions.

P.Kotler defines marketing as the set of human activities directed at facilitating

and consummating exchanges. The salient feature of marketing is to exchange of
products and services and that transaction should satisfy the human needs and wants.

The British Institute of Marketing has defined marketing as "the creative

management function which promotes trade and employment by assessing consumer
needs and initiating research and development to meet them; it coordinates the
resources of production and distribution of goods and services; determines and directs
the nature and scale of the total effort required to sell profitably the maximum
production to the ultimate user".

2.2 FEATURES OF MARKETING

The specific features of marketing are given below.

i) It is a creative management function

ii) It initiates research to assess consumer needs and plans to fulfil the needs_
iii) It promotes trade and employment
iv) It coordinates all the functional departments for the smooth distribution of goods
and services from manufacturing centre to consumption centre.
v) It directs the efforts and sales promotional measures to be put in to sell maximum
production to the users profitably and to make the ultimate users fully satisfied.

In a nut shell, product planning, sales and distribution, advertisement and

promotion, and marketing information and research are the principle functions of
marketing.

2.3 MODERN MARKETING CONCEPT

The modern marketing concept differs from that of traditional marketing. The
changes in the marketing concepts make the marketer alert towards marketing of his
goods and services.

47
 The differences between traditional marketing and modern marketing are
presented below:

Traditional Marketing Vs Modern Marketing

Traditional Marketing Modern Marketing

1. It is product oriented It is consumer oriented

It pays attention towards It pays attention towards
Production and products production and distribution
to be marketed at any that satisfy the needs of users
Cost to users

2. Consumer satisfaction Consumer satisfaction primary

secondary. It deals with Consumer satisfaction
sequence of Products is an important aspect in
irrespective of Consumers' all stages of marketing
satisfaction. functions.

3. Profit motive primary Profit motive secondary

profit earning is consumers' satisfaction is
primary objective primary objective. Profit can
be earned through satisfying
consumers.

4. Coordination minimum Coordination maximum.

Coordination among the Marketing decision is based
functional departments on the coordination among the
is minimum. various functional departments

The modern marketing except requires product planning, process planning and
market planning. Entrepreneurs are expected to learn these three planning techniques
to withstand and survive in the competitive market. So they require some support from
inside and outside the organisation.

Hence marketing support is the basic requisite to the entiepreneurs to continue

their venture for an indefinite period of time and to stay in the market. The
multinational enterprises and large scale private sector companies conduct extensive
market surveys to assess their market potentials and market share for their products.

48
 They have strong research and development division to process the market
surveys and change the features of the products based on the findings of the survey,
whereas the small scale enterprises donot possess such research and development
facilities. There are some institutions (Central and States) and schemes to extend
marketing support to the small scale enterprises. Marketing support is the felt need of
the hour to the small scale enterprises in India, compared to the multinational
enterprises and private sector companies.

Marketing support from the various institutions alone will not increase thf
market share of the small scale enterprises and market viability. The enterprises should
equip themselves in the field of marketing through marketing plan, marketing process,
market positioning and marketing intelligence. This is their primary function to
increase market share and institutional support for marketing is secondary.

A detailed discussion has been made to elaborate the following important

aspects of marketing that pave the way to raise market share and expand market
potentials.

i) Marketing plan
. ii) Marketing process
iii) Market positioning
iv) Marketing intelligence

2.4 MARKETING PLAN

Marketing plan deals with the planning activities relating to various stages of
marketing such as product planning. production, process of production and sales
promotion. Marketing plan is a pre-requisite for marketing management. Marketing
plan reveals the objectives of the marketing department and highlights the ways and
means to achieve the objectives. Marketing plan is a guide to the marketing executives
to achieve their target within the stipulated period.

Marketing plan answers the following questions.

- Where we are now?

- Where do we want to go? and
- How do we get there?

49
Marketing Management is given below:

a) Market opportunity analysis

b) Deciding marketing objectives
c) Planning marketing strategy
d) Marketing mix
e) Monitoring marketing plan

The entrepreneurs should assess their market share in the present competitive
market and opportunities to expand their market. If the opportunities are available,
entrepreneurs should plan to capitalise the opportunities as early as -possible.
Appropriate marketing strategies should be designed to capitalise the opportunities.
Marketing mix (product, place, price and promotion) is also a guiding torch to
penetrate the market. Monitoring the marketing plan serves to achieve the objectives
of the marketing plan. Conducting market survey helps to monitor the marketing plan.

Market expansion is based on the extent of support extended by the consumers.

Mr.Vivek Nayar of Reckitt & Colman has rightly stated that "to he where the
consumer wants you to be". Reckitt & Colman is very serious about its marketing plan
to face competition from its rival Hindustan Lever. Marketing plan should be based on
the ever changing needs of the consumers.

Mr.Ranabir Mitra, finance representative of Reckitt & Colman has stated that
"we are working as a team and continuously challenging costs in order to improve
brand profitability and the results have been very encouraging". It is understood that
team work, cost control, cost reduction and brand profitability are the important
features of marketing plan.

The supply representative of Reckitt & Colman has expressed that to keep up
the consumers' trust in the brand, we ensure that we deliver on time at the right places.
Delivery of products on at the right places is the nucleus of the marketing plan.

Nestle India Limited has decided to slash prices of its popular coffee brand -
Nescafe - by akout 15 percent across the board. Nestle has also decided to introduce
special low-priced packs simultaneously.

50
 This move is part of the company's plan to drive coffee consumption in India
and expand the user base for the product. The 50 gram Nescafe classic pouch will now
he available at Rs.49 down from Rs.59 earlier (Published in The Economic Times,
dated 25.9.99). Price reduction is also one of the alternatives to drive the market. Price
reduction is also one of the factors to be considered while designing marketing plan of
the business enterprises.

Introducing need based product is one of the objectives of marketing plan. A

home remedy 'Milkysure' is a product of Macro-sure Devices Pvt. Ltd., a home testing
kit consists of a coloured dipstick that defects the presence of chemicals in milk. The
product has a yellow indicator band that turns blue if the milk is adultered, with the
colour depending with the degree of adulteration". The product 'milkysure' helps to
detects the presence of any chemical contents in milk. This product is a need based
one.

Marketing plan is a document reveals the objectives of the marketing

department and explains ways and means to achieve the objectives with integrated
effort of the enterprise.

2.5 MARKETING PROCESS

keting process is based on the marketing plan. It brings together

manufacturers and consumers for mutual benefit. Vasant Desai. in his book 'Dynamic
of Entrepreneurial Development and Management' has expressed that marketing
process starts ‘‘ith knowledge of the customer, his needs and ends with a customer
purchase and the satisfaction of those needs.

Marketing process concentrates on buyers and their behaviour towards buying.

The elements of marketing mix such as product, price, place and promotion are the
core of the marketing programme and must be integrated to ac,tieve consumer
satisfaction. Marketing mix is the fundamental for marketing process. The elements of
marketing mix arc interdependent.

They are explained below:

51
 Marketing Mix

----------------------- ------ -------------- -----

:Product mix: Trice mix: :Promotion mix: :Place mix.

-------
1. Brand 1. Pricing 1. Personal selling 1. Distribution,
2. Style strategy 2. Advertising channels
3. Colour 2. Pricing 3. Publicity 2. Physical
4. Design policy 4. Sale,. Promotion distribution
5. Product 3. Terms of
line credit
6. Package 4. Discounts
7. Warranty 5. Allowances
8. Service

23.1 Product Mix

Product is the thing possessing some utility. There are various components ir
pioduct mix. They are product line, product features (colour design, package:
branding etc. Timely launching of need-based product is the primary objective whil(
evolving product mix. Rickitt & Colman's heard 'Dettol' has been most aztivt
throughout the nineties with four important launches, Dettol plaster in 1993, Detto
liquid soap in 1994, Dettol shaving cream in 1997 and the most significant launch ir
1999. the Dettol fresh soap.

Timely expansion of product line will increase market sriarc. Appropnate

product mix should be decided based on the consumer needs and opportunities
prevailing in if,- market. Packaging is a silent advertiser of a product. The marketing
department has to take care of packaging in order to retain the attractiveness of it in
the minds of the consumers.

23.2 Price Mix

Pricing is an important aspect of a product. Price should recover cost incurred

tor production and provide certain percentage of profit and at the sametime price must
be competitive. The pricing should have propel cushion to absorb discounts,

52
 allowances and terms of credit. Pricing strategies should be evolved while introducing
a product. Skimming and penetration strategies are adopted based on the nature of the
product, type of market and competition prevailed in the market.

2.53 Promotion Mix

Promotion mix deals with the activities relating to sales promotion. Personal
selling, advertising, publicity and sales promotional measures are the salient features
of promotion mix. One product free for one product purchase (fr..e bier) is a popular
sales promotion activity today. The business enterprises have to evolve appropriate
promotion mix based on the changes in the market. Product mix should attempt to
communicate the product and its strength and added features compared to competitors
to the consumers.

2.5.4 Place Mix

It deals with distribution channels (wholesalers, retailers) and physical

distribution. (transport, warehousing, inventory) Place mix takes steps to make timely
delivery of products to the right consumers. Increasing distribution out lets paves the
way for timely delivery of products. Decentralised production and supply will ease the
functions of physical distribution. Bottling plants are established regionwise by the
Coke and Pepsi to ensure timely delivery.

Ramasamy V.S. in his book, 'Marking Management' has stated that "blending
the marketing mix elements into a winning combination is a continuous task and not a
one shot assignment. No marketing man can assume that the marketing job is over
once the elements of the marketing mix are assembled and employed. The mix may
require constant changes. The marketing man has to carefully monitor the mix and
juggle the elements as required by the changing conditions".

2.6 MARKET POSITIONING

Market positioning is a technique of capturing the targeted market. It is the

process of making distinguished the enterprise or produce from competitors. The
process of market positioning involves.

i) knowing the requirements of the market

ii) ascertaining strength and weakness of the competitors

53
iii) assessing the capacity to fulfil the requirements of the market, better than the
competitors

Studying the existing market, strength and weakness of the enterprise and
competitors are the basic requisite for market positioning. The marketer has to
ascertain, the prevailing opportunities of his product in the existing market and to
select a target market for his products. Marketer should introduce appropriate
competitive strategies to retain his target market.

Product positiooing is the core of market positioning. The factors such as

luxury, economy, quality and fashion are taken into account for product positioning.
The detergent powder Surf Excel is positioned for the middle income group and the
Nirma is positioned for the lower inco:ue group. The products may be positioned tbr
men, women, children and tean aged.

Johnson and Johnson baby soap, baby oil, baby powder are exclusively
targeted to baby care market. Schooi bags arc positioned in the market for the school
going children. Youth is the target market for skin care products and cosmetics.
Similarly there is a target market for hair-dye.

Smithklaim Beacham has positioned its brand 'Horlicks' as health drink.

Horlicks, Complan, Boost and Viva are positioned in the health conscious market.
'Amulya' milk powder is positioned as a convenient and ready substitute to milk.

While positioning a new product in the target market, consumers will

compare the features of the new product with the existing products. Milo was
introduced in the health drink market. Consumers discussed, Is Milo better than
Horlicks or Complan? and they compared price of milo with other health drinks. So
ascertaining the c^mpetitiveness of the leaders in the target market becomes essential
before positioning a product.

Before introducing the product, the marketing man should conceive theme of
product positioning. He cannot get into positioning theme when he is ready to enter
into the market with a product. The market man should decide where he should
introduce his product and for whom and on what distinctive claim he is going to raise
in the market. Product positioning is a battle to get a place in the minds of the
prospective consumers.

54
 Ramasamy V.S in his book, Marketing Management, has explained that
"Positioning is the act of fixing the exact locus of the produce offer in the chosen
market; it decides how and around what distinctive feature, the product offer has to be
couched and communicated to the consumers. While positioning its product, a firm
analyses the competitors positions, searches its own competitive advantages and then
identifies the best possible position for the product".

2.6.1 Product Repositioning

The positioned product may be repositioned in its life cycle. This is done to
increase the sales of the product and increase the market share. The product may be
given with some new added features or uses in the existing market as well as new
market for the purpose of repositioning. The cosmetics were positioned in the urban
market. Now cosmetics are repositioned in the rural market by introducing sachet
pockets.

Skin care cream 'fair and lovely' was introduced and positioned in the urban
market and for middle income group. Now this product is repositioned in the rural
market by making available in sachet pockets. Majority of the fast moving consumer
goods are under repositioning. The mixie is repositioned as a multi-purpose kitchen
machine. Product repositioning expands the usage of the product. Nestle's milkmaid
was positioned as a convenient form of milk for use in tea and coffee. Later milkmaid
was repositioned as an ideal ingredient for a variety of sweets and other preparations,
in addition to daily use in tea or coffee preparation.

2.7 MARKETING INTELLIGENCE

Marketing information is a highly valued asset in marketing management. It

serves to take marketing decisions in the changing market environment. Consumer
satisfaction is the ultimate objective of the marketing. Marketing information reveals
the expectation of the customers and their changing needs. The marketing man should
devise appropriate strategies to fulfil the expectations of the consumers and make
them satisfied and loyal consumers.

Marketing research serves to evaluate the marketing activities and guides to

offer right product, price, promotion, channel and choose right marketing strategies
and plans. It measures the existing market share for the different product lines and
suggests how to increase their market share. Marketing research consists of product
research, research on sales methods and policies, distribution research and sales
 research. Marketing research serves to accomplish the twin objectives of marketing -
customer satisfaction and profitabilityy.

Marketing intelligence provides information on changes in customers' needs

and preferences, changes in market conditions, forthcoming marketing strategies of
competitors and emerging opportunities in the market. Marketing intelligence differs
from marketing information or marketing research.

It is a part of market information system. Marketing research provides data

relating to effectiveness of the steps taken by market man to market the products and
consumers expectations and their behaviour towards buying, whereas marketing
intelligence provides strategic information in a flash and is quite often related to
competitors' activities.

Marketing department needs an excellent marketing inteEigence system. It is a

path finder to devise competitive strategies to face the cia threat competition and to
stay in the market for an indefinite period of time.

Marketing intelligence paves the way to know the customers' perception of

values and purchase preference. It attempts to explore the needs of the consumers and
the strategies adopted by the competitors to fulfil the needs.

Vasant Desai, in his book, "Dynamics of Entrepreneurial Development and

Management" has stated that marketing intelligence addresses to the constant research
and a deeper insight of the market changes and consumer
preference and the
organisation's response in terms of products and services. He has insisted that market
intelligence become essential for regular communication and integration for market
exploitation at all operational levels.

18 INSTITUTIONAL SUPPORT FOR MARKETING

Marketing is a most important function for any business enterprise. Market

survey is conducted before introducing a product. It helps to ascertain the
marketability of a product planned to introduce in the market. Marketing is an
integrated function of a business enterprise.

Activity of the functional departments are coordinated and integrated to design

a marketing plan. Market and market potentials do not remain constant. Buyer
needs
are ever changing in the market. Competition is also expanded day-by-day. New

56
products are being introduced in the market to meet the growing demands of the
consumers. Today's marketing activity is known as strategic marketing. the
multinational enterprises and large scale enterprises spend a lot of money for their
sales promotional activities and they get substantial share in the market for their
prodticts.

The small scale enterprises are not financially and technically competitive to
meet the challenges of the large scale enterprises and multinationals and their arm
length is limited with regard to putting money for sales promotional activities like
other larbe scale enterprises.

In the democratic country having the concept of equal distribution of income

and wealth, the Government is expected to assist the small scale enterprises in
marketing their products. The small scale enterprises are in need of institutional
support to market their products and to survive in the business.

2.8.1 Institutional Support

In order to assist the small scale industries in their marketing programme,

Government of India and State Governments have established various institutions,
such as National Small Industries Corporation, State Small Industries Corporation,
Small Industries Development Organization, Khadi and Village Industries
Commission, Export Promotion Councils, Commodity Boards, State Trading
Corporation, Miner,:ls and Metals Trading Corporation, etc.

The Government and other agencies have reserved certain items to be procured
from the small scale industries. This policy helps the small scale enterprises to expand
their market. The State Small Industries Corporation and National Small Industries
Corporation help to the small scale enterprises to market their products to the
Government. For providing marketing support to SSIs, Government stores purchase
programme in the form of reservation of products for exclusive purchase from small
scale sector and price preference programme is a major instrument.

The programme provide for reservation of certain products for exclusive

purchase by Government departments from small scale sector and price preference
upto 15% in case of selected items. As per revised list, 358 items are reserved at
present for purchase from small scale sector. Under the policy of price preference 15%
benefit is available to SSIs to compensate them on account of non-availability of

57
economics of scale, poor resource base, poor access to raw materials as computed to
large scale sector.

Central Government Stores Purchase Programme

This programthe is meant for procuring stores needed by the Central

Government, State Government, Public sector organisations and other Government
and Semi-Government bodies. The Central Government Stores Purchase Programme
provides the following support to small scale enterprises in order to expand the market
for their products.

i) Price preference to products of cotton and small scale enterprises, including

reservation of certain items of stores for purchase from the small scale sector
only and

ii) Providing facilities for the registration of small scale and cottage industries.

Under this programme, while procuring stores needed to the organisations,

preference is given to the small scale enterprises in procurement. Vasant Desai, in his
book, "Dynamics of Enterpreneurial Development and Management has given four
categories of Government purchases.

They are given below:

i) Group I - Items which are of no interest to small scale units and can be
procured only from the large scale sector.

Group II - Items which, by their very nature, require large scale firms as prime
contractors but permit substantial scope to purchase components and parts
from small scale units.

iii) Group III - Residing items which both small scale as well as large scale firms
can supply. Tenders for items filling under the groups are invited from all
parties, including small scale units.

iv) Group IV - Items which are reserved for exclusive procurement from small
scale units.

58
 I he lacillues are also provurleu to Inc small scale enterpnses unaer
:he central government stores purchase programme:

a) Application forms are issued at free of charge for initial registration and renewal.
b) For registration, no fee is charged.
c) Security deposit is not insisted for the tenders from the small scale enterprises. But
such enterprises should be registered with the National Small Industries
Corporation.
d) In some specific cases, items listed in group III may be confined to small scale
enterprises.
Group III items are purchased from the large scale as well as small scale
enterprises. The small scale enterprises are given price preference upto a
maximum of 15 percent. The price preference will be decided based on the
conformity of products to specification, quality, capacity to supply and delivery.

A committee was constituted in the year 1075 to review the Central

iovernment stores purchase programme. The committee's recommendations are listed
;low:

Categorisation and review of items given in all the four groups.

) Uniformity should be adopted by the Central and State Government while
oviding purchase and price preference to the small scale enterprises.
Sub-contracting of orders to small scale units.
Tenders should reach all the registered small scale enterprises.
[he NSIC should monitor performance of the small scale enterprises periodically.
small scale units interested to participate in the Government purchase programme
.ald registered with the National Small Industries Corporation.
1),mailed data bank should be maintained regarding the participation of small scale
tries in Government purchase programme

The small scale units could register their units with NSIC directly or through
• regional offices or Directorate of Industries or District Industries Officers or Small
dustrics Service Institute. The application for registration contains information
lating to plant and machinery, installed capacity and production and the specific
oducts for which the unit requests registration.

On receipt of the application by SISI or other certifying authority, the officer:.

ill visit the unit for assessing competency of the unit to produce the product for

59
 •

which registration is requested. If the officers are satisfied about the unit's
competency regarding production and supply recommendation will be sent to NSIC
far registration. The tender forms will be issued to the registered small scale units for
participation in the Government Purchase Programme.

2.9 MARKETING SUPPORT BY NATIONAL S\1 ALL INDUSTRIES

CORPORATION (NSIC)

The NSIC was established to coordinate the small scale units scattered in the
country and make them to participate in the Government purchase programme. Steps
were taken to give priority to the small scale units in Government procurement.

NSIC serves as a liaison agency to enable the small scale enterprises to get a
substantial share in the Government procurement. NSIC acts as an agent between the
Director - General of Supplies and Disposals (DGS & D), Government of India and
the small scale enterprises of our country.

The role of NSIC in Government Purchase Programme is given below:

a) Tender forms for'participation in the Government purchase programme are

provided by the NSIC to the registered small scale units at free of cost. They need
not approach the DGS & D for getting tender forms.

b) Registration certificates are issued by the NSIC after assessing the technical and
economical viability of small scale units. This certificate is essential for
participation in Government purchase programme. The registered units need not
pay any security deposits to Government purchasing agencies.

c) Participating small scale units in the Government purchase programme are given a
price preference upto 15% over the quotations of large scale units. But no
compromise will be given for quality and other specifications of the products.

d) If any injustice is done by the DGS & D to the small scale units, the NSIC will
take such issues to the DGS &D and try to redress the grievances of the small
scale units in Government purchase programme.

e) Efforts taken by the NSIC helped the small scale units to participate not only in the
government purchase programme but also purchasing programme of the Ministry
of Defence in line with the DGS & D. The Ministry of Defence has started

60
. exempting small units participating in its purchase programme from the payment
of secwity deposits.

U The small scale units registered under single point Registration scheme with NSIC
under the Government stores purchase programme are exempted from payment of
earnest money. The NSIC has involved in direct marketing also. It markets
tapioca starch, hand-made paper and hosiery products. It encourages ISI marked
hosiery products. It coordinates the efforts taken by the consortium of hosiery
manufacturers for improving the market for hosiery products in India and abroad.

2.9.1 Future Programmes of NSIC

I) To provide marketing intelligence support for the benefit of the small scale
industries.

2) To assist the small scale units in conducting market survey and marketing
research.

3) To provide technology support to small scale units for their upgradation and
modernization.

4) To enter into direct marketing at a larger scale.

5) To create a raw materials banks for the benefit of the small scale units.

The NSIC is a recognised export house also. It encourages exports of the small
scale units- hardwares, industrial fastners, sanitary fittings. locks and machine tools
etc. It is to he highlighted that the NSIC has supplied complete plant and machinery
for 32 turn key project undertaken by the 62 small scale units J., Tanzania against the
IDBI credit line of Rs.20 million. It shows the efforts taken by the NSIC in
encouraging the export of the products of small scale units.

2.10 STATE SMALL INDUSTRIES DEVELOPMENT CORPORATION

(SSIDC)

State Small Industries Development Corporation takes steps to promote

exports of the small scale enterprises. These corporations support the various export
promotional programmes organised by the small industries service institute.
State Small Industries Development Corporations are established under the Companies

61
Act 1956. These corporations are created for catering to the needs of the small, tin)
and cottage industries in the respective state or union territory. At present there are 16
State Small Industries Development Corporations (SSIDC) are functioning in India.
I
2.10.1 services of SSIDC
I
The services of the SSIDC arc given below:

a) Procurement and distribution of scarce raw materials to the small scale units.
b) Supplying machineries and other equipments to the small scale units on hire-
purchase basis.
c) Providing marketing support to the products of the small scale enterprises.
d) Providing infrastructure facilities to the small scale units.
e) Maintenance of infrastructure facilities.
f) Construction of industrial estates and sheds for the benefit of small scale units.
g) Extending seed capital assistance on behalf of the state governments.

SSIDC serves the small scale, tiny and cottage industries to increase market
share for their products. It is also planned to establish display centres to display SSI
products and to disseminate the role and prosperity of small scale sector in the
industrial development of the country.

2.11 KHADI AND VILLAGE INDUSTRIES COMMISSION (KVIC)

The Khadi and Village Industries Commission was established by an Act of

Parliament in 1956. Promoting Khadi and Village Industries in the rural areas is the
basic objective of KVIC. It provides marketing support to the rural industries.

KVIC has established retail outlets throughout India for selling the products of
the rural industries. It has a large number of village industries besides khadi under its
control. KVIC takes efforts to provide employment opportunities in rural areas by
establishing rural industries.

Using locally available raw materials, and local skills, utilising local market,
low percapita investment, indigenous techniques of production, short gestation period
of the project are the essential features of the khadi and village industries.

There are 30 State Khadi and Village Industries Board functioning in tnala to
cater to the needs of the Khadi and Village industries. The KVIC provides necessary

62
 support needed to the entrepreneurs through State Khadi and Village Industries Boards
and Khadi and Village Industries Programme.

Khadi and Village industries Board in collaboration with the concerned

District Rural Development Authority has brought out the following developments:

- Upgradation of Khadi and Village industries technology

- Improving quality of KVI products
- Establishing rapport with exporters for exporting KVI products
- Utilising distribution network of large scale and reputed business houses.
- Expanding need based product line in KVI.

2.12 STATE TRADING CORPORATION (STC)

The State Trading Corporation of India Ltd., was established in May 1956 under
the Indian Companies Act 1956 and it was designated as the sole import agency for
the products that the Government imports from time to time. Its main aim is to
increase India's exports and to facilitate for the import of essential capital goods, raw
materials and other components. It concentrates to expand the existing market and to
promote exports of certain bulk commodities and to canalise the import of bulk
commodities.

The Report of the Estimates Committee on State Trading Corporation of India

Ltd (1960) reveals the objectives of the State Trading Corporation of India Ltd.

They are given below:

To organise and effect exports from and imports into India of all such goods and
commodities as may be determined by the Company from time to time, and to
undertake the purchase, sale and transport of and the general trade in such goods and
commodities in India or anywhere else in the world. Initially the corporation was
intended to get into stride only gradually and cautiously.

In the case of imports it was intended that the activities should be restricted to
the import of certain essential items such as soda ash,. caustic soda, sodium
bicarbonate, sulphur, raw silk etc., where there is known gap between supply and
in demand and bulk supplies can be arranged on a cheap and profitable basis. So far as
' th countries canalising Jtheir foreign trade through State trading organisations were
.... concerned, it was desired that the Corporation should "nmvide facilities for collective
-I--
.

63
bargaining and create arditions under which trade with them could he developed to a
higher level"

It was also stated that STC should enter only those field of trade where the
normal trading mechanism has been found to be inadequate or where it would usually
supplement the objectives of the private trade. The Memorandum of Association of the
State Trading Corporation reveals the following as the functions of the STC.

2.12.1 Functions of STC

To organise and undertake trade with the State Trading Countries as well as other
Countries in commodities entrusted to the company for such purpose by the Union
Government from time to time and to undertake the purchase, sale and transport of
such commodities in India or anywhere else in the world;

To explore new markets for traditional items of export and develop exports of new
items with a view to diversifying and expanding the export trade;

To undertake at the instance of the Union Government import and or internal

distribution of any commodities in short supply with a view to stabilising prices
and nationalising distribution; and

To generally implement such special arrangements for import, export, internal

trade and/or distribution of particular commodities as the Union Government may
specify in the public interest.

Canalisation ensures supply of imported raw materials at reasonable prices to

the domestic industries. The Estimates Committee 14th Report (5th Lok Sabha)
observes that the effect of canalisation of import through State agencies has resulted in
savings in foreign exchange on imports on account of bulk purchases and also on
account of bulk shipments and in supply of raw materials to consumers in the country
at reasonable rates.

The other advantage of the SIC observed by the Estimates Committee are,
"Import and distribution of essential items in a planned and phased manner, long term
supply arrangements, self-generation of foreign exchange through special link
arrangements and equitable distribution in Iadia through associations/ consortia".
 Rajinder Sharma. in his book. Export Marketing has discussed about the scope
of the STC as given in the Annual Report (1980-81):

STC will have to undertake a substantial amount of actual trading on their own
account including buying, selling, stocking etc.. which would involve undertaking
greater risk than in the conventional back to back contract entered into by the STC
at present;

It will develop new products and markets for export and initiate action to help
strengthen and expand the supply base and infrastructural facilities;

It will need to organise their operations in such a way that these assist in the
attainment of socio-economic objectives such as price stability, increase in
employment, stoppages of exploration by middlemen etc.

- It will continue to manage canalised items but on a relatively smaller scale than in
the past.

- It will need to organise itself to monitor certain specified sectors of economy on

behalf of Government as its field agencies in the market place and provide timely
feedback for appropriate corrective action;

- It should acquire on the basis of performance a status of leadership within the

trading community in the country and a position of strength in the national market.

The Estimates Committee (1971-72, Fifth Lok Sabha. 14th Report) has given
the basic objectives of State Trading in exports.

They are given below: (Quoted by Varsheney and Bhattacharya in their book
International Marketing)

It was observed that in the case of certain products that there was sectoral decline
in the total value of exports. It was thought that a Government trading organisation
would be able to reverse this trend by concerned action;

- In some cases the intense competition among the Indian exporters was resulting in
lower unit value realisation. Entry of State Trading Organisation in the
international mar, through which exports were to be canalised could result in the
improvement of unit value realisation.
P

65
 There are certain prqducts tor which there may be a premium in the international
market. By canalising export of such products, excess profits from export
operation can be mopped up by the Government.

Canalisation was also thought of as an ,instrumental to improve the bargaining

power of Indian exporters. It was found that the principal buyers in Western
Europe and the United States were large corporations and to negotiate contracts
with them would require the existcnce of an equally large counterpart in India
which would be able to supply exportable products in bulk quantities. Especially
for products which originate in the small scale sector, a coordinating agency like
the STC would be helpful in promoting export of such products.

The State Trading Corporation is actively involved in promoting new items of

export, identifying emerging world markets for Indian products, (especially products
of the small scale and cottage industries) and introducing product adaptation and
development in keeping in line with the changes in the global environment.

Export canalisation avoids underinvoicing of exports and strengthens the

bargaining capacity of Indian exporters. Import canalisation helps the small scale
industries to get the scarce materials which are not available in the Indian market at
reasonable prices. The small scale industries are not afford to import the required raw
materials on their own.

Import canalisation saves the foreign exchange outgo through bulk-buying and
bulk-shipping.

2.12.2 Subsidiaries of STC

There are several subsidiaries for the State Trading Corporation of India Ltd.
These subsidiaries promote exports of their products.

The subsidiaries are:

- The Projects and Equipment Corporation of India Ltd.,

- The Cashew Corporation of India Ltd..
- The Tea Trading Corporation of India Ltd
- State Chemicals and Pharmaceuticals Corporation of India Ltd., and
- Cotton Corporation of India Ltd.,

66
 ybe Government of India constituted a Conaninee on tirade Policy tinder the
Chifirmanship of Shri Abid Hussain, Former Secretary, Ministry of Commerce.
government of India. -I-his Committee submitted :!s report in the year 1984. This
Committee has recommended to restrict the role of SIC in import canalisation.

State Trading Organisations should be restricted to import very sensitive items

only such as crude petroleum, foodgrains, oilseeds etc In export front also the STC's
role is minimised.

The STC should canalise exports only for fulfilling soda! objectives. Item.
coining under canalisation of exports and impors have been reduced altar
liberalisation. In the recent EXIM Policy (1997-2002) only six products are lis!cd
under export canalisation. They are petroleum products. onions and niger seeds. Onl>
eight products are listed under import canalisation. The> are edible oils. oilseeds.
cereals and petroleum products.

1.12.3 Strategies of STC

The STC has prepared its corporate plan to achieve turnover of Rs. 3000 crore
py the year 1999-2000. Varshency and Bhattacharya, in their book, International
Marketing have pointed out the major strategies adopted by the STC to achieve the
...:xpon target in the year 2000.

The strategies arc given below:

Focussed emphasis on direct buying and seine

- Strengthening overseas marketing net \‘ork
- Entering into joint veniures
- Undertaking 0(11. imports
- Concentrating, on domestic trade
- Entering into ne‘‘ line: of business
- Restructuring the organisation and
- Strengthening information base

The STC's infrastructural facilities available in the and the

ovt.seas branches should be utilised effectively to become an important export house
in the Indian export sector. The STC should concentrate on direct export in the
emerging overseas market for increasing its share in the Indian exports.

67
2.12.4 Performance of STC

ne annual report of the Ministry of Commerce, Government of India for the

year 1997-98 highlights the performance of the STC and MMTC. The performance
review report is discussed in the following pages.

The State Trading Corporation achieved a turnover of Rs. 2,836 crores

(provisional) during 1997-98 which is 12% nigher than the turnover of Rs. 2,525
crores achieved during the previous year. In fact, the turnover is the highest achieved
during the last ten years. The increase in turnover was contributed mainly by imports
which increased from Rs. 1,896 crores to Rs. 2,318 crores.

Profit

..;uring the year, the Corporation earned Profit Before Tax amounting to Rs. 11
crores (provisional). The Corporation paid a dividend of Rs. 8.19 crores, representing
30% of the paid up capital, to Government of India within 3 days of the end of the
financial year.

Exports

The export turnover of the Corporation during 1997-98 amounted to Rs. 352
crores. During the year, exports of coffee, cashew, consumer goods and textiles by the
Corporation improved over exports of these iter,is in the previous year. Despite low
international prices, the Corporation's exports of cashew increased from Rs.
19.5'crores in 1996-97 to Rs. 24 crores during the year 1997-98. Exports of coffee
increased by over 80% from Rs. 13 crores to Rs. 23.5 crores.
The total exports were lower than the previous year due to general stagnation in
the exports of the country in most of the areas and exports of many commodities
becoming uncompetitive because of weakening of the currencies of South East Asian
Nations.

impartit

I otal import turnover of the Corporation during 1997-98 increased fibm Rs.
1,616 crores during previous year to Rs. 2,318 crores (provisional) despite a
decline in the import turnover on STC's own account at Rs. 636 crores was the highest
ever achieved by the Corporation representing 300% growth over the 'revious year.

o8
 In keeping with its policy of diversification, the Corporation undertook, on a
large scale, import of gold/silver and effected import sales of gold/silver worth about
Rs. 600 crores. The Corporation is now planning to import gold on consignment basis
for which necessary arrangements are being tied up

import turnover on Government account is expected to decline :..W guialiy

from Rs. 1,743 crores during the previous year to Rs. 1,682 crores this year, mainly
because of lower imports and consequential reduced sales of edible oils for PDS and
fertilizers. Based on authorisation received by STC from the Government of India, the
Corporation imported 27.75 lakh MTs of wheat for arrival in the country during
January 1997 to February 1998.

