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ENTREPRENEURSHIP MANAGEMENT

Mrs. Juilee Katkar

Small scale industries

Small scale industries are the backbone of Indian industry

Crucial role in the economic development by value addition,


employment generation, equitable distribution of national income, regional dispersion of industries, mobilisation of capital

and entrepreneurial skills and contribution to export earnings

Contribution next only to agriculture as dynamic and vibrant sector of the economy

Micro, Small, and medium Enterprise development Act, 2006

Small industries comprises tiny, cottage, traditional, village and

modern enterprise

Fragmented across various ministries for the purpose of development and concessions

Handloom, powerloom, handicrafts,khadi suffered neglect compared


to manufacturing and service based enterprise

To correct discrepancies, MSMED Act was acted on June 16, 2006

First ever legal framework recognizing the concept of enterprises and


defining and integrating three tiers; micro, small and medium

Micro, Small, and medium Enterprises

Provide livelihood

Check rural and urban migration


Generates export earnings Touch upon the lives of the remotest and the most marginalised people MSMEs often act as ancillary industries for the large scale industries providing them with the raw material, vital components and linkages

Manufacturing of engineering and automobile products due to their


expertise in supplying assemblies and subassemblies, components etc

Concept and definition of SSI

Small scale industries

Is broadly based on the original value of plant and machinery


Any enterprise with the capital investment of Rs. 1.5 cr. To facilitate technology upgradation and enhance competitiveness ,

the investment limit is increased to Rs. 5 cr in respect of 71 hi-tech


export oriented items in the hosiery, knitwear, hand tool, drug pharmaceuticals, stationery and goods sector

Also includes small scale service and small scale business enterprises

Concept and definition of SSI

Tiny enterprise

Investment limit is Rs. 25 lacs, irrespective of the location of the unit (Prior to this it was
industries situated in villages with a population of less than 5000 and should also cover cottage industries in rural and semi urban area)

Export oriented Unit

Investment in fixed assets in plant and machinery whether held on ownership terms, or on lease or on hire-purchase does not exceed Rs. 100 lacs and has an obligation to export 30 percent of production

Women Enterprises

Small scale units where one or more women entrepreneurs have not less than 51% financial holding

Concept and definition of SSI

Artisans, village and cottage


Defined as Artisans irrespective of the location


Small industries activities (viz; manufacturing, processing preservation and servicing) in villages and small towns with a population not exceeding 50,000 involving utilization of locally available resources and or human

skills ( where individual credit requirements do not exceed Rs. 50,000

Small scale service and business( industry related) enterprises

Investment in fixed assets excluding land and building upto Rs. 10 lakhs irrespective of locations as on 31st March 2001 Eg: advertising agencies, beauty parlours, documentary filming, creches

Differences between Micro, small and medium enterprises

Micro enterprises
Generally artisan based , located mostly in rural and semi urban areas

Small and medium enterprises


Use power driven machines and possess some technological sophistication

Use local skills and resources and sell their products locally

Markets are relatively wide and quite

often include export market

Lower level investment in machinery Provide largely part time employment Mostly involved in activities such as handloom, khadi, handicrafts, sericulture, bidi making, embroidery, knitting, wood carving

Located close to or in urban areas including large industrial centres

Products include hosiery goods, ready

made garments, motor parts,


electronics, sports goods, rubber goods and engineering goods

Cottage V/s Small scale industries

Cottage Industries

Small scale industries

Produce mainly traditional goods Use pre dominantly manual labour Technically backward

Produce a variety of non-traditional products such as electrical, engineering goods, chemical products

Derive raw materials from local sources

Use of power and modern techniques Use modern methods of production and are technically advanced

Household enterprises employing

very little hired labour

Raw materials from a wide marketing area

Cater to the needs of the local market

Skilled and non-skilled labour


Cater to the needs of national as well as international market

Ancillary V/s Small scale industries

Ancillary Industries

Small scale industries

Investment in plant and machinery can go upto Rs. 1 Cr It supplies 50% of the production to

