INSTITUTIONAL FRAMEWORK FOR SSIs

Government has recognized the important role of entrepreneurs in the industrial development of the country, especially through the small scale industries (SSIs). employment generation foreign exchange earnings share in industrial output contribution to national income. The new entrepreneurs face a number of problems on account of inadequate infrastructure facilities and other support services. In order to accelerate the small industries development Government at the Central and State levels have set up a number of development agencies / institutions. The government of India offers a package of services (special facilities and incentives) through its specialized institutions and motivates entrepreneurs to take advantage of the various facilities and establish enterprises and flourish.

The institutions providing assistance to SSIs are:

All India (Central Government) Institutions o Small Scale Industries Board o Ministry of Small Scale Industries o SIDO o NSIC o SIDBI

o KVIC o National Institute of Small Industry Extension Training (NISIET), Hyderabad o Indian Institute for Entrepreneurship (IIE), Guwahati o National Institute for Entrepreneurship and Small Business Development (NIESBUD), N Delhi State Level Institutions o SDI o DICs (district level) o SSIDC o SISI o Commercial Banks o SFC o TCO o Industrial Estates Non- Government Institutions o ICSI o FICCI o ASCII o PHDCCI o CII o FIEO o LUB o FASH o WASME

ALL INDIA LEVEL INSTITUTIONS

SMALL SCALE INDUSTRIES BOARD (SSIB) The apex institution. Non-statutory, advisory body constituted by the GoI in 1954. SSIB is also known as central small industries board. Industries minister is chairman of SSIB. Functions: o Renders advice to the Government on all issues pertaining to the SSI sector. o Facilitates co-operation & linkage between various ministries & institutions. MINISTRY OF SMALL SCALE INDUSTRIES Set up in 1999. Office- Small Industries Development Organisation (SIDO) Function- Implements policies/ programmes/ schemes for providing infrastructure & support services to SSIs. Statutory bodies/other organisations likeo National Small Industries Corporation (NSIC) o Khadi and Village Industries Commission (KVIC) o Coir Board And three training instituteso National Institute for Entrepreneurship and Small Business Development (NIESBUD), New Delhi.

o National Institute of Small Industry Extension Training (NISIET), Hyderabad. o Indian Institute for Entrepreneurship (IIE) SMALL INDUSTRY DEVELOPMENT ORGANIZATION (SIDO) It is the Office of the Development Commissioner (Small Scale Industries). It is an apex body, established in 1954. It has over 60 offices and 21 autonomous bodies under its management, including Small Industries Service Institutes (SISIs), Regional Testing Center (RTC), Tool Rooms/Tool Design Institutes (TRs/TDI), Productcum-Process Development Centres (PPDCs), Sub-Contract Exchanges for Ancillary Development (SCXs- to register and create database). Functions: o Assists ministry in policy formulation, coordination, implementing and monitoring of policies and programmes for the promotion and development of SSIs. o Provides consultancy & Training services to strengthen competitive ability of SSIs. o Provides facilities for technology upgradation, modernisation, quality improvement & infrastructure. o Provides economic information services to SSIs. o Provides Marketing Assistance to SSIs. o Maintains a close liaison with the Central Ministries, Planning Commission, State Governments, Financial Institutions and other Organisations concerned with development of SSIs.

NATIONAL SMALL INDUSTRIES CORPORATION (NSIC) set up in 1955 in New Delhi. Functions: o Meet credit needs of SSI: NSIC facilitate sanctions of term loan and working capital credit limit of small enterprise from banks. o Raw Material Assistance: It facilitates availability of scarce raw material either through the domestic market or by importing. o Marketing Assistance: NSIC participates in government tenders on behalf of small enterprises to procure orders for them. Discount bills drawn by SSI for the supplies made to reputed and well established enterprise. Export Assistance: provide exposure to the products of SSEs in trade fairs, buyer and seller meets, pre-shipment credit facility, export incentives etc. o Information service: NSIC continuously gets updated with the latest specific information on business leads, technology and policy issues. o Performance and credit rating: NSIC gives credit rating by international agencies subsidized for SSIs up to 75% to get better credit terms from banks. o Develop Industrial Estates/ Technology Parks: NSIC set up TPs that provide built-up office space, high speed better transport & communication facilities through VSNL/SATCOM networks, and uninterrupted power supply, back-up power, modern business centre and other administrative support. Eg. NSIC-STP Complex at Okhla, New Delhi.