Domestic Trade

During the year, the Corporation effected highest ever domestic sales of Rs. 166
crores. Sales during the previous year amounted to Rs. 116 crores. Domestic sales of
edible oils/cakes during the year amounted to Rs. 95 crores as against Rs. 64 crores
during the previous year. Part of the quantities of edible oils was sold by the
Corporation in consumer packs under its own brand name 'Darpan'.

Natural Rubber

As per - the instructions of the Government, the Corporation purchased 9,600

MTs of Natural Rubber valued at approximately Rs. 30 crores to check the declining
domestic prices. Efforts are continuing to dispose of the stock partly through export.;
and the balance in the domestic market in small lots in consultation with Ministry of
Commerce. Thrust Areas

With a view to effecting improvements in the business, the Corporation has

identified export of extractions, tea, jute goods, coffee, castor seed, castor oil, import
of edible oil (on commercial account) and gold and domestic sale of edible oils
resulting from crashing operations as major thrust areas.

Extractions

* fo acquire a position of strength in export of extraction, STC undertakes direct

buying and processing of oil seeds. For this purpose, the Corporation takes

69
 =I I

crushing capacity on lease at selected locations. Whereas extractions are exported

oils arc sold in the domestic market. This enables STC to have its own rcliabli
supply base for exports and increase its overall turnover.

* Starting from soyabeans, SIC has gradually diversified into processing of

groundnut, mustard seed, sun flower, rapeseed and safflower etc.

* The Corporations 'so undertakes 'buy and sell' operations in extractions besides
extending seed financing for further developing its exports of extractions.

During the year, exports of extractions effected by the Corporation amounted to

Rs. 160 crores. This has been possible as a result of strenous efforts made by the
Corporation in the face of adverse market conditions. Efforts are also continuing to
sell a part of the oils in the domestic market in consumer packs under STC's own
brand name.

Castor oil/seed

During 1997-98, the Corporation's exports of castor seed/oil amounted to Rs. 25

crores.

Jute Goods

STC had extended financial assistance to a Public Sector undertaking and a co-
operative based at Calcutta and in lieu thereof, the Corporation has been exporting
their finished goods like Carpet Backing Cloth (CBC), Hessian Cloth, Sacking goods
and Jute yarn. The financial assistance is being extended for purchase of raw jute and
also in the form of export packing credit.

With the help of above arrangements, the Corporation's exports of jute goods
during 1997-9R are estimated at 11.3. 17 crores.

Coffee

The Corporation is planning to procure coffee directly from the domestic marke*
for export as well as domestic sale.

70
 Edible Oils

To make optimal utilisation of the available infrastructure and expertise, the .%

Corporation continues to undertake commercial imports of edible oils depending on
market conditions in addition to imports of edible oils handled by it on Government
account.

Gold

Having achieved a turnover of over Rs. 600 crores from import of gold and
silver during 1997-98, the Corporation is in the process of finalising arrangements for
import of gold on consignment basis.

Tea

STC has been participating in the Defence tenders for the last 3 years for supply
of tea and has been successful in bagging sizable orders. Supplies made during each of
the last 3 ycars were to the tune of Rs. 9 crores, Rs. 5 crores and Rs. 8 crores
respectively.

Infrastructure Development

As part of infrastructure development, the Corporation has acquired a plot of 10

acres of land at Kakinada Port for construction of warehouse for dry cargo. Necessary
plans have been finalised for starting construction of godowns. Allotment of 2.5 acres
of land has also been received from Vizag Port to be used for storage of edible oils and
molasses. Detailed economic viability is being worked out. Efforts are also being
made for getting allotment of land at other selected ports for development of storage
facilities for dry/liquid cargo.

2.13 MINERALS AND METALS TRADING CORPORATION

The Minerals and Metals Trading Corporation of India was established in the
year 1963 as the public sector enterprise to expand the export market for minerals and
other metal products. This corporation undertakes the export of ore, minerals and
metals from India. The same products are also imported by this corporation to fulfil
the requirements of the Indian industries.

71
 The Minerals and Metals Trading Corporation is an important canalising
agency for manganese ore, ferro-manganese, bauxite, coal and core, iron ore etc.
Fertilisers, steel, asbestos and non-ferrous metals are the important items among the
imported materials of the MMTC. Iron ore is an important item in its export basket.

The MMTC has engaged to trade the non-canalised products also. The Mica
Trading Corporation established in the year 1972 is the subsidiary of the MMTC. The.
MMTC has taken efforts to penetrate the Indian export market for canalised items in
the countries such as Japan, South Korea, Singapore, Eastern Europe and other
overseas markets.

Mishra, M.N., in his book International Marketing Management has listed the
objectives of the MMTC. They are as given below:

2.13.1 Objectives of MMTC

To organise and undertake exports from and imports into India of minerals. ores
and metals including iron and their alloys and semi-manufactures;

To explore and develop new markets for the export of minerals, ores and
concentrates;

To implement special agreements such as link deals, counter trade for import,
export, internal trade and/or distribution of minerals, ores and concentrate. metals
including iron and steel and their alloys and semi-manufactures; and

To organise and procure stock of minerals, ores and concentrate metals to sell
within or outside India.

The important function of this corporation highlighted by the Rajinder Sharma,

his book Export Marketing, are:

.13.2 Functions of MMTC

Availability of the railway sidings near mines;

Providing loading facilities at railway station;
Providing mineral loading facilities at the ports;
Provision for freighters, barges and canal boats;
Supply of machinery on the system of hire purchase;

72 1
 - Installation of washeries for improving the quality of ores: and
- Loans to the suppliers of ore against long term contracts.

2.13.3 Performance of MMTC

The total exports of the MMTC was at Rs. 976 crore in 1984-85 and it has
increased to Rs. 1148 crore in 1989-90, Rs. 1371 crore in 1993-94 and Rs. 1376 crore
in 1995-96 and it is Rs. 1137 in 1996-97 and Rs. 1200 in 1997-98. Export stagnation in
IvIMIC is due to liberalisation of export sector in India.

1-he total imports of the NIM . IC was at Rs. 2389 crore in 1984-85 and it has
increased to Rs. 3915 crore in 1989-90. It has decreased to Rs. 1700 crore in 1993-94
and increased to Rs. 4451 crore in 1995-96. It is Rs. 3103 crore in 1997-98. The
MMTC plays a significant role in imports though the import policy is liberalised in
India.

MMTC has achieved a record export of canalised minerals at Rs. 943 crores
during 1997-98 - an increase of 11.2% over. Rs. 848 crores achieved during the year
1996-97. The increase is all the more impressive for iron ore exports which recorded
over 22% growth from Rs. 655 erores in 1996-97 to Rs. 797 crores in 1997-98.

lire Corporation has shown substantial growth in iron ore exports mainly
through entering new markets such as Middle East and expanding the existing markets
in China, Pakistan. Japan and South Korea. Export of iron ore to China touched a
record level of 2.54 million tonnes valued at $ 45 million as against 1.5 million tonnes
valued at $ 25 million during 1996-97.

A five year long term contract with Pakistan commencing from 1.10.1997 for
export of 3.8 million tonnes of iron ore has been finalised. Iron ore concentrates, a
value added product valued at $ 1.2 million has been exported to Middle East.

Non-canalised Exports

During the year 1997-98 non-canalised exports by MMTC were of the order of
Rs. 257 crores - a decrease of 11% over Rs. 289 crores achieved during the year 1996-
97. During the year 1997-98 out of the non-canalised exports agro products accounted
for 30%, mcrchanting trade 19%, engineering 18%, gem and jewellery 16% minerals
and ores 14%.

73
 A4gro Products

The exports or agro products during 1997-98 reached a level of Rs. 76 crores,
bulk of the exports are accounted by soya meals export§.punrig the year 1997-98, due
to depressed international market conditions, the exportipf soya meal did not pick up.
For example, the Far East market which is one of the major markets for Indian soya
meal experienced serious currency crisis and the international prices of soya meal
started falling all of a sudden. Because of these developtnents, the exports have
become unviable and could not pick up.

Minerals & Ores

The exports of minerals and ores during the year 1997-98 at Rs. 36 crores
almost maintained the export level of 1996-97. While non-canalised iron ore exports
cover bulk of the export under this category, chrome concentrates, high grade
manganese ore and minor minerals are also exported under this category.

Engineering Goods/Industrial Products

The impressive performance achieved in engineering exports during 1996-97

_ontinued during 1997-98 also and the export reached a level of Rs. 46 crores.
Implementation of UPSEB contract under deemed exports, export of conveyor belts to
Jordan and execution of order for line hardware with Bangladesh has contributed to
the growth of engineering exports.

Merchanting Trade

In order to expand business, MMTC has recently entered into special trading •
arrangements and third country trade. During the year 1997-98, merchanting trade
made a spurt to Rs. 49 crores compared to Rs. 10 crores in the year 1996-97 - an
increase of 390%. The tripartite agreement between MMTC, BEML and GECO
PRAM (Syria) have generated new markets for heavy equipment line, dumpers to
Syria and MMTC imported rock phosphate of equal value and introduced the same for
the first time in Indian market.

Gcm & Jewellery

During the year 1997-98, exports under this category reached a level of Rs. 40
crol es as against Rs s2 crores for the year 1996-97 - an increase of 28%. Exports are

74
 affected through overseas exhibitions and sale through duty free shop at Sahar
International Airport, Mtnubai

General T rade

Under this category, MM1U has been exporting items such as textiles, building
materials, processed foods, marine products and others. During the year 1997-98, a
modest beginning was made with an export of Rs. 9 crores under this category. Plans
are afoot to increase exports under this category from 1998-99 onwards.

Canalised imports

Canalised imports are restricted only to import of urea. From the year 1997-98,
alongwith MMTC, urea is allowed to be imported by two other companies viz. IPL
and STC. During the year 1997-98, import of urea by MMTC has been of the order of
Rs. 551 crores as against Rs. 849 crores in the year 1996-97 - a decrease of 35%.
Import of urea undertaken by MMTC as per the authorisation/allocation and delivery
schedule given by the Department of Fertilisers and MMTC has got no role to play in
these matters.

More so, with induction of two more agencies, the share of MMTC in urea
imports has come down. Besides reduction in import quantity available to MMTC,
there is a substantial fall in price of imported urea (60-70%), but in this process the
Government has saved substantial amount in foreign exchange outgo.
Non-canalised Imports

During the year 1997-98, non-canalised imports were of the order of Rs. 2,552
crores as against the import level of Rs. 2,557 crores in the year 1996-97. The major
items under this category are non-ferrous metals, fertilisers. gold, silver, rough
diamonds and emeralds.

Gold, Silver, Rough Diamonds & Emeralds

Gold sale touched a record 49 MT registering an increase 36% over the year
1996-97. Further, during the year 1997-98, the import turnover under this category
reached a level of Rs. 2,120 crores - an increase of 5% over the previous year's
performance of Rs. 2,019 crores. MMTC accounted for 75% of the total gold imported
for supply to jewellery exporters in the country. During 1997-98, new gold sale
centres were opened at Chennai and Indore. The Chennai gold centres has helped the

75
jewellery exporters to get duty free gold easily. Earlier, the jewellery exporters from
Chennai have to get gold from outside the State of Tamil Nadu.

Non-Ferrous Metals

Due to prevalence of depressed market conditions, the import turnover of non-

ferrous metals decreased to Rs. 273 crores during 1997-98 as against Rs. 320 crores in
the year 1996-97, a decrease of 15%. The reasons for lower imports are the cautious
approach adopted by MMTC due to prevalence of high rate of volatility in prices for
metals. As a result. MMTC has given more emphasis on profitability rather than sales
turnover. Since indigenous producers dictate bench-mark prices for the domestic
market, MMTC has to be judicious while taking import decisions in the competitive
environment. Consequently, MMTC has substantially restricted its import of zinc for
godown sales. -

Fertilizers

MMTC's imports of DAP, MOP, sulphur, rock phosphate during the year 1997-
98 were of the order of Rs. 87 crores as against Rs. 203 crores in the year 1996-97. 1

Bearish international trends, coupled with emphasis on the current year to

minimise the inventory of fertilisers items and liquidation of existing stock, have
resulted in lower imports of fertilizer items in the current year i.e. 1997-98.

Domestic Trade

During the year 1997-98, domestic trade of MMTC was of the order of Rs. 158
crores as against Rs. 195 crores in 1996-97.

Fertilizers 4

The year 1997-98 was the fourth year for MMTC in the domestic distribution of
fertilizers. During the year 1997-98, Rs. 62 crores worth of fertilizers were sold in the
domestic market as against Rs. 126 crores in the year 1996-97.

During 1997-98, the emphasis regarding domestic distribution of fertilizer has

been to minimise the inventory and make all-out efforts for liquidation of existing
stock which has resulted in reduced sales.

76
Gold Jewellery

MMTC's entry into the domestic market through its hall marked jewellery
products has gained acceptance in urban markets with strong identification with
reliability, quality and craftsmanship. As a result, during the year 1996-97, a sale of
Rs. 17 crores was effected against Rs. 11 crores in the year 1995-96. Encouraged by
this performance, MMTC has established a retail shop in Mumbai in the current year.

Added to this, as a tribute to 50 years of India's independence, MMTC has

introduced the commemorable cold coins of 10 gram each on 15th August, 1997. The
commemorative coin has aroused overwhelming response in India as well as overseas.
As a result of all these efforts, the performance during the year 1997-98 reached Rs.
21 crores as against Rs. 17 crores in the year 1996-97 - an increase of (9%.

Joint Ventures

A canalising agency gets its tradable products from the Government.

Decanalisation resulted in MMTC losing its product base. MMTC being a trading
company had no supply base. Added to this, decanalisation of many products made the
company to adopt market driven focus.

To develop reliable supply base, it became imperative to develop supply

sources by investment in manufacturing bases through joint and own ventures. In the
last 4 years. MIMIC' has set up 5 joint ventures in the areas of aqua marine,
horticulture and processed food with partners from private sector.

C is also setting up a one million ton integrated steel plant in Orissa,

namely Neelanchal lspat Nigam Ltd. Another company, Konark Met Coke Ltd. has
been formed to produce 0.8 million tonnes of coke from imported coal to run a 50
MW power plant. This company shall supply coke and power to the steel plant.

2.14 EXPORT PROMOTION COUNCILS

The Export Promotion Councils are established under the Companies Act 1956
to provide direct institutional support to the Indian exporters. The Government of
India has created a separate export promotion council for every industry. Export .
Promotion Councils are the representative bodies of the various exporting industries.
They serve as a bridge between the Government and exporters for export promotion
and development.

77
 The exporters should register themselves with the respective export promotion
councils and become the member of the councils. A nominal fee is charged by the
export promotion council to issue membership certificate. This certificate is called
Registration-cum-Membership Certificate (RCMC). This certificate is issued in terms
of the EXIM policy.

Export Promotion council helps the member-exporters on technical matters,

export marketing strategies and export promotion. Experts are appointed in various
working committees of the export promotion councils in order to help the exporters to
solve various issues relating to international trade. The offices of the Indian Export
Promotion Councils are established in foreign countries for the benefit of the Indian
exporters.

The name and address of the Export Promotion Councils and the products
covered arc listed below:

SI. No Name and Product

address of the covered
Export Promotion
Council

Apparel Export Promotion Council Readymade Garments

15. NBCC Tower, (excluding woollen,
Bhikaji Cama Place leather, silk, jute
New Delhi - 110 066 products)

2. Basic Chemicals, Pharmaceuticals Drugs, pharmaceuti-

and Cosmetics Export Promotion als. fine chemicals,
Council dyes, intermediates,
7, Cooperage Road alcohol, organic
Jhansi Castle (4th Floor) chemicals. agro
Mumbai - 400 001 chemicals, glycerine.
soaps, detergents,
cosmetics, toiletries,
agrobatis, essential
oils, dehydrated
culture media and
crude drugs

78
 3. Carpet Export Promotion Council Ilandmade/Woollen/
Flat No. 110-A/1, Krishna Nagar synthetic carpets,
i Street No. 5, Safdarjung Enclave rugs, drug gets ana
New Delhi - 110 029 namdhas including
handmade silk carpets

4. Cashew Export Promotion Cashew products

Council
Chitoor Road
Ernakulam South
Cochin - 600 016
5. Chemicals and Allied Products Chemicals and allied
Export Promotion Council products (glass and
! World Trade Centre glasswares, ceramics,
14/1 B, Ezra Street (II Floor) paints, rubber
Calcutta - 700 001 products, paper and
paper products,
l
cement and cement
products, safety
matches, fire works,
wood products, mica
and mica based
products, granites,
prototype set films
and micro films

6. Cotton Textile Export Cotton textiles

Promotion Council
Engineering Centre, 5th Floor
Mathew Road
Mumbai - 400 004
SI. 11 - 6

7. Council for Leather Exports Finished leather and

Leather Centre leather goods, chrome
53, Sydenhams Road tanned blue hides and
Periamet skins, crane tanned
Chennai - 600 003 crust leather, E.I.
tanned hides and
79
 skins and El crust
leather

8. Electronics and Computer Electronics goods,

Software Export Promotion computer software and
Council related services
PMD House, Hauz Khas
New Delhi - 110 016

9. Engineering Export Promotion Engineering goods,

Council stainless steel
World Trade Centre products
14/1 B, Ezra Street
Calcutta - 700 001

10. Export Promotion Council Handicrafts

for Handicrafts
6 Community Centre
Basant Lok, Vasant Vihar
New Delhi - 110 057

11. Gems and Jewellery Export Gems and Jev‘ellery

Promotion Council
Diamond Plaza (V Floor)
391A, Dr. Dadasaheb Ambedkar Marg
Bombay - 400 004

12. Handloom Exports Promotion Handloom Products

Council
18, Cathedral Garden Road
Nungambakkam
Chennai - 600 034

13. The Indian Silk Export All natural silk

Promotion Council
62, Mittal Chambers
Nariman Point
Bombay - 400 021 -
80
fabrics, made-ups,
garments and machine
made carpets
14. Overseas Construction
Council of India
Commerce Centre, 7th Floor
J. Dadaji Road, Tardeo
Bombay - 400 037
Overseas construction
and civil engineering
products

15. Plastics and Linoleum Plastics, toys,

Export Promotion Council polyester film and
Centre 1, llth Floor, Unit No. 1 allied products,
World Trade Centre human hair and human
Cuffe Parade hair products
Bombay — 400 005

16. Powerloom Development Powerloom Cotton

Export Promotion Council Textiles
Cecil Court B Wing, 4th Floor
Mahakavi Bhusan Marg
Colaba
Mumbai - 400 039

17. Shellac Export Promotion Council Lac in all forms

World Trade Centre
4th Floor, 14/1 B, Ezra Street
Calcutta - 700 001

18. Sports Goods Export Sports Goods

Promotion Council
1E/6, Swami Ram Tirath Nagar
New Delhi - 110 055

19. The Synthetic and Rayon Textiles Non-cellulosic

Export Promotion Council products, cellulosic
Resham Bhavan products, nylon
78, Veer Nariman Road polyester fibre or
Mumbai - 400 020 yarn acrylic knit-
Wear
81
 20. Wool and Woollen Export Woollen textiles.
Promotion Council
hosiery, knitwear and
612/714 Ashoka Estate other woollen
24, l3arakhamba Road products
New Delhi - 110 001

2.14.1 Functions of the Export Promotion Councils

The important functions of the Export Promotion Councils are given below:

Providing a forum between the Government and the members of the export
promotion councils for consideration and early implementation of the export
promotion schemes

Sponsoring and inviting trade delegations and study teams for exploring export
markets for the Indian industries

Making arrangements for the distribution of scarce materials for export production

Allocation of export quota for the export products like textiles

Arranging Buyer-Seller Meets and trade fairs/exhibitions in India and abroad

Foreign publicity for Indian products in overseas markets through the scheme like
Joint Foreign Publicity

Recommending the Government regarding the formulation and implementation of

export incentive schemes like fixation of drawback rates, market development
assistance etc.

Creating export consciousness among the exporters

Collecting and disseminating statistical information and market intelligence about

the export opportunities through various media including newsletters, bulletins and
other periodicals

Coordinating with the export inspection council on quality control and

preshipment inspection

82
 Speedy disposal of export assistance applications and assisting small scale units to
export their products

Helping the member exporters in claiming various types of incentives from the
Government and

- Keeping the member exporters informed with regard to trade enquiries and
opportunities

2.15 COMMODITY BOARDS

Commodity Boards are established by the Government of India in order to hef t,

the organisation of industry and trade. The Boards take care of the entire range o:
problems of production, marketing, promotion, competition. etc in respect of the
commodities concerned. The Commodity Boards 'are statutory bodies taking steps for
the development of cultivation, increased productivity, processing, marketing and
research and development.

Offices of the Commodity Boards are established In foreign countries for

increasing the exports of the commodities concerned. The Boards for the respective
commodities arrange trade fairs and exhibitions, sponsor trade delegations and
conduct market surveys for,the purpose of promoting exports.

All the Commodity Boards except Central Silk Board are the registering
authority and provide Registration-cunt-Membership Certificate (RCMC) to the
member exporters in terms of the Export-Import Policy. Commodity Boards are
established in India for the commodities such as silk, coffee. coir. rubber. spices, tea
and tobacco.

The name, address and products of the Commodity functioning in India

arc ui'.•:t below:

\ r, Name of the Products

Commodity Board

Central Silk Board Silk

United Mansions Builciinti (II Floor)
39, Mahatma Gandhi Road
Bangalore - 560 001

33
 Coffee Board Coffee
2.
No. 1 Ambedkar Road
Bangalore - 560 001

Coir Board Coir

3.
Ernakulam South
Cochin - 682 016

Rubber Board Natural Rubber

4.
Shastri Road
Kottayam - 686 001
Kerala
Curry powder and
5. Spices Board
paste, spices.
Sugandh Bhavan
Near Ernakulam Medical Centre spices oil.
Cochin - 682 025 oleoresins

Tea Board Tea

6.
14, Biplabi Trailokya Maharaj
Sarani
Brabourne Road
Cochin - 700 001
Tobacco and tobacco
7. Tobacco Board
Srinivasa Rao Thota products
G.T. Road
Guntur - 522 004

REVIEW QUESTIONS

1. What is marketing process? Explain its importance in marketing.

2. What is market positioning? State its advantage.
Explain the significance of marketing intelligence in increasing the market share.
3.
Discuss the marketing support services provided by National Small Industries
4.
Corporation.
5. What are the functions of State Trading Corporation?
6 What are the market support services extended by State Trading Corporation?
7. Discuss the objectives and function of Minerals and Metals Trading Corpc)ration
8. Describe the export marketing support services of export promotion cour.c..s
9. State the services of commodity boards to the exporters.

REFERENCE BOOKS

1. C.B.Gupta and N.P.Srinivasan, 'Entrepreneurial Development', S.Chand & Sons,

New Delhi.
2. Vasant Desai, 'Dynamics of Entrepreneurial Development and Management',
Himalaya Publishing House, Bombay.
3. Sherlekar S.A., 'Marketing Management', Himalaya Publishing House, Bombay.
4. ' Laghu Udyog' - Quarterly Journal published by SIDO, New Delhi.

85
 UNIT III

TECHNICAL SUPPORT

OBJECTIVES

The objectives of this lesson are listed below:

to discuss the n,ed for technical support to the industrial projects,

to study the institutions assisting the industries to select appropriate machinery and
equipments,

to review the importance of setting quality standards and appropriate technology,

to study the technical support provided by the following institutions,

Department of Science and Technology,

Council of Scientific and Industrial Research,

Industrial and Technical Consultancy Organisation of Tamil Nadu,

Small Industries Service Institute,

Productivity Councils,

Project and Equipment Corporation of India.

3.1 INTRODUCTION

Technical support is a basic requisite to the Indian industries for their

upgradation, modernisation and overall improvement in productivity and market
expansion. Technological modernisation is the felt need of the hour in Indian industry
whether it is a large scale unit or a small one.

Technical support paves the way to avoid industrial stagnation and it

contributes to competitiveness of Indian industries. Technology support increasel
productivity of the enterprises and strikes a balance between production anc

ft• 86
 investment. Industries should devise their marketing plan based on the changing tastes
of the customers, changes taking place in production technologies and the extent of
competition in the market. Technology plays a vital role in designing production and
marketing plan of an organisation.

Quality consciousness is absolutely essential to withstand in today's market. In

the liberalised environment only a quality products can face challenges of competitive
market. Technology support helps the industries to improve the quality of their output.

It contributes to modernisation of products in terms of design, standardisation,

quality improvement, etc., Ravi Kapoor, in his article 'Modernisation a Step to SSI
Growth' published in Laghu Udyog March 1973 has stated that there is a large amount
of R&D activities taking place in technology with the aim to strike at still better
economy, efficiency and quality, that one cannot afford to remain isolated from them
if one really wants to grow and remain in business.

Thus modernisation of technology is very essential for an industry.

Modernisation refers to modernising knowledge and combining it with a new kind of
thinking aiming at the larger volume of production with lowest costs to serve the
largest buyers with quality satisfaction.

Small scale enterprises do not afford to pay for technology upgradation and
they are already affected by the problems of materials, power, finance etc., Small scale
units may face difficulties in upgrading their technology due to financial, technical and
commercial reasons.

In order to help the Indian industries to upgrade their technology, Government

of India has initiated scheme of modernisation programme so that the SSI sector
fluorishes in an environment of economic efficiency and continuous technological
upgradation.

Small Industries Development Bank of India, Small Industries Development

Organisation, Industrial Development Bank of India, State Financial Corporation,
National Bank for Agriculture and Rural Development, Small Industries Service
Institute, State Technical and Consultancy Organisations, Department of Science and
Technology, Council of Scientific and Industrial Research, National Science and
Technology Entrepreneurship Development Board etc., are established by the
Government of India for providing necessary technology support to the Indian
industries.

87
 I I • •

The above organisations assist the industries for

- know-how designing and development

- process designing
- selection of machinery and equipment
- setting quality standards
- choosing appropriate technology and
- pollution control and effluent treatment.

3.2 Know-how designing and development and Process Designing

The important objective of industrial designing is to maximise productivity.

Scientific industrial designing inbuilt with appropriate know-how contributes to
savings in skilled labour, reduction in the number of production operations and
effective utilisation of raw materials. Industrial designer should keep in mind about the
functions of machines, performance and capability of the workers and existing
production methods while panning the process designing of a project.

Areas of Technical Know-bow to Industry

1 Research and To enrich management

E , ' Development > knowledge
C ' Design Cell > To create a new
H product for the
N / market
Testing > Assistance of latest
Facilities techniques of produ-
A ction

Prototype > Viable Technical

Development base
O Tool Room > Tool engineering

iource: Vasant Desai, Dynamics of Entrepreneurial Development, p.485

88
 Following are the important divisions needed for designing technical know-how
in an industry:

- Research and development division

- Design cell - Prototype development division
- Testing laboratory - Tool room division

The Small Industries Development Organisation (SIDO) has set up Industrial

Design Cell in the Small Industry Service Institutes (S1SIs) for the benefit of small
scale industries.

The objective of establishing Industrial Design Cell is to analyse and improve

the industrial designs in small scale industries. A centralised facility consists of tool
room, machine shop. heat treatment shop, laboratories for chemical and electrical
research, library cum reading room is created by S1SI for developing and testing
industrial know-how and designing.

Industrial Design Cells help the small scale industries in the area of product
designing and process designing. The cells test the viability of product and process
designing.

Industrial Design Cells set up by the SIDO in SISIs specialise in designs for
the following industries:

- Domestic electrical appliances

- Ceramics
- Builder's Hardware
- Plastic Goods
- Leather Goods
- Furniture and Woodwork
- Cutlery and Domestic Utensils

National Institute of Design (NID) situated at Ahamedabad provides training

and consultancy services in industrial product and process designing. It offers
Graduate Programme in Industrial Designing and creates fully trained Indian designers
in spheres of industrial activities. Indian Institute of Technology situated at various
centres offers consultancy services in industrial product and process designing to the
entrepreneurs.

89
 El •

33 Selection of Machinery and Equipment

Entrepreneurs are expected to pay much attention towards selection of

machinery and equipments. They have to identify appropriate modern and
sophisticated machinery and equipments required for their project. They can get
guidance from District Industries Centre, Small Industry Service Institute, Tamil Nadu
Industrial Investment Corporation and other financial and consultancy organisations
and veteran industrialists for selecting appropriate machinery and equipments.

They can get appropriate machinery suitable for their project from the National
Small Industries Corporation (NSIC) under hire purchase scheme. takes steps
for the supply of indigenous and imported machines to the small scale entrepienc.n?
It takes care of all problems and procedures upto the stage of delivery of machines to
the entrepreneurs.

Entrepreneurs should apply to the NSIC for availing its hire purchase scheme.
Registration Certificate and report of the Director of Industries should be enclosed
with the application form. Entrepreneurs who want to avail hire purcnase scheme from
the NSIC should provide the following information in the application form.

- Organisational setup of the unit

- Production programme
- marketability
- profitability
- cost of production
- Available infrastructural facilities
- Technical capability of the entrepreneurs

Selection of appropriate machinery and equipments is an important aspect to be

considered by entrepreneurs while starting a project. If the procured machinery does
not suit the project, the investment made in machinery will be unproductive and
commercial production will be delayed.

Entrepreneurs should consult with the appropriate agencies before procuring

machinery and equipments for their projects. Entrepreneurs should learn the
technology involved in the operations of the machinery and ensure technical viability
of the machinery and equipment.
 3.4 Licensing and Registration

Small scale units have to confirm to the provisions and regulations of the
Central and State Governments and local authorities under the Factories Act,
Commercial Establishment Act, Town Planning Rules and Rules prescribed for the
issues of quotas of raw materials and registration procedures for availing subsidies and
incentives. Industries employing less than 100 workers and having fixed assets of less
than Rs. 10 lakh need not get any licence under the Industries (Development and
Regulation) Act. No formal license/permission is required for setting up of small scale
industries.

The existing small scale units, in their own interest, employing more than 10
workers should register their units with the Director of Industries and Small Industry
Service Institute in their State. The registration will be very much helpful to the small
scale units to avail incentives/subsidies and financial assistance from the Government
and financial institutions and to get machinery on hire purchase basis from the NSIC.
The registered units can get the supply of controlled raw materials, permission to
import required raw materials w.d components and facilities for export promotion.

3.5 Pollution and Effluent Treatment

Pollution and effluent treatment is an important aspect of a project to be

seriously viewed by the entrepreneurs. They have to confirm to the provisions of the
Pollution Control Acts. Entrepreneurs have to approach N‘ ith the SIS1 and Scientific
Research Institutions for getting guidance for contxring pollution in their projects and
processes for effluent treatment.

Entrepreneurs have to get clearance from the Pollution Control F3oard if their
projects are listed under the purview of the Board. Altaf Ilusain Khan, in his paper
'Air Pollution in Small Industry' published in l.aghu Udyog Samachar, June 19').5
discussed about air pollution in small s,..ale sector. He has stated that Government
policies on pollution abatement envisage a number of stens to check and counter
pollution.

The steps mentioned in the policy aim at preventing pollution at the source and
encourage best possible technical solutions to the pollution problems. The
Environment (Protection) Act 1986 has a much wider scope and relates to all aspects
of environment. Under this Act, considerable powers have been given to the
concerned authorities, such as to order to close down a polluting industry, disconnect

01
electric supply, deprive any other services. The Act also empowers a private citizen to
prosecute a polluter after giving notice to the Government or designated
environmental authority. The Act provides for strict punishment including a jail term
upto five year and/or fine which may be upto Rs. 1 lakh.

Bureau of Indian Standards (BIS) and Central Pollution Control Board (CPCB)
assist the industries to solve the problem of pollution. Air quality monitoring,
obviously forms the r•iost important aspect in the overall environmental programme.
CPCB has given guidelines for the monitoring frequency, limiting concentration of
pollutants, methods for measurement and selection of location of monitoring sites etc.,

Following are the steps suggested for air quality monitoring:

- identify the relevant pollutants to be monitored for a particular industry,

- selection of monitoring site,
- selection of sampling procedure, period of sampling and frequency, duration of
survey etc.
- data processing and
- collection of meteorological data.

As per CPCB guidelines three permanent air quality monitoring stations arc
required to be established at the boundary of the manufacturing or processing facility.
Air Pollution Control could be achieved by process and fuel changes, pollution
abatement at the source and dispersion and dilution in the atmosphere.

