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Chapter 8

Role of SSI in the Indian Economy

The Small-Scale Industries contribute in a notable way in the Indian Economy.
Numerically over 95 % of industrial units are SSI. They contribute about 40 % of the
manufacturing sector output, 35 % of exports and provide direct employment to nearly 200
lakhs persons. Number of units as per data available for the year 2002-03 stands to about
36 lakhs. Production and export estimates are 7,60,844 crores and 81,930 crores
respectively. SSI sector is estimated to have recorded a growth of 7.5 % in output, at 199394 prices, as compared to growth of 6.0% in the industrial sector as a whole and 6.1 % in
manufacturing sector. The outstanding bank credit to SSIs by banks was Rs. 62, 917 crores
as an end March 2002 which formed 12.6% of the net bank credit.
The small-scale industries sector comprises modern and traditional industries. The modern
segment consists of industries under SIDO and powerlooms, while the KVIC, handlooms,
handicrafts, coir, sericulture and silk boards manage the traditional industries. Further
classification divides the industries into organized and unorganized sectors based on the
criteria of employment in combination with the use/non-use of electric power.
Credit dispensation to the small-scale industries sector is controlled by SIDBI, Commercial
banks; Regional Rural Banks, Co-operative Banks, State Financial Corporations, State








Corporations. Other agencies include NABARD, KVIC, NSIC and NEDFI.

The high importance being given to SSI by the planners is for the following reasons:

Capital investment for establishing an SSI unit is low.

More jobs are generated in SSIs in relation to the capital investment.

SSIs can be dispersed in rural and backward areas with ease.

SSIs help in contraction of regional imbalances.

SSIs promote the culture of entrepreneurship at grass root level

SSIs make effective use of local material resources and human skills

SSIs exhibit quick adaptability of technology and operational flexibility

SSIs provide a cost-effective base for outsourcing to a large unit

The estimated classification of SSI units is as under:


40% Rural Areas

50% Urban Areas
10% Metropolitan Areas


80% Proprietary Units

17% Partnership Firms
3% Limited Companies


45% Manufacturing
15% Processing
20% Job Work
20% Repairing / Servicing


90% Below Rs. 5 lakhs

7% Between Rs. 5 lakhs to Rs. 25 lakhs
3% Above Rs. 5 lakhs

No. of Workmen 95% Below 10

5 % Above 10

Entrepreneurship and SSI are inter-linked. It is in the national interest to teach the subject
Management of SSI to the young generation.

The Present Scenario in SSI Sector

The present state of Small Scale Industries (SSIs) in terms of parameters like the
estimated number of units (both registered and unregistered), employment,
production and export is as under:

No. of SSI





Units (lakh)

(Lakh Persons)

(Rs. Crore)
4, 70, 966

(Rs. Crore)
1, 24, 416.56

Evolution of the Definition of SSI in India

To evolve a framework for the development and support of the village, tiny and modern
small-scale segment of the small industry sector, various policy decisions have been taken
by the Government of India. These have addressed the basic requirements of units in the
sector by providing assistance through various measures such as credit dispensation,
technology upgradation, technical training, industrial infrastructure support and
entrepreneurship development. With a view to ascertaining the types of industrial units
which required special support, it was considered necessary to develop an appropriate
classificatory definition for SSI units, spelt out under the industries (Development and
Regulation) Act, 1951.
The official definition of SSI was first evolved in 1950 in terms of the size of gross
investment in fixed assets (plant & machinery, land, building, etc.) as well as in terms of
the strength of the workforce in the unit concerned. This criterion underwent several
changes over a period of time. In the late fifties, a shift from a workforce based definition
to an investment based definition was effected. In 1966, the original amount invested in
plant and machinery was adopted as the sole norm for defining a unit as small-scale or
otherwise. Other concepts, namely, ancillary and tiny units were introduced in 1960 and
1977, respectively. Industry related business oriented service enterprises were classified
for the first time as Small Scale Service Enterprises Establishments (SSSEs) in 1985 and
latter in 1991 redefined as Small Scale Service and Business (industry related)
Enterprises (SSSBES).The Government in 1988 defined the term. Women Entrepreneurs
Enterprise indicating 51% equity held by women; the same was modified in 1991. Periodic
revisions in the definition of SSIs as made by the Government of India are furnishes in the
The SSI sector in India covers a wide spectrum of industries categorized under small,
ancillary, tiny SSSBEs, women enterprise and cottage segments, ranging from small
artisans / handicraft units on one end to modern production units with significant
investments on the other. This sector has acquired a pre eminent place in the socio
economic development of the country, as it acts as a nursery for the development of
entrepreneurial talent. The sector produces a wide range of about 7500 products.
The term Small Scale Industry evokes different meanings for different agencies that
defines SSIs. The Planning Commission, Government of India, for instance considers the

entire Village and Small Industries Sector (VSI) as the SSI sector. The National Sample
Survey Organization under the Central Satisfaction Organization, Government of India, on
its part, defines the entire industrial sector in terms of Organized and Unrecognized
segments, as well as in terms of industrial enterprises run by households and non
households. The Central Excise Department, on the other hand identifies SSIs on the basis
of the annual turnover of individual units. The Reserve Bank of India (RBI) adopts an
expanded definition of SSI which includes traditional industries as well. The Government
of India has recently redefined as SSI unit by lowering down the upper investment limit
from Rs. 30 million to Rs. 10 million in plant and machinery. As per this definition, the SSI
sector includes under its coverage residual units i.e. all such units that do not fall under the
assistance programmes of any of the Statutory Boards responsible for the development and
promotion of tiny and cottage segments of the SSI sector. The different segments of SSI
have been widely defined as under:
Small Scale Industrial Undertakings
Following the Abid Hussain Committee recommendations, the Government of India, vide
Gazette Notification No. S.O.857 (E) dated December 11, 1997 had raised the ceiling on
investment in plant and machinery for SSI and ancillary undertaking to Rs. 30 million. This
definition of SSI and ancillary has since been revised. As per the Government of India
Notification No. S.O. 1228 (E) dated December 24, 1999, an industrial undertaking in
which the investment in plant and machinery, whether held on ownership terms or on
lease / hire purchase basis does not exceed Rs. 10 million is regarded as a small scale
industrial undertaking.
Ancillary Industrial Undertaking:
An industrial undertaking which is engaged in the manufacture or production of parts,
components, sub assemblies, tooling or intermediates, or the rendering of services is
termed as an ancillary undertaking. The ancillary undertaking is required to supply or
render or propose to supply not less than 50% of its production or services, as the case may
be, to one or more other industrial undertakings. The investment on plant and machinery,
whether held on ownership basis or on lease or on hire purchase, should not exceed Rs.
10 million as in the case of ancillary industrial undertakings.
Tiny Enterprise:

A unit of treated as a tiny enterprise where the investment in plant and machinery does
exceeds Rs. 2.5 million, irrespective of the location of the unit.
Women Entrepreneurs Enterprise:
A women Entrepreneurs Enterprise is termed as an SSI unit/industry related service or
business enterprise, managed by one or more women entrepreneurs in proprietary concerns,
or in which she/they individually or jointly have share capital of not less than 51% as
partners/shareholders/directors of private limited company/members of a co-operative
Small Scale service and Business (Industry Related) Enterprise (SSSBE):
An industry related service/Business enterprise with investment upto Rs. 0.5 million in
fixed assets, excluding land and building, is treated as an SSSBE.

Recent changes in the Definition (2.10.2006)

Government of India has enacted Micro, Small and Medium Enterprises

Development Act, 2006 (MSMED) which has come into effect from 2.10.2006.

(A) Definition of Enterprises engaged in the manufacture or production of Goods

(i) a micro enterprise, where the investment in plant and machinery does not
exceed twenty-five lakh rupees;
(ii) a small enterprise, where the investment in plant and machinery is more
than twenty-five lakh rupees but does not exceed five crore rupees; or

a medium enterprise, where the investment in plant and machinery

is more than five crore rupees but does not exceed ten crore rupees;

(B) Definition of Enterprises engaged in providing or rendering of Services

(i) a micro enterprise, where the investment in equipment does not exceed ten
lakh rupees;
(ii) a small enterprise, where the investment in equipment is more than ten lakh
rupees but does not exceed two crore rupees; or

a medium enterprise, where the investment in equipment is more

than two crore rupees but not exceed five crore rupees,

Cost of pollution control, research and development, industrial safety devices and
such other items as may be specified, by notification, shall be excluded.

Steps for Setting up a Small Industrial Enterprise

The potential entrepreneur would become an entrepreneur only when he owns an

enterprise. The business enterprise to be set up can be a manufacturing venture, a trading
firm or a service establishment. The manufacturing venture encompasses the steps
necessary for setting up a trading firm or a service establishment, as well. The steps in
setting up a small industrial enterprise are as follows:

Deciding to go into business: This is the most crucial decision a person has to
take which may mean shunning wage employment and opting for selfemployment. He needs to understand the benefits and risk of entrepreneurship.

Analyzing Strengths/Weaknesses: Having decided to become an entrepreneur

the person has to analyze his/her strengths/weaknesses. This enables to know what
type and size of business would be most suitable. The strengths and weaknesses
may vary from person to person.

Availability of Own Money: No business can be created, with zero capital. The
Own Money concept means the funds available with an entrepreneur from his
own source or family or friends. The size of the units depends on the availability
of Own Money in short term and long term.

Training: The above analysis may reveal glaring deficiencies which are required
to be made up through training. Such training could be for:
a. Developing Skill for entrepreneurship.
b. Developing technical, conceptual and managerial skills.

Environmental Scanning: It is essential to study and understand the business

environment in which they operate particularly the Industrial Policy, Economic
Policy, Legal Environment, Technological and above all the Markets.

Product Selection: The next step is to decide what business one should venture
into, the product or range of products that shall be taken up for manufacture and in
what quantity. The level of activity will help in deciding size of business and form
of ownership. Several number of project ideas through environmental scanning
can be short listed. Closely examine each one of these and zero in on to a final

Market Survey: These days it is easy to manufacture an item but difficult to sell.
So it is prudent to survey the market before embarking upon production and ensure

that the product chosen is in sufficient demand and is preferably in the growth
phase of a product life cycle.

Forms of Ownership: A firm can be constituted as proprietorship, partnership,

limited company (public or private) or co-operative society. This depend on the
type, purpose and size of business. Decision of ownership can also be made on the
basis of resources in hand or from the point of view of tax planning.

Location: The next step is to decide on the place where the unit is to be located.
The place can be hired or owned. The size of plot, covered and open area and
suitability of site has to be decided. Logistics considerations are more important
than emotional considerations.

Technology: To manufacture any one item various processes are available.

Information on all these available technologies should be collected and the best
one should be identified. This will be useful in determining the machinery and
equipment to be installed.

Machinery and Equipment: Having chosen the technology the machinery and
equipment required for manufacturing has to be decided, suppliers identified and
their costs estimated. Planning well in advance for machinery and equipments,
especially if it has to be procured from outside the town, state or country will
control the project implementation schedule.

Business Plan: After deciding on the form of ownership, location, technology for
manufacturing, machinery and equipment, preparation of feasibility report can be
undertaken. The economic and technical feasibility of the product selected has to
be established through a project report. A project report that may be prepared is
helpful in formulating the financial, production, marketing and management plans,
obtaining finance, shed, power, registration, raw material quoteas etc. The business
plan should indicate the vision of the promoter and short term and long term
aspects of the project implementation.

Finance: To obtain money certain steps specified procedures have to be followed

to obtain it. A number of financial agencies will give loans on concessional terms.
Under some schemes entrepreneurs are also eligible for subsidies, which obviate
the need for margin money.

Technical Know-how: The technical know-how is required to be arranged

through TCO, NSIC, SSIDC, Private Consultants, SISI, foreign collaborators or

even machinery suppliers. Facilities are available to SSI for making variety of
technical know-how arrangements including turn-key jobs.

Power Connection: The power requirement should be assessed phase wise. There
are ceiling on the availability of LT power supply based on the location. HT power
supply may mean additional investment in transformer and substation. Most states
need a No Objection Certificate from the concerned Pollution Control Authorities
before the power connection.

Installation of Machinery: After arrangement of finance, work, shed, power, etc.,

it is essential to procure machinery and begin its installation as per the plant

Insurance: It is necessary to have adequate insurance for the fixed asset at this
stage and later on for the current assets as well.

Recruitment of Manpower: After installation of machines manpower is required

to run them. So the quantum and type (skilled, semi-skilled, unskilled,
administrative etc.) of labour also are important. This follows the recruitment,
training and placement.