Khadi and Village Industries Commission (KVIC) The KVIC is a statutory body created by a Special Act of Parliament in April 1957. Planning, promotion, organisation and implementation of programmes for the development of khadi and other village industries in the rural areas in coordination with other agencies engaged in rural development. The aim was to preserve & promote handicraft, khadi, village and cottage industry by providing them financial assistance, marketing assistance etc. Coir Board Coir Board is a statutory body established by the Government of India under a legislation enacted by the Parliament namely Coir Industry Act 1953. Promotion and development of Coir Industry in India as a whole.

Three National Level Training Institutes which undertakes

operations ranging from training- national and international level, consultancy, research and education, to extension and information services. National Institute of Small Industry Extension Training (NISIET), Hyderabad. National Institute for Entrepreneurship and Small Business Development (NIESBUD), New Delhi.

 Indian Institute of Entrepreneurship (IIE), Guwahati- was established to act as a channel for entrepreneurship development with its focus on the North East. STATE LEVEL INSTITUTIONS Execute different promotional and developmental projects/schemes and provide a number of supporting incentives for development and promotion of small scale sector in their respective States. These are executed through: State Directorate of Industries (SDI) State Small Industries Development Corporations (SSIDCs) Small Industries Service Institute (SISI) Scheduled Commercial Banks (SCBs) State Financial Corporation (SFC) TCOs Industrial Estates State Directorate of Industries (SDIs) Under the constitution of India, promotion and development of SSIs is a State subject. Therefore, the primary responsibility for implementation of policies and programmes of assistance rests with the Directorate of Industries in each State. It acts under the overall guidance of SIDO and concerned Central institutions. It performs both regulatory and developmental functions. It functions through a network of District Industries Centres (DICs) under them to implement Central/State Level schemes. The main functions of Directorate of Industries are as follows:

a) b) c) units d) e) f) g) h) i) j)

Registration of small scale units Providing financial assistance Distributing scare and indigenous raw materials to industrial Granting essentiality certificates for import of raw material Establishing industrial estates and industrial co-operatives Developing industrial infrastructure Undertaking industrial surveys and collecting information Arranging concessions and incentives for industries. Overall administration of village and small scale industries. Maintaining liaison with other agencies for industrial

development.
District Industries Centres (DICs) The DICs programme was launched in 1978 for effective promotion of cottage and small scale industries widely dispersed in rural areas and small towns. These centers are the focal points providing all the services and support required by small scale and village entrepreneurs under one roof. These serves as an integrated administrative framework at the district level for industrial development. The main functions of DICs are as follows: a) It conducts surveys to know industrial potential of a district keeping in view the availability of raw material, human skills, infrastructure, demand, etc. b) c) d) e) f) It prepares an action plan for industrial development. Identification of new entrepreneurs. Selection of new projects. It guides and assists entrepreneurs in buying appropriate machinery It suggests appropriate marketing strategies to entrepreneurs.

and equipment and raw material.

g) h) i)

It maintains links with research and development institutions for It conducts artisans training programmes. It has been assigned operation responsibility for special schemes to

upgradation of technology, quality improvement, industrial training etc.

provide self-employment to educated unemployed youths.