Licensing/Registration and Effluents Treatment in Tamil Nadu

Authority Authority from

Subject of
concerned which prescribed
clearance
form is available

Executive Officer, Executive Officer,

Trade License/
Village Panchayat Village Panchayat
Running License
Union Union
or or
Executive Officer Executive Officer
Township Township
or or
 -—
Commissioner Commissioner
Municipality Municipality
or or
Commissioner/Mayor Commissioner/Mayor
Corporation Corporation

Effluent Treatment District Health District Health

and Disposal lice- Officer, Department
se (only for 14 of Public Health of
types of industries concerned district or
as hazardous vide Director of Public
G.O. No. 291) Health and Preventive
Medicine, Chennai.
Officer, Department
of Public Health of
concerned district or
Director of Public
Health and Preventive
Medicine, Chennai.

3.5.1 Adoption of Pollution Control Measures - Manufacture of New Products

and by Products recovered through Application of Pollution Control Processes

I It is the policy of the Government that the industrial undertakings desiring to use
the wastes and effluents for manufacture of new products should be encouraged to
do so.

2. Many of the chemicals recovered from pollution control processes and recycling of
waste products are reserved for exclusive manufacture in the small scale. As per
current industrial policy, the non-small scale units require to obtain industrial
licence with 50% export obligation for manufacturing any of the products reserved
for the small scale sector. In this background, it was felt that if the chemicals are
recovered through installation of pollution control processes which are in the
larger interest of sustainable industrial development, capacity of such recoverable
chemicals, even it reserved for the small scale, should be permitted without the
mandatory export obligation.

3. The Government have now decided that in order to encourage adoption of

pollution control processes by the industrial undertakings which have the potential
to utilise the waste products and effluents for manufacture of new items, they may
be allowed to do so by suitable endorsement in the existing industrial Licences or
issued new industrial Licences for such recoverable items which may be reserved
for the small scale sector, without necessarily stipulating the mandatory export
obligation.

93
4. The industrial undertaking will submit application to the Secretariat for Industrial
Assistance, Ministry of Industry, Udyog Bhavan, New Delhi. Such applications
will be considered on merits and wherever Government agrees to allow industrial
undertakings to recycle their wastes and effluents, necessary endorsement of
capacity for the items allowed would be made on industrial licences, without
necessarily stipulating the conditions for export of such new items. However.
before taking a decision in the matter, the Secretariat for Industrial Assistance will
obtain the prio written comments/views of the Development Commissioner (SSI)
in each case.

3. It is hoped that adoption of this positive policy would encourage the industrial
units to install pollution control processes and be a positive incentive to utilise the
waste products and effluents.6. Entrepreneurs desirous of availing of this facility
shall have to submit application in the prescribed form for Industrial Licences
(Form FC/IL) to the Secretariat for Industrial Assistance (SIA), Department of
Industrial Policy & Promotion, Ministry of Industry, Udyog Bhavan, New Delhi -
110011, giving reference to this Press Note, with full details of the pollution
control processes proposed to be adopted and new items with capacities which
would be recovered from the same.

3.6 Setting Quality Standards

Quality has been defined in a number of different ways by a number of different

people and organisations.

The following are few definitions about quality.

N

Fred Smith, Chief Executive Officer of Federal Express defines quality as

'performance to the standard expected by the customer'.

Boeing defines quality as 'providing our customers with products and services that
consistently meet their needs and expectations'.

The US Department of Defence defines quality as 'doing the right thing right the •
first time, always striving for improvement and always satisfying the customer.

Perry L.Johnson in his book 'Total Quality Management' has stated that 'quality
encompasses every aspect of your firm and is actually an ernotinnal experience fnr the
customer. Customers want to feel good about their purchases, to feel that they have
gotten the best value. They want to know their money has been well spent, and they
take pride in their association with a company with a high quality image'.
Quality is a dynamic concept closely associated with products, processes, services,
people and environments that meets or exceeds expectation.

David L.Goetsch and Stanley B.Davis in their book 'Introduction to Total

Quality' have explained that Total Quality Management consists of continuous
improvement activities involving everyone in the organisation - managers and workers
- in a totally integrated effort toward improving performance at every level. This
improved performance is directed toward satisfying such cross-functional goal as
quality, cost, schedule, mission need and suitability. Total Quality Management
integrates fundamental management techniques, existing improvement efforts and
technical tools under a disciplined approach focussed on continued process
improvement. The activities are ultimately focussed in increased customer/user
satisfactions'.

Perry L.Johnson has opined that quality is about doing things right the first time
and about satisfying customers. But quality is also about costs, revenues and profits.
Quality plays a key role in keeping costs low, revenues high and profits robust.

The above definitions emphasis the significance of quality in a business. Quality

contributes to high revenue and profit. Entrepreneurs are expected to enhance the
quality in their products and services to withstand in the competitive market.
Entrepreneurs should identify the ways and means to improve quality of their
products. They have to ascertain the latest technical know how to uperade their quality
of their goods and services.

The Central Food Technology Research Institute (CFTRI) provides technical

know bow for improving the quality of the food items. Modern bakery units adopt the
CFTRI technology in manufacturing bakery products. Training courses are also
organised by the CFTRI periodically for the benefit of entrepreneurs. Scientific
Research laboratories functioning under Council of Scientific and Industrial Research
provide needed technology to the entrepreneurs for producing quality products.

Setting quality standard is a prerequisite for maintaining quality in the

manufacturing process and output. It depends upon the product, process, workers,
customers and the infrastructure available in the' organisation. Now-a-days market is
quality conscious, therefore quality of product plays an important role. An

95
entrepreneur has to set the standard of quality as per market requirement and has to
adhere to it in order to have the grip over the market and to develop the recognition for
his product. Entrepreneurs should maintain quality from the stage of processing so as
to get quality output. In the liberalised environment only quality products can
withstand in the market. Therefore entrepreneurs have to be quality conscious so as to
retain the market for their products and to increase market share.

Bureau of Indian Standard (BIS) provides the following pre-certification

services in order to help the industries to adopt quality system standards.

- Quality System Appreciation Programme

- Quality System Survey
- Quality System Trial Assessment

Other programmes of the BIS are listed below:

- Formulation of new national standards as well as review and revision of existing

standards to meet the quality requirements of the industries.
- Improving the quality of goods manufactured through its certification scheme which
provides a third party quality assurance.
- Providing consultancy and training for developing company standardisation.
- Training for establishment of Quality System as per IS 14000/ ISO 9000 Series.
- Training in Statistical Quality Control.
- Training of laboratory personnel for operation of Certification Scheme.
- Providing information on various national and international standards.

3.6.1 Quality System Standards - ISO 9000 Series

(ISO - International Organisation for Standardisation)

Bhullar, A.S. in his article 'Quality Systems Certification Scheme' published in

Laghu Udyog Samachar September - October 1993 has stated that with increased
forces on quality issues worldwide, the International Organisation for Standardisation
(ISO) brought out ISO 9000 Series of standards.

This series of standards establish requirements to which a company's Quality

Management System can be installed operated and evaluated both in house and
independently by third parties. The ISO 9000 series of standards serve as a basis for
ensuring quality to all providers of goods and services. Recognising the importance of
ISO 9000 series of standards, the Bureau of Indian Standard (BIS) has adopted these
ISO standards in toto and brought them out as IS 14000 series of Indian Standards.

The corresponding Indian Standards are as under:

ISO 8402 IS 139999: 1988 Quality Systems: Vocabulary

ISO 9000 IS 14000: 1988 Quality Management and Quality Assurance Guidelines for
selection and use.
ISO 9001 IS 14001: 1988 Quality system - model for quality assurance in design/
development. production, installation and servicing.
ISO 9002 IS 14002: 1988 Quality systems model for quality assurance in production
and installation.
ISO 9003 IS 14003: 1988 Quality systems - model for quality assurance in final
inspection and test.
ISO 9004 IS 14004: 1989 Quality management and quality system elements
Guidelines.

The three models of quality management system covered in IS 14001, 14002

and 14003 establish procedures for quality assurance to the customers at various
stages throughout the life cycle of a contract compliance with these standards require
that a system be in place according to the requirement of the model chosen.

3.6.2 Benefits of Quality System Certification

BIS Quality System Certification Scheme provides the following benefit to the
industries:

- Certification demonstrates that a company has implemented an adequate quality

system for the products or services it offers, thus enhances purchaser's confidence.
- Facilitates achievement of quality objectives of the company.
- Getting better product design and quality.
- Creating quality awareness in the employees.
- Reduction in scrap, rework and customer complaints.
- Reduction in quality lost.
- Efficient utilisation of resources resulting in higher productivity
- Creates confidence in suppliers because of the approval by an independent third
party.
- Quality improvement becomes an on-going process.
- Provides transparency in the system.

97
- Reduction in the costs of multiple developments by multiple trading partners.

Today consumers are quality oriented. Hence for satisfying the consumers,
manufacturers produced quality products. Of late, quality of the products are
determined by the ISO whose certification is of great importance. ISO 9000 is not a
product standard, but a quality system standard. It applies not to product or services,
but to the process which creates them. It is designed and intended to apply any product
or service made by any process anywhere in the world.

Perry [Johnson in his book '1S0 9000' has stated that a well designed, well
implemented and carefully managed ISO 9000 quality system provides confidence
that the output of the process will meet customer expectations and requirements.

Indian entrepreneurs should take efforts to obtain ISO 9000 certification to

ensure quality standards in their entire system and to enhance their participation in
domestic trade and international trade as well.

3.7 Appropriate Technology

'Technology is the yeast in the industrial cookie'

- Uwe Thomas, Germany

There are three types of technologies such as, traditional technology of

craftmanship, technology developed indigenously and technology through foreign
collaborations that can be used for quality upgradation and modernisation in Indian
industcy. Technology developed indigenously and foreign technology play a pivotal
role in modernisation. In all our Five Year Plans special emphasis is given on setting
up of plants of economic size and creation of an environment where small scale sector
can have enough incentives to modernise, reduce cost, improve the quality of their
output and upgrade the technology in use. Standardisation is one of the most important
tools for achieving quality upgradation and building a strong quality culture %%tthin the
organisation. As there is a continuous effort to upgrade the existing technologies and
generation of new technologies for raising the productivity in Indian industries. the
standardisation effort followed by the technology development remains a dynamic
activity.

R.K.Dua and M.Bakshi Gupta in their article 'Role of BIS in quality

upgradation' published in Laghu Udyog Samachar, March 1993 have stated that
standardisation is a key factor in technological development and it is of interest to

98
consider how it is accomplished. The usual procedure is to get experts representing
different interest together to discuss and agree on solutions to their recurring problems.
The solutions that are found to be acceptable are presented in the form of standards.
These standards normally consist of rules and technical requirements. The close link
between standardisation and technical development through research involves
determination of standard requirements on the basis of findings and convert them into
economic practice.

Technology development reduces cost and conserve resources. Standardisation

is a key factor in technological development. Standards contribute to improve
productivity standards for products reduce needless variations and eliminate
superfluous quality parameters, leading to production economies, use of alternative
materials, elimination of uneconomical production processes and reduction in
inspection requirements.

Technology is an upgradation input for enhancing productivity and quality of a

product. Standards integrate technologies and become carrier of technologies, defining
quality parameters of goods for their intended end use. Implementing proper standards
in all stages of production upgrades quality of the products and it facilitates for market
penetration both in domestic and international trade. Quality is linked with technology
innovation. Technology upgradation and product quality will move hand in hand.
R K.Dua and M.Bakshi are of the opinion that it requires efficient system of quality
assurance to transform the technological goals through standards.

The Department of Science and Technology and Council of Scientific and

Industrial Research and other scientific research organisations contribute to new
technologies and upgrade the existing technologies through their constant research for
improving productivity and quality in Indian industries.

Developed countries industrialise their nation through technical know how and
technology upgradation. Japan becomes a leader in electronic products in global
market. The US is the leader in info-tech products in the world market. Technology
development and upgradation'help the US and Japan to capture substantial share in the
world market. Technology is the felt need of the hour to Indian industries to stay and
survive in the domestic market and foreign market as well.

Indian small scale industries are at primitive stage in technology development.

The R&D efforts put in by the small scale sector is inadequate to innovate new
technologies and upgrade the existing technologies. Resources needed to upgrade the

99
technology is not sufficiently available with the Indian small scale sector. This sector
is in need of technology support from various organisations involved for the cause of
promoting entrepreneurship in our country.

Ravi Kapoor, in his article 'Modernisation a step to SSI Growth' published in

Laghu Udyog Samachar March, 1993 has expressed that visualising the various
parameters such as cut-throat competition, material supplies. discrimination, etc., in
which present small s'nle industries are operating, it is essential that instead of seeking
shelter under the reservations and protectionist policies it should acquire inherent •
strength through modernisation and technology upgradation.

The industries should also keep pace with the changing tastes of the customers,
the changes taking place in production technologies, management science etc., State
Financial Corporations and SIDBI have the schemes to consider the cases of SSI units
for necessary financial requirements for technology upgradation and modemisation
programme. Small Industry Service Institutes and Technical Consultancy
Organisations take steps to conduct in-plant study of the SSI units and suggest the
measures required by the units for technology upgradation and modernisation.

The need for the technology upgradation and quality improvements is so

demanding that all those directly or indirec•:y associated with industry should pool
their resources for this objective. There has to be a regular interaction between the
industry, developmental agencies, financial institutions, academic institutions and
R&D institutions to achieve the objective of choosing appropriate technologies and
technology upgradation.

It will be appropriate, in v'ew of the changing world scenario regarding

upgradation of technology, to upgrade and modernise the existing technology for the
survival of the small scale enterprises in a competitive world. Choosing appropriate
technology and continuous upgradation of technology is the felt need of the hour and
should be adopted by all the industries in their right perspective.

Quality is going to be the biggest issue in future for attaining competitiveness.

Since exports have become a national priority, improved and consistent quality is
necessary pre-requisite to tap the world market. Appropriate technology and
technology upgradation paves the way to improve product quality.

The Department of Science and Technology (DST), Council of Scientific and

Industrial Research (CSIR), Science and Technology Entrepreneurial Parks (STEPs)

100
 established by DST, Small Industries Service Institute and Industrial and Technical
"Consultancy Organisations provide substantial technology support to the Indian
Industries to bridge their technology gap.

The technology support provided by the Centre for Processed Foods is given
below: (Laghu Udyog Samachar, Oct-Dec. 1998) Centre for Processed Foods
(CPF) is a non-profit organisation with well defined objectives aimed at strengthening
the technology base of the Indian Food Processing Industry

It undertakes the following:

• Database in food technologies

• Consultancy services
• Setting up common services/facilities
• Product/process development and analytical services
• Recruitment of technical manpower
• Networking with similar organisations
• Adoption of HACCP system in food processing industries

All the activities of CPF are designed to meet the specific requirements of the
industry. It offers information on the new business opportunities in the food
processing industry. It has an ongoing technical assistance agreement with Centre for
Advanced Food Technology (CAFT), Rutgers University, USA.

CAFT is one of the largest and most reputed research and development
organisation in the world in the area of food processing. Technical assistance from
CAFT includes training of personnel, organising seminars, workshops and literature
search.

The range of consultancy services rendered by CPF include:

• Guidance on Business l'rospects/Investment Opportunities
• Turnkey Project Consultancy, Feasibility & project report preparation, project
implementation
• Market study and survey
• Equipment sourcing & selection
• Training of Manpower & HRD
• Statutory and legislation aspects
• Assistance in quality assurance & nutrition labelling
• Raw material and market tie-up-Foreign collaboration and tie-up

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 CPF apart from its in-house expertise maintains a panel of technical experts
which enables it to render customised services.

3.7.1 DEPARTMENT OF SCIENCE AND TECHNOLOGY (DST)

Department of Science and Technology (DST) was established in May 1971

with the important objective of promoting new areas of Science and Technology and
to be a nodal department for coordinating areas of science and technology in which a
number of institutions and departments have interests and capabilities.

Thus the department has a unique role in promoting research and development
in the country. A large number of universities, academic institutions and national
laboratories are supported by DST and their strengths brought out in the national
mainstream. DST fulfils a major task of interacting with socio-economic ministries on
matters of science and technology and these ministries are increasingly seeking advice
and active participation of DST in deciding on the S & T inputs to their programmes
and activities.

The important activities of the DST are summariged below:

3.7.1.1 Activities of DST

- Formation of policy statements and guidelines on science and technology; and

identification of frontier areas.

Providing meteorological services to agriculture, water resources management,

disaster warning, civil aviation as well as providing seismicity data through the
India Meteorological Department and Mecium Range Weather Forecasting
through the NCMRWF.

Providing scientific services in terms of surveying and maps for defence. External
affairs, State Governments and several other developmental agencies through the
Survey Of India (S01).

Creation of a National S &T Data Management and Information System

102
 Accreditation of testing to 13 autonomous high quality research institutions
specializing in different areas ranging from medical research, materials to.
astronomy.

- Fostering international co-operation and establishment of special joint

centres/projects.

- Catalysing and providing support to socially oriented S&T interventions.

- Entrepreneurship Development Programmes to create self-employment

opportunities, specially for those with S&T background.

Popularisation of science and technology among the people and stimulation of a

scientific temper among our citizens.

- Provide support to basic and applied research in national institutions throughout

the country and create infrastructural facilities for testing and instrumentation.

- Identify and provide support to critical technology programmes.

The approach which the Department has taken in implementing its major
responsibilities is based on the following guiding principles:

* Promotion of research is emerging areas

* Contribution to technology development and its linkages for future
commercialisation or large scale applications.
* Integration of scientific areas based on review. analysis and generation
* Focus on programmes based on developmental needs.
* Societal rele‘ance
* Linkages with S&T institutions, industr) and other users.
* Joint S8z1. projects/centres ‘‘ ith other countries

3.7.1.2 Socictial Programmes of DST

The Societal Programmes of the DST are given below:

i) Science & Technology application for weaker sections

ii) Science & Technology for women
iii) Long-term programmatic support
iv) Young scientists in societal programmes
v) Scheme for application of S&T for the development of scheduled castes
vi) Integrated waste management
vii) Science communication and popularisation
viii) S&T entrepreneurship Development and employment generation
ix) Natural resources data management system.

National Science Technology Entrepreneurship Development Board

(NSTEDB) established by the Government of India in 1982 in the Department of
Science & Technology has been following entrepreneurship among Science &
Technology persons with a view to generating income. creating employment and
mobilising resources.

3.7.13 Promoting, Entrepreneurship by DST

The following programmes are sponsored by the DST for promoting

entrepreneurship among Science & Technology persons:

3.7.13.1 Entrepreneurship Awarenes Camps

In order to create an awareness about various facet of entrepreneurship as an

alternative career option among students and faculty of engineering and science
courses, entrepreneurship awareness camps of 2-3 days duration are sponsored by
NSTEDB.

3.7.1.3.2 Enterpreneurship Development Programmes

Entrepreneuship Development Programme aims at exposing S&T

graduates/Diploma holders to the essentials of conceiving, planning. initiating and
successfully propagating an economic activity throuth classroom and field training
besides inculcating entrepreneurial ability in them using motivational input,

3.7.1.3.3 Science and Technology Entrepreneurhsip De%elopment scheme

With a view to identifying and documenting specific opportunities, primarily

for effective utilisation of local resources in backward districts of the country, the
S&T Entrepreneurship Development Scheme was launched in 1985-86. This scheme
aims at identifying location specific entrepreneurial opportunities for S&T persons.

104
3.7.1.3.4 Science and Technology Entrepreneurs Parks

This scheme envisages establishment of STEPs in and around select

educational and research institutions in the country after identifying their expertise and
available infrastructure. STEPs bridges the gap between the industry and academic
institutions. The concept of STEP was evolved by NSTEDB to provide the 'missing
links' among university, research institute and industry. Necessary facilities are
developed in the STEP premises and made available for the benefit of existing and
potential entrepreneurs. STEPs are jointly sponsored by DST, Financial Institutions,
State Governments, Commercial banks, Parent Institutions and Industry.

3.7.1.3.5 Entrepreneurship Development Cells

The concept of entrepreneurship development cells (EDC) was evolved by

NSTEDB to institutionalise entrepreneurship. The EDCs in S&T institutions are
initially supported by NSTEDB and later are expected to be treated as an independent
department of the parent college/university.

3.7.1.3.6 Employ ment Generation

A new scheme called Mass Employment Generation through science &

technology was launched in 1990-91 as an experimental project. This programme aims
at evolving a mechanism for job generation through S&T methods and by organising
scientifically designed skill Development Training Programmes for unemployed youth
after identification of opportunities in both wage as well as self employment avenues.

The DST under its scheme on 'Drugs and Pharmaceuticals Research' supports
collaborative research and development projects jointly submitted by drug companies
and the academic/national institutes.

The Technolog" Development Board of the DST provides financial assistance

to industries and other agencies for attempting development and commercial
application of indigenous technology to wider domestic application. The projects
include drugs and pharmaceuticals, engineering and e1ectronics. chemicals and
lubricants, bio-fertilizers and hio-pesticides, telecommunications etc. and technology
providers for these projects include national laboratories, academic institutions and in-
house R&D units in the industry recognized by the Government.

105
 The DST through its scheme of development of State Councils for Science
and technology initiated during the Sixth Plan has been assisting the states and union
territories for the purpose of using science and technology for their economic and
social development and strengthening R&D base.

3.7.2 Council of Scientific and Industrial Research (CSIR)

Technology support provided by the Council of Scientific and Industrial

Research (CSIR) for the benefit of Indian Industries is explained in the following
paragraphs:

The Council of Scientific and Industrial Research (CSIR) was established in

1942 and currently there are 40 laboratories, 80 extension/regional centres and 20
poly-technology transfer centres. The users of CSIR technologies include small to
large entrepreneurs. artisans, Government and public sector agencies, voluntary
organisations, farmers and rural communities at large. M.P.Dhir, A.K.Bhatia and
R.S.Saxena in their article 'CSIR Technologies for Small Scale Industries' have
discussed the CSIR technologies for small scale sector.

The technologies are,

(i) Food and post harvest agro based technologies,

(ii) Leather and other animal based technologies,
(iii) Cultivation and processing of medicinal and aromatic plants,
(iv) Building materials and components,
(v) Technologies in health, energy, environment/sanitation sector and
(vi) Enterprises for artisans.

The following technologies are provided by the CSIR under Food and Post
Harvest Agro-based Technologies:

Production of Value Added Processed Foods

- Technology for

Low Cost Weaning Food

Curing of new rice
Papad making
Fruit toffees

106
 Instant pickles
Potato products
Rice flakes
Energy foods
Papain

Post-harvest agro-hased Technologies

Technology for

Process for conservation of foodgrains

Nlodern milling of wheat, pulses, maize and rice
Prepackaeing of fruits and vegetables
l'xtension of shelf lite of eggs
Accelerated ripening of mangoes
Leaf cups and plates
Improved drying of fruits and vegetables
Green pepper processing
Black pepper processing
Mushroom cultivation

Leather and animal-based technologies

Technology for

Modernisation of tannery operations

Alternate & crust leather
Buff softie and upholstry leather
Rural tanned leathers
Leather chemicals

Technologies are provided by the CSIR laboratories for cultivation and

processing of medicinal and aromatic plants.

CSIR laboratories have been generating technologies for building materials and
components for use in housing, roads and other such constructions. The developed
technologies focus on materials of higher quality, materials as substitutes for scarce
materials and materials based on wastes.
Technologies are provided for,

Manufacturing brick making machine,

Manufacturing and use of solar timber seasoning kiln,
Manufacturing of thin precast R.C.lintels
Ferrocement water tanks and bins
Manufacture of bricks

Technologies in health, energy, environment/sanitation sector:

Technology provided for,

Making of water economy taps,

Manufacturing of ferro-cement tanks for water harvesting,
Manufacturing of ferro-cement irrigation and drainage channels,
Manufacturing of water filter candles for removal of chemical and bacterial
contamination,
Making of hand pump attachments for iron and fluoride removal,
Manufacturing of water quality testing kits,
Establishment of laboratories for water quality testing,
Energy saving devices

CSIR has developed low-cost technologies for sanitation .ind • waste

management. These include'rnanufacturing of toilet pans for low-cost and
septic tanks.

CSIR has developed technologies to offer to The artisans for uperadation of their
skills and increased earning capacity. The technologies in this regard inc:tle making
of fishing hook, making potteryware, ropeisulti making, bell metal casting. c-lectric
and electronic repairs.

CSIR offers technologies for power operated paddy thresher, making low dust
chalk for class rooms, making plastic and paper slates and recycling of used
lubricating oils. CSIR has set up a techno;ogy advisory cell to assist industry to
realise optimal returns from their assets and achieve technological competitiveness.

108
 CSIR - Business Driven Research

1993 1994 1995 1996 1997 1998

Details 1994 1995 1996 1997 1998 1999

Annual industrial prod-

uctio► n based on CSIR
ethnology
Rs. in crore) 2250 2600 3000 3600 3800 4000
International patents
tiled (in Nos) 18 29 58 71 91 110
Annual Govei iment
support (Rs. crore) 316 357 412 444 564 713
External cash flow into
('SIR (Rs. cane) 102 147 177 203 223 217

Source: Business India, June 28 - July 11, 1999, p.51

CSIR Vision 2001

Details CSIR Vision 2001 Achieved by 1999 March

hternational ;Arius
(Nos.) 500 350
Earnings from industry Rs. 350 crore Rs. 83 crorc
i-oreign Earnings US $ 40 million US S 4 million
Globally competitive
technologies 10 None so far

Source: Business India. June 28 - July 1 I 1999, p.54

3.8 SMALL INDUSTRIES SERVICE INSTITUTES (SISIs)

The Government of India has established the Small InJustries De% eloptnent
Organisation (SIDO) under the Ministry of Industry. headed by the Development
Commission, Small Scale Industries to give a fillip to the development of small scale
industries throughout the country. SIDO is a policy making body and provides
industrial extension service to the small scale industries through the network of small

109
industries service institute, Branch Institutes and Extension Centres in the State and
Union Territories.

Small Industries Service Institute (SISI) is a wing of the Small Industries

Development Organisation. The Small Industries Services Institute (SISI) Chennai has
the following Branch Institutes and Extension Centres which render technical and
managerial support to the projects of the entrepreneurs.

Small Industries Service Institute,

65/1, GST Road, Guindy, Chennai - 600 032.

2. Branch Small Industries Service Institute,

(including Electronic Motor Testing Laboratory)
386, Patel Road, Coimbatore - 641 009.

3. Branch Small Industries Service Institute,

76, CGE Colony. Tiruchendur Road,
Tuticorin - 628 003.

4. Government of India Extension Centre,

Industrial Estate, Madurai - 625 007.

5. Government of India Extension Centre,

Industrial Estate, Thattanchavady,
Pondicherry - 605 009.

6. Government of India Leather Finishing Centre,

Peria Agraharam, Erode - 638 005.

7. Central Footware Training Centre,

65/1, GST Road, Guindy, Chennai - 600 032.

The services and support provided by the SISI are listed below: (as given in
its pamphlets)

1. Technical consultany service

2. Development of Ancillaries
4
3. Sub-contract Exchange
4. Economic Information Services

110
 5. Management Consultancy and Training
6. Export Promotion Services
7. Modernization Programme
8. Preparing Technical Feasibility and Economic Viability of the Projects
9. Revitalisation of Sick Units
10.Catalogue Bank

3.8.1 Technical Consultancy Service

The types of assistance provided by SISI under this service are shown below:

i) Preparation and supply of

- model schemes
- project profiles
- technical bulletins, designs and drawings

ii) Providing technical advice on,

- proper selection of machinery and equipment
- process and techniques of manufacture
- appropriate raw materials to be used
- use of modern machine and equipment, proper plant layout etc.

Preparation and supply of project profiles and providing technical support in

selecting appropriate machineries, process of manufacture, raw materials, plant layout
are the basic services extended by SISI under Technical Consultancy Scheme.

Project profiles are the basic documents to choose appropriate entrepreneurial

activity. Project profiles reveal the investment required (fixed and working capital),
technology involved, profitability, break-even point, raw materials requirements,
machineries and equipment requirements, projected performance for 5 to 7 years of
the concerned project. The project profile makes the entrepreneurs to understand the
entire details of the concerned project in terms of investment, inputs, cash flow and
profitability. Model schemes, design and drawings of specific projects are also
prepared and supplied to the entrepreneurs.

Entrepreneurs .should pay great care and attention in selecting the appropriate
SI. 11 - 8

machinery, materials and process of production for their projects. Plant layout is also
equally important factor while planning a project. Entrepreneurs may not be the expert
in the above selection. They seek expertised advice for selection of machinery,

111
materials and process for their project. The SISI provides technical support to the
entrepreneurs in selecting appropriate machinery, materials and process for their
projects under the Technical Consultancy Scheme. Recent developments in the
manufacturing operations are also furnished by the SISI for the benefit of the
promising entrepreneurs.

3.8.2 Development of Ancillaries

The Small Industries Service Institute provides the following services under
Development of Ancillaries:

i) Identification of items for new ancillary units

i) Selecting small scale units after assessing their capacity to undertake

production of parts/components for large scale units

i) Encouraging small scale units to participate in Government stores purchase

programme by getting'them registered with National Small Industries
Corporation

i) Recommending ancillary units to the State Industries Department for

registration.

Ancillaries units are the source of strength to the large scale enterprises. Ancillary
units supply components and raw materials to the large scale units. Ancillaries assist
the large scale units in getting the finished goods for timely delivery through sub-
contracting. Ancillaries should identify the components, which could he manufactured
by them during the time schedule. SISI helps the ancillaries to identity specific items
of manufacture and selects the small scale units based on their ability to supply to
undertake production of components for large scale enterprises.

Government purchases programme is a source of marketing to the small scale

enterprises. The SSI units should register their enterprises with National Small
Industries Corporation (NSIC) to participate in the Government purchase programme.
SSI creates awareness about the Government purchase programme to the SSIs and
encourages them to participate in this programme and persudes them to get
registration with NSIC. SISI recommends ancillary units to the State Government for
registration.

112 `
3.83 Sub-Contract Exchange

Sub-contract exchange is a basic service/support needed to the small scale

entreprises. It reduces investment burden to the SSI, in increasing their scale of
operation. SISI helps the small scale industries for utilising their space capacity for
meeting the requirement of other small / medium / large scale units. Idle capacity of
one SSI can be utilised by another SSI which needs expansion in its manufacturing
operation. This type of facility is badly needed to many small scale enterprises. The
SISIs functioning in each State establish sub-contract exchange for the benefit of the
small scale units. SISI functioning at Chennai has established Tamil Nadu Sub
contract Exchange to facilitate the SSIs to exchange their spare production capacity
among themselves.

3.8.4 Economic Information Services

Following services/supports are provided by the SISI under the Economic

Information Services:

conducting techno-economic surveys of particular areas to project new industrial

possibilities

collecting analysing and disseminating economic information about availability of

raw materials, market potential of products, scope for new products etc. and assist
entrepreneurs to choose suitable industries

conducting in-depth studies on specific industries/products.

Identifying industrial opportunities in the backward areas becomes essential

today achieve balanced regional industrial development. To achieve this objective,
techno-economic surveys should be conducted intensively. SISI is doing this job and
conducts techno-economic surveys in different areas/regions to identify the new
industrial opportunities. This survey is a source to the entrepreneurs to identify and
select suitable projett.

SISI provides information package relating to availability of raw materials and

marketing opportunities for new products. It is a managerial support to the
entrepreneurs. They should plan in advance what to purchase, when to purchase and
where to purchase of required raw materials. The information package of the SISI
answers the above questions. Entrepreneurs can identify market potential for their

113
products and score for new products through the economic information supplied by
the SISI. In-depth study is also conducted by the SISI in the selected specific
industries/products to assess the market opportunities, identify the problems faced by
such units and suggest remedial measures to solve the problems encountered. This
type of in-depth study may minimise industrial sickness.

18.5 Management Consultancy and Training

SISI provides following managerial support to the entrepreneurs under the

management consultancy and training programme:

- Managerial consultancy
- Management development training courses
- Entrepreneurial development programme
- Technical training courses

SISI provides managerial consultancy support to the small scale enterprises to

enable them to manage their enterprises effectively. Managerial consultancy support
helps them to design suitable strategies to withstand in the competitive market.

Management Development Training Courses are organised by the SISI

periodically to train the executives of the small scale units in the various facets of
management. SSIs are trained in employee selection, motivation and training. Recent
developments in manufacturing techniques, and management techniques are flashed in
the management development training courses.

Problems of SSIs relating to production, finance, marketing and management

are discussed in the training courses and suitable suggestions are also suggested to
solve such problems. Management Development Training Courses pave the way for
the growth of SSIs and attempt to minimise sickness in small scale enterprises.

SISI organises Entrepreneurship Development Programme (EDP) in

collaboration with the various educational and financial institutions for the purpose of
assisting entrepreneurs in selecting the suitable projects.

Managerial and technical support and guidance.are given in the EDP to run the
SSIs successfully. Potential avenues for self-employment are explained in the
entrepreneurship development programme. Management experts, industrialists,
professionals, banks and academics will be the resource person of the EDP. Lecture

114
 classes are organised to explain about the product planning and development,
maintenance of books of accounts, marketing practices, pricing, project report
preparation, feasibility analysis of the project, taxation, human resource development,
employee training and motivation etc.

Market survey is also conducted to ascertain marketing opportunities of a

specified industry / product during the period of EDP. Bankers and industrialists meet
is also organised during the entrepreneurship development programme. It helps the
industrialists to discuss with the bankers about the procedures to be fulfilled for
availing bank finance. Industrial visit is also organised in EDP and trainees are
provided with the opportunity of visiting the successful enterpreises.