Raw Material: The raw materials required may be available indigenously or, may
have to be imported. Government agencies can assist if raw material required are
scarce or imported.

Production: The unit established should have an organizational setup. The

structure of the manpower proposed to be employed must be determined.
Production of the proposed items should be taken in two stages: (a) Trial
Production (b) Commercial Production. Trial production will help tackling of
problems confronted in production and test marketing of the product. This reduces
chances of losses in the eventuality of mistakes in project conception. Only after
successfully launching the product at test marketing stage commercial production
should be commenced.

Marketing: Marketing is the key to success in a competitive situation. Test

marketing will save the enterprise from going to disrepute just in case product
launched is not well accepted in the market. It will also assist in carrying out
modifications in the design, characteristics and features of the product. Having
successfully test marketed the product, commercial marketing can be undertaken.

Marketing covers reaching the customer, distribution channels, commission

structure, pricing, advertising or publicity etc.

Quality Assurance: Quality Certification like ISO 9000, BIS (earlier ISI), Q
Mark, Agmark, Del-in, etc. depending upon the products should be obtained. If
there is no quality standards specified for the product, the entrepreneur should
evolve his/her own quality control parameters. Quality, after all, ensures long term success.

Marketing Research: Once the product or service is introduced in the market,

there is need for continuous market research to assess needs and areas for
modification, upgradation and growth. Market becomes the waterloo for most SSI
entrepreneurs as they ignore this vital function. Initial success should not give a
sense of complacency.

Monitoring: Periodical monitoring and evaluation not only of markets but also
production, quality and profitability helps in knowing where the firm stands in
comparison to performance envisaged in the business plan. It also identifies
direction of future growth.
(Registration aspects is dealt separately)

Registration Formalities for SSI

Small Scale and ancillary units should seek registration with the Director of Industries of
the concerned State Government.
Registering Your SSI Unit: The main purpose of Registration is to maintain statistics and
maintain a roll of such units for the purposes of providing incentives and support services.
States have generally adopted the uniform registration procedures as per the guidelines.
However, there may be some modifications done by States. It must be notified that a small
industry is basically a state subject. States use the same registration scheme for
implementing their own policies. It is possible that some states may have a SIDO
registration scheme and a State registration scheme.
Benefits of Registration: The registration scheme has no statutory basis. Units would
normally get registered to avail some benefits, incentives or support given either by the
Central or State Govt. The regime of incentives offered by the Centre generally contains
the following:

Credit Prescription (Priority Sector Lending), differential rates of interest etc.

Excise Exemption Scheme.

Exemption under Direct Tax Laws.

Statutory support such as Reservation and the Interest on Delayed Payments Act.
(It is to be noted that the Banking Laws, Excise Law and the Direct Taxes Law
have incorporated the word SSI in their exemption notifications. Though in many
cases they may define it differently. However, generally the registration certificate
issued by the registering authority is seen as proof of being SSI).

Objectives of the Registration Scheme: They are summarized as follows:

To enumerate and maintain a roll of small industries to which the package of

incentives and support are targeted.

To provide a certificate enabling the units to avail statutory benefits mainly in terms
of protection.

To serve the purpose of collection of statistics.

To create nodal centers at the Centre, State and District levels to promote SSI.

Features of The Scheme:

DIC is the primary registering centre.

Registration is voluntary and not compulsory.

Two types of registration is done in all States. First a Provisional Registration

Certificate (PRC) is given. After commencement of production, a Permanent
Registration Certificate is given.

Provisional Registration is normally valid for 5 years and Permanent Registration is

given in perpetuity.

Provisional Registration Certificate (PRC):

This is given for the pre-operative period and enables the units to:

Obtain the term loans and working capital from financial institutions/ banks under
priority sector lending.

Obtain facilities like land, power, other approvals etc.

Obtain various necessary NOCs and clearances from regulatory bodies such as
Pollution Control Board, Labour Regulations etc.

Permanent Registration Certificate:

Enables the unit to get the following incentives/concessions:

Excise exemptions.

Income Tax exemption and Sales Tax exemption as per State Govt. Policy.

Incentives and concessions in power tariff etc.

Price and Purchase Preference for goods produced.

Availability of raw material depending on existing policy.

Procedure For Registration:

Features of the present procedures are as follows:

A unit can apply for PRC for any item that does not require industrial license which
means items listed I Schedule III and items not listed in schedule I or schedule
ii of the licensing Exemption Notification. Units employing less than 50 / 100
workers with / without power can apply for registration even for those item
included in schedule II.

Unit applies for PRC in prescribed application form. No. field enquiry is done and
PRC is issued.

PRC is valid for five years. If the entrepreneur is unable to set up the unit in this
period, he can apply afresh at the end of five years period.

Once the unit commences production, it has to apply for permanent registration in
the prescribed form.

The following form basis of evaluation:

The unit has obtained all necessary clearances whether statutory or administrative,
e.g. Drug License under Drug Control Order, NOC from Pollution Control Board,
if required etc.

Unit does not violate any locational restrictions in force, at the time of evaluation.

Value of plant and machinery is within prescribed limits.

Unit is not owned, controlled or subsidiary of any other industrial undertaking as

per notification.

De Registration: A small Scale Unit can violate the regulations in the following ways
which will make it liable for deregistration:

It crosses the investment limits.

It starts manufacturing any new item or items that require an industrial license or
other kind of statutory license.

It does not satisfy the condition of being owned, controlled or being a subsidiary of
any other industrial undertaking.

The authority in Maharashtra is the Development Commissioner (Industries), Directorate of

Industries, Government of Maharashtra, New Administrative Building, Madam Cama
Road, Mumbai 400 032 or the District Industries Centres.

Recent Changes in the Registration Procedure (2.10.2006)

Filing of Memoranda by MSMEs

Process of two stage registration of Micro & Small Enterprises dispensed

with & replaced by filing of memoranda.

Filing of memorandum optional for all Micro & Small Enterprises.

Filing of memorandum optional for Service Sector Medium Enterprises.

Filing of memorandum mandatory for Manufacturing Sector Medium


Existing Registered Units shall file the Memorandum within 180 days.

Concessions and Incentives for SSI in India

The main responsibility for the development of small-scale industries rests with State
Governments. Nationalization of Banks, protective and promotional policies by the
Government, awareness created through media and better educational facilities resulted
into significant growth from 1969 onwards. In pre-liberalization era, SSI enjoyed following
key advantages:
Reservation of items for exclusive manufacture in SSI sector
Concessional Finance from Banks
Subsidiaries from Central and State Governments
Excise Concessions
Protected Market
With opening-up of the economy, the situation has taken a different turn. There are still a
wide range of facilities, concessions and incentives. But the focus has changed. An outline
is narrated below:

Investment Limit in Plant and Machinery: The Government of India have lowered
the ceiling on investment in plant and machinery for small-scale and ancillary
industrial undertaking from Rs. 300 lakhs to Rs. 100 lakhs with effect from December
24, 1999. The revision has been effected with a view to securing that the ownership
and control of the material resources of the Community are so distributed as to sub
serve the common good, easing the problem of unemployment, and promoting in a
harmonious manner the industrial economy of the country. The investment ceiling for
tiny unit has been retained at Rs.25 lakhs.


Reservation of items for exclusive manufacture in the small-scale sector: The

policy was initiated in 1967 with 47 items having been initially reserved to promote
and protect he small-scale sector. Significant increases in the number of items were
made from time to time and particularly in 1977. At the peak level 836 items appeared
in the list. The Expert Committee on Small Enterprises set up under the Chairmanship

of Shri Abid Hussain had considered various aspects pertaining to reservation of items
including quality of SSI products which affected export earnings, import policy
liberalization and related issues. In January 1997, the Abid Hussain Committee
submitted its report to the Government and concluded that reservation policy is
redundant and therefore recommended a total dereservation. The inclusion of over 600
products under OGL fro the purpose of imports per se has partially defeated the
purpose of reservation as these products can now compete with the one produced by
domestic manufacturers. Policy changes in 1997 permitted large-scale units to
manufacture reserved products but with a 50% export obligation. Under the free trade
agreements amongst SAARC countries, produce items reserved for Indian SSI sector
and export them into India. There is a progressive dereservation approach. In the 200405 Budget about 85 items were dereserved.

Reservation of items for exclusive purchase from SSI: Purchases under the
Government Stores Purchase Programme by the Director General of Supplies and
Disposal (DGS&D) are made exclusively from SSI units for specified items known a
reserved list. Prior to 1997 there were 409 items in this list, which has now been
substantially reduced. Secondly, for these items and even for those items which are not
reserved, a purchase price preference of 15%,as against the quotations from large-scale
units or other suppliers is given to the SSI designated as the nodal agency to promote
the marketing of SSI products to the Government under this preferential Purchase
Policy. NSIC enlists SSI under a Single Point Registration Programme (SPRP) to
avoid multiplicity in the registration with various government agencies.


Foreign Direct Investment: To provide access to the Capital market and to encourage
modernization and technological upgradation in SSI sector, equity participation upto
24% of the total shareholding is allowed in the SSI units by other industrial
undertakings including foreign collaborators. Further, those SSI units seeking foreign
equity beyond 24% is considered policy initiative has opened up opportunities for SSI
to expand their investment bases to improve performance.


Export Promotion Councils: In order to overcome problems in the marketing of SSI

products in the overseas markets, it is considered desirable to adopt a consortium
approach. The Export Promotion Councils (EPCs) for different industries make efforts
to promote exports of the products of their member units through direct marketing,

developing vendor relations, opening respective sales outlets abroad as a collective

export marketing strategy. The activities of different councils are targeted to increase
the exports from the sector.
The Export Promotion Councils are registered as non-profit organizations under the
Companies act/Societies Registration Act. EPCs perform both advisory and executive
functions. These Councils are also the registering authorities under the Export and
Import Policy 1997-02 and have been assigned various roles and functions for the
promotion of exports.
SSI units can access export-related services from the Councils. Some of them obtain
bulk purchase orders from buyers and distribute these among SSI units for supply to the
council for deemed export. This process ensures orders to every member unit and the
timely delivery of goods. For such a service, the councils levies a nominal fee from
member units. EPCs also offer a package of other incentives to existing as well as new
exporters and by dissemination of information, to keep the members of the changes
with regard to export-import policies and procedures, customs and excise duty rules etc.
Besides trade enquiries, tender notices etc. are circulated among members in order to
help them you avail of business opportunities and augmenting overall exports.
Membership charges of such councils are minimum for SSI.

Incentive Scheme for acquiring ISO 9000 certification: ISO 9000 has become
synonymous with quality. It is the world accepted quality norm without which it many
not be possible to export the goods to the other countries. Small-scale industries are
making substantial contribution in countries exports. In Order to prepare the Small
Scale Industries to face the threat coming in the way of export in future due to ISO
9000 barrier, Office of the DC (SSI) has promoted the schemes to give incentive to
small scale industries acquiring ISO 9000 certification to the extent of the cost subject
to the maximum of Rs.75,000 in each case. The scheme is implemented by SIDBI.


Integrated Technology Upgradation and Management Programme (UPTECH): A

new scheme on Upgradation of Technology (UPTECH) has been conceptualized and
approved during the year 1997-98. it covers all the facets of technological
improvements such as quality upgradation, energy conservation, pollution control,
process modifications, modernization etc. Some illustrative clusters, where the Scheme
operates are: -

I. The Lock Industry at Aligarh, UP.

II. The Pottery Cluster at Khurja, UP.
III. The Forging Industry at Ludhiana & Jalandhar in Punjab, Hyderabad and
Vijayawada in Andhara Pradesh.
IV. The Food Processing Industry Clusters at Pune and Chitoor in Andhara Pradesh.
V. The Neem and Perfumery Industry at Kannauj, UP.
VI. The Brassware Cluster at Moradabad, UP.
VII. The Sports Goods Cluster at Jalandhar, Punjab
VIII. The Bulk Drug and Formulation Industry at Kushaiguda
IX. Auto Components Industry, Pune, Indore and Chennai.
X. Tile Industry along the West Coast
XI. Rice Milling Cluster at Bhandara in Maharashtra
XII. Toy Industry in Delhi and Noida.