Investment in fixed assets in plant and machinery not exceeding Rs. 1.5 Cr, 5 Cr in respect of 71 hi-tech export oriented items in the hosiery, knitwear, hand tool, drug pharmaceuticals, stationery and goods sector

one or more parent units

Engaged in the manufacture of parts, components, sub assemblies toolings and render services to the parent units

No such restriction placed Produce mainly consumer goods such as watches, transistors

for production purposes

Not controlled by any large unit

Is not a subsidiary to any large unit

Small scale units V/s Large scale units

Small scale units


Large scale Units


Small fixed investment Labour intensive Personal character Local area operation Limited scope of expansion Unorganised labour Small uneconomic size Proprietorship and partnership Decentralized location Independent management

Large investment Capital intensive Impersonal Wider area Economies of scale & great scope for expansion Labour organised Large economic size Joint stock company Centralized location Divorce between ownership and management

Relationship between small and large units

Supplementary

Fills in the gap between large scale production

Competitive

Industries such as tiles, perishable foods, bakery products require less engineering skills and more craftsmanship can co exist and compete with large scale sector

Complementary

Small units produce intermediate products for large units

Enjoy protected market under the cover of the large scale unit
Eg: Plastic dust cover for video recorders, electronic passive components

Relationship between small and large units

Ancillarisation

Many small firms provide small components, parts, accessories to large firms Eg: Tata motors, Bajaj

Jobbing

Large enterprises provide components and materials to small scale units. Small units process these materials into finished parts or sub-assemblies

Merchandising

Small scale units produce products which are then marketed by large companies Eg: Soaps, refrigerators etc

Servicing

Small firms are assigned the job of repairing and maintenance of products manufactured by large scale units Eg: Acs , personal computers, etc

Characterstics of small scale industries

Small capital investment

Cottage industries, artisans can start business with very less capital

Generates employment

Labour intensive and hence generate more employment Helps solve underemployment issues in an under developed economy like India

Personal contact

Personal supervision of all activities such as production, purhase etc is done by the entrepreneur himself

Location

Generally located in rural and semi urban areas Local raw material, labour and finance should be readily available

Characterstics of small scale industries

Exploitation of human resources

Child and women are generally exploited

Entrepreneurial growth

Is a beehive for entrepreneurial growth

Technology

Less use of technology, labour intensive Uses indigenous technology

Dispersal of manufacturing activity

No scope of manufacturing activity in large cities

Characterstics of small scale industries


Poor organisation and management

No delegation of authority Management is poor and negligible

Ownership

Organisations are mostly privately owned and organised as sole proprietorship

Family forms the largest component of the small scale force

Objectives of small scale industries


To create vast employment opportunities for the people

To effect decentralisation of industries by creating industrial estates


Redistribution of economic power and income To raise the standard of living To facilitate mobilisation of resources for capital and skill To utilise the available resources Promoting industrial development of backward areas To bring about an integration of development of rural economy and large scale industry To tap latent resources like entrepreneurial ability, hoarded wealth etc

Significance of small scale industries


Accounts for 40% of the total value of industrial production

Contributes directly about 33% of the aggregate exports


Labour intensive Equitable distribution of income and wealth Production of small sector contributes in large proportion of the national products

Dispersal of manufacturing activities results in balanced regional growth


Linkages creates opportunity for service industry to prosper due to large scale units Own identity co-exist with the large scale units Training ground for local entrepreneur Mobilisation of service offers an opportunity for investment for people living in under developed economy

Significance of small scale industries


Facilitation of capital formation

Export potential

Nearly 20% of the total value of export is from small scale industry Eg: leather, ready made cotton garment, pharmaceuticals etc

Innovative and productive Products can earn a substantial foreign exchange Favorable capital output ratio Meet substantial part of increasing demand for consumer goods including human consumption goods Requires only a short gestation period

Incentives available to SSI units in backward rural industries project area

Allotment of factory or factory sheds in industrial estates/ areas and industrially

developed colonies on easy terms

An outright subsidy of 15% on the fixed capital investment up to a maximum of Rs 15 lakhs is admissible to new units being set up in backward areas The central/ state government directly or through its subsidiary concern- the state