The industrial visit helps the budding entrepreneurs to learn the recent
developments in the small scale industry. Technical training courses are organsied by
the SISI to train about the recent technological development in the methods and
process of production, quality testing and improvement etc. Awareness programme
about the ISO 9000 certification is also organised in the technical training courses for
the benefit of small scale enterprises. Technical training courses of SISI is a source of
technical support to the small scale enterprises. The SISI Chennai has established
Central Footwear Training Centre. This centre provides training facilities in advanced
technology in footware manufacture and organises short term training courses to the
operators.

3.8.6 Export Promotion Services

SISI extends export promotion services to the small scale units and
encourages the units to participate in the export market. Export promotion services of
the SISI are given below:

i) Dissemination of information on foreign market, export procedures, export

pricing and costing, packaging, documentation etc.

ii) Training courses in export marketing

iii) Assistance to small scale units to display their products in trade fairs and
exhibitions held in India and abroad. SSIs contribute to 35 percent of the total
exports of our country. Export procedure and documentation is a pre-requisite
to enter into the export market. SISI disseminates informations relating, to
opportunities in Indian products in the overseas market. SISI encourages sranll

115
 scale enterprises to participate in the trade fairs and exhibitions in India and
abroad. international trade fairs is a source to capture export market.

The important objectives of Export Marketing Training Courses are

i) to assess the export marketing opportunities for the SSIs,
ii) to study the procedures involved in foreign exchange transactions in
export trade,
iii) to study the documentations involved and documentation
procedures in export and
iv) to eiscuss recent customs procedures and inspection procedures.

The training courses serve as a managerial and technical support to the SSIs
to enter into the export market.

SISI provides common facility services and training facilities for the benefit
of the small scale enterprises at the SISI workshops and extension centres.

The common facility services and training facilities provided by the SISI,
Chennai are given below:

Common facility Training Facility

available available

. Central Workshops' Mechanical, General Carpentry,

SISI, Chennai Electro Plating
Ceramics and glass
Mechineshop practice
electroplating,
screen printing,
chemicals and allied
products

. Extension centre Machine Shop Machine shop

Madurai practice

. Branch SISI Foundry and testing

Coimbatore of electric motors

Central Footwear Training in Footwear

Training Centre, Technology
Chennai

116
S. Extension Centre Leather Finishing Light Leather
for Leather manufacturer
Finishing, Erode

6. Extension Centre Machine shop Machine shop

Pondicherry practice and fitter

SISI Chennai has three mobile workshops for providing training and
demonstration in carpentry, screen printing, machine shc7. glass products, simple
chemical manufacture etc. to rural artisans.

3.8.7 Modernisation Programme

Seminars, industry workshops, industry clinics and modernization courses are

organised by the SISI to emphasis modernisation in small scale enterprises. SISI
appoints study team to conduct intensive and quick inplant studies for modernization
in selected small scale units and assists SSIs in implementing suggestions made by the
study team is respect of modernisation.

3.8.8 Catalogue Bank

A catalogue bank for selection of suitable machinery has been created by SISI
for the benefit of small scale enterprises. This catalogue bank reveals the machineries
required for the different projects undertaken under small scale industry.

3.8.9 Other Services of SISI

1) SISI assists the institutions providing financial assistance to small scale

industries by providing them with reports on technical feasibility and economic
viability of the schemes and demand prospects of products etc. on specific
requests.

ii) SISI assists the State Directorate of Industries and Commerce in Assessment of
capacity and raw material requirements of individual units against specific
requests.

iii) SIS1 renders assistance to the sick small scale units for their revitalisation.

117
3.8.10 Stimulatory Activities

The stimulatory activities include entrepreneurial education, planned publicity

about entrepreneurial opportunities, identification of potential entrepreneurs in a given
area, motivating them by producing economic sight and managerial skills through
training.

(a) Intensive Industrial Compaigns. It connotes concerted intensive and coordinated

efforts made by the institute alongwith other developmental agencies in order to
identify entrepreneurs, mobilise local enterprise, capita! and skill in favour of
starting such small scale units as are based on local resources-human and material.

(b) Entrepreneurial Development Progra,mes. The intensive industrial Campaigns

are followed by EDPs conducted for one month's duration. The entrepreneurs
identified in campaigns are further interviewed, subjected to certain tests and
selected for one month's intensive training under EDP. Before conducting the EDP
in a particular area, a survey of Industrial Potential of that area is conducted and
list of suitable items which has scope in that particular area is made as a guide to
participants in EDP. The curriculam of EDP comprises class-lectures, field-visits
group-discussions, experience of successful entrepreneurs, demonstrations on
certain items, processes of manufacture. In the end the projects of participants are
prepared and got registered.

(c) Short-term EDPs for students: These programmes arc conducted for one or two
days sometimes a week's duration in the technical institutions i.c., ITIs,
Polytechnics for motivating the students to go in for setting up small scale
industries after their studies are over instead of wasting their time in search of jobs
1
which are very difficult to be available. Every year three to four institutions arc
covered.

(d) Short-term EDPs for the beneficiaries of Self-employment Scheme for Educated
Unemployed:

These programmes are intended to provide support activity to the

beneficiaries. These are conducted for one week's duration. The course
contents comprise lectures on management, accounting, marketing techniques
etc.

118
3.8.11 Support Activities

Support activities of the domestic include nurturing of entrepreneurship after it

has been stimulated.

These activities aim:

(i) To provide on-the spot technical assistance and guidance to small scale units to
solve their manifold technical problems.

(ii) To advise small entrepreneurs on new and improved techniques of production

and in the use of modem machinery and equipment.

(iii) To assist SSI units in manufacture of quality and standardised products.

(iv) To provide workshop and laboratory facilities to demonstrate the use of

modern technical processes on different machines and equipments

(v) To enlist SSI units for participation in the Govt. Stores Programme.

(vi) To encourage and guide SSI units to export their products.

(vii) To conduct in-plant studies for modernisation etc.

(viii) Assessment of production capacities for the requirement of scarce and

controlled raw materials.

3.9 Science and Technology Entrepreneurship Development Scheme (STEDS)

The STEDS was introduced in the year 1985-86 for the purpose of identifying
and documenting the specific opportunities for effective utilisation of local and
indigenous resources in distrizts of the country. The objectives of the STEDS are
given given below:

- identifying location - specific entrepreneurial opportunities for S&T persons,

- training them in managing the enterprise and
- introducing innovative work methods, techniques and processes through active
interaction with scientists and technologists.

119
 The STEDS has been in operation in 13 backward districts in different parts. of_
the country. The project offices in these districts collect and disseminate data relating
to entrepreneurial opportunities, prepare resource booklets and maps, identify local
Science and Technology (S&T) persons possessing entrepreneurial skills, and organise
seminars and workshops on various aspects of entrepreneurship and employment
generation.

3.10 Science and Technology Entrepreneurs Parks (STEPs)

STEPs provide technology support to new entrepreneurs.

The objectives of STEPs are

(i) to establish linkages between universities/academic institutions and

industry,
(ii) to promote entrepreneurship among S&T persons, many of wnom
would otherwise seek jobs soon after their graduation and
(iii) to provide R&D support to the small scale enterprise.

STEPs are being established around select educational and research institutions
and are jointly sponsored by Department of Science and Technology, Financial
Institutions, State Governments, Commercial Banks and Industry.

Needed facilities and infrastructure are created in the STEP premises and made
available to the existing and potential entrepreneurs in

(i) testing and calibration;

(ii) prototype development,
(iii) standardisation and quality control,

besides offering them a via media for information exchange to enable them to cater to
the specific needs of the industry in the region. STEPs create linkage between
academic institutions and industries which leads to optimum utilisation of the
expertise and facilities available in institutions which otherwise were lying unutilised
or under utilised. STEPs conduct Entrepreneurship Development Programmes,
Entrpreneurship Awareness Camps and Skill Development Training Programmes for
artisans utilising locally available expertise to generate employment through Science
and Technology.

120
 STEP situated at Regional Engineering College, Tiruchirapalli encourages
S&T entrepreneurs. Jawaharlal Nehru Entrepreneurs' Chemical Park (JNECP),
Bombay provides high quality testing facilities to chemical industries situated in and
around Bombay.

The following testing equipments are installed in JNECP for the benefit of
chemical industries:

i) Differential Scanning Calorimeter,

ii) U1/Nimble Spectrometer
iii) Gas Liquid Chromatograph
iv) Fourier Transfonn Infrared Spectrophotometer
v) High Performance Liquid Chromatograph
vi) Thermogravimetric Analyzer
vii) Atomic Absorption Spectrophiometer and
viii) Elemental Analyser

STEP situated at Sree Jayachamarajendra College of Engineering, Mysore

conducts training programme for the promotion of first generation entrepreneurs in
collaboration with large public sector and private sector enterprises.

This STEI' has developed the following six technologies for the benefit of the
entrepreneurs:

i) electronic ballast
ii) varying light
iii) water level pump indicator
iv) power packs
v) function generator and
vi) cordless FM microphone

STEP situated at Indian Institute of Technology, Kharagpur attempted to

develop technologies in the areas of special alloy costing, .oft an:: hard ferrite,
computer software, C-Band antenna reception system, fibre glass based flexible
expansion joints and stepper motors etc.

Advisory Committee on STEPs headed by Mr.R.Rajamani, Secretary,

Department of Environment and Forests recommended that there is a need for

121

•
promoting organisations such as S FEPs on a continuing basis in various parts of the
country in view of the role being playing by the existing STEIN. NSTEDB has created
task force to study the various problems being faced by the STEPs and suggest
remedial measures and identify new institutions for establishment of S

l Productivity Councils

Productivity councils take steps to organise seminars! conferences to discuss the

trade policies and investment policies announced by the Government. They assist the
small scale enterprises by providing necessary managerial and consultancy support.
The officials of the productivity councils actively participate in the Entrepreneurship
Development Programmes as resource persons and motivate the prospective
entrepreneurs to enter into entrepreneurship.

Productivity Councils serve as liaison agencies between the Government and

the entrepreneurs. they address the problems of the entrepreneurs to the Government
and keep informed the entrepreneurs about the various schemes of the Government
promoting entrepreneurship and for the growth and development of small scale
industries.

Productivity councils organise awareness camps and workshops 'on cost

control and increasing productivity in industries' This type of workshops help the
entrepreneurs to cut their cost of production and increase productivity in their
enterprise.

Productivity councils inculcate quality awareness to the entrepreneurs. They

assist the entrepreneurs to increase their product quality and organisational quality.
They propagate the importance of ISO 9000 in domestic trade and global trade and
provide necessary support to the entrepreneurs in obtaining ISO-9000 certification.

Productivity Councils provide the needed support to the entrepreneurs for

upgradation and modernisation of their industries. They help the entrepreneurs in
selecting appropriate plant and machinery, equipments and appropriate technology for
their projects.

Productivity councils have created data centres for the benefit of the
entrepreneurs. For any reference regarding setting up of small scale units,
entrepreneurs could approach the data centres and get the required information.

122
 Productivity councils conduct feasibility studies for ascertaining viability of
the particular project in the specified area. They assist the entrepreneurs for project
identification, selection, review and implementation. They suggest revitalisation
programme for reviving the sick industrial units.3.12 Technical Consultancy
Organisations (TCOs)

Information is an important input in all human endeavour. Information on

various aspects is needed to establish a business. Information on industrial potentials
of an area, raw materials, machinery, skills, processes, location. layout and other
production related aspects, capital requirements. source of capital. optimum mix of
capital, arrangements for raising the capital and the like and information on market
potential, competition, market concentration and dispersal etc., arc essentially required
by entrepreneurs before setting up new enterprise.

Dr. M.Selvam, in his paper 'TCOs in Service of SSI Sector' published in

Laghu Udyog, November 1993 has expressed that existing business establishments on
course of expansion, modernisation or rehabilitation need information on the relevant
programme package. In other words, information on industrial potential, project
feasibility, project appraisal, market potential, project commissioning, revival
package, modernisation package and so on should be available to potential and
existing entrepreneurs. The above mentioned entrepreneurial information must be
made available to empower the entrepreneurs.

Large business houses can hire the services of professional consultancy agencies
in the financial, marketing and technical fields. Small scale enterprises do not afford to
pay for availing consultancy services from the professional consultancy agencies.
Entrepreneurial information must be made available at affordable cost to the small
scale enterprises.

To achieve this objective, the apex industrial financial institutions in the

country, viz., Industrial Development Bank of India (IDBI) together with Industrial
Finance Corporation of India (IFCI) and Industrial Credit and Investment Corporation
of India (ICICI) promoted the Technical and Consultancy Organisations ('[COs) in
different states.

At present there are 18 TCOs in the country l he details are given in the
following table:

123
 Table

List of Technical Consultancy Organisation

Year Area Paid up Lead

SI. Name of TCO
establish- Operations share spon-
No.
ment capital soring
(Rs. in financial
lakh) institution

1976 Andhra Pra- 10 IDBI

1. Andhra Pradesh
Industrial & desh
Technical
Consultancy

1974 Bihar 15 IDB1

2. Bihar Industrial
& Technical Consul-
tancy Organisation
Ltd. (BITCO)

1978 Gujarat 15 ICICI

3. Gujarat Industrial
& Technical Consul-
tancy Organisation
Ltd. (G1TCO)

1985 Haryana & Delhi 10 IFC1

4. Haryana-Delhi Indus-
trial Consultants
Ltd. (HARDICON)

1977 Himachal Pradesh 15 1FC1

5. Himachal Consultancy
Organisation Ltd.
(HIMCON)

1979 Tamil Nadu 10 ICICI

6. Industrial & Technical
Consultancy Organi-
sation of Tamil Nadu
Ltd. (ITCOT)

124
7. Jammu & Kashmir 1977 Jammu & Kashmir 15 IDBI
Industrial & Technical
•Consultancy

8. Kerala Industrial & 1972 Kerala 15 IDBI

Technical Consultancy
Organisation Ltd.
(KITCO)

9. Madhya Pradesh Consul- 1979 Madhya Pradesh 15 IFCI

tancy Organisation
Ltd. (MPCON)

10. Maharashtra Industrial 1982 Maharashtra, Goa, 10 ICICI

& Technical Consult- Damen & Diu
ancy Organisation Ltd.
(MITCON)

11. North-Eastern Indust- 1973 North Eastern 15 IDBI

rial & Technical Con- Region
sultancy Organisation
Ltd. (NEITCO)

12. North-Eastern Indust- 1987 Nagaland, Mani- 15 IDBI

rial Corporation Ltd. pur. Tripura &
(NECON) Mizoram

13. North India Technical 1984 Punjab & Chandi- 10 IFCI

Consultancy Organisa- garh
tion Ltd. (NITCON)

14. Orissa Induftrial & 1976 Orissa lc IDB1

Technical Consultancy
Organisation Ltd.
(ORITCO)

15. Rajasthan Consultancy 1978 Rajasthan 10 IFCI

Organisation Ltd.
(RAJCON)
125
16. Uttar Pradesh Indust- 1974• Uttar Pradesh 15 IDB1
rial Consultants Ltd.
(UPICO)

17. West Bengal Consulta- 1979 West Bengal, 15 iDB1

ncy Organisation Ltd. Sikkim, Andaman
(WEBCON) & Nicobar Islands

18. Technical Consultancy 1977 Karnataka 25 Sponsore

Organisation of Karna- by
taka (TECSOK) Govt.of
Karnataki.

• Restructured on the lines of other TCOs in August 1976

Source: Dynamics of Entrepreneurial Development & Management. Vasanth Desai.

Services provided by Industrial and Technical Consultancy Organisation of Tamilnadu

(ITCOT) to the small scale enterprises arc given below:

- Identification of industrial potentials of a region

- Preparation of industrial potential surveys
- Preparation of feasibility reports and project profiles
- Identification of potential entrepreneurs
- Appraisal of projects referred to it by financial institutions and entrepreneurs
- Preparation of modernisationlupgradation programme packages
- Conducting diagnostic studies to know the causes of sickness
- Preparation of rehabilitation package for viable sick units
- Provision of technical and managerial assistance to SSIs
- Undertaking of market research and market surveys for specific products
- Consultancy on use of non-conventional sources of energy and enerp conser‘atior .
measures
- Conducting area development surveys
- Surveys for establishment of functional industrial complexes
- Implementation of turn key projects
- Supervision over implementation of projects
- Acting as data bank for entrepreneurs
- Conducting entrepreneurship development programmes
- Entrepreneurship awareness camps

126
 - Skill upgradation programme
- Undertaking export consultancy for export oriented projects based on modern
technology

Services provided by ITCOT and SSIs are divided into two categories. They are
shown below:

1TCOT Support System

Pre-investment stage Post investment stage

> Preparation of feasibility
studies
> Preparation of project
profiles and project reports
> Evaluation of projects
> Market survey and research
> Industrial potential
studies/area development
studies
• Modernisation/technology
upgradation studies
• Rehabilitation and
diagnostic surveys
• Rehabilitation package
for viable sick units

Undertaking market research, market surveys, project evaluation and feasibility

studies are expensive. Small scale enterpri3c3 are granted subsidies when these studies
and surveys are done by the TCOs on behalf of the SSIs. Entrypr•neurial Information--
Bank is also created by TCOs to provide relevant information to the entrepreneurs to
assess the viability of their projects.

3.13 PROJECTS .AND EQUIPNIF. \ IS CORPORATION OF INDIA

The Proje,:ts and kquipmeni orporiition of India is a subsidiary of the State

Trade Corporation of India. It is one of the public sector c:riterprises in India. It is
involved in export of textile imichmeries, project equipments !ransport equipments,
mechanical and electrical equipments etc.

Selected imports of mechanical and electrical eqairnients arc also done by this
Corporation. It has identi tied projects and products ha‘ hIgh export potentials in
the overseas market for increasing exports. It helps the exponers for ensuring proper
quality control in the exportable products. This Corporation is located at 'Hansalya',
15, Barakhamba Road. New Delhi - 110 001.

127
 The objectives of the Projects and Equipment Corporation of India as laid down
in its Articles of Association are given below:

Objectives of PEC

The objects for which the Company is established are:

I. To take over from the State Trading Corporation of India Ltd., the business and
activities at present being handled by its Engineering Division and Railway
Equipment Division together with right and liabilities pertaining to such business
and to carry on the business as merchants importers, exporters, dealers, agents for
the dealers in, hires, repairers, cleaners stores and warehouses of railway and
other engineering goods including heavy and precision castings, forgings and
ancillary equipments, railway locomotives, coaches and wagons, small horse
power diesel locomotives and tipping wagons for mining and industrial narrow
guage railways, railway rolling stock, permanent way fittings for railway tracks,
railway signalling equipment, boilers of various types, components bridges,
electric overhead portal and gantry cranes, sluice gates for dams and barrages.
rivercrafts such as diesel tugs, barges, pantoons etc., pennstocks for hydro electric
projects, Heavy structurals and equipments, vehicles of all kinds and all
machinery, implements, utensils, appliances, apparatus, spare parts, components
and accessories, lubricants. cements, solutions, enamels, and all facilities and
things capable of being used therewith, or in the maintenance, and working
thereof respectively, or in the construction of any track or surface adapted for the
use thereof.

2. To carry on the business of merchants, importers, exporters, repairers, and agents

for the sale and purchase of an dealers in instruments, apparatus appliances and
accessories of all kinds including for indicating, recording, controlling, measuring
and timing pressure. humidity, flow, depth, density, movement and temperature
and for other industrial, commercial, scientific and other purposes and materials
of all kinds capable of being used in connection therewith.

3. To enter either alone or jointly with any other companies or persons and specially
outside India into contracts, (or turnkey basis or otherwise) for the erection,
construction, maintenance, alteration, repair, pulling down and restoration of
railways, factories, mills, industrial plants, engines, machinery, work of all
descriptions, including railways, tramways, waterways, road bridges, warehouses,
factories, mills, engines, machinery. railway carriage, and wagons, ship and

128
 vessels of every description, gas works, electric works, water works, drainage ana
sewage works and other public utilities, wharfs, docks, piers and buildings of
every description.

4. To carry on specially outside India all or any of the business of engineering and
management consultants, and as advisers on problems relating to the
administration and organisation of industry and business, and the training of
personnel and industry and business, and to advise upon the means and methods
for extending developing and improving all types of business or industries and all
systems or processes relating to the production, storage, distribution, marketing
and sale of goods and/or relating to the rendering of services, and to engage in
research into all problems relating to personnel, industrial and business
management and distribution, marketing and selling;, to collect, prepare and
distribute information and statistics relating to any type of business or industry
and to promote or purpose such methods, procedures and measures as may be
considered desirable or beneficial.

5. To aid, counsel, assist, cooperate with, protect and promote the interests of
engineering and railway equipment industry and to provide them with capital
credit, means, resources, and technical and managerial assistance, and to take
other suitable measures to enable them to improve methods and techniques or
production, management and marketing.

6. To buy, sell, exchange, instal, work, repair, alter, refine, improve, manipulate,
prepare for market, let out on hire plants, machinery, equipment, works, carriers,
vehicles, apparatus and appliances, which are necessary or convenient for carrying
on any business which the company is authorised to carry on or is required by any
customers of or persons dealing with the company or which may seem to the
company capable of being profitably dealth with the Company and to experiment
with and to render marketable process, convert, fabricate and manufacture such
articles, commodities and goods as may be necessary or may seem to the
Company capable of being undertaken, conveniently in furtherance of its objects
or may be calculated directly or enhance the value of such articles, commodities
and goods.

7. To carry on any other business, whether trading or otherwise, which may seem to
the Company capable of being conveniently carried on in connection with the
above or calculated directly or indirectly to enhance the value of or render
profitably any of the property or rights of the Company.

129
8. To purchase, take on lease or in exchange, hire or otherwise acquire, any real and
perso-al property and any rights or privileges which the Company may think
necess, -y or convenient for the purnose of its business or may enhance the value
of any other property of the Company.

9. 1 o purchase, acquire, take on lease, rent, let out on hire, build, construct, execute,
carry out, equip, improve work develop administer, manage, maintain, enlarge,
pull down, remove replace, rebuild in India and/or elsewhere, works and
conveniences of all kinds, which expression includes, among other things, roads,
railway sidings, jetties, piers, wharfs, bridges, canteens, warehouses, stores,
buildings, offices, and/or residences, places of recreation for employees and to
pay for survey preliminary or otherwise, and for experiments etc., and to pay or
contribute to the expenses of acquiring, constructing, maintaining, improving any
such works and conveniences, for the attainment of main obierrq

10. To apply tor, purchase or otherwise acquire and protect and renew in any part of
the world and patents, patent rights, brevate inventions, trade marks, design
licenses, concessions and the like, conferring any exclusive or non-exclusive or
limited right to their use, or any secret or other information as to any invention
which may seem capable of being used for any of the purposes of the Company,
or the acquisition of which may seem to be calculated directly or indirectly to
benefit the Company, and to use, exercise, develop, or grant licenses in respect of,
or otherwise turn to account the property, rights or information so acquired and to
expand money in experimenting upon, testing or improving any such patents,
inventions or rights.

11. To acquire and undertake the whole or any part of the business, property, and/or
liabilities of any person or company carrying on or proposing to carry on any
business which the Company is authorised to carry on, or processed of property
suitable for the purpose of the Company, or business which can be carried on in
conjunction therewith or which is capable of being conducted so as directly or
indirectly to benefit the Company.

12. To amalgamate, enter into partnership or into any arrangement for sharing profits,
union of interests, co-operation, joint adventure, joint marketing or reciprocal
concession or for limiting competition with any person or company carrying on or
engaged in or about to carry on or engage in any business or transaction which the
Company is authorised to carry on or engage in, Of which can be carried or in

,30
 conjunction therewith or which is capable of being conducted so as directly or
indirectly to benefit the company.

13. to improve, manage, develop grant right or privileges in respect of or otherwise

deal with, all or any part of the property and rights of the Company.

14. To subscribe, take or otherwise acquire, and hold shares, stock, debentui-es, or
other securities of any other Company, Co-operative Society or Society registered
under the Societies Registration Act 1860.

The Projects and Equipment Lorporation of India Limited

Performance during 1997-98

The following table gives the performance highlights of the Project and
Equipment Corporation of India Limited for the year 1997-98.

(Value in Rs. lakhs)

1997-98 1996-97
(Provisional) (Actual)

Contracting 43,36b.uu 16,494.15

Sales Turnover 45,000.00 23,587.02
Income 1,126.00 1,142.20
Expenditure 975.00 1,011.78
Profit before tax 151.00 130.42
Profit after tax 914.00 62.42
Dividend & dividend Tax 33.00 33.00
Equity 1,863.00 1,798.18

131
 • MI

Turnover

The sales turnover of the Corporation for the last three years is as under:

(Value in Rs. lakhs)

Year Turnover

- 1994-95 24,173.20
1995-96 48,557.14
1996-97 23,587.02

The Corporation achieved a total turnover of Rs. 45,000 lakhs during the year
1997-98 as compared to Rs. 23,587 lakhs for the year 1996-97. The turnover
comprises export sales. worth Rs. 22,500 lakhs and import sales of Rs. 22,500 lakhs
during the year.

Export

The composition of the export during the year 1997-98 and the comparative
figures for the year 1996-97 are placed below:

(Value in Rs. lakhs)

--------- ------ ^

Items 1997-98 1996-97

(Provisional) (Actur.1)

Commodities 13429 10894

Engineering Equipment 9071 9386

Total 22500 20280

Import

During the year 1997-98, the Corporation achieved an import turnover of Rs.
22,500 lakhs as compared to Rs. 3,306 lakhs in the previous year. The Corporation
imported gold and silver valuing Rs. 22,250 lakhs. The other constituents of the

132
import are timber, floriculture equipment and industrial chemicals. The composition of
the import is place below:
(Value in Rs. lakhs)

Items 1997-98 1996-97

(Provisional) (Actual)

Gold/Silver 22,250 2,675

Industrial Chemical 12 631
Timber 100
Floriculture Equipment 70

Total 22,432 3,406

Export of Commodities

The export of commodities include agro products like wheat and rice exported
to Singapore, Philippines, Iran and Afghanistan. The total turnover during the year has
been Rs. 13,429 lakhs as compared to Rs. 10,894 lakhs during the previous year.
Export of Engineering Equipment

During the year, the export of engineering equipments to Rs. 9,071 lakhs. These
exports sales comprises mechanical equipment, agricultural equipment, transpon
equipment, electrical equipment, transformers and railway rolling stock etc.
export of Pharmaceuticals & Other Items

The Corporation also registered sales of various other items like medicines
agricultural machinery educational equipments, tooth paste, stationery items, medica
gloves etc.. These goods were exported to Vietnam and some of the African Countries
The total exports had seen Rs. 375 lakhs during the year 1997-98 as compared tc
previous year exports of Rs. 155 lakhs.

Imports

Import turnover of Rs. 22,500 taxns was registered during the year 1997-98. The
import comprises gold and silver from Dubai and Chemicals and other indirect raw

133
General

The trading profit for the year 1997-98 amounted to Rs. 955 lakhs as compared'
to Rs. 638 lakhs during the year 1996-97. The profit before tax is of the order of Rs.
151 lakhs during the year as against Rs. 130.42 lakhs in the previous
year.Memoran,*•Im of Understanding

The Corporation's performance has been evaluated as 'EXCELLENT during

1997-98 as per the parameters.

Signing of MoU for the year 1998-99 is under process.

highlights of the year 1997-98 are given below:

Highlights of 1997-98

Details Actual MoU

(upto 31.3.1998) Targets

Contracting 43,366 50,700

Sales Turnover 45,000 30,000
Export 22.500 26,000
Income 1,126 4,000
Expenses 975 832
Profit hefore tax If 1 108
Profit after tax 98 75
Dividend & Dividend Tax 33 30
Equity 150 150
Reserve 1,713 1,700
Net Worth 1,863 1,858

During 1997-98, PEC has continued to obtain business in the thrust markets for
thrust items. Simultaneously, PEC has continued to diversify in the non-engineering
products.

134
 REVIEW QUESTIONS

1. What do you understand by technical support to a project?

2. What is process designing?
3. What are the objectives of quality standards?
4. What are the institutions assisting the entrepreneurs in selecting appropriate
machinery and equipment?
5. Explain the technical assistance provided by the Department of Science and
Technology to the entrepreneurs.
6. Discuss the technical support provided by the CSIR to the entrepreneurs.
7. Explain the role of Industrial and Technical Consultancy Organisation in providing
technical support to the entrepreneurs.
8. What is Small Industries Service Institute? State its technical supports to the
entrepreneurs.
9. What do you understand by Science and Technology Entrepreneurial Parks? State
its objectives.

Reference Books

I. Vasant Desai, 'Dynamics of Entrepreneurial Development and Management'.

I Iimalaya Publishing House, Bombay.
2. Prasanna Chandra, 'Projects Planning, Analysis, Selection, Implementation and
Review', Tata McGraw-Hill Publishing Company Limited, New Delhi.
3. Annual Report - Department of Science & Technology.
4. 'Laghu Udyog' - Quarterly journal published by Small Industry Development
Organisation, New Delhi.
5. Perry L.Johnson, 'ISO 9000', McGraw-Ili!! Inc.
6. David L.Goetsch, Stanley 13.Davis. Introduction to Total Quality', Prentice-Hall
International, Inc.
I

135
 -
UNIT IV

FINANCIAL SUPPORT

OBJECTIVES

The objectives of this lesson are,

- to study the need for financial support to the industrial projects.
- to study the means of financing and financing plan,
- to discuss the financial support provided by the following institutions,
- Industrial Development Bank of India,
- National Bank for Agriculture and Rural Development,
- Small Industries Development Bank of India,
- State Financial Corporations,
- Export-Import Bank of India,
- Commercial Banks,
- Leasing Companies,
- Investment Institutions,
- to study the financial support plans of the World I ...lid Asian Development
Bank.

4.1 INTRODUCTION

Finance is the life blood of any business. It is a basic requirement to commence

a project. Entrepreneurs are in need of capital to start business and they can get
financial assistance at every stage of business. Capital is one of the four factors of
production (land, labour, capital and organisation). It is inferred that availability of
fi ,ance measures the level of production and scale of operation of the business.
b.
Distinction between idrge scale industry and small scale industry is made based
oi. the capital invested in plant and machinery. The success of the business
organisation is measured based on the return of capital employed. It refers to
utilisation of a, ailable finance effectively in order to maximise wealth of the
company. In turn, wealth of the shareholders is also maximized correspondingly.

Realising the significance of financial functions, a separate functional division

known as financial management has been set up in the process of managing the
enterprise. Procuring finance through the cheapest sources and utilising the procured
finance in a profitable ways are the twin objectives of financial management. Project

136
idea generation, implementation and expansion depend upon the availability of finance
at the disposal of the entrepreneurs.

Entrepreneurs should identify the sources of finance. They cannot invest entire
financial requirement of the project from their own source. Fulfiling the entire
financial requirement through their own source is not advisable also.

Entrepreneurs should plan in advance to procure the needed finance for

investment from the external sources. They should identify the financial institutions
providing financial assistance for their projects. Financial institutions provide financial
assistance to meet fixed capital, working capital and venture capital requirements of
the entrepreneurs.

Entrepreneurs cannot depend entirely on the external sources of finance for

fulfilling financial requirements of their projects. They should contribute their share of
investment from their own sources. Financial institutions will insist promoters'
contribution while funding for projects.

The project reports submitted by the entrepreneurs are appraised by the

financial institutions to assess their feasibility. It indirectly assists the entrepreneurs to
get appraised their projects from the external agencies. Any ambiguity or intricacy in
the project report that can be solved with the advice and help of the financial
institutions. Getting financial assistance from banks not only fulfils the financial
requirements but also ensures project feasibility.

Financial support system paves the way to fulfil investment requirements of the
entrepreneurs. Financial institutions have money; entrepreneurs have not money.
Financial institutions have mobilised money for the purpose of lending to
entrepreneurs. So entrepreneurs have to bring out viable projects to utilise the financial
resources available with the financial institutions.

Central and State Governments should case the lending procedures of the
financial institutions in order to assist entrepreneurs to nave greater access for
borrowing and strengthen financial support system to the entrepreneurs, especially to
the small scale units.

4.2 MEANS OF FINANCING

Large scale enterprises (joint stock companies, private companies, foreign
companies, etc.,) mobilise their required finance through stock market, public &posit,

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 ti

development banks, commercial banks and foreign money markets. Small scale
enterprises get financial assistance from the state level financial institutions,
commercial banks and cooperative banks. These are the external sources of finance to
the small scale and large scale enterprises.

Majority of the small scale enterprises are not corporate enterprises. So they do
not issue shares or debentures to mobilise required capital and they depend fully on
financial institutions and commercial banks for getting necessary financial assistance.

Generally for corporate type of enterprises there are two means of financing.
They are, internal and external sources.

Means of Finareing

•
Intermil External

1. Paidup capital 1.Borrowings from financial

2. Reserves and surplus institutions, banks,
3. Ploughing back of profit Government and Semi-
4. Provisions Government agencies

2. Trade dues and other

current liabilities

For small scale enterprises, entrepreneurs own investment is known as internal

source of finance.