Technology Bureau for Small Enterprises: The Technology Bureau for Small
Enterprises (TBSE) is a joint venture of Small Industries Development Bank of India
(SIDBI) and the Asian Pacific Center for Transfer of Technology (APCTT).
TBSE offers under one roof, assistance to existing and prospective small enterprises in
the sphere of technology accession transfer and funds syndication. The main objective
of the Bureau is speedy access and transfer of technologies. The bureau has a large
computerized database on technology options available in the Asia Pacific region. It
identifies business partners willing to collaborate, brings them face-to-face extends
support to tie-up financial assistance.
The bureau undertakes financial syndication covering term loans, foreign currency,
venture capital, lines of credit, equity assistance and bills finance. It offers package for
the export of technologies as well as SSI projects and products and arranges assistance
through SIDBI and other Development related Financial Institutes apart from
commercial banks.

TBSE provides consultancy services to encourage product excellence; arranges buyerseller meets on a regular basis for specific product groups; undertakes technology
appraisal and documents latest developments in the areas of technology, processes,
export patterns, market opportunities etc.

Small Enterprises Information and Resource Center Network (SENET): The

Scheme came into being w.e.f. April, 1997 with a view to pioneer, create and promote
data-base and information services and facilitate information sharing (the small
entrepreneurs, exporters and market avenue seekers and other interested ones),
information providers and between relevant institutions in mutually beneficial and cost
effective manner. It also aims to pro vide technical know-how and package assistance
to small information server. As on date SENET has electronic nodes comprising of
Main Nodal Centre (MNC) located at Headquarters i.e. DC (SSI), Technology Nodal
Centers (TNCs) in Metros and User Centers (UCs).

10. Relaxation under Environmental Laws: The Ministry of Environment Forests have
simplified the consent procedure in respect of small-scale industrial units for obtaining
consent under the Air (Prevention and Control of Pollution) Act, 1981 and Water
(Prevention and Control of Pollution)Act, 1974. To this effect, the Ministry have
issued directions to the Central Pollution Control Board on 12 th September 1992 and
10th May 1993 under clause (a) od Sub-Section 1 of Section 18 of the Water
(Prevention and Control of Pollution) Act, 1974, stating that for the units of smallscale sector except 17 categories which are heavily polluting, the acknowledgement of
the application by the Board would serve the purpose of the consent and the consent
granted shall be valid till 15 years or till such time the industry modifies or changes its
process or any treatment and disposal system or brings into use any new or altered
outlet for discharge of effluent/sewage whichever is earlier. However, the concerned
State Pollution Control Boards/ Committees specified by the Central Government (for
UTs) may conduct random checks or call for information from any unit and make a
formal consent order prescribing conditions etc. as required.
List of Highly Polluting Industries
1. Fertilizer (Nitrogen/ Phosphate)
2. Sugar
3. Cement

4. Fermentation and Distillery

5. Aluminium
6. Petro chemicals
7. Thermal power
8. Oil refinery
9. Sulphuric Acid
10. Tanneries
11. Copper Smelter
12. Iron & Steel
13. Pulp & Paper
14. Dye and Dye intermediates
15. Pesticides manufacturing and formulation
16. Basic Drugs and Pharmaceuticals
11. Common Effluent Treatment Plants (CETP): The Ministry of Environment and
Forests is implementing the scheme for setting up of Common Effluent Treatment
Plants (CETPs) in clusters of small-scale industrial units. The financial assistance under
this scheme towards the total cost of the project is as follows:
a. 25% as subsidy from both Central and State Governments;
b. 30% as loan at reduced rate of interest from the financial institutions and
c. 20% a contributions from individual units.
MIDC now levies a cess on water consumption by the industrial units to meet the
expenditure on effluent disposal system. SSI and members of CETP are given some
concessions. Training and awareness progammes for adoption of clean technology are
conducted by DC, SSI. A project Waste Minimization in Small-Scale Industries has
been launched by the Ministry with National Productivity Council a nodal agency
under the World Bank assisted Industrial Pollution Prevention Project. The main
objectives are development of communication strategy for launching an awareness
campaign on waste minimization and establishment and running Waste Minimization
Circles (WMC) in small-scale industries in the country.
12. Industry related Research Institutes: The council of Scientific and industrial
Research (CSIR), New Delhi, set up in 1942, is working under the Ministry of Science
and Technology, Government of India. It has continually been striving to promote the

development of indigenous technologies and utilization of indigenous resources. Over

the years, CSIR laboratories have developed new products, processes and technologies.
In the process, a network of 40 CSIR laboratories has acquired modern infrastructural
facilities and a multiplicity of skill bases. The CSIR has a pool of talented scientists and
technologists capable of providing R& D solutions relating to the industry sector.
CSIR has as its mission to provide scientific industrial R& D that maximizes the
economic, environmental and societal benefits for the people of India. The CSIR
Research market link ha been strengthened over a period of time. CSIR has signed four
MOUs for alliances with All India financial institutions and industry associations viz.
ICICI, SIDBI, CII, and FICCI. The alliances seek to synergise the core competencies of
each partner to mutual advantage.
13. Exemption and Preferential Treatment from Excise Duties: For SSI having
clearances in the financial year not exceeding Rs. 3 crores, there are two schemes:
a. First Clearances upto Rs. 100 lakhs Nil rate of duty; Cenvat credit is not
b. First Clearances upto Rs. 100 lakhs- 60% of Normal Duty; cenvat credit is
14. Policy of Priority Credit: SSI units are entitled for priority sector lending from the
nationalized commercial banks on the pattern of agriculture. Out of 40% of bank
advances earmarked as priority sector lending about 15 to 17 % have been flowing to
SSI sector. Out of priority sector credit going to small-scale sector 40% is earmarked
for tiny units having investment in plant and machinery below Rs. 5 lakhs an another
20% for tiny units whose investment in plant and machinery ranges between Rs.5
lakhs to Rs.25 lakhs. For the current interest rate, it is advisable to contact the banks.
15. Initiative for credit: In order to ensure adequate and timely credit to the Sis Reserve
Bank of India had set up Nayak Committee in 1991. The Committee submitted its
report in 1992, which recommended inter alia, that commercial banks might provide
working capital to SSI units worked out at the rate of 20% of their annual turnover
subject to a limit of Rs.1 Crore. The limit of working capital has since been raised to
Rs. 5 Crores.
16. OTC Exchange of India (OTCEI) : The OTC Exchange of India has been setup by
leading Financial Institutions like UTI, IDBI, ICICI, LIC and GIC, expressively to

provide an ideal avenue for corporate of all the sizes, its special focus on small scale
companies to raise resources from the capital market.
The Exchange provides sophisticated trading mechanism like Bought Out deals,
market making and sponsorship, which makes it very convenient for the small, and
medium sized companies to access the capital market
It is the only exchange-allowing nation wide as well as regional listing for smaller
companies. The minimum requirement of Rs. 30 Lakhs of post issue paid up capital for
a company too list on exchange facilities even small enterprise promoters to set up new
venture or expand their activities.
The Exchange also provides its constituents with the advantage of trading in
innovative financial instruments like debentures, units of mutual funds, bonds and
other corporate papers.
The Exchange uses the state-of the-art technology and trading mechanism to promote
transparent and wide spread transactions across the country.
OTC Exchange of India has a memorandum of Understanding with NASDAQ, USA,
which entails mutual exchange of information, training in various aspects of capital
market and access to the global market.
17. The interest on Delayed Payment Act: The interest on Delayed Payment to SmallScale and Ancillary Industrial Undertaking Act was enacted in 1993. in order to tackle
the problem of settlement of dues from companies, the Act has been amended so that
SSI units are not handicapped by delays in the settlement of their dues from larger
companies. The amended Act has come into force from 10 th August, 1998. the
amended Act provides for:
a. Change in the penal rate of interest from the present 5 percentage points above the
floor rate which was applied hitherto, to 150% of the Prime Lending Rate (PLR)
of SBI;
b. The agreed date of settlement of dues (i.e., any contract between the SSI supplier
and the large-scale buyer) not to exceed 120 days from the date of acceptance of
goods by the large companies;
c. An additional/alternative mechanism of arbitration and conciliation to resolve
disputes between the SSI supplier and the large-scale buyer within the framework

of the Arbitration and Councils with the Director of Industries of the concerned
State Government as Chairman and representatives of Banking/Financial
Institutions, industry associations and persons with knowledge of industry and /or
law a its members to deal with issues/disputes which arise due to
nonpayment/delayed payment of the dues of SSI units/suppliers by large company

Recent Changes (2.10.2006)

Provisions to Check Delayed Payments

Provisions related to delayed payments to micro & small enterprises (MSEs)


Period of payment to MSEs by the buyers reduced to forty-five days.

Rate of interest on outstanding amount increased to three times the

prevailing Bank Rate of Reserve Bank of India, compounded on monthly

Constitution of MSE Facilitation Council(s) mandatory for State


Reference made to the Council to be decided within ninety days from the
date of reference.

Declaration of payment outstanding to MSE supplier mandatory for buyers

in their annual statement of accounts.

Interest (paid or payable to supplier) disallowed for deduction for income

tax purposes.

No appeal against order of Facilitation Council to be entertained by any

Court without deposit of 75% of the decreed amount payable by buyer.

Appellate Court may order payment of a part of the deposit to the supplier

Disclosure of delayed payments and interest mandatory in the Annual

Accounts, wherever audit provision is applicable.

18. SIDBI Strategic Initiatives (Others)

A. Modernization and Technology Upgradation

B. Marketing Finance
C. Development of Industrial Infrastructure
D. Bills Discounting and Factoring service
E. National Venture Fund for Software and IT Industry

Credit Rating for Exporting SSI units

G. Incubation Centers
There are some other promotional measures being offered or monitored by SIDBI. Please
see the details in Chapter No.8
19. Sector Based Incentives: Special incentives are being announced for sunrise sectors
or the high thrust sectors which includes capital subsidy also. It is advisable to search
the website address of the office of the Development Commissioner, SSI

Promotional and Financial Incentives in Maharashtra

(Valid upto 31st march 2011)
1. Industrial Promotion Subsidy: Maharashtra
a. New SSI/MSI/LSI (including IT/BT) units
New projects, which are set up in these categories in different parts of the State,
will be eligible for Industrial Promotion Subsidy (IPS). The quantum of subsidy
will be linked to the Fixed Capital Investment. Payment of IPS every year will be
equal to 25% of any Relevant Taxes paid by the eligible unit to the State or to
any of its departments or agencies. The quantum of benefit and period will be
as follows:
Taluka / Area

Ceiling as % of Fixed
Capital Investment

Number of Years


b. Expansion Units
Existing SSI/MSI/LSI (including IT/BT) units making additional investment to the
extent of 25% or more over the Gross Fixed Capital investment, as on the last date of
the previous financial year, for expansion, diversification or modernization, will also
be eligible to get the Industrial Promotion Subsidy equivalent to 75% of the
incentives admissible for new units. The admissible period for availing the subsidy
will be reduced by one year in the respective category and area.
Explanation The Zero Vat Units will be eligible for getting employment based
incentive in lieu of IPS as proposed for low HDI districts in the form of 75%
reimbursement of expenditure on account of contribution towards Employees State
Insurance (ESI) and Employees Provident Fund (EPF) Scheme for a period of 5 years.
However the quantum of incentives for these units will be limited to 20%, 30%, 40%,
50%, 60% of FCI in B, C, D, D+, No Industry District respectively whichever
is lower.
2. Additional Incentives
The eligible SSI units coming up in Industrial Clusters / Parks to be notified by the
State Government and in Agro-based Industries, Textiles, Auto & Auto components,
Electronic products, Pharmaceuticals and Gems & Jewellery, Services Information
Technology, I.T. enabled services, Biotechnology sectors in C, D, D+ areas only
will be eligible for the IPS applicable to the one step higher incentive category under
clause 1.
3. Special Incentive for Units coming up in Districts low in HDI
The State Government will make special efforts for speedier economic development in
the 10 districts lowest in the State on the Human Development Index as given in the
Table I. It is proposed to offer the following employment based incentives to the units
coming up in these districts.
New units setting up facilities in these notified districts and employing at least 75%
local persons as defined in the Employment of Local Persons Policy will be offered
75% reimbursement of expenditure on account of contribution towards Employees
State Insurance (ESI) and Employees Provident Fund (EPF) Scheme for a period of 5
years. However these benefits will be limited to 25% of FCI. The amount of