Industrial Development Corporation-underwrites or participates in preference


shares of public limited companies on a selective basis for setting up medium and large industrial units. State government also considers cases for setting up of joint ventures with the private sector

Incentives available to SSI units in backward rural industries project area

Loans and advances to SSI units under the State Aid to Industries

Act and Rules framed there under for the construction of factory
buildings, purchase of machinery and equipment and working capital on easy terms

The state Financial Corporations grant loans of acquisition of fixed asset up to Rs. 30 lacs in the case of limited companies and registered co-operative societies and up to Rs. 15 lacs for other at liberalised margins and rate of interest and this is done over a longer span of repayment and moratorium period

Incentives available to SSI units in backward rural industries project area

New units are exempted from property tax for a period of 5 years

New units established in the districts are completely exempted from the
payment of electricity duly up to a period of 7 years Industrial units set up within the municipal limits are exempted form octroi on capital equipment and building materials subject to a

maximum period of 3 years from the date of regular registration

State government have set up independent testing laboratories on behalf of the Indian Standard Institution, the export inspection Council, the department of Defense, Govt of India and various other govt organizations for making industrial products of good quality

Incentives available to SSI units in backward rural industries project area

In order to provide some important and sophisticated common facilities, a

network of industrial development centres, heat treatment centres and


common facility workshops have been set up in the state to equip the SSI Units with modern techniques and process of manufacturing

Provision of essential, controlled raw material to the SSI units on priority and

at very liberal terms

Interest free loans in lieu of inter-state sales tax paid / payable by SSI units are available up to 7 years , provided the loan in particular year will not exceed 8% of the capital investment

Special incentives in the form of transport subsidy to concentrate partially of


the higher transport cost of established industries in hilly backward areas is also being provided by the Union government

Concessions to SSI

Reservation of products for small scale sector


836 items reserved for small scale sector List available at the District Industries centre

Purchase of reserved products from SSI


400 items to be only purchased from small scale units

75 % things the government needs is purchased from small scale sector

Price preference to SSI products

15% price preference to assist small scale sector in marketing their products

Assistance for marketing

Govt institutes help the small scale industries in selling their products. Physically help is given to DGS&D , NSIC, SSIDC, Directorate of Industries, Defence railway and Central Govt purchase from SSI. Industries need to register their names with these institutions

Concessions to SSI- contd

National and International Exhibitions


Small scale sector is given concession in rent for space in exhibition In Maharashtra , concessions are given by SSIDC, NSSIC

Other schemes for Assistance in Marketing

Tender forms are sent free of cost by DGS&D, Directorate of Industries to registered small scale units

Concessions in security deposit Priority is given to products manufactured by small scale sector

Orientation courses for entrepreneurs


Training is provided by the State and the Central government Has started many institutes for giving guidance in respect of technology and orientation courses for entrepreneurs

Concessions to SSI- contd

Financial assistance

Gives loans to small scale sector at lower rate of interest Govt gives assistance by way of seed money and loans at lower rate of interest State government also grants subsidy to this sector under its corporation schemes of incentives

Grants lands on concessional rental basis or on lease to the SSIs

Place for small scale Industry

Industrial societies sponsored by local industrial estates are encouraged so as to enable

the SSI units to commence their units at earlier stage

At 142 places, SSI estates are established with the help of MIDC in the state of Maharashtra

Concessions to SSI- contd

Supply of electricity

MIDC shares part of expenditure on electricity for the units which require less than 100 H.P load for their industry who get the electricity at cheaper state

Concessions in Central Excise Duty


This duty is paid by industries for whom it is made applicable by the government Small scale industries are exempted from paying any excise duty till their sale does not exceed Rs. 30 lacs

Import of raw material and machinery

Special concessions are granted to SSI units for import of raw material and machineries required for the industry

Concessions to SSI- contd

Export of products of SSI Units

Various concessions for export of their products

Concessions in paying Income tax to SSI

Concessions in paying income tax, concessions in depreciation, capital investment in

their profits

Concessions in Stamp duty

On availing a loan , small scale units are required to mortgage their immovable

properties with such institutions

Govt of Maharashtra has granted concessions for stamp duty on Mortgage deeds to be executed for that purpose

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