43 INSTITUTIONAL FINANCING FOR WORKING CAPITAL SUPPORT ti

Working capital refers to the capital required to meet the day-to-day

expenses/commitments of the business enterprise. Working capital needs could be
fulfilled through loans from the commercial banks in the form of hypothecation or
pledge.

Working Capital Financing Institutions

- Commercial Banks

138
 - Finance Companies
- State Financial Corporations
- Cooperative Banks

4.4 INSTITUTIONAL, FINANCING FOR FIXED CAPITAL SUPPORT

Fixed capital refers to the capital required to purchase fixed assets such as land
and buildings, plant and machinery, furniture etc. Fixed assets are used for the
processing the inputs for getting the standard output. Fixed capital needs could be
fulfilled through market borrowings and term loans from the financial institutions.

4.5 FIXED CAPITAL FINANCING INSTITUTIONS

- Industrial Development Bank of India

- Industrial Finance Corporation of India
- Small Industries Development Bank of India
- Industrial Credit and Investment Corporation of India
- National Small Industries Corporation
- State Financial Corporation
- Small Industries Development Corporation
- Life Insurance Corporation of India
- General Insurance Corporation of India
- National Bank for Agriculture and Rural Development
- Shipping Credit and InveFtment Corporation of India
- Industrial Reconstruction Bank of India

4.6 TYPES OF FINANCE

Entrepreneurs require three types of finances depending upon their nature of

business.

The three types arc,

(i) short term finance,

(ii) medium-term finance and
{iii) long-term finance.

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 Short term finance refers to funds required to meet the commitments during thd
shorter period of time i.e., less than one year. Short term finance is used to meet the
temporary working capital of the enterprise.

Medium term refers to a period of five years. Medium term finance is required
to meet permanent working capital needs, to expand the business, to replace certain
assets and to meet the expenses for modemisation.

Long term refers to the period exceeding five years. Long term finance is
required to purchase fixed assets, establish a new business, and to meet the expenses
of expansion and modernisation of the business enterprise.

4.7 MEANS OF SHORT TERM FINANCE

Short term financial requirements can be met through the following sources:

- Bank Credit
- Trade Credit
- Instalment Credit
- Customer Advances

4.8 MEANS OF MEDIUM TERM FINANCE

Medium term financial requirements can be fulfilled through the following

sources:

- Issue of shares and debentures

- Loans from the financial institutions and commercial banks
- Ploughing back of profits
- Public deposits
(Ploughing back of profits and public deposits are applicable to existing companies)

4.9 MEANS OF LONG TERM FINANCE

The sources of long term finance are listed below:

- Issue of shares and debentures

- Loans from the financial institutions providing long term finance
- Ploughing back of profit

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4-10 FINANCIAL PLANNING AND ESTIMATING PRO.IECT COST

Estimating the exact requirement of financial needs. mobilising the required

finance through cheapest sources and utilising the mobilised finance productively to
earn maximum return are important objectives of financial planning. The requirement
of short term, medium term and long term funds should be estimated in advance based
on the financial needs of the enterprise in the days to come.

Entrepreneurs are expected to estimate the fixed capital and working capital
requirements of their projects judiciously. If major portion of available finance is used
by the entrepreneur to meet his fixed capital requirements, he may not meet his
working capital requirements. Utilising the available capital for fixed and ‘vorking
capital purposes should be based on the financial allocation given in the project report.

Entrepreneurs should not use the short term funds borrowed from the financial
institutions to meet the long term financial requirements. If short term funds are used
for long term business activity, entrepreneurs cannot repay in time the short term
funds borrowed from the financial institution. Entrepreneurs should plan well in
advance about the proper utilisation of available funds to meet their business
objectives.

Estimating the project cost should follow the following order:

4.11 ESTIMATING THE PROJECT COST

I Fixed capital requirement

Under this head, there are two components. vie.. land and building and
machinery and equipment. Entrepreneurs should estimate hinds require to acquire land
and building and machinery aild equipments and the details of funds requirement
should be given in the rdp-rt

i) Land & Ituildint

Under the head land & building the follow 7-hou1,1 he considered for
estimating cost of land & building.
Owned/leased land/size of the building/own building/rented building/leased
building.

141
ii) Machinery and Equipment

Under the head machinery and equipments following factors should be

considered for estimating funds required for purchasing machinery and equipments.

Types of machinery requirement imported or indigenous machinery price of

the individual machinery. Electrification and installation of plant and machinery. Cost
of tools, jigs, fixtures pre-operative expenses cost of office equipments and furniture.

Working Capital Requirement

Under this head, the following factors should be considered to estimate the
working capital requirement. I

- Staff and labour (technical, office, sales and others) per month
- No. of Staff
- Salary per Month
- Perquisites to staff per month
- Raw materials and components requirements per month
- Quantity of raw materials
- Value of raw materials
- Overhead per month
- Power, water, fuel charges
- advertisement
- transport
- consumable stores
- rent
- insurance
- stationery
- postage & telephones
- repairs and maintenance
- sales expenses

III Entrepreneurs should estimate the total non-recurring (fixed capital) expenses and
recurring (working capital) expenses to show the total capital requirement for their
projects. Total capital requirement refers to the total investment to be made in the
project.

142
 After estimating the total investment required for the project, entrepreneur
should confirm the share of his own funds in the total investment required and the
funds to be borrowed from the financial institutions.

Entrepreneurs should ascertain appropriate funding institution to borrow the

funds needed for his project. While approaching the financial institution to borrow
funds, entrepreneur should justify the financial, technical, economical and market
viability of his project. Financial institution also will appraise the project on these
angles. Estimating project cost and justifying viability of the project should go hand in
hand.

Entrepreneurs should mention the projected performance of his project for a

few years in his project report to justify project viability in future. Estimating total cost
of production, annual turnover, profitability and break-even point are also important
aspects of the project report. The funding institutions will appraise the above aspects
to decide funding for the project.

Entrepreneur should estimate and ensure the loan repaying capacity of the
project to the financial institutions. Entrepreneur should estimate cost of the project
and outcome of the project as well. A model project report is given below for better
understanding about the estimation of project cost.

Project Profile

Name of the Project : Cold Chain Retail Vending Outlets (meat, fish and
poaltrn products
Location Proposed to he located in the main marketing centres in
the Districts/ Sub-divisional towns

Financial Aspects

Fixed Capital

Building : Covered Area 150 sq. ft. rented. Rent Rs. 2.000 p.m.
Machinery and Equipments : Rs. 45,000
Working Capital : Rs. 40,300
Total Capital Investment : Rs. 85,100
Expenditure per Month : Rs. 141,562
Total Sales per Month : Rs. 147,500

•
143
Net Profit per Month : Rs. 5,938
Return on Investment : 83.5%
Return on Sale : 4%
Employment :3

In India it is estimated that live-stock contributes Rs. 1,500 crows to the

economy of the country out of which the contribution of meat and meat products is
11.5%. Mostly meat is sold in India in fresh form. With the rising standards of living
of the people the demand for processed meat is also increasing day by day. The
production of poultry meat is growing over the years. In order to cater to the
increasing demand for dressed chickens there is a need for setting up a number of
poultry dressing plants in the country.

There is also an increasing trend in the fish production with the inception of new
deep sea fishing policy, introduction of on hoard proCessing facilities and setting up of
shrimp culture farm aided by various incentives offered by the Government. It is
estimated that by the turn of the century. Indian can produce 13 million tonnes of fish
& prawns.

Thus there is an increasing availability of both meat, poultry and fish products
for which cold chain facilities need to be provided for preservation and increasing the
shelf life of these perishable food materials. The cold chain retail outlet is one such
facility through which wastatze can be prevented and the food materials can be made
available to the consumers in convenient form under proper hygienic conditions.
Simultaneously this will also help in generating employment.

Market

Due to urbanisation a number of marketing centres are coining up in the

districts/sub-divisional towns where the cold chain retail outlets for selling fish, meat
and poultry products will be set up. Consumers will prefer to purchase these products
from such retail outlets as they will get the dressed products under hygienic
conditions.

The demand of fish, meat and poultry products is increasing over the years as
the per capita income of the Indians is increasing due to industrialisation. With the
liberalisation of industrial policy a number of NRIs are setting up meat processing
plants to manufacture the meat and allied products. Thus there is good scope to 1

144
develop cold chain retail outlets in the country through the PMRY Scheme by the
educated unemployed youth in different parts of the country to sell these products.

Basis & Presumptions

1. The scheme is based on 300 working days per annum.

2. The cold chain retail outlets will be located in important market centres in the
districts/sub-divisional towns.
3. The premises will be taken on rental basis.
4. Meat. fish and poultry products will be sold through these outlets.
5. This will be implemented under PMRY Scheme.

Note

The entrepreneur is presumed to enter into an agreement with the

multinationaUreputed companies/fishing/poultry farms etc. to sell their products
through the cold chain retail outlets. It is further presumed that the scheme will be
financed under PMRY Scheme and this activity will be treated at par with small scale
industrial activity in regard to financial assistance.

Financial Aspects

Fixed Capital

(i) Building : Rented

Covered area 150 sq.fl.
with facilities for electri-
city and water : Rs. 2.000

(ii) Machinery & Equipments

Particulars Qty Rate Amount

Rs Rs.

1. Deep freezer with all accessories 1 30,000 30,000

2. Miscellaneous equipment for L.S L.S 15,000
decoration, weighing machines.
working table, choppers, furnitures etc
Total 45,000

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 •

Recurring Expenditure

(i) Personnel (per month)

Designation No. Salary Total

1. Manager (Self) 1 2.500 2,500

2. Assistant 2 900 1,800

Total 4,300

(ii) Raw Materials (per day)

Particulars Qty Value (Rs.)

1. Meat (Mutton and Poultry) 40 kg @ 2,200

Rs. 55 per kg

2. Fishes of all popular 80 kg @ 2,000

varieties Rs. 25 per kg on
an average

3. Processed meat and fish 1,000

products

4. Packing materials (Polythene 50

packets)

Total 5,250

Utilities per month (Rs.)

Power 2,000
Miscellaneous expenses per month 500
146
 Working Capital

Rent 2.000
Salary & Wages 4.300
Raw material for one week 31.500
Power /.000
Miscellaneous 500
Total 40,300

Total Capital Ins estrnent

Fixed Capital 45,000

Working Capital 40,300
Total 85,300

Expenditure per Month

Rent 2,000
Salary & Wages 4,300
Raw material 1,31,250
Power 2,000
Miscellaneous expenses 500
Depreciation on machinery
@ 10% per annum 375
Interest on total capital investment
@ 16% per annum 1,137
Total 1,41,562

Total Sales (per month) (Rs.)

Meat 1000 kg @ Rs. 60 per kg 60,000
Fish 2000 kg @ Rs. 30 per kg 60,000
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Processed meat &
fish products 27,500

Total 1.47.500

Net Profit per Month 5,938

Return on investment 83.5%
Return on sale 4.0%

Financial support schemes of the financial institutions for funding the projects
of the entrepreneurs are discussed in the following pages.

4.12 INDUSTRIAL DEVELOPMENT BANK OF INDIA (IDBI)

The Industrial Development Bank of India was established in the year 1964
under the Industrial Development Bank of India Act. It was a wholly owned
subsidiary of the Reserve Bank of India. The ownership of the IDBI has bcen
transferred to the Central Government with effect from 16th February 1976 in
accordance with the Public Financial Institutions laws (Amendment) Act 1975. The
IDBI is the accelerator of industrial development in India. It is the premier financial
institution involved in financing, promotion and development of industries in india.

The IDBI plays a vital role in promotion of small scale enterprises. Refinancing
of industrial loans and bills rediscounting schemes are the important sources of
financing small scale units. Liberalised refinance scheme has been created for the
benefit of the small scale sector. Special scheme of concessional finance is also
introduced by the IDBI for the small scale units. The IDBI provides its financial
assistance to the small scale units through 18 State Financial Corporation., 28 Small
Industries Development Corporations, Commercial banks and reizional rural banks.

4.12.1 Objectives and functions of IDBI.

- to serve as a premier financial institution ..or providing term finance to the

industries,

- to coordinate with the other financial institutions in providing necessary financial

assistance to the industries,

148
 to provide refinancing facility for industrial loans to assist the industrial concerns
engaged in research and development for the promotion of industrial growth,

to provide direct and indirect financial assistance, technical and consultancy

assistance for the growth and development of industries,

to undertake market research, investment research, technical viability studies and

feasibility studies for the benefit of industries anu to promote industrial
development,

to finance all types of industrial activities (manufacture. processing, or

preservation of goods, mining, shipping, transport, hotel industry, generation or
distribution of power, fishing, maintenance, repairs, servicing of machinery,
setting up of industrial estates etc)

.12.2. IDBI schemes of Assistance to the Industrial sector

The IDBI's schemes of assistance to the industrial sector is divided into two
atagories.

i) Direct Assistance
ii) Indirect Assistance.

Direct Assistance programme of the IDBI consists of the following schemes;

i) Textile Modernisation Fund Scheme

ii) Technical Development Fund Scheme
iii) Modernisation Assistance Scheme for all Industries
iv) Venture Capital Fund Scheme
v) Energy Audit Sitsidy Scheme
vi) Equipment Finance scheme
vii) Equipment Finance For Energy Conservation Scheme
viii) Foreign Currency Assistance scheme

Project finance scheme is the principal lending scheme of the !DIU. Loans,
iderwritting, direct subscription and guarantees are listed under project Finance
heme.

Indirect assistance programme of the IDBI consists of the following schemes:

149
 i) Refinance schemes for modernisation and rehabilitation of small and'medium
industries
ii) Refinance scheme for industrial loans for small and medium industries
iii) Bills discountingiRediscounting scheme
iv) Equipment refinance scheme
v) Seed capital scheme
vi) Scheme for investment in shares and bonds of other financial institutions
vii) Scheme for concessional assistance for manufacture and industrialisation of
renewable energy systems

4.12.3 IDBI - Soft Loan Scheme

Financial assistance under the soft loan scheme is provided for modernisation,
replacement and renovation of plant and machinery. Soft loan is sanctioned to the
selected industry groups such as cotton textiles, jute, cement, sugar and specified
engineering industries. Soft loan helps the industries to achieve higher and more
economic levels of production and strengthen their competitiveness.

The Industrial Finance Corporation of India (IFCI) and Industrial Credit and
Investment Corporation of India (ICICI) participate in the soft loan scheme of the
IDBI. Jute and sugar industries avail soft loan from IFCI, engineering industries from
ICICI and cotton textiles and cement industries get soft loan for modernisation of plant
and machinery from IDBI.

Interest concession is given for the financial assistance provided under soft
loan scheme. Concession is also extended to promoter's contribution, maintaining
debt-equity ratio, initial moratorium and repayment period.

In order to diversify and expand loan portfolio, IDBI has decided to resume
medium and long term lending to the Non-Banking Financial Companies (NBFCs).
Loans will be given to NBFCs without any restriction on the end use and is expected
to utilise by NBFCs for both retail finance and machinery lease and hire purchase.
IDBI decided to increase the refinance amount to selective State Financial
Corporations from 65 percent to 80 percent.

4.12.4 IDBI - Sanctions and Disbursements

The following table shows the sanctions and disbursement of loans by the IDBI
during the period 1996-97 to 1998-99

150
 Loan % of disbursement
SI. No. Year Sanctions % Disbursements % over sanctions
Rs. Increa- Rs. Increa-
se se
(in crore)

I 1996-97 15634 - 11467 - 73

2 1997-98 23999 54 15183 32 63
3 1998-99 25578 64 14350 25 56

Source: The Hindu Business Line, August 2, 1999, p.4.

The above table reveals that the loans sanctioned by the IDBI have increased
from Rs. 15634 crore in 1996-97 to Rs. 25578 crore 1998-99, showing the percentage
increase of 64 percent. Loan disbursement was at Rs. 11467 crore in 1996-97 and it
has increased to Rs. 14350 crore in 1998-99, recording the percentage increase of 25
percent. The loan disbursement over sanction was at 73 percent in 1996-97 and it has
decreased to 56 percent in 1998-99.

4.13 SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI)

Small Industries Development Bank of India is a national institution for

promotion, financing and development of the small scale industries. It became
operational on April 2, 1990. The Industrial Development Bank of India (IDBI)
created 'Small Industries Development Fund' in 1986 for refinancing, bill discounting
and equity support tesmall scale industries. This was the first move for setting up of
SIDBI as a premier institution for taking care of the financial and other *promotional
needs of the small scale industries. In March 1990 the sum ‘ILLiimulated in the Small
Industries Development Fund Rs. 4200 crore was transferred to SIDBI.

The small scale enterprises can avail financial assistance from SIDBI through its
direct and indirect financial assistance programme. All the programmes of the SIDBI
are directed to solve the problems of the small scale industries in areas such, quality
upgradation, obsolescence of technology and
technology improvement, marketing, infrastructure development, delayed realisation
of bills, ancillarisation, export financing and venture capital financing. The procedures

151
and terms of financial assistance programmes are liberalised based on the liberalised
fiscal and industrial policy.

Delayed payment is an important problem faced by the small scale industries. In

order to solve this problem, SBI Factors and Commercial Services Pvt Ltd. and
Canbank Factors Ltd. have been established with SIDBI as a partner with 20%
shareholding. SIDBI takes steps to solve the problem of delayed payment to small
scale units through factoring services. SIDBI extends financial support to Non-
Banking Finance Companies through lines of credit against their assistance to small
scale units by way of leasing, hire-purchase and bought-out deals.

The financial assistance programmes of SIDBI am. listed below:

- direct equity participation

- equity type loan on concessional terms
- term loan and working capital loan in rupees as well as foreign currencies
- bill discounting
- venture capital finance

4.13.1 Support Services

The support services of SIDBI for the benefit of small scale enterprises are
given below:

Technology adoption, technology exchange, transfer and upgradation in small scale

units
- quality upgradation
- increasing marketing capabilities of small scale units, both in domestic market and
international market
- organising entrepreneurship development programmes to inculcate entrepreneurial
culture
- Environment management
- Rural industrialisation
- Encouraging self-help groups
- Promotional and developmental services (Under this service, project profiles are
published for the benefit of small scale tiny units and hi-tech small industrial units).

SIDBI collaborates with voluntary organisations, industrial and technical

consultancy organisations and other national and international agencies serving for

152
entrepreneurial development for devising suitable strategies lo promote small scale
units and solve their problems and to create healthy industrial base in our country.

SIDBI is a wholly-owned subsidiary of the Industrial Development Bank of.

The important objectives of SIDBI are:

a) To serve as the principal financial institution for promotion, financing and

development of industry in the small scale sector, and

b) To coordinate the functions of the institutions engaged in promoting, financing or

developing industry in the small scale sector.

Dr. Sailendra Narain, in his paper, 'SIDBI - a promotional - cum - developmental

agency for SSIs' published in Laghu Udyog, June 1996 has stated that SIDBI provides
promotional, developmental and support services to SSI sector in collaboration with
voluntary organisations and international agencies. SIDBI has identified five broad
thrust areas of assistance viz.,

i) Technology upgradation and transfer,

ii) Marketing including exports,
iii) Rural industrialisation,
iv) Management Development, and
v) Environment management and pollution control

Technology upgradation and modernisation efforts of SIDBI are aimed at

identifying needs of the industry in terms of process technology,
environment'management, quality management, common facilities centre etc. and at
initiating efforts to fulfil their needs to the small scale enterprises.

SIDBI has signed Memorandum of understanding with Small Industries

Development Organisation in 1994 envisaging upgradation of technology in the SSI
sector and development of SSIs as ancillaries to defence and large establishments.

While the facilities of SIDO through its various outfits in the form of Small
Industries Service Institutes (SIS1s) and Tool Room Centres will be available for
technology back-up, SIDBI as a financial institution would provide financial support
and also train SIDO officials in project appraisal and preparation. A Memorandum of

153
Understanding was signed in 1995 between SIDBI and Council of Scientific and 1
Industrial Research (CSIR) envisaging an alliance between SIDBI and CSIR for
synergising their core competence for promotion of small scale industrial units based
on appropriate technologies developed by CSIR, assimilating of new and improved'
technology to bring about upgradation and modernisation of the small scale industrial
units.

SIDBI provides direct finance to SSI units for the activities relating to market
promotion such as brand promotion, advertising, participation in trade fairs and
exhibitions, executing sample export orders for entering into global market.

SIDBI has undertaken a major campaign to organise participatory workshop all

over the country on 'Total Quality Management and ISI 9000 certification' for the
purpose of creating quality awareness to the small scale units. These workshops
besides creating awareness. have served to clarify the concept of ISO 9000 and
feasibility of acquiring 1SO-9000 Certificate by potential small scale units.

SIDBI has taken steps to promote informal income generating activities and
micro and tiny enterprises in the rural areas.

The following activities are undertaken by the SIDBI to achieve the objective
of rural industrialisation.

- Promotion of rural enterprises in the comparatively backward states,

- Fund support to voluntary organisations, for on-lending to rural poor.
- Assistance to voluntary organisations for women development,
- Support to voluntary organisations for conducting Entrepreneurship Development
Programmes.

For assisting SSI units in complying with pollution control norms, SIDBI has
followed a two pronged approach of not only encouraging implementation of
corrective measures by the existing units but also ensuring implementation of
preventive practices by the new units. Besides creating awareness on environment
management to SSIs, SIDBI assists the units in setting up the requisite facilities for
pollution control. SIDBI helps the SSIs for getting assistance from the appropriate
technology institutions, pollution enforcement authorities. banks and other
development agencies for taking remedial measures to control pollution. Common
effluent treatment facilities is also being encouraged by the SIDBI especially in the

154
 case of homogeneous group of industry clusters. SIDBI supports awareness
programme on environment management for the benefit of the small scale enterprises.

4.13.2 SIDBI - Sanctions and Disbursements

The following table shows the financial assistance sanctioned and disbursed by
the S1DBI during the period 1995-96 to 1997-98.

Financial Assistance Sanctioned and Disbursed by SIDBI during 1995-96 to 1997-98

Financial Assistance % of disbursement

SI. No. Year Sanctions % Disbursements % over sanctions
Rs. Increa- Rs. Increa-
se se
(in crore)

1 1995-96 6061 - 4801 - 79

2 1996-97 6485 7 4585 -4 71
3 1997-98 7484 23 5241 9 70

Source: RBI, Annual Report 1997-98.

4.14 STATE FINANCIAL CORPORATIONS

State Financial Corporations play a vital role in the development financing

system in the country. SFCs are functioning at state level.

The important objectives of the State Financial Corporations are listed below:
I
- financing and promoting small and medium scale units,
- achieving balanced industrial growth throughout the state,
- creating employment opportunities through industrialisation
- conducting entrepreneurship development programmes to promote entrepreneurship,
- expanding the ownership base of industry,
- financing for modernisation and upgradation of technology in industrial units,
- providing seed capital assistance and soft-loan for fulfilling financial needs of the
small scale units.

155
 There are 18 State Financial Corporations arc functioning in our country. The
SFCs were established under the State Finaneial Corporations Act 1951. The
Tamilnadu Industrial Investment Corporation (TIIC) was established in 1949 under
the Companies Act. It was called Madras Industrial Investment Corporation. The TIIC
is functioning as a full-fledged SFC in Tamilnadu.

The SFCs provide the following financial support to the small and medium scale
enterprises:

- term loans,
- direct subscription to equity/debentures,
- guarantee and
- discounting of bills of exchange.

SFCs provide financial support for transport operators, setting up hotels,

hospitals and tourism related activities. Special financial schemes are also introduced
by the SFCs to fulfil the financial needs of artisans and the special target groups such
as scheduled castes/tribes, women, ex-servicemen and physically handicapped.

The industries involved in the following activities get financial support from the
SFCs under the State Financial Act, 1951.

- manufacture of goods,
- preservation of goods,
- processing of goods,
- mining,
- generation and distribution of electricity,
- hotels,
- transport (road, sea, air),
- servicing of machineries,
- assembling, repairing, packing of any article with the aid of machinery or power,
- fishing, providing shore facilities for fishing,
- providing technical support to the industries.

4.15 SFCs - SANCTIONS AND DISBURSEMENTS

The following table reveals financial assistance sanctioned and disbursed by

State Financial Corporations in India in the year 1995-96 and 1996-97.

156
Financial Assistance Sanctioned and Disbursed by SFCs in 1995-96 and 1996-97

Financial Assistance % of disbursement

SI. No. Year Sanctions % Disbursements % over sanctions
Rs. Rs.
(in crore)

1 1995-96 6963 3835 55

2 1996-97 5012 3935 79

Source: RBI. Annual Report 1997-98.

The above table reveals that the financial assistance sanctioned by the 3FCs to
the industrial units in India was at Rs. 6963 crore and it is decreased to Rs. 5012 crore
in 1996-97. The financial assistance disbursed by the SFCs was at Rs. 3835 crore in
1995-96 and it has increased to Rs. 3935 crore in 1996-97. The percentage of financial
assistance disbursed over sanction is increased from 55 percent in 1995-96 to 79
percent in 1996-97.

4.16 NATIONAL BANK FOR AGRICULTURE AND RURAL

DEVELOPMENT (NABARD)

It is a development bank promoting agricultural and rural development. The

important function of this bank is to provide refinance credit facilities to the State
Cooperative Banks, Regional Rural Banks and other financial institutions approved by
the Reserve Bank of India. The NABARD was established on July 12, 1982 on the
recommendations of the Committee to Review arrangements for Institutional Credit
for Agriculture and Rural Development.

The NABARD takes steps for promoting integrated rural development and to
provide all sorts of production and investment credit for agriculture and rural
development. NABARD provides refinance assistance for agricultural activities,
marketing of agricultural produce, marketing and distribution of aericultural inputs,
production and marketing activities of rural artisans, small scale industries. village and
cotton industries and handicrafts.

The NABARD coordinates with the Central and State Government and financial
institutions for the cause of development of small scale industries, village and cottage

157
industries and rural crafts. This bank provides short term refinance assistance (period
not exceeding 18 months) and long term loans (extending upto a maximum period of
25 years including the period of rescheduling of such loans) to the State Cooperative
Banks, Regional Rural Banks, scheduled Commercial Banks and other financial
institutions approved by the Reserve Bank of India.

The short term loans are provided for financing of agricultural operations and
marketing of agricultural produce. Long term loans are provided for the purpose of
making investment loans and giving loans to artisans, small scale industries. village
and cottage industries etc. NABARD provides medium term (period extending from
18 months to 7 years) loans to the State Cooperative Banks and Regional Rural Banks
for agriculture and rural development. The Bank is empowered to contribute to the
share capital or invest in the securities of the financial institutions concerned with
agriculture and rural development.

Dr.P.Kotaiali, Chairman, NABARD in his paper 'Banking on

Microentrepreneurs-Innovative Lending and Credit Programmes' has given the
following details relating to financial support provided by NABARD.(1) Among the
various institutions engaged in providing credit to the small scale enterprises,
NABARD occupies a unique place in as much as it is the apex development bank in
India, with mandate to support agriculture, small scale industries, cottage and village
industries, rural artisans and crafts through credit so as to promote integrated rural
development.

Credit 'per se' does not bring economic development, though it is recognised
that credit is an important input in any economic activity more so for any enterprise.
NABARD recognises the constraints of micro enterprises, micro entrepreneurs and the
need for looking beyond credit. It is trying various requirements to provide 'Credit
plus Approach' facilities specially to the tiny and micro enterprises in rural areas.

(2) Further in a country as vast as India and divergence in social and economic levels,
a single approach may not be feasible. Therefore, recognising this crucial factor,
NABARD has been adopting a multi-pronged, multi-agency, multi-policy approach
and strategy in promotion of micro-enterprises in India. Considering the need for
flexibility in providing credit to micro-enterprises, 'Composite Loan Scheme' in which
working capital requirement and also investment credit are blended and provided as a
term loan has been introduced by NABARD.

158
 Under this the entrepreneurs can use'the funds for working capital/investment
capital/both, which provide him flexibility in operation. The financial products have
greatly helped the growing demand of small amount of loan by the micro-
entrepreneurs without the hassles of frequently visiting the bank for their operations.

(3) NABARD has been piaying a prominent role in giving resources as well as policy
support to the Integrated Rural Development Programme (IRDP).

(4) District Rural Industries Project (DRIP) of NABARD is an integrated package for
rural industrialisation. It aims at creating significant sustainable employment
opportunities in rural areas. Alongwith credit enhancement to the rural non-farm
sector, the project aims at technology upgradation, skill development, market and
opportunity guidance. ensuring of backward and forward linkages, development of
artisans clusters etc through sensitisation, stimulation and gearing up of state/district
machinery, NGOs and the banking system in a comprehensively planned and
coordinated manner.

4.17 EXPORT-IMPORT BANK OF INDIA

The Export-Import Bank of India (EXIM Bank) was established on January 1,

1982 by an Act of Parliament. It is the premier financial institution serving for the
promotion and financing of foreign trade in India. EXIM bank provides financial
support to the exporters and importers, export oriented units coordinates the financial
institutions providing export finance and takes timely steps for the promotion of
foreign trade.

EXIM banks provides refinancing facilities to the commercial banks.

Refinance is provided for the term loan given by banks to the exporters. Export bills
rediscounting facility is also extended by EXIM bank to the commercial banks.
ffr,
4.17.1 Major Programmes of the EXIM Bank are given below:

THe major programmes of the EXIM bank are divided into three categories.

They are,

i) EXIM bank financial support for Indian Entities

ii) EXIM bank financial support for Commercial Banks
iii) EXIM bank financial support to Overseas Entities

159
4.17.2 Schemes of Financial and Management support to Indian Entities

Export (supplier's) credit

Financing Rupee Expenditure for Project Export Contracts
Finance for consultancy and technology services
Finance for deemed exports
Pre-shipment credit
Foreign currency pre-shipment credit
Finance for export oriented units
Import lines of credit
Export marketing finance
Export vendor development finance
Export product development finance
Equity finance for overseas ventures
Bulk import finance
Working capital term loans
- Production equipment finance
- Minor ports development guarantee facility
- Underwriting
- Forfeiting
- Business advisory and technical assistance services overseas
- Product and process certificate programme
- Executive services overseas programme
- Project preparatory services overseas
- Asian country investment partners facility
- EC investment partners facility
- Africa project development facility

4.17.3 Schemes for financial support to Commercial Banks

- Refinance of term loans to export oriented units

- Export bills rediscounting
- Refinance of export (supplier's) credit
- Foreign currency pre-shipment credit
- Guarantee cum refinance (supplier's) credit

Major programmes for Overseas Entities

- Buyer's Credit
- Lines of Credit

166
. 4.17..4 Services of the EXIM Bank 4'.

The services of the EXIM Bank are given below:

1) Projects, Products and Service Exports

2) Building Export Competitiveness
3) Import Financing for Exports
4) Foreign Trade Guarantee Programme
5) Export Services

4.17.5 Projects, Products and Service Exports

Projects. products and service exports are the principal services of the Export-
Import Bank of India. Under this service, export bids relating to supply, construction
and turnkey projects and consultancy services are approved by'the EXIM Bank. This
bank helps the Indian companies to fulfil the procedural formalities to submit export
bids for projects/contracts in the emerging overseas markets. Commitment (in
principle) is also given by the bank for loans and guarantees every year. EXIM bank
facilitates Indian companies for getting financial assistance under Multilateral Funded
Projects Overseas (MEPO).

Strategic Market Entry Support is also one of the services of the EXIM Bank.
This bank encourages exporters to develop responsive bids under international
competitive bidding procedures. Under this support scheme, Bank reimburses the cost
of tendering in respect of successful bids for Multilateral Funded Projects Overseas
(MEPO).

Regional Distribution of Loans Sanctioned and Disbursed by EXIM Bank during

1988-98

Loans Sanctioned Loans Disbursed

SI. No. Region Rs. in million Rs. in million

1. West Asia 13737 12678

2. South Asia 4022 3484
3. South East
Asia, Far
East and es.

161
 Pacific 4901 2073
4. North Africa 1122 1723
5. Sub-Saharan
Africa 3253 2484
6. Europe and CIS 3113 1362
7. America 2412 1052

Loans - Sanctions and Disbursements by EXIM Bank during 1094-95 to 1997-98

S1.No. Year Loans out- Loans 'to of Dishur-

standings Sanctions Disburs- sements ever
Rs. inc- Rs. meets sanction::
Tease Rs.

1 1994-95 25961 29030 15561 54

2 1995-96 29302 13 24657 21300 Rh
3 1996-97 34513 33 12421 12566 101
4 1997-98 39166 51 18406 13704 74

Loans sanctioned by the EXIM bank was at Rs. 29030 million in 1994-95 and it
has increased to Rs. 18406 million in 1997-98. Similarly loans disbursements arc also
increased from Rs. 15561 million to Rs. 13704 million during this period. The
percentage of loan disbursement over sanction was at 54 percent in 1994-95 and it is at
74 percent in 1997-98.