reimbursement will be paid annually based on minimum statutory limit subject to the
condition that the unit has paid its contribution towards ESI & EPF on the due dates.
The procedural modalities of giving this employment incentive will be issued by the
Development Commissioner (Industries).
4. Mega Projects
Industrial projects with investment more than Rs.500 crores or generating
employment for more than 1000 persons in A and B areas or investment more than
Rs.250 crores or generating employment for more than 500 persons in rest of
Maharashtra will be termed Mega Projects and would be eligible for customized
package of incentives. The industrial projects coming up in the 10 low HDI districts
mentioned in the Table with investment of more than Rs.100 crore or generating
employment for more than 250 persons would also qualify for customized package of
incentives. The quantum of incentives within the approved limit will be decided by the
High Power Committee under the chairmanship of Chief Secretary, Government of
Maharashtra. The Infrastructure Committee under the chairmanship of the Chief Minister
of the State will have the power to customize and offer special/extra incentives for the
prestigious Mega Projects on a case by case basis.
5. Interest Subsidy
All new eligible units in textile, hosiery, knitwear and readymade garment sector units
in the SSI sector will receive interest subsidy. The Interest Subsidy will be payable only
on the interest actually paid to the Banks and Public Financial Institutions on the term
loan for acquisition of fixed capital assets, equal to the interest payable at 5% per
annum as stated in the table below.
Taluka / Area
Monetary Ceiling
Maximum Period
Classification Limit (Rs. In Lakhs)
In Years
6. Exemption from Electricity Duty
Eligible new units in C, D, and D+ areas and No-Industry District(s) will be exempted

from payment of Electricity Duty for a period of 15 years. In other parts of the State,
100% Export Oriented Units (EOUs), Information Technology (IT) and Bio-Technology
(BT) units will also be exempted from payment of Duty for a period of 10 years.
7. Waiver of Stamp Duty
The 100% exemption from Stamp duty will be extended up to 31st March 2011 in C, D,
D+ Talukas and No Industry Districts. However, in A and B areas, stamp duty exemption
would be available as follows:
BT and IT units in public IT Parks : 100%
BT and IT units in private IT Parks : 75%
Mega Projects : 50%
8. Exemption of payment of Royalties/NA charges
Units in MIDC areas/Cooperative Industrial Estates will be exempted from payment of
Non Agricultural Assessment Charges. Royalty payable on minor minerals extracted
during construction under taken in MIDC area as well as in Cooperative Industrial
Estates will be 100% exempted.
9. Royalty Refund
All eligible units, (new as well as units undertaking expansion) in Vidarbha region will
be eligible for refund of royalty paid on purchase of minerals from mine owners within
the State of Maharashtra for a period of five years from commencement of production.
10. Refund of Octroi/Entry Tax in lieu of Octroi
Octroi based incentive will continue to be offered by way of refund of Octroi Duty/Entry
Tax etc. An eligible unit, after it goes into commercial production, will be entitled to
Refund of octroi duty, or any entry tax or account based cess levied by the municipal
bodies in lieu of octroi and paid to the local authority on import of all the items required
by the Eligible Unit. This incentive will be admissible in the form of a grant restricted to
100% of the admissible Fixed Capital Investment of the Eligible Unit for a period of
5/7/9/12/15 years respectively in the B/C/D/D+/NID areas.
11. Octroi Exemption on Raw Materials
Several manufacturing units in the Municipal Corporation limits are facing acute

problem on account of high incidence of octroi. Some units have already shifted while
others are planning to relocate even outside the State. This migration would result in
rendering a large number of employed persons jobless. It is, therefore, proposed to
exempt 100% the octroi payable on all raw materials used by units in Municipal
Corporation areas for manufacture of products to be exported out of the limits of the
Municipal Corporations. The burden of such exemption will have to be borne by the
concerned Municipal Corporations.
12. Modification in Seed Money Scheme
Under the Seed Money Scheme, the educated unemployed youths are getting seed
money assistance between 10% to 22.5% of the project cost limited to a maximum of
Rs.10 lakhs for starting self-ventures from the Directorate of Industries as margin
money. The seed money assistance carries interest @ 10% p.a. with a rebate of 3% for
prompt payment. At present penal interest @14% is charged on delay in payment of
the seed money dues. It is proposed to carry out the following modifications in the Seed
Money Scheme:
Quantum of Seed Money Assistance : Maximum amount Rs.25 lakhs
Interest rate : 6%
Penal rate : 1%
13. Strengthening the SME Sector
Looking at the impressive growth which the SME sector has registered in the last few
years, especially in the field of light engineering, textiles, biotech and IT, the State
Government will give special focus on the SME sector to achieve its objective of high
growth with greater employment opportunities. The Government will, therefore, initiate
measures to address the challenges faced by the SME sector in the areas of availability
of cheap and timely finance, technology ugradation, upgradation of skill sets of those
employed in this sector and marketing. The State will also take all necessary measures
to complement the initiatives proposed by the Central Government in its Small &
Medium Enterprises Bill, including setting up of a special institution for the SMEs. It
will also provide the following incentives to promote quality competitiveness, research
and development and technology upgradation
5% subsidy on capital equipment for technology up gradation limited to Rs.25 Lakhs.
50% subsidy on the expenses incurred for quality certification limited to Rs.1 Lakh.

25% subsidy on cleaner production measures limited to Rs.5 Lakhs.

50% subsidy on the expenses incurred for patent registration limited to Rs.5 Lakhs.

Prospects and Outlook for SSI

Changes in the Macro Business Environment are reflected in the Union Budget.
Announcement of a comprehensive policy package for SSI and tiny sector by the Prime
Minister on 30th August 2000 reflected the changes in the macro environment. Important
fall out were:
SSI exemption limit for excise duty raised from Rs. 50 lakhs to Rs. 1 crore.
Capital Subsidy of 12 % fro investment in Technology in select sectors.
Group set up to recommend streamlining of Inspections.
Continuation of Scheme of granting subsidy for opting ISO 9000 Certification.
In the National Equity Fund Scheme, the project cost limit revised from Rs. 25 lakhs to
Rs. 50 lakhs.
The eligibility limit for coverage under the Credit Guarantee Scheme enhanced to Rs.
25 lakhs.
Self-certification to be encouraged in lieu of inspection.
The Integrated Infrastructure Development (ID) Scheme to progressively cover all
areas in the country with 50 % reservation for rural areas.
Setting up of Incubation Centers in sunrise industries.
Overall budget strategy of Union Budget 2002-03 is quoted:
In my last budget I had laid out a comprehensive agenda of the second-generation
economic reforms. I had also deepened tax reforms aimed at providing a modern tax
regime. My aim this year is to consolidate and implement these policies at all levels. I
propose to take the process further at the State level through a strategy of reform linked
public funding.
The broad strategy of the budget, therefore, is to:
Continue the emphasis on agriculture and food economy reforms
Enhance public and private investment in infrastructure
Strengthen the financial sector and capital markets
Deepen structural reforms and regenerate industrial growth
Provide social security to the poor
Consolidate tax reforms and continue fiscal adjustment at both the central and state
Specifically related to SSI, the proposals announced were as under:

Small Scale Industries are now subject to increasing competition with the competition
of trade liberalization. A new approach to the promotion of small-scale industries
therefore, has already been adopted.
Adequate credit flow is essential for the small-scale sector. The net bank credit
outstanding to small scale industries increased from Rs. 45,890 crore on March 31,
2002 to Rs. 48,445 crore on March 31,2003. In order to further increase the flow of

The limit for composite loans has been increased from Rs. 2 lakh to Rs. 5 lakh

391 specialised branches of public sector banks have been opened for smallscale industries as September 30,2001.

The exemption limit for collateral security has been increased from Rs. 25,000
to Rs. 5 lakh. The project cost limit under the National Equity Fund has been
from Rs. 25 lakh to Rs. 50 lakh

The extension of credit to SSI has already been facilitated through the Credit
Gaurantee Scheme and Credit Lined Capital Subsidy Scheme for Technology

Encouraged by the Kisan Credit Card Scheme, public sector bans have now
decided to introduce a scheme called Laghu Udyami Credit Card (LUCC)
Scheme for providing simplified and borrower friendly credit facilities to
small businessmen, retail traders, artisans and small entrepreneurs,
professional and other self employed persons, including those in the tiny

Members will recall that last year I had announced the dereservation of 14 items in the
footwear, leather goods and toy sectors. The Government has been engaged in
discussions with the stake holds in respect of certain other items in the reserved list.
Over 50 items of knitwear, certain agricultural implements, auto components, some
chemicals and drugs, and others will now be dereserved.


The Excise duty exemption scheme for the small-scale sector is applicable to granite.
In view of the fact that it is not available to marble, I propose to withdraw this
exemption from granite also.
The justification of taxing more services does not require any elaboration. This year, I
propose to extend the service tax to the following services
o Life Insurance, including insurance auxiliary services relating to life insurance
o Inland cargo handling
o Storage and warehousing services (except for agriculture produce and cold
o Event Management
o Rail travel agents
o Health Clubs and Fitness centers
o Beauty Parlours
o Fashion Designers
o Cable Operators
o Dry Cleaning service
The small-scale industry sector has been making an important contribution to
economic growth, and deserves continued support. In order to enable the Small
Industries Development Bank of India (SIDBI) to augment its resources and provide
cheaper credit to the small scale sector, I propose to allow capital gains exemption
under section 54EC of the Income-tax Act to amounts invested in bonds issued by
A deduction of 50% of the profits earned by units setting up and operating large
conversion centers will be allowed by 5 years under section 80 IB.
Union Budget 2003-04 identified 5 objectives (Panch Priorities):

Poverty education; addressing the life time concerns of our citizens, covering health,
housing, education and employment;


Infrastructure Development


Fiscal consolidation through tax reforms and progressive elimination of budgetary

drags, including reforms of the additional excise duty, introduction of service tax, and
introduction of Value Added Tax (VAT) from April 1, 2003 at the State level.


Agriculture and related aspects including irrigation; and


Enhancing manufacturing sector efficiency, including promotion of exports and

further acceleration of the reform process.

The Finance Minister further said:

The essential entrepreneurial character and the creative genius are our greatest asset.
This energy has to be released.
A second revolution, to follow the earlier Green Revolution is the vital need of today.
But neither in agriculture, not in industry, shall we be able to attain our objective, if
infrastructure, both physical and social, is not rapidly and efficiently developed.
The core need in the country is realizing national creativity
Despite the agriculture GDP decline of an estimated 3.1 %, caused entirely by a large
decline in crop output, the country, registered a real growth of 4.4 % in GDP, net of
inflation. Growth rates of industry (6.1%) and services (7.1 %) accelerated very
encouragingly, as did exports by a healthy 20.4%
Related to SSI, the announcements were as under:
A vibrant small-scale industry, contributing to both industrial and export growth, is
critical for sustained growth in income and employment. The full benefits of the
declining rates of interest have percolated neither to agriculture, nor to small-scale
industry. The recent announcement by State Bank of India and decision by the Indian
Bank Association about an interest rate band of 2 % above and below PLR for secured
advances will help the SSI sector in obtaining bank finance at moderate rates of
interest. In addition, benefits and entitlements available to this sector shall be placed
on the Ministrys website, for ready reference.
Accessing the global market with consumer goods of quality, at competitive prices,
produced in both large and small-scale establishments operating under flexible
conditions, is the goal that we need to target. Last year, Government had announced
the dereservation of over 50 items. After consultations with stakeholders in respect of
certain other items in the reserved list, it is now proposed to withdraw SSI reservation
from another 75 items of laboratory chemicals and reagents, leather and leather
products, plastic products, chemicals and chemicals product and paper products. To

help further investment in the SSI sector, Government will examine the question of a
limited partnership act.
Union Budget 2004-05: SSI & Entrepreneurship
Economic Survey 2003-04 Mentions: Among the other factors that can help in boosting
industry is the removal of the remaining items from the list reserved for small-scale
industry. Small and Medium Scale enterprises are critical for industrial development, for
they provide the cradle that nurtures the big businesses of tomorrow. They choose the
appropriate product designs and techniques, be it labour or capital intensive, and they have
flexible management capacities to respond to fast-changing market conditions. The
progress in gradually dismantling the reservation policy observed over recent years should
continue and the policy of protection through reservation should be replaced by promotion
as the cornerstone of future policy. Adequate supply of credit services, technology
assistance and infrastructure, low transaction costs are aspects upon which this promotion
policy should focus.
National Common Minimum Programme: The Guiding Light
The United Progressive Alliance (UPA) has given to itself, and to the people of this
country, a Common Minimum Programme. The government has since adopted it as the
National Common Minimum Programme (NCPM). The programme spells out seven clear
economic objectives:

Maintaining a growth rate of 7-8% per year for sustained period


Providing universal access to quality basic education and health


Generating gainful employment in agriculture manufacturing and services, and

promoting investment


Assuring 100 days employment to the bread-winner in each family at the minimum


Focusing on agriculture and infrastructure


Accelerating fiscal consolidation and reform


Ensuring higher and more efficient fiscal devolution.