Loans sanctioned (Industrywise) by EXIM Bank during 1988 - 1998

4
SI. No. Industry Loan sanctioned
Rs. in million

1 Vehicles 4962
2 Construction goods, equipments 8243
3 Capital and engineering goods 11275
4 4 Computer Software 3667
i 5 Agricultural products and
food processing 2289 1

162
 6 Textiles and garments 11570
7 Leather and leather products 893
8 Chemicals. drugs and
pharmaceuticals 8648
9 Machine tools and accessories 1319
10 Power generation and distribution
equipment 3765
11 Railway rolling stock 269
12 Consultancy Services 1073
13 Telecommunications 728
14 Miscellaneous 18451

4.17.6 Building Export Competitiveness

The EXIM Bank offers several programmes aimed at inc:easing. the export
competitiveness of Indian industries. In the year 1997-98, the bank introduced
working capital term loan facility for export-oriented units. Bank ofters
comprehensive financing package covering term loans for investment, working capital
finance and foreign trade related guarantees.

EXIM Bank Finance Assistance in 1997-98

Scheme Amount (in million)

Term Loans 1,384

Loan to export oriented units 665
Production equipment finance programme 193
Loan to Software Training Institute 47
Export Marketing Finance 616
Export Product Development 74
Export Vendor Development 48
Overseas Investment Finance 2.007
Export Facilitation 720

4.17.7 Import Financing for Exports

The EXIM Sank offers Bulk Import Finance, Foreign Currency Pre .shipment
Credit and Import Lines of Credit under the head import financing for exports.

163
 Under Bulk Import Finance Scheme in the year 1997-98. EXIM Bank has
sanctioned Rs. 400 million for bulk import of raw materials and components. Bank has
sanctioned US $ 7 million under Foreign Currency Pre-shipment Credit.

Bank has lines of credit in place for financing import of machinery from UK,
Italy, other European Countries, USA and Korea. In 1997-98 EXIM Bank has
sanctioned Rs. 82.6 million to export-oriented units for financing import of capital
goods from Korea and Italy under lines of credit from EXIM Bank of Korea and
Mediocredito Centrale, Italy.4.17.8 Foreign Trade Guarantee Programme

Under this programme, EXIM Bank, in the year 1997-98, has sanctioned
guarantees aggregating Rs. 2.49 billion to export oriented units for fulfilling export
obligation under the Export Promotion of Capital Goods Scheme, deferred payment
guarantees covering import of capital goods and advance-cum-performance guarantees
on behalf of Indian exporters.

4.17.9 Export Services

EXIM Bank information, advisory and support services to the Indian companies
and overseas entities on a fee basis. Export services of the bank include market related
information, sector and feasibility studies, technology supplier identification, partner
search, investment facilitation and development of joint ventures both in India and
abroad.

Export services (selected) rendered by the EXIM Bank to Indian companies and
overseas ei,,ities are given below:

- information on sanitaryware market for setting up a joint venture in India,

- identification of buyer for sale of a marine container manufacturing unit in India.
- conducting market research for setting up sales offices in eastern Europe,
- study for taking over a company in Italy,
- information on polyester staple fibre manufacturers in Korea,
- users of antimony trioxide in USA,
- household electrical industry in Taiwan and advance alerts on projects funded by
multilateral agencies.

EXIM Bank is correspondent in India of the European Commission's trade and

investment corporation network. Bureau de Rapprochement des Enterprises (BRE).
Through BRE network. Bank disseminates among Indian companies, information on
trade and investment opportunities emanating from various countries as also
publicizes on BRE network, corporate profiles of Indian companies seeking partners
or offering their products and technologies.

With a view to enlarging networking with international organisations and other

service providers, EXIM Bank has entered into cooperation agreements and
Memoranda of Understanding in the year 1997-98 with business promotion agencies
in Spain, Hungary, Russia, South Africa and Mexico. Such international linkages
facilitate exchange of information, identification of joint venture partners, logistic
support for seminars, exchange of faculty and establishing Lines of Credit.

4.18 COMMERCIAL BANKS

Commercial banks play a vital role in providing financial assistance to the

industry, business and service sectors in India.

Commercial banks participate in all lending programmes sponsored by the

Government for the benefit of small scale industries, agriculture, rural industries and
crafts.

Commercial banks have a wider network of branches in India, comparing the

other financial institutions. Regional rural banks are also sponsored by the selected
commercial banks. The wider network of branches facilitates the banks to serve the
people living in rural areas and remote villages.

Commercial banks mobilise deposits and utilise the deposits for lending after
fulfilling the statutory obligations such as statutory liquidity ratio and cash reserve
ratio.

Priority sector lending is a specific lending programme of the commercial

banks. Forty percent of the net bank credit is earmarked for the priority sector lending.
Agriculture and small scale industry get substantial share in the priority sector lending.

Commercial banks provide 18 percent of the total priority sector credit to

agriculture. Annual credit plan is prepared regionwise under lead bank scheme. The
credit plan reveals the credit requirement of the agriculture, small scale industries and
other priority sectors. All the commercial banks of the region participate in fulfilling
the credit requirements of the various priority sectors shown in the annual credit plan.

165
 Commercial banks provide term ldan and working capital finance to tle.
industrial sector. They actively participate in the 'Prime Minister's Rozkar Yojana' in
order to create self employment opportunities in the urban and rural areas.

Commercial banks coordinate with the District Industries Centre for providing
financial support to the beneficiaries of the Prime Minister's Rozkar Yojana Scheme.

Transport operators and traders get tinancial support from commercial hanks
under hypothecation also Commercial banks provide financial support to the
industries after assessing their technical, financial, economic feasibility and market
viability.

Commercial banks indirectly helping the industries to improve their

performance by active participation in the project review stage and funding after
review.

Commercial banks provide financial support to the export sector also. They
provide pre-shipment and post-shipment credit to the exporters at concessional rate of
interest.

The gross bank credit of the commercial banks was at Rs. 231860 crore in 1996
and it has increased to Rs. 258991 crore in 1997 and Rs. 300283 crore in 1998.

The following table reveals deployment of gross bank credit to priority sector
and medium and large scale industries during 1996 to 1998.

Sectoral Deployment of Gross Bank Credit during 1996 to 1998

(Rs. in crore)

SI.No Sector Outstanding as on

March 29 March 28 March 27
1996 1997 1998
Rs. Rs. Rs.

I. Priority Sector 73329 84880 99507

(16) (36)
a) Agriculture 27044 31442 34869
(16) (29)

166
 b) Small Scale Industries 31884 35944 43508
(13) (36)
c) Other priority sectors 14401 17494 21130
(21) (47)

2. Industry (medium and

large) 93053 102604 117530
(10) (26)

3. Wholesale Trade 11980 12340 13217

(other than food (3) (10)
procurement)

4. Other sectors 43707 51570 57544

(18) (32)

5. Export Credit 29590 30008 33947

(1) (15)

Source: RBI, Annual Report 1997-98.

Figures in brackets show percentage increase.

The above table reveals the financial support extended by the commercial banks
to the various sectors during the period 1996 to 1998. In the year 1996 the priority
sector credit was at Rs. 73329 crore in 1996 and it has increased to Rs. 99507 crore in
1998.

Financial support to agriculture has increased from Rs. 27044 crore to Rs.
34869 crore, small scale industries from Rs. 31884 crore to Rs. 43508 crore and other
priority sector from Rs. 14401 crore to Rs. 21130 crore during the period 1996 to
1998. The percentage increase in financial support to priority sector is 36 percent
during this period.

Financial support provided by the commercial banks to the medium and large
scale industries was at Rs. 93053 crore in 1996 and it has increased to Rs. 117530
crore in 1998, showing the percentage increase of 36 percent. Financial support to
wholesale trade is increased from Rs. 11980 crore in 1996 to Rs. 13217 crore 1998.

167
 Financial support to the export sector is increased from Rs. 29590 crore to Rs.
33947 crore during the period 1996 to 1998, registering !he percentage increase of 15
percent.

4.18.1 Trends during the First Quarter: 1998-99

The Annual Report of the RBI for the year 1997-98 reveals that the aggregate
deposits increased by Rs. 14,447 crore (2.4 per cent) in the first quarter of 1998-99 as
compared with Rs. 13,381 crore (2.6 per cent) in the corresponding period of the
previous year. Partly reflecting the seasonal downswing in the demand for non-food
credit, bank credit declined by Rs. 5,056 crore (1.6 per cent) in the first quarter of
1998-99 as compared with a decline of Rs. 2,732 crorc (1.0 per cent) in the
corresponding period of the previous year.

Non-food credit witnessed a perceptible decline of Rs. 9,399 crore (3.0 per
cent) during the first quarter of 1998-99 as compared with a decline of Rs. 5,210 (1.9
per cent) in the comparable period of the previous year. However, food credit
expanded by Rs. 4,343 crore (34.8 per cent) as compared with an increase of Rs. 2,478
crore (32.6 per cent) during the first quarter of 1997-98.

The increase in investments in government securities was lower at Rs. 13,168

crore (7.0 per cent) as compared with that of Rs. 17,460 crore (11.0 per cent) in the
corresponding period of the previous year. Reflecting this, the ratio of incremental
investments in government securities to incremental deposits declined to 91.1 per cent
in the first quarter of 1998-99 from 130.5 per cent in the comparable period of
1997-98.

4.18.2 Sectoral Deployment of Credit

Gross bank credit of select scheduled commercial banks increased sharply by

Rs. 41,292 crore (15.9 per cent) during 1997-98 as against a rise of Rs. 27,131 crore
(11.7 per cent) in the previous year. The industrywise distribution of gross bank credit
shows that while iron and steel, petroleum, electricity and cotton textiles continued to
record sizeable credit expansion, chemicals witnessed a large credit expansion in
1997-98 in contrast to a decline in the previous year. On the other hand, a decrease in
credit was observed in respect of 'other metals and metal products' during 1997-98.
Extension of bank credit to infrastructure industries and computer software stood at
Rs. 3,163 crore and Rs. 616 crore, respectively, as at the end of March 1998.

168
4.18.3 Export Finance

The export credit refinance limits of scheduled commercial banks declined from
Rs. 6,654 crore (26.1 per cent of outstanding credit eligible for refinance) in March
1997 to Rs. 2,403 crore (8.4 per cent) in March 1998 but increasal to Rs. 5,380 crore
(18.4 per cent) by June 1998 reflecting restoration of refinance limits in April 1998.
Aggregate export credit increased from Rs. 30,112 crore as at end-March 1997 to Rs.
34,430 crore as at end-March 1998, although as a percentage of net bank credit, it
dropped marginally from 10.9 per cent to 10.7 per cent over this period. As on June
19, 1998, aggregate export credit was Rs. 34,956 crore (11.0 per cent of net bank
credit).

4.18.4 General Refinance

The general refinance facility was introduced with effect from April 26, 1997.
The limit under this facility which was fixed at one per cent of each bank's fortnightly
average outstanding aggregate deposits in 1996-97, was reduced to 0.25 per cent in
mid-January 1998 as part of the monetary policy measures to stem the volatility in the
foreign exchange market. The amounts utilised under this facility as at end-March
1998 and as at-end June 1998 were negligible as a result of comfortable money market
conditions.

4.18.5 Rank Credit to Priority Sector

The aggregate priority sector advances of the public sector banks increased from
Rs. 79,131 crore as on the last reporting Friday of March 1997 to Rs. 91,319 crore as
on the last reporting Friday of March 1998: the share of priority sector advances in net
bank credit increased marginally from 41.7 per cent to 41.8 per cent over this period as
against the target of 40 per cent.

"The priority sector advances of private sector banks, also increased from Rs.
8,831 crore in March 1997 to Rs. 9.502 crore in September 1997 although as
proportion of their net bank credit. declined from 41.2 per cent to 39.9 per cent during
this period. The priority sector advances of foreign banks operating in India increased
from Rs.'6,129 crore (37 per cent of net bank credit) in March 1997 to Its. 6.938 crore
(34 per cent of net bank credit) in March 1998 and remained above the target of 32 per
cent.

169
4.19 LEASING COMPANIES

A lease is a contract whereby the owner of the asset (known as the lessor) grail,'
to another party (known as the lessee) the exclusive right to use the asset. usually for
an agreed period of lime, in return for the payment of rent.

There are two types of leases. They are financial lease and operating lease. In
financial lease the lease period is generally equal to the expected economic life of the
equipment. The lease contract is non-cancellable and lessee should pay least rent until
the lease period expires. Operating lease is short term or service lease. Lease period is
less than the full expected economic life of the equipment and the lease contract is
cancellable with proper prior notice. Of late, financial lease is popular than the
operating lease.

In lease financing, there is no immediate cash outlay for getting the required
plant and eq'iipments. Leasing is suitable for the companies suffering resource crunch.

Leasing is a means of financing capital equipment. Leasing will be the only

sources used for equipment financing in the days to come. Financial institutions, non-
banking finance companies and commercial banks have entered into lease financing in
a big way and they have established their wholly owned subsidiary companies to look
after the leasing activities exclusively. Canara Bank 'Leasing Division' has introduced
equipment leasing and hire purchase.

Leasing is gaining greater recognition as an innovative means of equipment

financing and an important vehicle in the economic development of our country.

Leasing has become an increasingly important technique of financing asset

acquisition in India. India Leasing Year Book 1994 revealed that Leasing and Hire
Purchase today accounts for about 3% to 4% of Gross Fixed Capital Formation in
India as against 22% in the developing countries. This rate is relatively small,
indicating on the whole that there is considerable scope for expansion and growth
prospects are high. The share of leasing and hire purchase is remarkable in the
automobile segment, including cars, where recent estimates indicate that one out of
every 2 cars, and one out of every 3 transport vehicles is financed on leasing or hire
purchase.

Weston J and Brigham E.F. in their book Managerial Finance have defined
Leasing as a 'Contractual relationship in which the owner (lessor) of an asset or

170
property grants to a firm or a person (lessee) the use of the assets services ior
Specified period of time, usually for an agreed sum of rent'.

According to Encyclopedia Britannia, Leasing is "a contract for the exclusive

possession of property (usually but not necessarily land or building) for a determinate
period or at will. The person making the grant is called the lessor and the person
receiving the grant is called the lessee. Two important requirements for a lease are that
the lessees have exclusive possession and the lessor's term of interest in the property
be longer than the term of the lease.

4.19.1 Top 10 Leasing Companies in India (1994) [based on Gross Leased Assets]

Gross Leased
SI. No. Leasing Company Assets
Rs. in lakh

1. 20th Century Finance Corporation Ltd 34027

2. First Leasing Company of India Ltd 23453
3. Gujarat Lease Financing Limited 19536
4. ITC Classic Finance Limited 18733
5. Reliance Capital and Finance Trust Ltd 13093
6. LLoyds Finance Ltd 11969
7. Ashok Leyland Finance Ltd 9893
8. Alpic finance Ltd 9557
9. ICDs Ltd 8766
10. SRF Finance Ltd 8569

Source: India Leasing Year Book 1994.

Activities of a selected finance companies involved in lease financing are given

below:

CEAT Financial Service Ltd.

Activities

Leasing, Hire Purchase, Bill Discounting, Merchant Banking, Loan Syndication.

Bought out Deals.

171
Birla Global Finance Ltd.

Activities

Corporate Hire Purchase and Lease, Vehicle Finance, Fixed Deposits, Corporate
Finance, Medical Equipment Finance, Foreign Exchange Money Changing, Merchant
Banking.

L & T Finance Limited

Activities

Corporate Finance - Hire Purchase, Equipment Leasing, Bills Discounting p

Project Finance - Project Appraisal, Financial Structuring, Loans Syndication
Investment Banking - Issue management and underwriting, Corporate Advisory
Services

Money Markets - Syndication and advisory services

Leasing is an important source to acquire the needed plant and machinery for a
project. Entrepreneurs, instead of purchasing equipments through borrowed funds,
may opt for equipment lease from the finance companies or banks. Lease rent paid
will be the revenue expenditure. The balance of lease rent will not be shown in the
balance sheet as liability.

Thus Lease Financing does not affect the existing debt-equity ratio. In lease
financing there is no immediate cash outflow for getting the plantiand machinery. The
amount to be invested in purchase of plant and machinery can be used for other
productive purposes. Today's machinery may become outdated one tomorrow due to
advancement in technology. So putting huge money for purchasing equipment may
not be the wise decision in the changing technological environment.

In case of outright purchase of equipments, the company has to bear the risk if
such equipments become obsolete before the completion of their service life, whereas
the equipments are acquired under lease, the risk due to obsolescence contributes to
the growth of leasing today.

Leasing is a viable means of financing to the companies require specialised,

sophisticated and technology oriented equipments in their manufacturing operations

172
 involving more losses due to rapid technological advancement that mattes the present
equipments obsolete in the near future.

4/0 INVESTMENT INSTITUTIONS

Unit Trusi of India, Life Insurance Corporation of India, General Insurance

2orporation are known as Investment Institutions. They mobilise savings of the people
and utilise it for the purpose of developing infrastructure facilities in our country.
nvestment institutions participate with other financial institutions in providing term
oans to the industries and providing facilities for underwriting/direct subscription to
he shares and debentures in industrial undertakings. The insurance companies should
nest 70 percent of the annual accretions to their investible funds for the social
ievelopment of the country.

There are four subsidiaries to the General Insurance Corporation. They are,
National Insurance Company Ltd., New India Assurance Company 'Ltd., Oriental Fire
and General Insurance Company Ltd., and United India Insurance Company Ltd. The
Unit Trust of India mobilises savings of the people through its various mutual funds
schemes and the mobilised money is utilised for investment in shares/debentures in
corporate sector and securities market. The corporate sector is getting financial
support from the investment institutions.

The following table reveals financial assistance sanctioned and disbursed by the
investment institutions during the period 1995-96 to 1997-98.

Financial Support by Unit Trust of India during 1995-96 to 1997-98

SI.No. Year Financial Support % in- % of dispur-

Sanctioned % inc- Disbur- crease sed over
reasc sed sanctioned
(in crore)

1 1995-96 3686 3017 82

2 1996-97 366y -0.5 3336 11 91
3 1997-98 4579 24 3499 16 75

173
 Financial Support by Life Insurance Corporation of India during 1995-96 to 1997-98

SI.No. Year Financial Support % in- % of dispur-

Sanctioned % inc- Disbur- crease sed over
rease sed sanctioned
(in crore)

1 1995-96 2342 - 2530 108

2 1996-97 2821 20 2960 17 105
3 1997-98 3563 52 3971 57 111

Financial Support by General Insurance Corporation of India during

1995-96 to 1997-98

SI.No. Year Financial Support % in- % of dispur-

Sanctioned % inc- Disbur- crease sed over
rease sed sanctioned
(in crore)

1 1995-96 1216 965 79

2 1996-97 1273 5 925 -4 73
3 1997-98 1173 -4 1144 19 98

Source: RBI. Annual Report 1997-98

The financial support provided by the investment institutions to the industrial

sector is explained below:

Financial support provided by the UT1 was at Rs. 3686 crore in 1995-96 and it
has increased to Rs. 4579 crore in 1997-98, showing the percentage increase of 24
percent. The percentage of financial support disbursed over the sanctioned was at 82
percent in 1995-96 and it is 75 percent in 1997-98.

Financial support extended by the LIC was at Rs. 2342 crore in 1995-96 and it
has increased to Rs. 3563 crore in 1997-98. The percentage increase of financial

174
 assistance is 52 percent. The financial assistance disbursed is more than sanctioned
during the period 1996 to 1998.

Financial support provided by the GIC was at Rs. 1216 crore in 1995-96 and it
has increased to Rs. 1173 crore in 1997-98. The percentage of financial assistance
disbursed over the sanctioned was 75 percent in 1995-96 and it has increased to 98
percent in 1997-98.

The Life Insurance Corporation of India provides loans for the development of
specially-oriented and infrastructure projects such as housing, rural electrification,
water supply and sewerage. Financial support is provided to corporate sector by way
of term loans and underwriting/direct subscription to shares and debentures. LIC
provides financial support to other financial institutions by way of subscription to their
• shares and bonds and also by way of term loans.

4.21 INTERNATIONAL FINANCIAL AGENCIES

International Financial Agencies (World Bank, International Bank for

Reconstruction and Development, International Development Association) provide
financial support to the projects of their member countries. The agencies provide
financial support to the projects related to social and economic progress of the member
countries. The term World Bank refers to two legally and financially distinct entities.

The two entities are.

i) International Bank for Reconstruction and Development (IBRD) and

ii) International Development Association (IDA)

The services of the IBRD and IDA are listed below:

1) providing financial support to the member countries

ii) providing economic advice and technical assistance
iii) serving as a catalyst to investment by others
iv) assisting the member countries for reconstruction and development of their
economy by facilitating investment of capital for productive purposes
v) promoting foreign investment by guarantees or through participation and other
investment of capital for fulfilling the investment needs of the member countries

175
vi) maintaining equilibrium in the balance of payments of member countries b)
promoting international investments for creating productive resources and increasing
exports in the member countries

Bhattacharya B.B. in his book 'International Marketing Management' has given

the basic rules governing the World Bank operations.

They are given below:

(i) It must lend only for productive purposes and must stimulate economic growth in
the developing countries where it lends.
(ii) It must give due regard to the process of repayment.
(iii) Each loan is made to a Government or must be guaranteed by the Government
concerned.
(iv) The Bank's decision to lend must be based on economic considerations.
(v) Loans must be used to meet the foreign exchange component of the projects.
(vi) The rate of interest is somewhat lower but related to market rates.
(vii) The use of loans cannot be restricted to purchases in any particular member-
country. In otherwords. loans are not 'tied'.

4.21.1 World Bank

The World Bank Annual Report 1995 highlights the services rendered by the
World Bank.

The details given in the Annual Report regarding its services are given below:

The World Bank, which consists of the International Bank for Reconstruction
and Development (1BRD) and the International Development Association (IDA). ha•
one central purpose, to promote economic and social progress in developing nations
by helping raise productivity so that their people may live a better and fuller life.

This is also the aim of the International Finance Corporation - which works
closely with private investors from around the world and invests in commercial
enterprises in developing countries - and the Multilateral Investment Guarantee
Agency (MIGA) - which was established to encourage direct foreign investment is
developing countries by protecting investors from noncommercial risk. Collectively.
the World Bank, the IFC, and MIGA are known as the World Bank Group.

176
 Of the four institutions, the IBRD established in 1945, is the oldest and largest.
The resolution passed in the Bretton Woods Conference held in the year 1944
contributed the establishment of the International Bank of Reconstruction and
Development. The IBRD is owned by the governments of 178 countries that have
subscribed to its capital. Under its Articles of Agreement, only countries that are
members of the International Monetary Fund (IMF) can be considered for membership
in the IBRD. Subscriptions by member countries to the capital stock of the IBRD are
related to each member's quota in the IMF, which is designed to reflect the country's
relative economic strength.

The IBRD makes loans only to creditworthy borrowers. Assistance is provided

only to those projects that promise high real rates of economic return to the country.
As a matter of policy, the IBRD does not reschedule payments, and it has suffered no
losses on the loans it has made. It has earned a net income every year since 1948.

The IBRD obtains most of the funds through medium and long-term borrowings
in the capital markets of Europe, Japan and the United States. it) also borrows funds at
market-based rates from central banks and other government institutions. The IBRD's
solid standing in the markets is based upon the combination of conservative lending
policies, strong financial backing by 'its members and prudent financial management.

Apart from borrowings, significant amounts also come from the IBRD's paid-in
capital, from its retained earnings, and from the flow of repayments on its loans.

The International Development Association was established in 1960 to provide

assistance to the poorer developing countries on terms that would bear less heavily on
their balance of payments than IBRD loans. [DA's assistance is concentrated on the
very poor countries - mainly those with an annual per capita gross national product of
less than S696 (in 1993 U.S.dollars). By this criterion, about sixty countries are
eligible.

Membership in IDA is open to all members of the IBRD and 158 have joined.
The funds lent by IDA come mostly in the form of contribution from its richer
members, although some developing countries contribute to IDA, as well, 1DA's
resources have also been augmented by frequent transfer from the net earnings of the
IBRD.

IDA credits are made only to governments. They have to be repaid over a
- period of thirty-five to forty years. They carry no interest, but there is an annual

177
service charge of 0.5 per cent on the disbursed amount of each credit. Although IDA is
legally and financially distinct from the IBRD, it shares the same staff, and the
projects it assists have to meet the same criteria as do projects supported by the IBRD.

The success of the Bank's operations depends upon the trust it has established
with borrowers, and this trust is based on the experience and technical skills the Bank
has demonstrated over the years in working with its member developing countries.

Under its Articles of Agreement. the Bank cannot allow itself to be influenced
by the political character of a member country; Only economic considerations are
relevant. It also seeks to ensure that the developing country gets full value for the
money it borrows. Bank assistance, therefore, is untied in that it may be used to
purchase goods and services from any member country.

The IFC was established in 1956. Its function is to assist the economic
development of developing countries by promoting growth in the private sector of
their economies and helping to mobilize domestic and foreign capital for this purpose.
One hundred sixty-five countries are members of the IFC. Legally and financially, the
IFC and the World Bank are separate entities. The IFC has its own operating and legal
staff, but draws upon the Bank for administrative and other services.

In the project-financing role, the IFC provides loans and makes equity
investments. Unlike most multilateral institutions, the IFC does not accept government
guarantees for its financing. Like a private financial institution, the IFC prices its
finance and services, to the extent possible in line with the market, while taking into
account the cost of its funds, and seeks profitable returns. .fhe IFC shares full projects
risks with its partners.

MIGA, the newest member of the World Bank Group, was established in 1988.
It has its principal responsibility the promotion of investment for economic
development in member countries through guarantees to foreign investors against
losses caused by noncommercial risks and through advisory and consultative services
to members countries to assist them in creating a responsive investment climate and
information base to guide and encourage the flow of capital.

MIGA is also an entity separate from the World Bank like the WC. it has its
own operating and legal staff but draws upon the Bank for administrative and other
services. MIGA currently has 128 members.

178
 World Bank Operational and Financial Overview, 1991-95

(million of US Dollars unless otherwise noted; fiscal years)

Item 1991 1992 1993 1994 1995
IBRD
Commitments 16,392 15,156 16,945 14,244 16,853
Disbursements 11,431 11,666 12,942 10,447 12,672
Net disbursements to
current borrowers,
excluding prepayments 2,909 2,594 3.289 963 1.23S

Net disbursements to
all borrowers,
including prepayments 2,109 1,833 2,331 -731 897
Net Income 1,200 1,645 1,130 1,051 1354
Financial return on
average investments • 9.23% 8.07% 6.09% 3.56% 5.71%
New medium- and long-
term (MI.T) borrowings
after swaps 10,883 11.789 12,676 8,908 9,026
Average cost of new MLT
borrowines after swaps 8.06% 6.69% 5.9f7' , 5.03% 6.32%
Subscribed capital 139,120 152,248 165.58') 170,003 176.438
Statutory lending limit152,327 168,368 183.312 189.189 198,988
Loans and callable gua-
rantees outstanding 90,648 100,968 104,6(At 109.468 123,676
Asa % of statutory
lending limit 60 60 57 58 62

179
I leadroom 61,679 67,400 • 78,706 79,721 75312

Liquidity ratio 51% 48% 48% 51% 46%

Reserves-to-loans ratio 11.2% 11.7% 11.7% 13.9% 14.3%

IBRD/NDA Joint Activities

Administrative expenses 964 1,074 1,236 1,389 1,409

IDA
Commitments 6,293 6,550 6,752 6,592 5,669

Disbursements 4,549 4,765 4,947 5,532 5,703

Net disbursements 4,274 4,441 4,581 5,110 5,205

Development credit
outstanding 45,478 52,304 56,158 62,810 72,032

Accumulated surplus 598 1,363 1,194 -1,365 1,995

a. Excludes guarantees and loans to the IFC.

b. Includes disbursements from the Special Fund

Source: The World Bank Annual Report, 1995

The - bove table reveals the financial position of the International Bank for
Reconstruction and Development (IBRD) and International Development Association
(IDA) for the period 1991 to 1995.

IBRD's commitments was at US $16392 million in 1991 and it has increased to

US $16853 million in 1995. Similarly disbursement has increased from US $1 1431
million to US $12672 million during this period.

Net income of the IBRD was at US $1200 million'in 1991'and it has reached
to US $1354 million in 1995. The subscribed capital of the IBRD has increased from
US 5139120 1991 to US $176438 million in 1995. Commitments of the IDA was at
in

180
 US $5669 million in 1995 whereas disbursements has increased from US $4549 ir
1991 to US $5703 million in 1995. Accumulated surplus of the IDA has increased
from US $598 million in 1991 to US $1995 million in 1995.

Commitments and Disbursements of the IBRD in 1996 are CS $14656 million

and 13372 million respectively. Commitments and Disbursements of IDA in 1996 are
US $6864 million and US S5884 million respectively. The sector-wise lending of the
IBRD and IDA is given in the following table.

The following table shows the number of projects sanctioned the IBRD for the
various sectors of the global economy.

Number of Projects Sanctioned by IBRD

1974-92 1993 1994 1995

SI.No Sector No. of Projects

1 Agriculture/Rural
Development 172 14 36 29
2 Education 47 6 10 14
3 Environment 25 13 5 6
4 Industry/Energy 41 8 13 8
5 Infrastructure/Urban
development 6w 8 24 15
6 Population,health,
nutrition 64 16 14 19
7 Rehabilitation)
tb. reconstruction 8 3

Source: The World Bank Annual Report, 1995

4.21.2 Asian Development Bank (ADB)

Asian Development Bank's (ADB) strateeic objectives are given below:

i) promotion of growth
ii) reduction of poverty
iii) improvement of the status of women

181
 iv) development of human resources (including among other things, population
planning) and
v) sound management of natural resources and the environment.

in achieving these objectives, which are overlapping and mutually reinforcing,

ADB emphasises the role of the private sector as well as efficient public sector
management.

Since the Bank's inception in 1966, poverty reduction has been an implicity
element in its operations. Its concerns were sharpened by the findings and
recommendations of an internal Task Force on the Bank's role in Poverty Alleviation,
established in 1988.

Poverty issues arc now considered systematically during country strategy and
operational programming exercises, and an increasing number of projects and
programmes are being aimed at meeting specific poverty reduction goals. The Bank is
increasingly concerned with projects which will increase income and employment
opportunities for the poor and improve their access to basic social services, such as
education and health care. it also supports policy adjustments to involve the poor in
the development process.

The ADB believes that the role and needs of women should be an integral part
of project activity not only for reasons of equity but also for development to remain
sustainable. Community participation to enhance the role of women was emphasised
in various technical assistance projects covering agriculture. education, health and
population, water supply and sanitation and urban development.

Investment in education, health and population programmes, particularly those

designed to benefit lower-income groups, has clear economic and development
advantages. The ADB is increasingly emphasising projects in primary or basic
education to help boost literacy rates and increase women's participation in education.

In the field of higher education, the efficiency and effectiveness of the system
can be improved by rationalising and consolidating the number and types of
institutions and making curricula more responsive. The ADB has financed a number of
projects to achieve these objectives.

Important projects on education sanctioned by the ADB are,

182
 i) Rehabilitation of Damaged School Facilities Project in Bangladesh,
ii) Secondary Education Development Project in Nepal,
iii) Teacher Training Project and Project on Lower Secondary Education in Pakistan,
iv) Vocational Education Project in Indonesia,
v) Technical Education Project in Sri Lanka.

The ADB's projects on health and population are aimed at improving the
access to and the quality and efficiency of primary health care and family planning
services in rural and urban areas. Allocation of bank resources is shifting from the
expansion of physical infrastructure to building more effective health care institutions.
This bank has sanctioned Health and Population Project to Sri Lanka and Health Care
Development Project to Pakistan.

The ADB's objectives behind its water supply projects are to increase the
coverage of the urban poor, ensure reasonable supplies of safe water, promote water
resource management and reduce waste. The bank has sanctioned a large number of
projects on water supply and sanitation to its member countries.

Efforts are taken by the ADB to strengthen basic infrastructure to enable the
member countries to face the problems generated by rapid urbanisation. Improving
living conditions in slums and squatter settlements is also an important element of the
Bank's urban development projects. ADB sanctions projects on Environment
Preservation and Natural Resources Management.

Technical Assistance sanctioned by AD Sectorwjse - 1992 Total US $463.92

The share of Technical Assistance to the various sectors is shown below:

% of share in
SI.No. Sector Technical Assistance
1 Agriculture and agro industry
18.5
2 Industry and non-fuel minerals 3.13
3 Multisector 2.50
4 Urban, education and health 23.47
5 Water supply 3.25
6 Transport and Communications 3.18
7 Finance
1.17
8 Others
3.60
9 Energy 24.70

183
 The Bank's technical assistance is financed through grants or loans or a
combination of both. Grants are funded from voluntary contributions to the Technical
Assistance Special Fund by both developed and developing member countries,
Technical Assistance Special Fund (TASF) from Asian Development Fund VI,
investment income from TASF, income from Ordinary Capital Resources (OCR)
operations, allocations from the Japan Special Fund (JSF) and grants from multilateral
and bilateral sources such as the United Nations Development Programme and the
governments of Finland, France, Netherlands, Norway and Switzerland.

Technical assistance loans are financed from both OCR and ADF together with
multilateral and bilateral sources. The following table shows the cumulative lending
by ADB to India as on 31st December 1992.

Cumulative Bank Lending to India as on 31.12.1992

SI.No. Sector No. of loans Amount of %

loans $
million

1. Energy 11 1853.80 43.5

2. Transport & Communication 9 1617.60 37.9
3. Finance 5 770.00 18.0
4. Industry and Non-fuel
Minerals 3 25.90 0.6

Total 28 4267.30 100

4
The ADB's operational strategy is focussed on the industrialisation of the
economy, with emphasis on greater private sector participation, the development of
economic infrastructure (physical, social and financial), and private investment in
areas where policy and technological changes arc being promoted.