The Small Farmers Agri-business Consortium (SFAC) was set up in 1994. Although SFAC
started functioning from 1998, its corpus stands at a meager Rs. 10.95 crore. SFAC should
provide venture capital to projects and must be run, preferably by a banker, on purely
business lines. The M S Swaminathan Research Foundation has identified 13 districts
where there is a huge potential for agri-businesses and an appetite for investment of nearly
Rs. 170 crore. The ministry of agriculture has initiated action to improve the governance of
SFAC, including the appointment of a banker as the chief executive. It is proposed to
provide the necessary additional capital that SFAC will require to aggressively promote
Small Scale Industry
Small-scale industry is and must be regarded as, an engine of growth. At the same time SSI
units must also be given the space to grow into medium enterprises. World over, policies
are devised to meet the requirements of small and medium enterprises (SME). Keeping in
mind the twin objectives, the ministry of small-scale industry has identified 85 items that
can be safely taken out of the reserved list. Furthermore, it is felt that technology
upgradation of SSI units is the most urgent requirement to do business in a competitive
environment. According to reviewed Capital Subsidy scheme, the proposal is to raise the
ceiling for loans under the scheme from Rs 40 lakh to Rs. 1 crore. The rate of subsidy will
also be raised from 12 % to 15 %. The scope of the scheme will be enlarged by adding
more sub-sectors and technologies eligible for assistance. SSI units will be encouraged to
obtain credit rating. With these measures it is expected that many more SSI units will
benefit from the restructured scheme. A provision of Rs. 135.24 crore has been made for
Promotion of SSI Schemes, and within that amount funds will be found for the Capital
Subsidy Scheme.
Regeneration of Traditional Industries
Some of our traditional industries, namely coir, handloom, handicraft, sericulture, leather,
pottery and other cottage industries not only contain great potential for growth and exports,
but are integral for maintenance of our cultural heritage. Accordingly, a fund for the
Regeneration of Traditional Industries, with an initial allocation of Rs. 100 crore will be set

SSI Sector in Union Budget 2005 06

SSI turnover eligibility limit for availing General SSI Excise Exemption enhanced
from Rs. 3 crores to 4 crores. Further SSI units will now have only two options: either
full exemption on the first clearance of Rs. 1 crore or normal duty on the first
clearance of Rs. 1 crore with CENVAT credit.

108 items de reserved which include 30 textile products including hosiery.

Small service providers having gross annual turnover less than Rs. 4lakhs have been
exempted from purview of service Tax.

Service Tax on business auxiliary service has been exempted for person producing /
processing goods, from the inputs received from a manufacture and sending the
resultant product to the same manufacture for further manufacture of final products,
which are cleared on payment of excise duty.

A provision of Rs. 173 crores made for promotion of SSI Scheme.

SME growth fund to be created by SIDBI with a corpus of Rs. 500 crores to provide
equity support to small and medium units in knowledge based industries such as
Pharma, Biotechnology and IT Sector.

The Small and Medium Enterprises Development Bill to be introduced during the
current session of the Parliament.

As proposed by the National Commission on Enterprise in the Unrecognized/informal

Sector, pilot projects for creation of growth poles applying the Provision of Urban
Amenities in Rural Areas (PURA) principles will be taken up in 2005-06 to expand
production and employment in the un recognized enterprises around existing clusters
of industrial activities and services around existing clusters of industrial activities and
services as well as encourage the formation of new clusters.

The target for Credit Linking of Self-Help Groups (SHGs) enhanced as well as
enhanced from 2 lakhs SHGs to 2.5 lakhs SHGs.

Micro Finance Institutions (MFIs), which seeks to provide Small Scale Credit and
other financial service to low income households and small informal business to be
promoted in a big way.

Rs.100 crores Micro Finance Development Fund to be redesignated as Micro Finance

Development Equity Fund and the corpus will be enhanced to Rs. 200 crores.

RBI to open a window to enable qualified NGOs engaged in micro finance activities
to use the External Commercial Borrowing (ECB) window.

In order to revive the manufacturing sector, particularly small and medium enterprises
and to unable them to adjust to the competitive pressure caused by the liberalization
and modernization of tariff rates a new scheme called Manufacturing Competitive
Programme to be launched to strengthen operations and sharpen competitiveness. The
design of the scheme will be worked out by the National Manufacturing
Competitiveness Council.

Cluster development approach is to be adopted for production and marketing of

handloom products.

Peak rate of custom duty for non agriculture products reduced from 20% to 15%.
The custom duty on seven specified machinery for leather and footwear industry
reduced from 15% to 10%.

Custom duty on nine specified machinery used in pharmaceutical and biotechnology

sector reduced to 5%.

For primary and secondary metals customs duty reduced from 15% to 10%.
Industrial raw materials such as catalysts, refractory raw materials, basic plastic
materials, molasses and industrial ethyl alcohol key inputs to manufacture, will
have reduced custom duty of 10%. On lead, custom duty is reduced to 10%.

Custom duty on cooking coal is reduced from 15% to 5%.

4% Countervailing Duty (CVD) imposed on the imports of Information Technology
Agreement (ITA) bound items and their inputs that attract nil duty.

Excise duty reduced from 16% to 8% on imitation jewellery.

8% excise duty imposed on Mosiac Tiles.
Surcharge of Re. 1 per kg on tea abolished.
Excise duty of Re.1 per kg. on refined edible oils and Rs. 1.25 per kg. on Vanaspati

Excise duty reduced from 16% to 12% on matches made in mechanized and semi
mechanized sector.

Excise duty on Iron & Steel restored to the normal level of 16%.

An Advisory Committee to be set up to advice the government on the extent of

abatement for excise duty and service tax.
To Summarize
The process of liberalization, while providing tremendous opportunities, has thrown
up new challenges for the Indian small-scale industries sector.
For SSIs the globalization of economic activities has two interfaces. For some, the
process opens new opportunities to expand and grow; for others, a much larger group,
the process poses a threat from abroad.
In view of emerging WTO regime and a high-level reservation redundancy, there may
be a need reconsider orienting of the existing Government policies so as to achieve a
phased dereservation. The Report of the Expert Committee on Small Enterprises
(1997) strongly favoured total dereservation based on the ineffectiveness of the policy.

Recent Announcements (2.10.2006)

Central Government shall constitute a National Board for Micro, Small and
Medium Enterprises for promotion and development. The Board shall also review
policies and programmes to enhance the competitiveness of such enterprises

Central Government shall also constitute an Advisory Committee. The committee

shall advise on
(a) the level of employment in a class or classes of enterprise;
(b) The level of investments in plant and machinery or equipment in a class or
classes of enterprises;
(c) The need of higher investment in plant and machinery or equipment for






competitiveness of the class or classes of enterprises;

(d) The possibility of promoting and diffusing entrepreneurship in micro, small
or medium enterprises; and
(e) The international standards for classification of small and medium

The focus shall be on:

Development of skills in the employees, managers and entrepreneurs of

micro & small enterprises.

Technological upgradation.

Marketing assistance

Infrastructure facilities

Cluster development

The policies and practices in respect of credit to the MSMEs shall be progressive
and such as may be specified in the guidelines or instructions issued by the Reserve
Bank of India with the aims of:

Ensuring smooth credit flow to the MSMEs,

Minimizing sickness among them, and

Ensuring enhancement of their competitiveness.

Procurement Policies

Central Government or a State Government to notify preference policies in

respect of procurement of goods and services, produced and provided by
MSEs, by its ministries, departments or its aided institutions and public
sector enterprises (non-statutory till now).

Valid only for Micro and Small Enterprises and not for Medium Enterprises.

Services also covered.

Support Organizations for an Entrepreneur and

their Role






1. Industry
2. Non Governmental

(At the Apex Level : SIDBI)

Commercial Banks
Co-op Banks
State Level
1. SFC














Glossary of Abbreviations used:


Development Commissioner for SSI


District Industries Center


Entrepreneurship Development Institute of India


Entrepreneurship Development Institute


Export Promotion Council


Field Testing Station


Housing and Urban Development Corporation


National Bank for Agricultural and Rural Development


National Institute for Entrepreneurship & Small Business



National Small Industries Corporation Ltd.


Product and Process Development Center


Regional Rural Bank *


Regional Testing Center


State Electricity Board


State Financial Corporation Ltd.


Small Industries Development Bank of India


State Industrial Development Corporation Ltd.


Small Industries Development Organization


State Industrial and Investment Corporation Ltd.


Small Industries Service Institute


Small Scale Industries Board


State Small Scale Industrial Development Corporation Ltd.


Technology Bureau for Small Enterprises


Technical Consultancy Organization


Tool Rooms


Government has been playing a major role. The Office of Development Commissioner
(SSI) has been functioning since 1954 along with the Ministry of Industry as an apex /nodal
organ and provides link between the Ministry and field organizations.
At Central Level, along with Ministry of Industry an exclusive Department of Small Scale
& Agro and Rural Industries has been created since 1954 for the promotion and
development of small-scale industries. Presently it is being headed by a Minister of State
with independent charge.
The Small Industries Development Organization (SIDO) headed by the Additional
Secretary & Development Commissioner (DC-SSI) is an apex body for formulating
policies for the development of SSI's in the country and is playing a very constructive role
for strengthening this vital sector. It functions through a network of SISIs, Branch SISIs,
Regional Testing Centers, Footwear Training Centers, Production Center, Field Testing
Stations and specialized institutes.
It renders services such as:

Advising the Government in policy formulation for the promotion and development of
Providing techno-economic and managerial consultancy, common facilities and
extension services to small-scale units.
Providing facilities for technology up gradation, modernization, quality improvement
and infrastructure.
Human Resource Development through training and skill up gradation.
Providing economic information services.
Maintaining a close liaison with the Central Ministries, Planning Commission, State
Governments, Financial Institutions and other Organizations concerned with
of SSI's.
Evolving and coordinating Policies and Programmes for development of SSI's and
ancillaries to large and medium scale industries.
Monitoring of PMRY Scheme.

SIDO has under its control:

Regional Testing Centers (RTC) :

Field Testing Stations (FTS)
Tool Rooms / Tool Design Institutes (TRS / TDI)
Product-Cum-Process Development Centers (PPDC)


The Small Industries Development Organization (SIDO) acts as a policy formulating
agency, co-ordinating and monitoring the growth and development of small scale industries
at the national level. It provides a wide range of extension services through the field
agencies viz. Small Industries Service Institutes, The Small Industries Service Institute,
provides :

Technical Consultancy Services

Management Consultancy Services
Economic Investigation Services
Entrepreneurial Development Programme & PMRY
Ancillary Development Programmes
Marketing Assistance & Services
Export Promotion Services
Modernization / Technology Up-gradations Services
Common Facilities Services
Library Facility
Assistance to the State Govt. Agencies
Technical Assistance to the various Central Govt. Agencies Like DGFT, NSIC,
NSIC, Excise,
CSIR, etc. and all sorts of assistance and support to various NGOs, Associations
& Institutes involved in promotion and development of industries.
SISI, Mumbai has set-up a CAD/CAM Training Centre in collaboration with IndoGerman Tool Room, Aurangabad.
SISI, Mumbai has also set-up a Toy Design cell in collaboration with National Institute
of Design, Ahmedabad.
SISI, Mumbai has set-up a Technology Resource Centre in Mumbai.

Further details on SISI can be obtained from:

Small Industries Service Institute,
Ministry of Small Scale Industries,
Government of India,
Kurla Andheri Road, Sakinaka,
Mumbai 400 072.
Phone no.:- +91-22-2857 6090, 2857 3091.
Fax:- +92-22-2857 8092.
Website:- www.sisimumbai.com.



The genesis of the National Small Industries Corporation Ltd. (NSIC

(NSIC)) was a result
of the recommendations of an International Planning Team, which visited India in
1954 sponsored by the Ford Foundation for suggesting ways for development of
small scale industries. NSIC was registered in 1955 under the Companies Act


Assistance to SmallScale units in securing reasonable share of Government Purchases

Government orders both by a system of corporation taking prime contracts and then
issuing sub-contracts or assisting the small scale units in getting contracts from the
Government Purchase Agencies.
Supply of machines both indigenous and imported to small scale industrial units on hire
purchase under easy installment repayment terms.
Scheme of providing machinery and equipment on lease terms for encouraging
technological up-gradation, modernization, expansion and diversification. Under the
scheme 100% finance is provided.
Marketing of the small scale industries products within the country by
-formation of consortia of units manufacturing same or similar purchase products
-agency basis and
-securing institutional orders
- Export Marketing

Export marketing is encouraged among small scale units who can gradually acquire
capability to independently handle the export of their products. Exports of the products
as well as projects is undertaken.
Allotment scarce raw material
Warehousing facilities

Marketing activities include arrangement of Buyer Seller meets, Trade Fairs both National
and International etc.
Further details on NSIC can be obtained from:
National Small Industries Corporation,
Prestige Chambers, 3rd Floor, Kalyan Street,
Madjid Bunder, Mumbai 400 009.
Phone no.:- 2374 0272, 2374 0268, 2371 7725.
E-mail: nsicmum@bom5.vsnl.net.in.


In response to the long standing demand of the small scale sector in India, Small Industries
Development Bank of India (SIDBI) was set up, by an Act of Parliament, as an apex
institution for promotion, financing and development of industries in the small scale sector
and for co-ordinating the functions of other institutions engaged in similar activities. SIDBI
is a wholly owned subsidiary of Industrial Development Bank of India (IDBI). It
commenced its operation on April 2, 1990 by taking over the outstanding portfolio and
activities pertaining to the small-scale sector. SIDBI is operating through its Head Office at
Lucknow and a network of 5 Regional Offices and 33 Branch Offices in all the States.
SIDBI under the Charter has, inter alia, been assigned the task of being the main purveyor
of term finance to the small-scale sector in the country. Small scale industrial units,
artisans, village and cottage industrial units in the tiny sector and small road transport
operators are extended financial assistance mainly by way of refinance through primary
lending institutions (PLIs) viz., State Financial Corporation (SFCs), State Industrial
Development Corporations / State Industrial Investment Corporations (SIDCs /SIICs) and
banks, which have a wide network of over 65,000 branches.
With a view to encouraging bills culture and helping the SSI units realize their sale
proceeds of capital goods/equipment and component/sub-assemblies/intermediates, SIDBI
directly discounts bills arising out of these transactions and also rediscounts those bills that
are discounted by the banks. In addition, SIDBI has also introduced direct finance schemes
for specialized marketing agencies, sub-contracting/ancillary units and infrastructure
development agencies so as to fill the gaps in these areas in the existing credit delivery
mechanism. SIDBI has been providing assistance to well-run companies on a selective
basis for acquiring machinery/equipment both indigenous and imported for
modernization/expansion/diversification/balancing, etc. under Equipment Finance Scheme
(EFS). Project loans are also considered on a selective basis. It also provides assistance for
working capital, credit rating, quality certification and vendor development. Besides,
SIDBI operates a Venture capital fund for support to ventures in the small scale sector
which have special features in terms of technology, market prospects, return on investment
or entrepreneurial profile.
Over the years, the approach of the bank has been to identify the gaps in the existing credit
delivery systems for SSIs and devise tailor-made schemes not only for providing refinance
but also for direct lending to SSIs. While extending direct assistance to SSIs, the Bank has
been pursuing the policy of supplementing the efforts of PLIs. Each of Schemes of SIDBI
is directed to mitigate specific problems faced by SSI sector such as delayed payment of
bills, obsolescence of technology, working capital requirements, marketing inadequacies,
lack of inadequacies, lack of infrastructure, insufficient export capital, venture capital and
human resources development. (refer to the box below)


Direct Discounting of Bills (Components)Scheme

Direct Discounting of Bills (Equipments) Schemes
Direct Factoring Services
Bills Rediscounting Scheme (Equipments)
Bills Rediscounting Scheme against Inland Supply Bills of SSIs
Invoice Discounting Scheme


Technology Development and Modernization Fund (TDMF) Scheme (both direct and
indirect assistance)
ISO 9000Scheme (both direct and indirect assistance)
Technology Upgradation Fund Scheme for Textile Industry (both direct and indirect
Tannery Modernization Fund Scheme (both direct and indirect assistance)


Single Window Scheme (Through PLIs)

Composite Loan Scheme (Through PLIs)
Working Capital Term Loan (Direct Assistance)

Marketing Inadequacies Scheme

Scheme for Financing Activities relating to marketing of SSI Products

Lack of suitable Infrastructure Schemes

Scheme of Direct Assistance for Development of Industrial Infrastructure for SSI

Scheme of Integrated Infrastructural Development (IID)

Insufficient Export Credit Schemes

Pre-shipment Credit in Foreign Currency

Scheme for Export Bills Financing
Rupee Pre-shipment/Post-shipmen Credit
Foreign Letters of Credit

Venture Capital Availability Schemes

Venture Capital Scheme
Human Resources Development Schemes
Entrepreneurship Development Programme
Small Industries Management Programme
Expanding Activities

Over the years, SIDBI has widened its horizon and entered into newer areas with a view to
facilitating the growth of the SSI sector in the years to come. Apart from traditional
security based project financing approach of Development Financing Institutions, SIDBI
commenced providing assistance in the form of venture capital, micro credit, marketing
finance, export credit, etc. through specialized departments/outfits to accord focused
attention to the specific requirements of the sector.
SIDBI co-promoted SBI Factors and Commercial Services Limited, Canbank Factors
Limited, IDBI Bank Limited and North Eastern Development Finance Corporation
Limited. The Bank is also one of the founder members of the Indian Institute
Entrepreneurship, Guwahati.
During 1998-99, SIDBI has launched Rs.100 crore SIDBI Foundation for Micro Credit for
up scaling micro finance activities and for creating a national network of strong, viable and
sustainable micro finance institutions (MFIs) from formal and informal sector. This
initiative gained world-wide recognition when SIDBI was awarded coveted Asian Banking
Award99 in the Development Finance Product category. The Bank is the first institution to
launch dedicated venture capital funds catering to the requirements of high growth sectors
such as information technology and in collaboration with Central and State Governments.
In order to pay specialized services and focused attention, separate subsidiaries viz. SIDBI
Venture Capital Limited and SIDBI Trustee Company Limited were set up by the Bank.
Refer the table below:


Venture Capital Department (since 1992-93) Two subsidiaries, viz. SIDBI Venture
Capital Limited and SIDBI Trustee Company Limited formed to oversee :
Setting up Venture Capital Fund
Direct Venture Capital assistance and contribution to corpus of other Funds dedicated
to SSIs
Launching SSI dedicated funds for Software/Information Technology sector.
12 Funds in 10 States and a national level Fund, viz. National Venture Fund for
Software and IT Industry in collaboration with Government of India.
Technology Bureau for Small Enterprises (since 1994-95)
Technology transfer
Match making services
Finance syndication
Facilitating joint ventures
Marketing Finance and Development Department (since 1995-96)
Setting up Marketing Development Assistance Fund
Direct assistance to SSIs for undertaking marketing related activities
Resource support to intermediaries
Developmental activities relating to Marketing of SSI products.
International Finance Department (since 1996-97)
Pre-shipment / Post-shipment credit
Foreign currency term loans
Foreign letters of credit
International Co-operation Division (since 1998-99)
Consultancy services
Institutional up gradation and training
Establishing lines of credit particularly for developing countries
SIDBI Foundation for Micro Credit (since 1998-99)
Rs. 100 crore Fund for creating a national network of strong, viable and sustainable
micro finance institutions (MFIs) from formal and informal sector
Financial support to MFIs for on-lending to poor (individuals/groups) with emphasis
on women for taking up income generating activities at micro level
Rating and capacity building of MFIs


The strategic business interventions were aimed at improving the flow of credit to small
scale sector by broad-basing certain schemes in tune with the changing requirements of the
sector. A number of steps aimed at enhancing the scale of operations under direct finance
schemes have been initiated, which are likely to yield results in future. Besides, initiatives
have been taken to revitalize the functioning of State Financial Corporations to facilitate
their meeting emerging needs of the SSI sector. Emphasis was laid on liberalizing the
schemes of assistance while simplifying the systems and procedures so as to make them
market friendly and customer oriented.
SEAF India SME Fund
SIDBI entered into Memorandum of understanding with Small Enterprise Assistance Funds
(SEAF) of United States of America. The Bank has, in-principle, agreed to contribute Rs.
25 crore to the initial corpus of the proposed SEAF India SME Fund of US$ 40 million.
The Fund would be utilized towards equity and equity related investments in small and
medium enterprises (SMEs) in India.
Micro Ventures Innovation Fund
Setting up of a micro venture capital fund for small innovations, in collaboration with the
National Innovation Foundation (NIF). A corpus of Rs. 500 lakhs is build up.
Tie-up with SEDF
Memorandum of understanding focusing on economic development of North Eastern
Region of India was signed between SIDBI and South Asian Enterprise Development
Facility (SEDF), an agency established by the World Bank and International Finance
Corporation. Two sub-sectors viz. food and fruit processing and silk have been identified
for focused attention in the North Eastern Region.
Resource Support involving Two Tier Credit Dispensation
SIDBI has been endeavouring to expand linkages with Public Financial Institutions (PFIs)
for supplementing the existing partnership with Primary Lending Institutions. Towards this
end, the Bank had approach Government of India for specific authorization to consider
financial assistance by way of resource support involving two-tier credit dispensation.
Technology Development and Modernization Fund Scheme
Technology Development and Modernization Fund (TDMF) Scheme was introduced by
SIDBI in April 1995 for a period of 5 years. The scheme was reviewed and it has been
decided to continue it upto March31, 2005. Further the scope of the scheme has been
enlarged to cover such service sector projects that are eligible for assistance from SIDBI
like hospitals, nursing homes and tourism related activities on a selective basis.

Service Sector

In the context of the important role played by entertainment industry in the small scale
sector, SIDBI included establishing studios for making/producing films/software for
television, inter alia, for letting out the facilities to other producers on rent /fee basis, as
eligible activities for direct assistance from Bank.
Revision in Minimum Term Loan for Direct Assistance
The Bank reduced the minimum loan limit for direct assistance from SIDBI under Project
Finance Scheme (PFS) and Equipment Finance Scheme (EFS). Accordingly, the revised
limits for PFS and EFS are Rs. 50 lakhs.
Export Credit
SIDBI has been providing export credit to SSI exporters and export/Trading Houses
sourcing their requirements from SSI units both in rupees and foreign currency. In addition
to direct export credit, special emphasis was laid during the year on providing Lines of
Credit in foreign currency to commercial banks and Factoring Companies for channelising
resources for the benefit of SSI Sector.
Refinance Scheme for Credit Linked Capital Linked Capital Subsidy Scheme fro
Technology Upgradation of the Small Scale Industries
As per decisions taken by the Governing and Technology Approval Board (GTAB), which
monitors the scheme, certain changes as well as additional features have been incorporated
in the scheme. Accordingly, the PLIs would henceforth release the entire subsidy amount to
the beneficiary units if the loan is disbursed in more than one installment, 50% of the
eligible subsidy may be released with the first installment and balance 50% along with the
last installment. Existing SSI units which are likely to graduate to medium scale on account
of additional loan will also now be eligible for assistance under the scheme.
Refinance Scheme-Increase in Exemption Limit fro Collaterals
Pursuant to RBI guidelines to increase the limit of dispensation of collateral requirement
for loans from existing Rs. 5 lakh to Rs. 15 lakh on the basis of good track record of the
units, the Bank has decided to extend this benefit to all SSI units under the Refinance
Reduction in interest rate on past loans
In view of the general decline in the interest rates and requests made by borrowers to
reduce interest rates in respect of loans contracted at higher rates in the past, a rebate
scheme was introduced by SIDBI in the previous year for loans carrying a rate higher than
16.5 % per annum. With further reduction in interest rates during the year under review, the
facility was extended in March 2003 to loans carrying interest rates of more than 15% per