Improvements are sought in energy, transport and telecommunications

infrastructure to ease bottlenecks to industrial development. The environment and
social impacts of development are also addressed.

184
REVIEW QUESTIONS

I. What do you understand by financial support to a project?

2. How will you estimate the project cost?
3. Explain the importance of judicious financing plan.
4. What arc the means of financing?
5. Explain financial support provided by Industrial Development Bank of India.
6. Describe financial support schemes of NABARD.
7. Explain the financial assistance of the SIDBI for the development of small scale
industries.
8. Explain the financial assistance provided by Commercial Banks to the small scale
industries.
9. What do you understand by investment institutions? Explain their financial support
to the projects.
10. Describe the role of international financial agencies in providing financial support
system to the various projects.

REFERENCE BOOKS

1. Vasant Desai, 'Dynamics of Entrepreneurial Development and Management',

Himalaya Publishing I louse. Bombay.
2. Shama, Financial Management, Kalyani Publishers.
3. World Bank. Annual Report.
4. Asian Development Bank, Annual Report.
5. Annual Report, Reserve Bank of India.
6. 'Laghu Udyog' - Quarterly Journal published by SIDO, New Delhi.

185
 UNIT - V

MANAGEMENT, CONSULTANCY AND TRAINING SUPPORT

The objectives of this lesson are:

i) to discuss the need for management, consultancy and training support to the
entrepreneurs,
ii) to study the advisory services required to entrepreneurs,
iii) to present the importance of awareness training, motivation training and
management training,
iv) to explain the management, consultancy and training support provided by the
following institutions:
- District industries centre
- Small industries service institute
- National small industry extention training institute
- Small industries development organisation
- Federation of Association of small scale industries
- National science and technology entrepreneurship development
- Management consultancy organisations
- Centre for entrepreneurship development and
- Non-government organisation

5.1 INTRODUCTION

Small scale industries play a vital role in the economic development of India.
SSI sector paves the way to create employment opportunities. assist entrepreneurship
and ensure a better use of financial resources and appropriate technology. Capital
requirement in SSI sector is smaller than the large scale industries and gestation period
is also very short in small scale sector. Setting up of small scale industries in rural and
backward areas will minimise migration of people from rural area to urban area for
seeking employment.

Number of registered small scale units in India was at 19.48 lakh in 1990-91
and it has increasd to 30.14 lakh in 1997-98. Production of SSI sector was at
Rs.155340 crore in 1990-91 and it has incresed to Rs.465171 crore in 1997-98.
Employment generation in SSI sector was at Rs.125.30 lakh numbers in 1990-91 and
it has increased to 268159 lakh in 1997-98. Exports of SSI sector has increased from
Rs.9664 crore in 1990-91 to Rs.43946 crore in 1997-98.

186
 Small scale sector has great potential grow in Indian economy. Since agriculture
is the major occupation of the people, agri-bascd small scale industries have greater
opportunities to grow. Small scale sector contributes to industrial production,
employment and exports. But starting a small scale industry or large scale industry is
not a easy task. It requires a lot of ground work. A detailed planning work is to be
done regarding selection of industry, selection of site, selection of materials
employees, mobilising required finance. infrastructural facilities etc.

Entrepreneurs may not be the experts in all fields of industry or all functions of
industrial management. They have to observe and fulfil the legal formalities to start an
industry and they have to adopt the regulations laid down by the government for
environment protection.

Entrepreneurs are in need of managerial support to keep their industries

competitive, quality oriented and to face any challenges forthcoming in the domestic
as well as overseas market. Human resource management is also one of the important
aspects of industrial management. Employee recruitment, selection, training,
motivation, promotion etc. are to be carefully planned for the success of industries.

It is the felt need of the hour to provide the required support to the
entrepreneurs to fulfil the legal formalities for setting up of enterprise and
environment protection. Entrepreneurs should be advised and enlightened in a
systematic way regarding how to manage the entreprise successfully? and how to
manage the human resources for ensuring better productivity.

Entrepreneurs must be informed and advised about the financial, technical,

managerial support etc. provided by the government and other agencies for the growth
and development of industries.

Entrepreneurs should be informed and advised about the institutions offering

industrial management, consultancy and training support to the industries. The small
industries development organisation provides consultancy support for the following
aspects":

- Technical
- Managerial
- Marketing
- Quality control

187
 - Production
- Finance
- Labour laws
- In-plant Studies

The National Small Industry Extension and Training Institute (NSIETI) located
at Hyderabad provides training support for industrial management and other areas of
small industries development. It undertakes feasibility studies, research studies,
collects and disseminate technical information, required for project profiles
preparation and execution of the project. Its documentation centre is a valuable source
of information to entrepreneurs to get relevant information about the steps to be
followed for setting up of an enterprise.

These area a number of institutions providing management, consultancy and

training support to the entrepreneurs. Institutional support available to the
entrepreneurs in the field of management, consultancy and training is discussed in
detail in this chapter.
Government comes forward to estabish industrial estates with all infrastructure
facilities for the benefit of the entrepreneurs and industrialising the country.
Entrepreneurs should be encouraged and motivated to utilise such facilities created by
the government. Entrepreneurs should be advised about the procedural formalities to
be fulfilled to enter into the industrial estates. It requires support from the institutions
serving for the cause of entrepreneurship and industrial development

5.1.1 Advisory Services: - Legal Aspects

Entrepreneurship development institutions arc expected to provide advisory

services to the entrepreneurs for,

fulfiling the legal formalities for setting up of industrial units, hiring labourers
availing financial assistance from financial institutions, taxation and filing of
relevant documents to the government periodically.

5.1.2 Environmental Aspects

Entrepreneurs should be informed about the procedures to be adopted to get

clearance for their project from the pollution control board. [hey are to be advised
about the Environment Protection Act and its features. Assistance provided by the

188
Government for pollution control and effluent treatment must be informed and brought
to the notice of the entrepreneurs. If so, they will take remedial measures timely to
control the pollution in their projects. Entrepreneurs should keep advised about the ill-
effects of pollution also.

5.1.3 Managerial and Human Aspects

Management is an art of getting things with others. Entrepreneurs should

observe this art to meet the organisational objectives. Entrepreneurship Development
Institutions conduct management development programmes periodically to create
awareness to the entrepreneurs about the managerial skills needed to run the enterprise
successflly in today's competitive environment and to keep the work force motivated
and couraged.

Management development programme supports the entrepreneurs to enhance

their managerial skills in all functions of management such as planning, organising,
directing, controlling etc. Material and human resources must be managed property for
achieving the objectives of the entreprise.

Of late, quality is well recognized globally. To obtain quality output, we need

quality input and processing. Entrepreneurs are expected to understand and observe
how'to Jimprove product quality and how to improve overall organisational quality?
Product quality could be improved by continuous modernisation of manufacturing
operators and utilising recent technolgies.

Organisational quality could be improved by injecting work oriented and

quality oriented culture in the overall system of the organization. ISO 9000
certification is the authorized document witnessing organisational quality. Proper
guidence should be given to the entrepreneurs to ensure product quality and
organisiational quality. These could be ensured by the well motivated work force. So
managing human resources is the most important segment of industrial management.

Employee selecting training and promotion should be seriously viewed in the

organisation and human aspects cannot be compromised. Entrepreneurs need support
from the Government and other agencies for building their organisational qualiuty and
to obtain ISO 9000 certification.

SIDO has introduced an incentive scheme for small scale industries which
have acquired ISO-9000 quality certification or its equivalent.

189
 The details about this scheme is mentioned below.

In order to encourage technology upgradation and quality assurance to prepare

the small scale industries to face global competition and increasing exports, the office
of the Development commissioner (SSI) in the Department of SSI & ARI, Ministry of
Industry, Government of India has been operating a scheme to provide incentives to
small scale /Ancillary industries to acquire ISO 9000 certification or its equivalent.,
since March 1994. The scheme is valid for the financial year 1999 - 2000 as well

The scheme envisages reimbursement of charges of acquiring ISO 9000

certification or its equivalent to the extent of 75% of the cost subject to a maximum of
Rs.75000.

A screening committee under the Chairmanship of Secretary and Development

Commissioner (SSI) has been set up to consider the cases for approval of
reimbursement amount in accordance with the simplified procedure. The screening
committee has approved reimbursement of Rs.2.14 crore for 392 cases since the
inception of the scheme. The application form and other details can be obtained from
the following address:

Director (Technology Management Division)

Office of the Development Commissioner (SSI)
Ministry of Industry
7th Floor, 'A' Wing, Nirman Bhavan,
Maulana Azad Road, New Delhi - 110 011.

5.1.4 Awareness Training, Motivation Training and Management Training

Entrepreneurship Development Programmes conducted by the Financial

Institutions, Small Industries Service Institutes and other agencies provide awareness
training, motivation training and management training to the entrepreneurs.

Entrepreneurship Development Programmes (EDPs) endeavour to change,

educate and equip a person to become a successful entrepreneur. Technical training
offered by SISI aims to develop existing small scale industries by upgrading the skills
and knowledge of their workers and, in the process, develop entrepreneurs as well.

Industrial management training courses are introductory courses to

management studies which include general appreciation programmes as well as

190
 specialized courses in specified areas of management. While specialised courses are
conducted only for the small scale industrialists or their managerial personnel, the
general appreciation courses are meant for the prospective entrepreneurs also. The
course content is suitably modified by the SISI to suit the requirements of the
participants by incorporating few sessions on environmental scanning, project support
system etc. in addition to lectures on management topics.

EDPs create awareness about entrepreneurship and its significance to the

prospective entrepreneurs. Entrepreneurship Awareness Camps (EACs) are
periodically conducted by the National Science and Technology Entrepreneurship
Development Board. EACs serves as awareness training to the prospective
entrepreneurs to understand the entrepreneurial opportunities available to them.
•
Motivation training is also a pan of the EDPs. Entrepreneurs are motivated
through the incentives offered by the Government, support system available with
various agencies, entrepreneurial opportunities, creation of employment and ,
highlighting other merits of entrepreneurship. They are motivated to switch over from
wage-employment to self-employment and job seekers become job providers. EDPs
are aimed to equip the prospective entrepreneurs with the basic knowledge of small
scale / tiny industries management such as production management, marketing
management, financial management, inventory management, personnel management,
etc.,

5.2 DISTRICT INDUSTRIES CENTRE (DIC)

District Industries Centre (DIC) was established in the year 1978. Mr.George
Fernandes, the then Union Ministry of Industries in the Janatha Government had
brought the opinion of developing an agency like DIC. Then DICs were created in
every district which were to provide different forms of assistance under one roof.
• District Industries Centres attempt to establish close links ‘‘ith development blocks,
banks and specialised institutions for the cause of entrepreneurship development in all
parts of our country.

M.Phil dissertation 'Contribution of DIC to the Development of Small Scale

Industries' (by Deivarani) submitted to Alagappa University highlights the important
tv) serviaes and support extended by DIC to the entrepreneurs. The details are given
111° below:
Vs,
to,

191
 A District• Industries Centre is an institution at the district level which provides
all services and facilities to entrepreneurs at one place so that they may set up small
and village industries. These centres are the focal point for spreading a rural
transformation and generation of industrial growth for village communities.

Important services of the DIC are given below:

Identification of prospective entrepreneur for setting up industries by conducting

motivation camp throughout the district

Providing technical assistance to the entrepreneurs in the selection of projects

suitable for them- Issuing provisional SSI Registration certificate to the
entrepreneurs trained in entrepreneurship development programme for gettin€
financial assistance from financial agencies like NSIC, SIPCOT, SIDCO, Banks.
etc.

Issuing permanent registration certificate after commencing production

_ •
AssiSsing raw materials requirements and forwarding recommendations to the
supplying agencies regarding coal, coke, wax, furnace oil, diesel, kerosene,
cement, iron and steel materials.

Making necessary arrangements for getting clearance from various government

departments like

- Pollution Control Board

Factories Department

Chief Inspector of Boilers

Drug Controller

Fire service

- Power Connection from TNEB

- Textile Commissioner

•
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- Coordination with lead bank and other financial institutions for arranging financial
assistance to the entrepreneurs.

Organsing training courses to the entrepreneurs of small tiny units in collaboration

with Small Industries Service Institute and other Institutions involved in
entrepreneurship development

Identifying marketing opportunities and disseminating marketing intelligence' to

the entrepreneurs in liaison with Government procurement agencies.

Conducting marketing surveys and market development programmes in selected

projects / products

- Preparing techno - economic feasibility reports for the benefit of entrepreneurs and
offering investment advise to entrepreneurs.

- Indicating the source of machinery and equipment for different categories of

industrial units, for procurement

Making a survey of existing, traditional and new type of industries for assessing
their feasibility.

Assessing the human resource requirement and assisting existing small scale units
when they face labour problems.

Registering and organising industrial cooperative societies

Sponsoring loan applications for the purchase of land and building and
recommending to TIIC, SIDCO and nationalised banks.

DICs are operational mechanism for offering functions and facilities for
setting up of industries in rural and backward areas and ensuring their continued viable
operation by developing close linkages with rural development blocks on the one hand
and specialized developed institutions on the other.

The important objective of DIC is to help small industries and rural artisans is
backward areas. DIC helps the weaker sections of the community in rural and
backward areas so that they may service all the assistance they need to set up village
industries and improve their own economic condition and status. DIC extends i'ts

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 helping hand for the uplift of entrepreneurs not only before but also after setting up of
the units.

For promoting SSI units, government started DEC tOr each district ‘kith the
main objective of providing the necessary assistance under a single root'. The basic
function of the DIC is to register SSI units which is prerequisite for availing facilities
and amenities from the Government.

District Credit Plan (DCP) consists of development schemes based on the

careful assessment of the potaftial resources and requirements of the district. DCP
reveals technical feasibility and economic viability of the proposed development
schemes. While preparing district credit plan steps are taken for the integration of
various schemes.

For example, while proposing a large scale agricultural development project,

viability factors relating to availability of fertilisers, seeds, facilities for storage,
marketing and transportation are also analysed and suitable suggestions are
incorporated. DCP reveals credit requirement for the various sectors of the economy in
the district. It reveals the extent of managerial and technical support needed in the
various projects under small scale industry. Preparing district credit plan is the
responsibility of the lead bank of the concerned district.

A district level committee is constituted to prepare this credit plan. This

committee is headed by the Collector of the district and consisting of district level
officers of other, departments and representatives of local bodies such as the State
Electricity Board, Municipality District Panchayat, Chamber of Commerce, Academic
Institutions Organising EDP, Non-Governmental Organisations etc. This committee
prepares District Credit Plan after a detailed investigation of the resources available
for entrepreneurial development in the district, identifies opportunities available for
entrepreneurship development, and managerial, technical and financial resources
needed for the various projects proposed. •

District industries centre adopts the credit plan as an integral tool of

management. Efforts are taken by the DIC in collaboration with the various
Government departments, financial institutions, nationalised banks, non-governmental
organisations technical consultancy organisations, management institutes in order to
fulfil the managerial, technical and financial needs of the various projects proposed in
the district credit plan. DIC is the accelerator of industrial development in the

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 concerned district and provides all sorts
various sectors of the economy. of support needed for the projects in Inc.

5.3 SMALL INDUSTRIES SERVICE INSTITUTL (SISI)

The Government of India has established the Small Industries Development

Organisation (SIDO) under the Ministry of Industry, headed by the Development
Commission, Small Scale Industries to give a fillip to the development of small scale
industries throughout the country. SIDO is a policy making body and provides
industrial extension service to the small scale industries through the network of small
industries service institute. Branch Institutes and Extension Centres in the State and
Union Territories.

Small Industries Service Institute (SISI) is a

wing of the Small Industries
Development Organisation. The Small Industries Services Institute (SISI) Chennai has
the following Branch Institutes and Extension Centres which render technical and
managerial support to the projects of the entrepreneurs.

1. Small Industries Service Institute,

65/ 1 , GST Road, Guindy, Chennai - 600 032.

2. Branch Small Industries Service Institute,

(including Electronic Motor Testing Laboratory)
386, Patel Road, Coimbatore - 641 009.

3. Branch Small Industries Service Institute,

• 76, CGE Colony, Tiruchendur Road,
Tuticorin - 628 003.

4. Government of India Extension Centre,

Industrial Estate, Madurai - 625 007.

5. Government of India Extension Centre,

Industrial Estate, Thattanchavady,
Pondicherry - 605 009.

6. Government of India Leather Finishing Centre,

Peria Agraharam, Erode - 638 005.

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7. Central Footware Training Centre,
65/1, GST Road, Guindy, Chennai - 600 032.

The services and support provided by the SISI are listed below: (as given in
its pamphlets)

I . Technical consultany service

2. Development of Ancillaries
3. Sub-contract Exchange
4. Economic Information Services
5. Management Consultancy and Training
6. Export Promotion Services
7. Modernization Programme
H. Preparing Technical Feasibility and Economic Viability of the Projects
9. Revitalisation of Sick Units
10.Catalogue Bank

5.3.1 Technical Consultancy Semler

The types of assistance provided by SIST under this service are shown below:

i) Preparation and supply of

- model schemes
- project profiles
- technical bulletins. ‘1,:igtis and drawings

ii) Providing technical advice on,

- proper selection of machinery and equipment,
- process and techniques of manufacture
- appropriate raw materials to be used
- use of modern machine and equipment, proper plant layout etc.

Preparation and supply of project profiles and providing technical support in

selecting appropriate machineries, process of manufacture, raw materials, plant layout
are the basic services extended by SISI under Technical Consultancy Scheme.

Project profiles are the basic documents to choose appropriate entrepreneurial

activity. Project protiles reveal the investment required (fixed and working capital),
technology involved, profitability, break-even point, raw materials requirements,

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 machineries and equipment requirements, projected performance for 5 to 7 years of
the concerned project. The project profile makes the entrepreneurs to understand the
entire details of the concerned project in terms of investment, inputs, cash flow and
profitability. Model schemes, design and drawings of specific projects are also
prepared and supplied to the entrepreneurs.

Entrepreneurs should pay great care and attention in selecting the appropriate
machinery, materials and process of production for their projects. Plant layout is also
equally important factor while planning a project. Entrepreneurs may not be the expert
in the above selection.

They seek expertiscd advice for selection of machinery, materials and process
for their project. The SISI provides technical support to the entrepreneurs in selecting
appropriate machinery, materials and process for their projects under the Technical
Consultancy Scheme. Recent developments in the manufacturing operations are also
furnished by the SISI for the benefit of the promising entrepreneurs.

5.3.2 Development of Ancillaries

The Small Industries Service Institute provides the following services under
Development of Ancillaries:

i) Identification of items for new ancillary units

i) Selecting small scale units after assessing their capacity to undertake production of
parts/components for large scale units
i) Encouraging small scale units to participate in Government stores purchase
programme by getting them registered with National Small Industries Corporation
• i) Recommending ancillary units to the State Industries Department for registration.

Ancillaries units are the source of strength to the large scale enterprises.
Ancillary units supply components and raw materials to the large scale units.
Ancillaries assist the large scale units in getting the finished goods for timely delivery
through sub-contracting. Ancillaries should identify the components, which could be
manufactured by them during the time schedule. SISI helps the ancillaries to identify
specific items of manufacture and selects the small scale units based on their ability to
supply to undertake production of components for large scale enterprises.

• Government purchases programme is a source of marketing to the small scale

enterprises. The SSI units should register their enterprises with National Small

197
 industries Corporation (NSIC) to participate in the Government purchase programme.
SSI creates awareness about the Government purchase prouramme to the SSIs and
encourages them to participate in this programme and persudcs them to get
registration with NSIC. SISI recommends ancillary units to the State Government for
registration.

5.3.2 Sub-Contract Exchange

Sub-contract exchange is a basic service/support needed to the small scale

entreprises. It reduces investment burden to the SSI. in increasing their scale of
operation. SISI helps the small scale industries for utilisinu their space capacity for
meeting the requirement of ether small medium large scale units. Idle capacity of
one SSI can be utilised by another SSI which needs expansion in its manufacturing
operation.

This type of facility is badly needed to many small scale enterprises. The SISIs
:unctioning in each State establish sub-contract exchange for the benefit of the small
scale units. SISI functioning at Chennai has established Tamil Nadu Sub-contract
Exchange to facilitate the SSIs to exchange their spare production capacity among
themselves.

5.3.2 Economic Information Scrviccs

Following scr' ices/supports arc provided by the SISI under the Economic
Information Service::

conducting techno-c—,nomic surveys of particular areas to project new industrial

possibilities
•
collecting analysing and disseminating economic information about availability of
raw materials, market potential of products, scope for new products etc and assist
entrepreneurs to choose suitable industries

conducting in-depth studies on specific industries!products.

Identifying industrial opportunities in the backward areas becomes essential

today achieve balanced regional industrial development. To achieve this objective.
techno-economic surveys should be conducted intensively. SISI is doing this job and
conducts techno-economic surveys ill different areas/regions to identify the new

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•
 industrial opportunities. This survey is a source to the entrepreneurs to identify and
select suitable project.

SISI provides information package relating to availability of raw materials and

marketing opportunities for new products. It is a managerial support to the
entrepreneurs. They should plan in advance what to purchase, when to purchase and
where to purchase of required raw materials. The information package of the SISI
answers the above questions.

Entrepreneurs can identify market potential for their products and score for
new products through the economic information supplied by the SISI. In-depth study
is also conducted by the SISI in the selected specific industries/products to assess the
market opportunities, identify the problems faced by such units and suggest remedial
measures to solve the problems encountered. This type of in-depth study may
minimise industrial sickness.

5.3.5 Management Consultancy and Training

SISI provides following managerial support to the entrepreneurs under the

management consultancy and training programme:

- Managerial consultancy
- Management development training courses
- Entrepreneurial development programme
- Technical training courses

SISI provides managerial consultancy support to the small scale enterprises to

enable them to manage their enterprises effectively. Managerial consultancy support
helps them to design suitable strategies to withstand in the competitive market.

Management Development Training Courses are organised by the SIth

periodically to train the executives of the small scale units in the various facets of
management. SSIs are trained in employee selection, motivation and training. Recent
developments in manufacturing techniques, and management techniques are flashed in
the management development training courses.

Problems of SSIs relating to production. finance, marketing and management

are discussed in the training courses and suitable suggestions are also suggested to

199
solve such problems. Management Development Training Courses pave the way for
the growth of SSIs and attempt to minimise sickness in small scale enterprises.

SISI organises Entrepreneurship Development Programme (1-:DP) in

collaboration with the various educational and financial institutions for the purpose of
assisting entrepreneurs in selecting the suitable projects. Managerial and technical
support and guidance are given in the EDP to run the SSIs successfully. Potential
avenues for self-employjnent are explained in the entrepreneurship development
programme.

Management experts, industrialists, professionals, banks and academics will be

the resource person of the EDP. Lecture classes are organised to explain about the
product planning and development, maintenance of books of accounts, marketing
practices, pricing, project report preparation, feasibility analysis of the project,
taxation, human resource development, employee training and motivation etc. Market
survey is also conducted to ascertain marketing opportunities of a specified industry /
product during the period of EDP.

Bankers and industrialists meet is also organised during the entrepreneurship

development programme. It helps the industrialists to discuss with the bankers about
the procedures to be fulfilled for availing bank financen Industrial visit is also
organised in EDP and trainees are provided with the opportunity of visiting the
successful enterpreises. The industrial visit helps the budding entrepreneurs to learn
the recent developments in the small scale industry. Technical training courses are
organsied by the SIS1 to train about the recent technological development in the
methods and process of production, quality testing and improvement etc.

Awareness programme about the ISO 9000 certification is also organised in •

the technical training courses for the benefit of small scale enterprises. Technical
training courses of SISI is a source of technical support to the small scale enterprises.
The SISI Chennai has established Central Footwear Training Centre. This centre ~••
provides training facilities in advanced technology in footware manufacture and
organises short term training courses to the operators.

5.3.6 Export Promotion Services

SISI extends export promotion services to the small scale units and
encourages the units to participate in the export market. Export promotion services of .
the SISI are given below:
 i) Dissemination of information on foreign market, export procedures, export pricing
and costing, packaging. documentation etc.
ii) Training courses in export marketing
iii) Assistance to small scale units to display their products in trade fairs and
exhibitions held in India and abroad.

SSIs contribute to 35 percent of the total exports of our country. Export

procedure and documentation is a pre-requisite to enter into the export market. SISI
disseminates informations relating to opportunities in Indian products in the overseas
market. SISI encourages small scale enterprises to participate in the trade fairs and
exhibitions in India and abroad. International trade fairs is a source to capture export
market.

The important objectives of Export Marketing Training Courses are

i) to assess the export marketing opportunities for the SSIs,

ii) to study the procedures involved in foreign exchange transactions in ex77ort trade,
iii) to study the documentations involved and documentation procedures in export and
iv) to discuss recent customs procedures and inspection procedures.

The training courses serve as a managerial and technical support to the SSIs
to enter into the export market.

SISI provides common facility services and training facilities for the benefit
of the small scale enterprises at the SISI workshops and extension centres. The
common facility services and training facilities provided by the SISI. Chennai are
given below:

Common facility Trair.ing Facility

available availahle
1. Central Workshops Mechanical, General Carpentry,
SISI, Chennai Electro Plating Mechineshop practice
Ceramics and glass electroplating,
screen printing,
chemicals and allied
products

201
2. Extension centre Machine Shop Machine shop
Madurai practice

3. Branch SISI Foundry and testing

Coimbatore of electric motors

4. Central Footwear Training in Footwear

Training Centre, Technology
Chennai

5. Extension Centre Leather Finishing Light Leather

for Leather manufacturer
Finishing, Erode

6. Extension Centre Machine shop Machine shop

Pondicherry practice and fitter

SISI Chennai has, three mobile workshops for providing training and
demonstration in carpentry, screen printing. machine shop. glass products, simple
chemical manufacture etc. to rural artisans.

5.3.7 Modernisation Programme

Seminars, industry workshops, industry clinics and modernization courses are

organised by the SISI to emphasis modernisation in small scale enterprises. SISI
appoints study team to conduct intensive and quick inplant studies for modernization
in selected small scale units and assists SSIs in implementing suggestions made by the
study team is respect of modernisation.

5.3.8 Catalogue Bank

A catalogue bank for selection of suitable machinery has been created by SISI
for the benefit of small scale enterprises. This catalogue bank reveals the machineries
required for the different projects undertaken under small scale industry.

53.9 Other Services of SISI

i) SISI assists the institutions providing financial assistance to small scale
industries by providing them with reports on technical feasibility and economic

202
 viability of the schemes and demand prospects of products
requests. etc. or 2pecific

ii) SISI assists the State Directorate of Industries and Commerce in Assessment of
capacity and raw material requirements of individual units against specific
requests.

iii) SISI renders assistance to the sick small scale units for their revitalisation.

Stimulatory Activities

The stimulatory activities include entrepreneurial education, planned publicity

about entrepreneurial opportunities, identification of potential entrepreneurs in a given
area, motivating them by producing economic sight and managerial skills through
training.

(a) Intensive Industrial Compaigns.

It connotes concerted intensive and coordinated efforts made by the institute

alongwith other developmental agencies in order to identify entrepreneurs, mobilise
local enterprise, capital and skill in favour of starting such small scale units as
are
based on local resources-human and material.

(b) Entrepreneurial Development Programmes.

The intensive industrial Campaigns are followed by EDPs conducted for one
month's duration. The entrepreneurs identified in campaigns are further interviewed,
subjected to certain tests and selected for one month's intensive training under EDP.
Before conducting the EDP in a particular area, a survey of Industrial Potential
of that
area is conducted and list of suitable items which has scope in that particular area is
made as a guide to participants in EDP. The curriculam of EDP comprises class-
lectures, field-visits group-discussions, experience of successful entrepreneurs,
demonstrations on certain items, processes of manufacture. In the end the projects of
participants are prepared and got registered.

(c) Short-term EDPs for students:

These programmes are conducted for one or two days sometimes a week's
duration in the technical institutions i.e., Ills, Polytechnics for motivating the students

203
 to go in for setting up small scale industries after their studies are over instead of
-• wasting their time in search of jobs which are very difficult to be available. Every year
three to four institutions are covered.

(d) Short-term EDPs for the beneficiaries of Self-employment Scheme for Educated
Unemployed:

These programmes are intended to provide support activity to the beneficiaries.

These are conducted for one week's duration. The course contents comprise lectures
on management,'accounting. marketing techniques etc

Support Activities

Support activities of the domestic include nurturing of entrepreneurship after it

has been stimulated.

These activities aim:

(i) To provide on-the spot technical assistance and guidance to small scale units to
solve their manifold technical problems.

(ii) To advise small entrepreneurs on new and improved techniques of production

and in the use of modern machinery and equipment.

(iii) To assist SSI units in manufacture of quality and standardised products.

(iv) To provide workshop and laboratory facilities to demonstrate the use of

modern technical processes on different machines and equipments

(v) To enlist SSI units for participation in the Govt. Stores Programme.

(vi) To encourage and guide SSI units to export their products.

(vii) To conduct in-plant studies for modernisation etc.

(viii) Assessment of production capacities for the requirement of scarce and

controlled raw materials.

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5.4 NATIONAL SCIENCE AND TECHNOLOGY ENTREPRENEURSHIP
DEVELOPMENT BOARD (NSTEDB)

The National Science and Technology Entrepreneurship Development Board

(NSTEDB) was established in 1982 in the department of Science and Technology,
Government of India. It has been promoting entrepreneurship among Science &
Technology (S & T) persons. The Board devotes its attention for generating both self-
employment and wage-employment through S&T methods and techniques and
involving S&T persons.

The NSTEDB has been fostering entrepreneurship among Science and

Technology persons with a view to generating income, creating employment and
mobilising resources. The efforts of the Board are now being directed towards
entrepreneurship development on one hand and sustainable employment generation on
the other. The NSTEDB organises the following programmes as a managerial and
training support to the budding entrepreneurs to do their project successful Iv .

- Entrepreneurship Awareness and Development Programmes

- Trainers' Training Programme
- S&T Entrepreneurship Development Scheme
- S&T Entrepreneurs Park
- Employment generation through S&T
- Entrepreneurship Development Cells
- Creation and Maintenance of a data bank

5.4.1 Entrepreneurship Awareness Camps

Entrepreneurship Awareness Camps (FACs) of 2-3 da' .i'onsored by the

NSTEDB in educational institutions in order to create an about various
facets of entrepreneurship as an alternative career option among students and faculty
of engineering and science courses. A visit to the industries located in the area, which
is an essential component of the camp. brings the students face to face with the
realities of functional entrepreneurship.

The prevailing opportunities of the various types of projects are highlighted in

the entrepreneurship awareness camps and the trainees could identify the projects
suitable to them. The NSTEDB organises EACs every year in the premises of various
science colleges, polytechnics, engineering colleges and universities in order to

20S
nculcate the concept of entrepreneurship among the young graduates and to provide
.anagerial and technical support to them for their projects.

'.4.2 Entrepreneurship Development Programmes (EDT's)

The Annual Report of the Department of Science and Technology. Government

of India (1993-94) states that HP aims at exposing science and technology
graduates/diploma holders to the essentials of conceiving. planning. initiating and
successfully propagating an economic activity through classroom and field training
besides inculcating entrepreneurial ability in them using motivational inputs.

IA well structured EDP of 6-8 weeks duration broadly covers the t011owine
important elements of entrepreneurship:- identification of a business opportunity and
subsequently the specific product/sery ice to be offered

conduct of market surAcy to establish its viability

incentives and facilities offered by various constituents of support system
including Financial Institutions (Fls), Banks, District Industries Centres (DICs ►.
State Industrial Development Corporations (SID( 's) etc
writing a bankable project report.
achievement of motivation training and
•
decision making techniques

The entrepreneurship development programmes are joinly sponsored by

NSTEDB and all India Financial Institutions. Banks or State Governments. EDPs are
conducted by reputed institutions like Institute of Entrepreneurship Development.
Technical consultancy organisations, Entrepreneurship Development Cells, Science
and Technology Entrepreneurs parts, universities, etc.

Financial incentive is provided to the selected Science and Technology EDF

trainees pursuing technology oriented projects. Financial incentive is provided in order
to encourage persons belonging to Science and Technology stream to pursue
entrepreneurship as a vocation. Managerial and technical support needed to the
projects of the entrepreneurs arc also provided in EDPs.

5.4.2.1 Objectives of EDP

- to motivate the potential prospective entrepreneurs to take up self-employment.

- to help the participants in taking up suitable industrial activities.

206
 to assist the entrepreneurs in preparing economically viable and technically
feasible project report,

to strengthen enterprise building skills to the entrepreneurs,

to conduct market survey for ascertaining market viability of the projects,

to assist the entrepreneurs in availing financial assistance provided by the various

financial institution and technology support from the SJSI and other organisations,

to arrange industrial visit for the benefit of the entrepreneurs. It helps them to learn
how to run a small scale unit,

- to conduct lecture cum practical sessions on pricing, cost control and maximising
profitability,

to organise lecture sessions on financial management, human resource

management, marketing management, production management, standardisation,
quality control and inventory control for the benefit of entrepreneurs,

to make the entrepreneurs to understand about the provisions of labour laws and
taxation,

- to assist the entrepreneurs in preparing relevant books of accounts of the

enterprise.