Rehabilitation of Sick SSI units

Based on the recommendation of a Working Group headed by Shri S.S. Kohli, the then
Chairman, Indian Bank Association, RBI has issued fresh guidelines for rehabilitation of
sick SSI units, which, inter alia, include revision in definition of sick SSI unit. Accordingly,
this new definition has been adopted by SIDBI for purpose of Banks assistance and the
extant guidelines regarding grant of reliefs /concessions to potentially viable sick SSI units
under the rehabilitation package have been reviewed and further liberalized.
Guidelines to Borrowers
In continuation of ongoing efforts towards building better customer relationship and
educating its borrowers, the Bank has brought out a booklet titled Guidelines to the
Borrower enumerating the formalities to be completed by them for availing the term loan
sanctioned by SIDBI. The booklet is given to borrowers after an in-principle decision is
taken to consider the proposal so as to aid speedy documentation and creation of security.
Recovery Measures
During the year under review, detailed guidelines were issued for rehabilitation of
potentially viable sick assisted SSI units /concerns, including modification in the existing
WTO Impact Assessment Studies
16 product groups have been identified within small-scale sector for assessing the impact of
WTO on their competitiveness. The studies on six sub-sectors viz. Gems & Jewellery,
Leather and leather products, Dyes and dyes intermediates, Drug & Pharmaceuticals,
Textiles including Readymade Garments and Toys have been completed. Summarized
versions of these Reports were distributed amongst various stakeholders. In the second
phase, SIDBI has initiated the studies on three more sub-sectors, viz. Food processing,
Biotechnology and Bicycle parts.
Prepayment of Outstanding under Refinance
To enable SFCs reduce their cost of borrowings, the Bank decided to accept prepayment of
outstanding refinance, carrying interest at 13.5% per annum and above, without premium.
This facility, which was available upto March31, 2003, was also provided to State
Industrial Development Corporations (SIDCs) and Twin Function Industrial Development
Corporations (TFIDCs). The Bank also decided to accept prepayment of refinance, carrying
interest of 13% per annum from the state level institutions at such premium as may be
mutually agreed upon.
Interest Rate Structure
SIDBI effected downward revision in it Prime Lending Rates (PLRs) by 50 basis points
w.e.f. December 12, 2002. Accordingly, the Long Term PLR (for loans of maturity more
than 3 years), Medium Term PLR (for loans of maturity between 1 and 3 years) and short
Term PLR (loans upto 1 year maturity) have been reduced to 12%, 11.75% and 11.25% per
annum, respectively. The corresponding reduction in interest rates has been effected across
the board under various refinance and direct assistance schemes including products offering

assistance at sub-PLR rates. The existing score chart system for direct assistance schemes
was also liberalized so as to offer more competitive rates to small scale units obtaining
direct loans from SIDBI.
Rural Industries Programme
The Rural Industries Programme (RIP) of the Bank basically designed to provide impetus
to rural development by creating sustainable industrial ad service enterprises in rural areas,
leading to higher employment generation and effective utilization of local skills and
resources. Considering its sizeable benefits, the Bank continued its thrust on upscaling and
geographical expansion of RIPs.
The Programme is designed to improve the quality of the product by introducing new tools
and processes, to reduce raw material wastage, and to impart skill development training to
artisans in the cluster.
Mahila Vikas Nidhi
The Mahila Vikas Nidhi (MVN) provides a developmental window through which the
Bank aims at bringing about economic empowerment of women by facilitating the creation
of appropriate infrastructure. During the year under review, assistance under MVN was
extended to Helping Hands, BHEL Ladies Welfare Society, Bhopal for settingup/establishing a mini offset printing press for providing training in the field of off-set
printing, computer designing, etc.
Entrepreneurship Development Programme
The Banks Entrepreneurship Development Programmes (EDPs) emphasis on promotion of
enterprises, especially in rural areas targeting less privileged sections of the society. During
2002-03, the Bank supported 128 EDPs taking the cumulative number of EDPs to 1709
comprising 779 programmes for rural youth, 331 fro women and 599 fro other groups.
These programmes are conducted through well-trained NGOs and specialized agencies, the
major ones being EDII, Ahmedabad and Rural Development and Self Employment
Training Institute (RUDSETI), Ujire, Karnataka. Besides, the Bank continued to lend
capacity building support to conducting agencies by way of trainers training, NGO-banker
interface, financial management programmes etc.
Human Resource Development
The Human Resource Development intervention of the Bank for the benefit of SSI sector is
undertaken through two structured mechanisms
The Small Industries Management Programme (SIMAP) which targets educated
unemployed as well as industry-sponsored candidates with the Overall objective of
providing competent managers to SSI sector
(ii) The Skill-cum-Technology Upgradation Programme (STUP), which aims at
enhancing technology profile of SSI units.

Besides providing support to various technical/management institutions, these programmes

are being conducted in an on-going manner by 18 national level institutions out of corpus
fund provided by the Bank.
Cluster Development Programme
In the recent years, the Cluster Development Programme of the Bank has undergone a
paradigm shift from a technology centric intervention to a comprehensive package of
business development services. The Banks relationship with cluster development agencies
continued during the year and the UNIDO programme for technology was extended
support for the clusters of Ambur (Tamil Nadu) for leather; Ahmedabad for drugs and
pharmaceuticals; Banglore for machine tools and Bellary (Karnataka) for garments. Such
interventions have yielded positive results like enhanced productivity, reduction of process
cycle and defect rates, energy conservation, quality upgradation and introduction of
environment friendly technologies.
Other ongoing interventions, which continued during the year, included programmes for
the cluster of foundry units at Vijaywada. During the year, the visit of a foundry expert
from the UK was arranged and the units were provided inputs on improved foundry
practices. In the cluster of rape-seed mustard at Agra, Mathura and Bharatpur, the
implementing agency continued with its efforts to bring about improvements in units of
different sizes so as to seed new technology and improved operating practices. In another
ongoing intervention in the scientific instruments cluster at Ambala, EDII has been
assigned the responsibility of structuring a growth programme for select units in the cluster.
In the first phase of the intervention, each sub-component of the student microscope was
standardized and units were provided with jigs and fixtures, tools and dies to enable tem to
fabricate as per standard dimensions with acceptable tolerances.
Environment Management
During 2002-03, the environment management initiative of the Bank was consolidated. The
intervention with the Punjab State Council for Science and technology (PSCST)
endeavored to seed cleaner production technologies in a number of sectors like foundries,
rice mills, brick kilns, electroplating units, etc.
Marketing Initiatives
During 2002-03, the Bank supported 93 events/activities such as trade fairs, buyer-seller
meets, seminars, trade delegations, etc. with an assistance aggregating to Rs. 148 lakh to
enhance the marketing capabilities of small scale sector. The initiatives at the national and
regional levels covered various industry groups/ activities such as knitwear, textiles, gems
and jewellery, engineering goods, leather products, stones, handicrafts, rubber, food
processing etc.

Support to Industry Organizations

The Bank has been making efforts for the past few years to initiate developmental
programmes through proactive industry associations. In this regard, during the year under
review, support was extended to the Indian Industries Association, Lucknow to setup a
model Small Industries Information and Service Center (SIISC) at its central office for
providing information and consultancy support to SSI entrepreneurs throughout the state of
Uttar Pradesh. SIISC will also create a data base on SSIs in UP with special reference to
their products and raw materials needs and help in widening the market sphere of small
scale units through Internet and e-Commerce. In terms of consultancy support, the Center
will develop capacity in the areas of technology upgradation, credit availability and
taxation for the benefit of their members.
SIDBI Venture Capital Ltd.
SIDBI Venture Capital Ltd. (SVCL) was established to carry out the business of setting-up,
advising and managing venture capital funds and has been acting as the Investment
Manager to National Venture Fund for Software & Information Technology Industry
NFSIT is a 10-year close-ended Venture Capital Fund, with a committed corpus of Rs. 100
crore. The fund has been contributed by Small Industries Development Bank of India,
Ministry of Communications & Information Technology (MCIT) (formerly called as
Ministry of Information Technology / Department of Electronics), Government of India and
Industrial Development Bank of India. Investment is NFSIT includes Info-tech sector,
software industry and related businesses such as networking multimedia, data
communication services and /or any other related sectors.
The global downturn in IT spending and other macro economic and political factors around
the world affected the software and IT companies, especially the units in the SME sector.
However, new opportunities in the Business Process Outsourcing (BPO)/ Information
Technology Enabled Services (ITES) sector are emerging and it is expected that this sector
would grow at over 70% in the next 1-2 years. While overseas Venture Capital (VC) funds
focused on large size investments, the domestic funds were highly selective in their
investments. Exit has become a major problem for the VC industry in India.
In the present scenario, NFSIT and State/Regional funds promoted by SIDBI have emerged
as major source of VC funds for the SME sector. Considering the present trends, SVCL is
exploring the possibility of setting up a general SME fund, with a focus on knowledge base
Technology Bureau for Small Enterprises
In collaboration with United Nations-Asian and Pacific Center for Transfer of Technology
(APCTT), SIDBI set up Technology Bureau for Small Enterprise (TBSE) in 1995 with the
objective to strengthen the efforts of small scale units in technology access and transfer.
Services rendered by TBSE include technology promotion through multi-channels,

facilitation of transfer of technology, joint ventures, business collaboration and finance

Credit Guarantee Fund Trust for Small Industries
The Government of India, in association with SIDBI, formulated a Credit Guarantee Fund
Scheme for Small Industries, which was launched on August 30, 2000. The Scheme aims at
helping the new and existing industrial units in the SSI sector, including units in
information technology and software industry, in getting collateral-free/third-party
guarantee free credit by way of both term loan and working capital, from eligible lending
institutions namely scheduled commercial banks, select Regional Rural Banks and such of
the institutions as may be approved by the Government of India.
The Credit Guarantee Scheme is operated by CGTSI, set up by Government of India and
SIDBI. The corpus of the Trust is contributed by the Settlers, GOI and SIDBI in the ration
of 4:1. The corpus of the Trust has been enhanced to Rs. 427 crore by March 31, 2003.
CGTSI extends guarantee cover for mitigating credit risk upto 75% of the collateral free
credits extended by eligible lending institutions to the SSI units, subject to maximum credit
of Rs. 25 lakh per SSI unit. Under the Credit Guarantee Scheme, the eligible lending
institutions are required to register themselves with CGTSI as Member Lending Institutions
(MLIs). As on March 31, 2003, there were 35 MLIs of the Trust, comprising 25 Public
Sector Banks, 5 Private Sector Banks, 3 Regional Rural Banks, National Small Industries
Corporation Ltd. (NSIC) and North Eastern Development Finance Institution.

Further details on SIDBI can be obtained from:

Small Industries Development Bank of India
Nariman Bhavan, 227, V. K. Shah Marg,
Nariman Point, Mumbai 400 021.
Phone no.:- 2287 2475, 22872508, 2281 7499, 2281 7503.
Fax:- 2287 2490, 2287 2450.


The problems faced by the small enterprises particularly in accessing technology and
maintaining competitiveness have been formidable. Lack of familiarity with new options,
inability in accessing them, and organizing necessary finance for growth are a few which
need to be addressed through institutional support. Absence of a platform where small
enterprises can tap opportunities at the global level for acquisition of technology or
establish business collaboration has been compounding the problem. Technology Bureau
for Small Enterprises (TBSE) is an endeavour to bridge the technology gap. Resulting
from the collaboration between the United Nations Asian and Pacific Centre for Transfer
of Technology (APCTT) and Small Industries Development Bank of India (SIDBI). It
represents, under one roof, synergy of technology and finance. The important features of
its objectives, role and services are:
Offers a professionally managed system for technology and collaborations search.
Helps in building up confidence between prospective partners.
Lends a friendly hand in the intricate task of negotiations and matching of perceptions
for technical collaborations.
Provides a gateway to global technology market through Internet and other channels.
Unique mechanism for arranging technology and finance.
Renders customized service and has wide ranging affiliations.
Takes up project appraisal and preparation of business plan for finance syndication.
APCTT, a United Nations regional institution under the aegis of the Economic and Social
Commission for Asia and the Pacific (ESCAP), Bangkok, assists member and associate
member countries of ESCAP through strengthening their capabilities to develop, transfer,
adapt and apply technology. It improves terms of technology and identifies and promotes
the development and transfer of technologies relevant to the region. APCTTs activities are
mainly directed towards the small and medium enterprises (SMEs). The Center maintains
close and effective linkages with key sources and users of technology management,
development, transfer and utilization.
SIDBI was established in April 1990 under an Act of the Indian Parliament to serve as the
principal financial institution for promotion, financing and development of industry in the
small scale sector and to co-ordinate with similar institutions engaged in promoting
financing or developing small scale sector. SIDBI offers a wide range of assistance
through its direct finance, refinance, bills finance, equity finance, venture capital, foreign
currency loans, lines of credit and other schemes of assistance besides support services. It
has set up the Technology Development and Modernization Fund to encourage technology
up-gradation in small enterprises.