The topics recommended for conducting entrepreneu7Thir development and

training programme under the Prime Minister's Rozgar Yo..ara ire iven below:

Lecture cum demonstration sessions are arranged on the Following topics under
the head 'Entrepreneurship Motivation'.

- Characteristics of a successful entrepreneur.

- Developing entrepreneurial competencies,
- Business Orientation (Risk taking, innovativeness and creativity),
- Perceiving and mobilising resources,
- Influencing and negotiation skills,
- Problem solving orientation process and skill,
- Achieving business goals,

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 I

Lecture cum demonstration sessions are arranged on the following topics under
the head 'Enterprise Launching'.

- Formalities in setting up of enterprises,

- Registration procedures and formalities,
- Availing bank finance and bank formalities including subsidies,
- Insurance for enterprise, need and formalities,
- Project implementation and monitoring,
- Overview of institutional support system for small enterprises,
- Financial support system,
- Non-financial support system,
- Forms of organisation,
- Visit to a few support organisations.
- Break-even point, how to calculate in and typical pitfalls in its achievement,
- Interface with existing entrepreneurs,
- Study of typical micro enterprises.

Lecture cum demonstration sessions are arranged on the ibllowing topics under 1
the head 'Enterprise Management'.

- Small business management (fundamentals and basic concepts).

- Book-keeping and accounts:
the need. monitoring books of accounts,
- Managing money,
- Handling and resoureing working capital.
- Costing and pricing.
- Marketing product/services,
- Organising production.
- Purchasing and managing stores,
- Business/industrial laws,
- Taxation laws,
- Organising workers for better performance,
- Experiences of existing entrepreneurs in managing micro-enterprises,
- Business failures - causes and cures,
- Developing business contracts,
- Packaging,
- Quality control,
- Enterprise growth

208
- expansion and diversification,
Preparing action plan.

5.4.3 Trainers' Training Programme (TTP)

Trainers' Training Programmes are conducted for teachers of Science and

Technology institutions to enable them and to equip them to organise entrepreneurship
development activities, such as EDPs and EACs. TTPs are organised by the NSTEDB
to bring the academics in the mainstream of economic development through
promotion of entrepreneuship.

TTPs pave the way to create specialists in organsing and conducting EDPs and
EACs. The target group 'of this programme comprises of teachers of Science and
Technology Institutions interested in entrepreneurship activities. TTP concentrates on
enhancing training skills in behaviour sciences of the faculty engaged in promotion of
entrepreneurship among Science and Technology persons.

5.4.4 Science and Technology Entrepreneurship Development Scheme (STEDS)

The STEDS was introduced in the year 1985-86 for the purpose of identifying
and documenting the specific opportunities for effective utilisation of local and
indigenous resources in districts of the country. The objectives of the STEDS are
given given below:

- identifying location - specific entrepreneurial opportunities for S&T persons,

- training them in managing the enterprise and
- introducing innovative work methods, techniques and processes through active
interaction with scientists and technologists.

The STEDS has been in operation in 13 backward districts in different parts of

the country. The project offices in these districts collect and disseminate data relating
to entrepreneurial opportunities, prepare resource booklets and maps. identify local
Science and Technology (S&T) persons possessing entrepreneurial skills. :iiid organise
seminars and workshops on various aspects of entrepreneurship and employment
generation.

5.4.5 Science and Technology Entrepreneurs Parks (STEPs)

!••
STEPs provide technology support to new entrepreneurs.

209
 The objectives of STEPs are

(i) to establish linkages between universities/academic institutions and

industry,

(ii) to promote entrepreneurship among S&T persons. many of whom

would otherwise seek jobs soon after their graduation and

(iii) to provide R&D support to the small scale enterprise.

STEPs are being established around select educational and research institutions
and are jointly sponsored by Department of Science and Technology, Financial
Institutions, State Governments, Commercial Banks and Industry.

Needed facilities and infrastructure are created in the STEP premises and maae
available to the existing and potential entrepreneurs in

testing and calibration;

(ii) prototype development,
(iii) standardisation and quality control,

besides offering them a via media for information exchange to enable them to cater to
the specific needs of the industry in the region. STEPs create linkage between
academic institutions and industries which leads to optimum utilisation of the
expertise and facilities available in institutions which otherwise were lying unutilised
or under utilised. STEPs conduct Entrepreneurship Development Programmes,

Entrpreneurship Awareness Camps and Skill Development Training

Programmes for artisans utilising locally available expertise to generate employment
through Science and Technology. STEP situated at Regional Engineering
College, Tiruchirapalli encourages S&T entrepreneurs. Jawaharlal Nehru
Entrepreneurs' Chemical Park (JNECP), Bombay provides high quality testing
facilities to chemical industries situated in and around Bombay.

The following testing equipments are installed in JNECP for the benefit of
chemical industries:

) Differential Scanning Calorimeter,

210
 ii) UVNisible Spectromtcer
iii) Gas Liquid Chromatograph
iv) Fourier Transform Infrared Spectrophotometer
v) High Performance Liquid Chromatograph
vi) Thermogravimetric Analyzer
vii) Atomic Absorption Spectrophiometer and
viii) Elemental Analyser

STEP situated at Sree Jayachamarajendra College of Engineering, Mysore

conducts training programme for the promotion of first generation entrepreneurs in
• collaboration with large public sector and private sector enterprises. This STEP ha-.
developed the following six technologies for the benefit (lithe entrepreneurs:

i) electronic ballast
ii) varying light
iii) water level pump indicator
iv) power packs
v) function generator and
vi) cordless FM microphone

STEP situated at Indian Institute of Technology, Kliaracpur attempted to

develop technologies in the areas of special alloy costing, soft and hard ferrite,
computer software, C-Band antenna reception system. fibre class based flexible
expansion joints and stepper motors etc.

Advisory Committee on STEPs headed by N .R.Rajainani, Secretary.

Department of Environment and Forests recommende,1 that there is a need for
promoting organisations such as STEPs on a contintiiii i.! bask in arious parts of the
country in view of the role being playing by the ex
S IEPs. \S IEDB has created
task force to study the various problems being faced by the STEPs and suggest
remedial measures and identify new institutions foi establishment of STEPs.

5.4.6 Entrepreneurship Development Cells (EDCs)

EDCs are created by NSTEDB in academic institutions for the purpose of

institutionalising entrepreneurship and providing technical guidance to new
entrepreneurs. EDCs established in the academic institutions would initially be
supported by NSTEDB and later they are expected to be treated as independent
departments of the parent colleges/university.

21I
 The enterpreneurship development cells take steps to n.. educe
entrepreneurship in Science and Engineering curricula. These cells coordinates with
the NSTEDB in organising entrepreneurship Development Programmes and
I-Intrepreneurship Awareness Camps. EDCs attempt to create entrepreneurial culture
and provide managerial and technical support to the small scale units. They conduct
market survey to study the market potentials for the prospective entrepreneurs.

NSTEDB launched a new employment scheme called Mass Employment

Generation through Science And T:chnology (MEGAT) in the year 1990-91 as on
experimental project.

The objective of this scheme are

(iN
to evolve a mechanism for 'job generation through Science and
Technology methods and

(ii) to organise scientifically designed skill Development Training

Programmes for unemployed youth after identification of opportunities
in both wage as well as self employment avenues.

Conducting extension market survey is also attempted under this scheme to

assess the absorbability of trainees in a particular trade by experienced agencies
proposing to create employment opportunities in the near future. NE(1SAT extends
technical support to the entrepreneurs through Science and Technology methods.

This scheme ha.-; provided technology support to the entrepreneurs involved in

engineering products, agro industries, mushroom cultivation. sericulture projects and
fabrication of various household articles. Under the MEGSAT scheme training
programmes are arranged to develop skills of the artisans in maintenance and repairs
of electrical appliances, plumbing, carpentry. household items, etc

The NSTEDB coordinates with other Ministries/rescarch laboratories involved

in entrepreneurship development and employment generation. Research laboratories at
Calcutta (CGCRI) and Karaikudi (CECRI) are extensively utilised by the NSnI.E.DB
for its entrepreneurship related activities. NSTEDB organises meetings periodically
with the administrative officials, industries department officials, voluntary agencies
and entrepreneurs to plan ways and means for the development of entrepreneurship

212
•

and to enhance technology base of the existing industrial units. In STEP tenant
entrepreneurs are expected to stay in the STEP for a period not exceeding five years.

Facilities available to the entrepreneurs at STEP. Regional Engineering

College Complex, Tiruchirapalli are given below:

Latest publications relating to entrepreneurship and technology development in

various fields of industries are provided to the tenants of the STEP.
- A computing system to design new products
Telecommunication facility
A counselling team for timely advice and guidance.
- Testing facility and pilot plant centre to test the products and to assess whether the
quality of the products are according to the specification given.
A shed or room for each tenant entrepreneurs
An administrative office alongwith a bank and a post office
- A personal residential complex for the tenant entrepreneurs.

5.5 National Institute of Small Industry Extension Training

National Institute of Small Industry Extension Training, Hyderabad is playing

its role in the training of trainers and development and management of small industries
since 1962. In the last two decades it has widened its role with the addition of
department like consultancy, audio-visual and documentation which is known as
Small Enterprises National Documentation Centre (SENDOC) in addition to applied
behavioural science, industrial development and industrial management departments.

Applied behavioural science department had involved itself for many years in
training of trainers programme known as Entrepreneur Motivation Development
(EMD) which was designed for trainers and extension agencies like Small Industries
Service Institutes, District Industries Centres, Technical Consultancy Organisations,
financial institutions, etc., to motivate entrepreneurs to come forward and start self-
employment ventures, small, business, enterprises and industries.

New Roles

Consultancy Department has done some entrepreneurship development

programmes since 1976. The programmes are:

• •

213
Small Industry Orientation Programmes

Three to four da prorammes were organised for final year engineering and
other college students in the country wherein inputs were given regarding various
sources of information to identity products. various agencies in the loc.ilities to be
approached for registration of units. getting fixed and working ..:apital. outline of
product profiles. lexibility reports, sources for inachiner . raw materials. market
surveys etc.. Some of the colleges where the awareness camps wcrc held are
Siddhartha Engineering College, Vijayawada, JNTU College at Ananthapur,
Kakinada, Hyderabad, Guindy Engg. College. Madras, Roorkee Engineering College.
Roorkee; REC Warangal, etc., Some of the final year students after passing out from
college have shown eagerness to start industries and also attended entrepreneur
development programmes.

EDPs for SC/ST,'BCs:

:*:ISIET programmes at backward districts of Adilabad, Visakhapatnam, Ranga

Reddy etc., where SC/ST/BC candidates were given six-week training which included
motivational inputs. product identification, marketing. technical and financial inputs,
management and project formulation Lnd implementation inputs followed by
monitoring visits. It is seen that nearly 30% of the entrepreneurs have started ventures
and some are under the process of starting enterprises. These programmes wcrc
sponsored by Andhra Pradesh Small Scale Industries Development Corporation,
Hyderabad.

EDPs for "'omen:

Industrial Development Bank of India is giving big helping hand to develop

entrepreneurship among women in the country. Women entrepreneurs can augment
their family income and play an important role in economic upliftment of the country.
They are nearly 500/0 of the population of the country.

Programmes for women, each of four to six weeks duration by NISIET were at
Kurnool, Warangal, Bhopal and North-East Region (Branch Institute, Guwahati).

These programmes were sponsored mainly by IDBI and Department of Science

and Technology, New Delhi. Nearly 25% of women have embarked on their ventures
and some are in process of establishing their units.

214
 EDPs in North-East Region:

, NISIET Branch at Guwahati has done nearly more than fort) entrepreneurs
development programmes and NISIET consultanc department faculty have
participated in some prueramaws at Guwahati, Barpeta. I e7pur, Kokrajpur. N,11N
Manipur State, etc.

Techno-managerial programmes were done for plastics, rubber, ceramic &

!lass. food and metallurgical industries wherein entrepreneurs with technical
,.:cl:ground in the above fields were developed.

• .nformation Data-base

To hold any entrepreneur development programme successfully strong

:ntormation data-base is required containing primary and secondary information.
NISIET has the advantage of having Small Enterprises National Documentation
Centre (SENDOC) with wealth of information from all over the world like product
profiles, machinery and raw material supplies, processes, technology availabilities,
know-how information, etc., General information file includes statistical market and
process data articles which help prospective entrepreneurs with latest information.
Information is sought by organisations, individuals in India as well as various
countries continuously.

Problems of escort and monitoring services

After the training programme is over, the participants go to different places

where they would like to locate units and strengthen their project report with local
market survey and infrastructural details. Generally two to four monitoring visits are
done after every two months. I lere, the participants stay at different places and the
gestation period for starting units is one to two years period.

International Entrepreneurship

NISIET has trained entrepreneurs from Fiji Islands sponsored by ITEC

Fellowship of Government of India in 1978. Entrepreneur motivation and feasibility
training is also being given in international training programmes.

NISIET has strong faculty base, rich experience of over three decades and of all
the information data-base, SENDOC with primary and secondary information as well

7 15
rr
as field experience to take up national and international entrepreneurship development
programmes.

NISIET has done many programmes on women entrepreneur development.

SC/S1 entrepreneur development and general entrepreneurship development
programmes which ‘s,ere sponsored by

1. IDBI,
2. NAIIARD.
3. Department of Science & Technology.
4. APSSIDC and others.
(Source: Laghu Udvog, March 1993)

5.6 Small Industrial Development Organisation (SID( )

Small Industries Development Organisation extends marketing support to the

small scale enterprises. It provides following support for the benefit of the small scale
units.

- Consultancy support
- Testing
- Marketing facilities

SIDO provides consultancy services for product selection, modification,

marketing channels, management tactics, crisis management, project feasibility study
and overall administration of the small scale units. Quality testing facility is an
essential technology support provided by SIDO to small scale units. SIDO suggests
suitable marketing strategies for maximising sales of the SSI units. It assists for the
promotion of exports of goods produced by the small scale units.

SIDO takes steps for the participation of small scale industries in Government
Purchase Programme. Marketing is a nucleus of the small scale enterprises. SIDO's
marketing support through consultancy, testing and marketing facilities contributes to
the development of small scale industries.

SIDO serves as a model agency for formulating, coordinating and monitoring

policies and programmes for the growth of small scale units in our country. SIDO
develops ancillary units to the public sector enterprises. Large scale enterprises
develop their ancillary units for their purchases of stores. It helps the large scale units

216
to get their stores requirements in time at reasonable rate and paves the way to expand
their industrial base.

Main unit and ancillary units will function under one management. It serves for
effective management and cost minimisation is possible in all stages of production and
marketing. Ancillary units promoted by SIDO serves as a source of marketing to small
scale industries.

The Government of India has established Small Industries Development

Organisation in New Delhi under the Ministry of Industry in order to give a fillip to
the development of small scale industries throughout the country. SIDO is a policy
making body and also provides industrial extension service to the small industries
through a network of Small Industries Service Institute, Branch Institutes and
Extension Centres in the States and Union Territories.

S1DO's journal "LOK UDYOG' disseminates the recent developments in the

small sector, technology upgradation, marketing opportunities, essentials of EDP, new
product development, services of the financial, technical and consultancy organisation
for the cause of the development of small scale sector.

SIDO has created 27 Small Industry Service Institutes in different parts of the
country for the benefit of small scale industries. 38 Exchange Centres have been
created within some SISI for assisting the small scale units to get jobs on sub-contract
basis. 31 Branch Small Industries Service Institutes, 4 Regional Testing Centres. 3
Process-cum-Product Development Centres and 20 Field Testing Stations have been
set up by SIDO for providing a wide range of services and ticIlities to small scale
units.

Small Industry Service Institutes established by S1DU I i, . 1,:.:s the following

services/ support to th small scale sector:

- Technical Consultancy Service

Developing Ancillary Industries
- Sub-Contract Exchange
- Economic Information Services
- Export Promotion Services
- Modernisation Programme for SSIs
- Managerial Consultancy
Management Development Training Courses

217
- Entrepreneurial Development Programmes
- Technical Training Courses

Technical Consultancy Service serves the entrepreneurs as a technology support

to choose appropriate technology for their project.

Developing Ancillary Industries helps the small scale units to get a market for
their products from public sector enterprises and large scale industries.

Sub-Contract Exchanges are created within the SISI for helping the small scale
units to get job on sub-contract basis.

Economic IntOrmation Services provide techno-economic surveys of particular

areas to project new industrial possibilities. Availability of raw materials, machineries,
market potential, for various products. marketing opportunities for new products arc
also provided to the SS's through this service.

Export Promotion Services help the small scale units to participate in the export
market. Assistance needed to the SSIs to enter into the export market is provided
through this service. Training courses in export marketing are also conducted to create
awareness of export to SSIs. Small Scale Units are encouraged to participate in the
trade fairs and exhibitions in India and abroad.

Modernisation Programme assists the entrepreneurs to modernise their

industries by adopting recent development in production technology, packaging
technology' and to minimise cost of production.

Managerial Consultancy Services help the SSIs to manage their units

effectively. They are provided managerial support required for project selection and
implementation.

Management Development Training Courses assist the entrepreneurs to learn

the specific type of training needed in the various functions of the organisation for
effective management of the enterprise.

Entrepreneurial Development Programme discusses the steps to be taken for the

promotion and development of small scale industries. Entrepreneurial awareness is
created in EDP. Entrepreneurship motivation camp is also organised under EDP
Project viability, managerial, technical and financial support needed for the project,

218
 project report preparation, product cost, profitability are also elaborately discussed in
the EDP.

Technical Training Courses provide inplant training to the entrepreneurs to learn

technology and processes involved in the production of different types of products. It
helps the entrepreneurs to adopt appropriate technology while modernising their small
scale enterprises.

Assisting the small scale 'units for their revitalisation is also one of the supports
extended by SIDO through its Small Industry Service Institutes.

5.7 Management Consultancy Organisations

• Management Consultan,-.:y Organisations assist the entrepreneurs from the stage

of idea generation of the project and to the stage of project implementation. The
Government departments involved for promoting entrepreneurship extend
management consultancy services to the entrepreneurs.

Financial Institutions, Industrial and Consultancy Organisations, Small

Industry Service Institutes, National Small Industry Extension and Training Institute,
Small Industry Development Organisation, Non-Governmental Organisations (CII,
FICCI, FIEO, ASSOCHAM, FASSI etc.,), Centre for Entrepreneurship Development
and Entrepreneurship Cell of the Commercial Banks provide management consultancy
support to the entrepreneurs for the successful implementation of their project.

Management Consultancy Organisations provide suggestions to the small scale

enterprises to solve their problems relating to production, marketing, finance and
managerial problems. They suggest the entrepreneurs to adopt suitable strategies to
withstand in the competitive market.

Counselling service also extended by the management consultancy

organisations. They actively involve in the Entrepreneurship Development
Programmes to guide the beneficiaries in project selection, estimating the project cost,
procuring required raw materials and purchasing appropriate plant and machinery.

Management Consultancy Organisations create awareness of the various

project support systems provided by the Government and financial institutions and
commercial banks. They provide consultancy service with regard to feasibility
analysis, techno-economic analysis, project design and network analysis, input

219
analysis, financial analysis, social cost-benefit analysis and pre-investment analysis of
the project.

Entrepreneurs discuss with the management consultancy organisation about the

organisational, commercial and legal aspects of their project for implementing all the
formalities and procedures in accordance with the various Acts of the Government
towards starting a new industry.

5.8 Centre for Entrepreneurship Development (CED)

The Centre for Entrepreneurship Development (CFI)) take steps to organise

entrepreneurship development programme periodically for the benefit of educated
unemployed persons, women, technicians, foremen. rural artisans, physically
handicapped persons etc., CED is situated at Ahmedabad. This CED was sponsored by
the State Government and public sector corporations interested in industrial
•
development in the State.

The beneficiaries of the EDP are selected front the employees, workers,
merchants and graduates and entrepreneurial training is imparted to the beneficiaries at
six centres. Vasant Desai, in his book 'Dynamics of Entrepreneurial Development' has
stated the significant features of the entrepreneurial training provided by the CED to
its beneficiaries:

Before conducting the programme of training, a survey of investment opportunity

was made for identifying industries having good scope in the area;

Appropriate linkage was developed with various agencies which provide support
and service to entrepreneurs in getting finance, readymadc sheds, raw materials
and other inputs;

Entrepreneurs were selected through behavioural tests. Due Weightage on

experience was given rather than education or unemployment;

Programmes of training included theoritical and practical coverage, including

visits to industrial units consistent with the items identified by the entrepreneurs;

Follow-up action was taken by the full-time project leader and individual attention
was given to each entrepreneur trainee.

220
 Centre for Entrepreneurship Development takes efforts for the promotion of
entrepreneurship. Entrepreneurship Development Programme (EDP) is the basic
instrument to propagate entrepreneurship and encourage the educated youth to involve
in self employment. EDP is conducted by CED scientifically. EDP covers:

- identification of industries having prosperity in the days to come in the specific

area;

- linkages between various agencies supporting entrepreneurship for getting

technical, managerial and financial support from such agencies:

entrepreneurial motivation;

- industrial visit relevant to the projects identified:

follow up action to assess the performance of the trainee during post EDP.

Centre for Entrepreneurship assists the entrepreneurs to avail financial,

managerial and technical support extended by the various agencies functioning for the
cause of entrepreneurship in our country.5.9 Federation of Associations of Small Scale
Industries of India (FASSI)

FASSI is a non-government organisation. It serves as a liaison agency between

the small scale industries and Government Departments for the benefit of small scale
industries. It brings to the notice of the Government about the requirements of the
small scale industries and keep the industries informed about the industrial and
investment policies of the Government.

It assists the small scale enterprises for getting necessary managerial, technical,
financial and marketing support from the Government D:partments, financial
institutions, technical and consultancy organisations. It organises
seminars/workshops/conferences to discuss the various issues of trade and investment
policies and problems faced by the small scale enterprises in the ce-npetitive market. It
suggests remedial measures to the Government to solve the problems of the small
scale enterprises. FASSI serves as a shield to the SSI units for solving the problems
they face in their day-to-day business.

The Central Government is committed to extend all possible support and

assistance to industry associations to launch a nationwide Quality Awareness

221
 Total Quality Management. FASSI takes
►gramme and to promote to Concept of
_ _ ns to get all assistance provided by the Government for quality upgradation and
in tenting ISO 9000 certification standard in small scale enterprises.

Pn.SSI takes efforts to organise Entrepreneurship Development Programme to

discuss 1:16out the entrepreneurial opportunities in small scale business and available
support system from the Government for the benefit of small scale sector. In
Entrepreneurship Development Programme bankers - beneficiaries meet is organised
to facilitate for getting necessary financial assistance.

FASSI assists the small scale industries to get space at concessional rate from
Indian Trade Promotion Organisation (ITPO) for holding exhibitions/trade fairs in
India and abroad. FASSI publishes a periodical known as 'FASSI Bulletin' to
disseminate Government policies regarding the growth and development of SSI sector A.
and response of this sector towards the policies of the Government. Financial,
marketing. technology and other support systems provided by the various agencies are
also given in detail in FASSI Bulletin for the benefit of the small scale units.

5.10 Non-Governmental Organisations (NGOs) and Project Support System

Non-Governmental Organisations (NGOs) assist the small scale industries to get

the required infrastructure, financial, technical and managerial support from the
various Government Departments, financial institutions and other agencies functioning
for promoting entrepreneurship and industrial development in India. Project report
preparation is an important aspect the entrepreneur has to do while approaching the
banker/ financial institution for getting necessary financial assistance.
NGOs assist the entrepreneurs to prepare comprehensive project report in an
appropriate format covering all the details relating to financial requirements, project
cost, fixed capital, working capital, profitability. projected performance etc., NGOs
assist the entrepreneurs to get necessary licensing and project approval from the
Government Departments.
NGOs functioning in rural areas attempt to give birth to Self 'Help Groups in
villages and rural areas for getting necessary financial assistance from the commercial
banks for establishing small and tiny enterprises. Proper counselling is also done by
the NGOs about the entrepreneurship to the people living in villages and rural areas.
concentrate on rural entrepreneurship and rural industrialisation. NGOs address
They

222
 the problems and grievances of the small scale industries to the various Government
Departments for their early redressal.

NGOs keep in touch with the Government Departments, so that any new
policies announced by the Government are brought to the notice of the entrepreneurs
immediately by the NGOs. They serve as a liaison agency between the entrepreneurs
and Government Departments for the purpose of expanding entrepreneurial base in our
country.

NGOs organise seminars/workshops/conferences periodically to discuss about

the issues in industrial and investment policies of the Government and promotional
measures taken by the Government for the growth and development of industries in
India. fhe Federation of Indian Export Organisations (FIEO) assist the exporters to
avail all the concessions for export from the Government. FIFO discusses the
problems of the exporters and suggests solutions to the Government and exporters to
solve all the problems.

NGOs exist in the form of either foundations or federations of associations of

small scale industries/chamber of commerce and industry. The following are few
NGOs actively involved in assisting the industries to get necessary infrastructure and
other supports from the Government:

i) Federation of Indian Export Organisations (FIFO)

ii) Federation of Indian Chamber of Commerce (FICCI) and Industry
iii) Confederation of Indian Industry (Cli)
iv) Punjab-Haryana-Delhi Chamber of Commerce and Industry IDCCI)
v) Associated Chamber of Commerce and Industry (ASSO( 1 \
vi) Federation of Association of Small Scale Industries (fAS I
vii) National Alliance of Young Entrepreneurs (NAYE
viii) World Assembly of Small and Medium Enterprises (WASN11...)
ix) Bharatiya Yuva Shakti Trust
x) Tamilnadu Small and Tiny Industries Association (TANST:A)
xi) Madurai District Tiny and Small Scale Industries Association (MAD[TSSIA)
xii) Federation of Indian Micro acid Small & Medium Enterprises (FISME)

NGOs constitute task force to prepare a comprehensive strategy towards

helping create a conducive and growth-oriented framewo:k of policies on the small
U,
scale sector. NGOs undertake survey for the financial requirement sectorwise and
suggest mechanisms to meet financial requirements of SSI units.

223
 NGOs have reviewed the reservation policy of the small scale sector and
advocated a phased dereservation of products currently reserved for this sector.
Confederation of Indian Industry (CID) has insisted that single window agencies should
be instituted under any Directorate of Cottage and small scale industry for providing,
under one roof, all clearance as well as facilitating registrations with different
authorities under different Acts.

The excerpts from the paper 'NGOs in SSI Development' published in Laghu
Udyog, November 1996 are given below:

Popular participation is a crucial element in any strategy for successful and

sustainable economic development. Participation of SSIs in the development process
initiated by Governmental organisations and promotional institutions can be more
meaningfully secured by involving NGOs which exist either in the form of
foundations or federations of associations of small scale industries/chambers of
commerce and industry.

In all aspects of manufacturing and marketing, that is credit facilitation,

purchase of quality inputs at competitive prices, technology acquisition, skill
improvement, quality enhancement, securing favourable marketing terms, joint
tendering, joint R&D etc., the intermediation of NGOs can be instrumental in
extending outreach of the development agencies and in the provision of these services
in a cost-effective manner.

Under the present economic policies within national economies, their

progressive integration with the global economy, increasing rapidity of change than
before in the technological sphere and unleashing of competitive forces from within
and without, SSIs who individually are weak in finance and technology, will find it
hard to survive this onslaught without the active support of NGOs. NGOs are major
change agents and beneficial intermediaries.

In numerical terms, the largest number of NGOs arc active in the field of social
development, that is education, health, sanitation, etc., particularly in rural areas.
These NGOs are also active in all the countries of Asia and Africa in organising self
help credit groups, women development and organising artisan and craftsmen.
However, in urban areas, NGOs have taken up programmes of economic development, )
including SSI development.

224
 In India, several SSI associations are functioning at local and state levels_ A
prominent national level organisation is the Federation of Indian Micro. Small and
Medium Enterprises (FISME) with headquarters at New Delhi. Primarily involved in
the promotion of small and medium enterprises. FISME is not merely acting as a
lobby for SMEs but it is providing vital industry-related services.

It is organising training programmes, workshops and refresher courses,

facilitates enterprise to enterprise cooperation for acquisition of technology, financial
collaboration, setting up joint ventures, providing information on trade opportunities
in other countries, disseminating information about offers of dealership, arranging
meetings with foreign business delegations, and liaising with Government, bilatera!
and multilateral development agencies, conducting research on subjects of importance
to SMEs, etc., It is bringing out a monthly newsletter and a technical bulletin. For
promoting entrepreneurship among women, there is another organisation, Federation
of Indian Women Entrepreneurs (FFIWE). FFIWE operates programmes similar to
FISME's.

They have also entered into MOUs with similar national organisations in other
countries. They are affiliated to international organisations, namely, World
Association for Small and Medium Enterprises (WASME) and International
Federation of Women Entrepreneurs (IFWE) respectively. They have the potential to
contribute to the economic development of the country as much as the organisation
like the Korean Chamber of Commerce and Industry in Korea provided cooperation.
Assistance is provided to them from the Government, financial and technology
institutes.

NGOs have the personnel and dedication but run short of equipment and finance
to undertake and expand activities for SSIs. NGOs can provide a very effective
delivery mechanism if they develop proper linkages with institutional sources and
retain and strengthen constant contact with the artisans and entrepreneurs.

REVIE W QUESTIONS

1. Explain in detail about the need for management, consultancy and training
support for the industrial development in India
2. What is motivation training?
3. What is manag.ement training'?
4. What are the services provided by District Industries Centre to the
entrepreneurs?

Y75 ,,•
 What do you understand by Small Industries Service Institute! State :ts /
5.
services to the small scale industries.
Discuss the services rendered by the National Institute of Small Industry
6.
Extension Training to the development of entrepreneurs in the country.
Explain the role of Small Industries Development Organisation in
7.
entrepreneurial development in our country.
What do you understand by National Science and Technology
8.
Entrepreneurship Development Board? and describe its functions.
9. Explain the services rendered by the Non-Government Organisations for the
growth of entrepreneurship.

Reference Books

1. Vasant Desai, 'Dynamics of Entrepreneurial Development and Management',

Himalaya Publishing House, Bombay.
C.B.Gupta and N.P.Srinivasan, 'Entrepreneurial Development', S.Chand &
2.
Sons, New Delhi.
3. Annual Report. Department of Science and Technology.
4. 'Laghu Udyog' - Quarterly Journal published by S1DO, New Delhi.

226
 Model Question Paper

PROJECT SUPPORT SYSTEM

Time : 2 hrs Max. Marks : 100

Part A

Answer any FIVE Questions only 5 * 8 = 40 marks.

1. What do you understand by Project Support System? And explain project

support facilities.
2. Explain the incentives and subsidies mailable to the small scale sector.
3. Explain the importance of marketing support to the projects.
4. How will you select appropriate machinery and equipment for your project?
5. What is ITCOT? Explain the technical support provided by ITCOT to the
industrial projects.
6. Explain the role of SIDBI in providing financial support to the small scale
industries.
Discuss the significance of consultancy and training support for the success of
a project.
8. What do you understand District Industries Centre? State its consultancy
and training support to the industrial projects.

Part B

Answer any FOUR question only 4 * 15 = 60 marks.

9. Describe the role of Governmental department in projec: support system.

10. Explain the marketing support prov ided by the National Small Industries
Corporation to the small scale sector.
11. What do you understand by •Ikpartment of Science and Technology'? Explain
its technical support to the industrial projects.
12. What is Small Industries Services Institute? What are its technical support to
the small scale industries?
13. Describe the financial support provided by the Industrial Development Bank of
India to the industrial projects.

227
14. What is 'National Science and Technology Entrepreneurship Development
Board? Explain its management, consultancy and training support for the
benefit of entrepreneurs.
15. Discuss the role of non-governmental organisations in project support system.

4
 Elevate
Empower
Educate

Alagappa University
formed in 1985 has emerged from the galaxy of
institutions initially founded by the munificent and multifaceted
personality, Dr. RM . Alagappa Chettiar in his home town at Karaikudi.
Groomed to prominence as yet another academic constellation in Tamil
Nadu, it is located in a sprawling and ideally suited expanse of about 420
acres in Karaikudi.

Alagappa University
was established in 1985 under an Act of the State
Legislature. The University is recognised under Sec. 2(f) and Sec.12(B)
of the University Grants Commission. It is a member of the Association
of Commonwealth Universities and the Association of Indian
Universities. The University is accredited with 'A' Grade by NAAC.

The Directorate of Distance Education offers various innovative, job-

oriented and socially relevant academic programmes in the field of Arts,
Science, IT, Education and Management at the graduate and post-
graduate levels.
It has an excellent network of Study Centres
throughout the country for providing effective service to the student
community.

The distance education programmes are also offered in South-East

Asian countries such as Singapore and Malaysia; in Middle-East
countries, viz., Bahrain, Qatar, Dubai; and also at Nepal and Sri Lanka.
The programmes are well received in India and abroad.

ALAGAPPA UNIVERSITY
(Accredited with 'A' Grade by NAAC)
Karaikudi 630 003

DIRECTORATE OF DISTANCE EDUCATION

(Recognized by Distance Education Council (DEC), New Delhi)