Range of Services
Technology Information: The Bureau has a large computerized database on technology
options available from different countries. It gives the user updated information on sources
of technologies and means of accessing them. Also background information on
technology-seeking enterprises is maintained and made available to interested technology
Match Making: TBSE identifies business partners willing to collaborate, brings them
face to face and extends support to tie up financial assistance and other requirements for
transfer of technology and joint ventures. Collaborating partners are further assisted in
drafting agreements.
Finance Syndication: Depending on the cost of project, nature and quantum of assistance
required, the Bureau undertakes finance syndication through SIDBI covering term loans,
foreign currency, venture capital, letter of credit; equity assistance; and on selective basis
interest-free loan to meet initial expenditure in the pre-technology absorption stage.
Support Services: It arranges consultancy services, visits of overseas experts for in-plant
counseling; coordinates buyer-seller meets for specific product / process technologies; and
represents the business interests of small enterprises in international events.
Further details on TBSE can be obtained from:
Technology Bureau for Small Enterprises,
APCTT Building, Qutab Institutional Area,
P.O.Box 4575, Off New Mehrauli Road,
New Delhi 110 016.
Ph.:- +91-11-6864501, 6856276, 6966521.
Fax:- +91-11-6856274.
E-mail:- tbsc@apctt.org.
URL:- www.techsmall.com.


Maharashtra Industrial Development Corporation popularly known as MIDC was
established on 1st August 1962.
Constitutors under the Maharashtra Industrial
Development Act, 1961. MIDCs basic objective is to set up industrial development. Its
activities are:

Development of Industrial area by acquiring land.

Preparing layout with suitable grouping of plots of various sizes and allotment of plots
on leasehold basis.
Construction of roads, drainage system and provision streetlight in the industrial areas.
Planning implementing and managing water supply schemes.
Establishing common facility center (CFC) by providing accommodations for bank,
post office, telecom facilities, police stations, medical facilities canteens etc.
Establishment of effluent collection and disposing systems for chemical zones.
Implementing Government / Semi government projects.

MIDC was developed more than 222 industrial estates across the state, spread over an area
of 52,223 hectares of land. The cumulative fixed investment made by the cooperation is
around Rs. 2,552 crores providing quality infrastructure, both social and industrial has been
the hall mark of the MIDCs mission. There are one or more industrial estates developed by
MIDC in each revenue district of Maharashtra. The category of plots is Industrial,
Commercial, Amenities, Residential and Under Sheds. Its main office is located at
Mahakali Caves Road, Andheri (East), Mumbai 400093.
Allotment Procedure of Plots:
Various MIDC officers have been empowered to allot the plot depending upon the size and
The entrepreneur has to apply for a plot of land in the prescribed application from and
enclose a cover letter, a project profile, block plan of proposed construction and required
processing fee (which ranges from Rs. 300 /- to Rs. 5050 /- ). The allotment committee
scrutinizes the proposal and then offer letter is issued normally within 15 days. As a next
step, the promoter has to submit an application for allotment in the prescribed form along
with the Earnest Money Deposit (50% of the total premium amount). Within 30 days the
allotee has to pay the balance amount and execute the Agreement to lease. The plot can
be mortgaged for getting the financial assistance from banks or financial institution subject
to the consent from MIDC and a tripartite agreement is entered into . the plot is to be
utilized as consent as per the clauses of the agreement is entered into . The building
completion certificate (B.C.C.) is to be obtained from the planning authority and finally the
allottee is allowed to use the built premises. The final lease is to be executed for a period of
95 years after completing the above -mentioned formalities. The ground rent is a nominal
amount of Rs. 1 per plot for a calendar year. The plot is not allowed to be transferred or
disposed without prior written consent from MIDC. The transfer rule are framed and
amended from time to time.

Advantages of Locating the Industry in MIDC Area:

No separate non agriculture permission is required.

Clear title of land is assured.
The land is owned by the State Government and allotted on 95 years leasehold tenure.
Filtered water supply to plot is assured by MIDC through its own water supply
Power supply is available from MSEB.
MIDC constructs ready built sheds/galas for small entrepreneurs and for electronic
Separate zones are earmarked to accommodate Engineering/chemical/Electronic
Plots are carved out to accommodate small, medium, and large-scale industrial units.
As well as commercial complex and various amenities in a well planned lay out and
Congenial atmosphere.

Disadvantages of locating the Industry in MIDC Area:

MIDC plot are leasehold and transfer rules keep on changing.

Generally the entrepreneur is not entitled to the benefits of appreciation of land price.

Further details on MIDC can be obtained from:

Maharashtra Industrial Development Corporation,
Udyog Sarathi, Mahakali Caves Road,
Andheri (E), Mumbai 400 093.
Phone no.:- 91-22-2687 0052/54/27,
Fax:- 91-22-2687 1587.
Website: http:/www.midcindia.org

Maharashtra Small Scale Industries Development

Corporation Ltd. (MSSIDC)
Maharashtra Small Scale Development Corporation was established in 1962 and later on it
got registered as a public limited company. Corporation has head-office at Mumbai and
seven divisional offices and twenty-three Branch offices at various districts. One
production center (Paithani Production) at Paithan, District Aurangabad and one liaison
office at Delhi. To help small-scale entrepreneurs, development of SSI and provide stability
to SSI.

Supply under Raw Material Credit / Supply Scheme:

a. Bank guarantees & Credits
b. Warehousing services
c. Performa Invoice
d. Supply rate order
e. Post-dated cheques


Marketing Assistance : Corporation helps to sell products of SSI units to State

Govt./Central Govt. undertakings. Some units have been registered with the
Corporation as suppliers to the government undertakings. Corporation assists the SSI
units in filling, tenders published by State/Central Government. Once the purchase
order is received, to give concerned SSI order to supply material and to help get
payment of that order in time. After given supply order to SSI, Corporation gives 75%
advance payment to concerned SSI if he gave bank surety. Under another scheme,
concerned customer gives certificate of received goods, then concerned SSI get 80%
payment from Corporation, so SSI get working capital and can supply goods and keep
production continued. On behalf of State Govt. Corporation, supply to govt. buyer,
under 19 Price Agreement Annual Supply Scheme.

3. Import-Export Assistance: SSI can import raw material from particular producer through
corporation. Imported goods / material can keep in corporations godown or custom bonded
as he wishes. After the payment goods can distributed accordingly to SSI. It is necessary
to customize goods in certain period under this scheme.
4.Warehousing on commercial basis: Storage and handling raw material handling,
equipments to assist SSIs for public undertaking and other producers.
5. Handicraft / Handloom / Exhibitions: Provide shops to Handicraft/handloom
industries/skill workers/artists via exhibitions, media and marketing.
6. Paithani Sari: Production and marketing for paithani saris (Pride of Maharashtra).
Further details on MSSIDC can be obtained from:

Maharashtra Small-Scale Industries Development,

Kripanidhi, Walchand Hirachand Marg,
Ballard Estate, Mumbai 400 038.


The Maharashtra State Financial Corporation (MSFC) has been set up under the `State
Financial Corporations (SFCs) Act 1951. The Corporation has been operating in the State
of Maharashtra since 1962 and in the State of Goa and the Union Territory of Daman &
Diu since 1964. The main function of MSFC is to provide Term Loan assistance to small
and medium scale industries (new as well as existing) for acquisition of fixed assets like
land, building, plant and machinery.
Eligible Industries / Activities
a) Most of the industrial activities such as Manufacturing, Assembling, Servicing,
Processing, Preservation, Transportation, Setting-up Industrial Estates, Road
Construction etc.
b) Small Nursing Homes, Hotels, Restaurants, Tourism Related Activities.
c) Medical Practitioners, Qualified Professionals.
Major Schemes - General Loan Equipment Finance Small Nursing Homes
Electro-Medical Equipment for Medical Practitioners
Entrepreneurs Service Industries Hotels, Restaurants & Tourism Related Activities
Qualified Professionals
Mahila Udyam Nidhi
National Equity Fund

Equipment Lease Finance

Technology Development & Modernisation Extended
Credit Facilities for good clients.
Loan Limits
Limited Companies
Proprietary / Partnership Firms

: Upto Rs. 2.40 crore

: Upto Rs. 90 lakh

Project Cost Limit

: Upto Rs. 10 crore.
(Cost of the fixed assets, margin money for working capital, preliminary & pre-operative
expenses and contingencies).
Net Worth Limit

: Upto Rs. 10 crore.

(Paid up capital + free reserves excluding share premium amount)

Interest Rates:
Ranging between 12.5% and 20.5% p.a., depending upon scheme, quantum of loan, rate of
refinance, eligibility for refinance, covered under line of credit etc.
Quantum of Assistance
The loan amount is worked out considering the debt-equity ratio & minimum
promoters contribution norms also ensuring that at least 10 per cent security margin
is maintained on the value of fixed assets eligible for loan. Higher security margin

and/or collateral security may also be insisted depending upon nature of assets & risk

Debt Equity Ratio (D/E )

For loan amount upto Rs. 10 lakh, D/E at 3:1 (75% loan, 25% equity) is observed,
while for loan amount over Rs. 10 lakh, D/E depends upon the scheme, loan amount,
nature of assets and risk perception and is usually 2:1, but may even extend to 1:1,
keeping in mind viability and collateral security. `Equity includes promoters
contribution, share capital, seed capital, State Govt. subsidy, part of the reserves,
portion of accruals transferred out of profits, interest free unsecured loans (quasi
equity) etc. `Debt includes long term loans, deferred payments etc.
Processing Fee (For Long Term Loans)
Loan above Rs. 50,000 &
upto Rs. 10 lakh
Loan above Rs. 10 lakh

: 0.7% of the amount sanctioned.

: 1% of the amount sanctioned
subject to the maximum of Rs. 1 lakh.

Repayment Period
Maximum 8 years, Moratorium up to 2 years from the date of first disbursement during
which only interest payment commences. For certain schemes shorter repayment period is
Further details on MSFC can be obtained from:
New Excelsior Bldg., A.K. Nayak Marg, Fort, Mumbai - 400 001 (Te;. 2077711-12,
2077786-87; Fax 2070113) Regional Offices are located at Amravati, Aurangabad,
Kolhapur, Mumbai Konkan, Nagpur, Nashik, Pune, Thane and Panaji (Goa).


(A Joint Venture of ICICI, IDBI, IFCI, SICOM, MIDC, MSSIDC & Banks)
MITCON was promoted by ICICI, IDBI, IFCI, SICOM, MIDC, MSSIDC & Banks as a
catalyst for industrial growth especially in the SMEs sector. Over a period of last 18years;
MITCON has grown to all India level with a strong team of 40 consultants. MITCON is
well networked with experts in various fields and updated of latest developments across the
globe. MITCONs reach is your advantage.
MITCON has a well-equipped infrastructure including state-of-the-art facilities, library,
computerized national as well as international memberships, tie-ups and accreditations:
Policy and Macro study services for policy-makers (Government of Maharashtra)
Region & Industry Studies
Long range Planning Reports
Industrial Area Planning
Pre-investment Services
Techno Economic Feasibility Reports(TEFR)
Detailed Project Reports(DPR)
Market Research
Financial tie-ups
Project Management Services
Energy Audits
Safety Audits
Environment Audits
Operation Audits
Quality Management Services
Marketing Research & Assistance
Transfer of Technology
Joint Ventures, Collaborations & Tie-ups
Energy & Projects Services (EPS)
Energy Information Business (EIB)
MITCON provide IT Solutions for Energy audits Efficiency & Conservation. We ensure
visible impact on Customer Business, Culture and Profitability.
The training programmes are conducted by MITCON under the following:

Prime Ministers Rozgar Yojana (PMRY) Dept. of Industries, Govt. of Maharashtra.

Swarnajayanti Gram Swarozgar Yojana (SGSY) Rural Development Dept., Govt. of
Swarna Jayanti Shahari Rozgar Yojana (SJSRY) Dept. of Urban Development, Govt.
of Maharashtra.
Entrepreneurship Development Programmes (EDP) for Dept. of Science & technology
(DST) Industrial Development Bank of India. Small Industries Development Bank of
India National Bank for Agriculture and Rural Development, Govt. of Maharashtra.
Skill Development through Science & Technology (STST) Dept. of Science &
Science & Technology Entrepreneurship Development Schemes (STEDS) - Dept. of
Science & Technology.
District Rural Industries Project (DRIP) NABARD
Providing consultancy for procuring ISO-9001 Certification
Publishing viable project profiles, reports for the entrepreneurs from various

Further details on MITCON can be obtained from:

Kubera Chambers Shivajinagar, Pune 411 005. Maharashtra
Tel : 020- 5533309, 5534322
Fax : 020- 5530305, 5533206.
E - mail : mitcon @ giaspn01. vsnl . net .in