State Small Industries Development Corporations (SSIDCs) Set up in various states under the companies Act 1956, as atate gov undertaking . Act as catalyst in Promoting & developing small, medium & large enterprises in their respective states. The main functions of SIDCs are as follows: a) Implementing seed capital scheme (risk capital) of IDBI in the state. b) Providing term finance. b) Underwriting and directly subscribing to shares/ debentures. c) Preparing feasibility studies, conducting market surveys. and motivating private entrepreneurs d) Motivating private entrepreneurs to set up their industrial ventures in the state.& Collaborating with them. e) To procure and distribute scarce raw materials. f) To supply machinery on hire purchase system. g) To provide assistance for marketing of the products of small-scale industries. h) To construct industrial estates/sheds, providing allied infrastructure facilities and their maintenance. i) provide management assistance to production units.

Small Industries Service Institutes (SISIs) One in each state. Provide consultancy & training to small entrepreneurs. Main functions are: Interface between central & state Govt. Render technical support services. Conduct E.D.P's. Initiate Promotional Programmes. Provide Trade and market information. Technical Consultancy Organisations (TCOs) are established by state govt with the primary objective to furnish Industrial and technical consultancy to the entrepreneurs. FUND-BASED INSTITUTIONS Of all the elements that go into a business, credit is perhaps the most crucial. SSIs need credit support not only for running the enterprise & operational requirements but also for diversification, modernisation/ upgradation of facilities, capacity expansion etc. In respect of SSIs, the problem of credit becomes all the more critical when ever any episodic event occurs such as a large order, rejection of consignment, inordinate delay in payment etc. In general, SSIs operate on tight budgets, often financed through owner's own contribution, loans from friends and relatives and some bank credit. GoI recognised the need for a focused credit policy for SSIs in the early days of promotion of SSIs and RBI has been instrumental in devising a multi-

stage approach/financial system for credit dispensation to different sectors of the economy, for example, agriculture, industry, exports, SSIs etc. Small Industries Development Bank of India (SIDBI) For ensuring larger flow of financial and non-financial assistance to the small scale sector, the GoI set up the Small Industries Development Bank of India (SIDBI) under Special Act of Parliament in 1989 as a wholly owned subsidiary of the IDBI. The SIDBI has taken over the outstanding portfolio of the IDBI relating to the small scale sector. The important functions of IDBI are as follows: To initiate steps for technological upgradation and modernization of existing units.To expand the channels for marketing the products of SSI sector in domestic and international markets. To promote employment oriented industries especially in semiurban areas to create more employment opportunities and thereby checking migration of people to urban areas. The financial assistance of SIDBI to the small scale sector is channelised through the two routes 1. Indirect assistance (Refinance) is available for, Setting up of new ventures, Availability of working capital, Marketing of SSI product, Expansion, Modernisation, Human resource development, Diversification of existing unit, througha) the existing credit delivery system, which consists of state financial corporations, state industrial development corporations, rural and commercial banks. b) to Primarily Lending Institutions (PLI) and discounts the bills. c) Provides financial support to NSIC

2. Direct assistance in form of loans are available for new ventures, diversification, technology upgradation, modernization and expansion of well run small scale enterprises. Assistance is also available for private sector. a) Small scale sector is eligible for maximum debt-equity ratio of 3:1 b) Foreign currency loan for import of equipment are also available to EOU. c) SIDBI also provide venture capital assistance to the entrepreneurs for their innovative ventures if they have a sound management team, long term competitive advantage and a potential for above average profitability leading to attractive return on investment. New Initiatives of SIDBI a) Two Subsidiaries viz. SIDBI Venture Capital Limited and SIDBI Trustee Company Limited formed to oversee Venture Capital. b) Technology Bureau for Small Enterprise formed to oversee Technology Transfer, Match making Services, Finance Syndication and facilitating Joint Ventures. c) SIDBI Foundation for Micro Credit has been launched to provide financial assistance to the poor and to meet emerging needs of the micro finance sector especially in rural areas. Commercial Banks (SCBs) Credit requirement of SSIs is of two types long term loans and working capital. Scheduled Commercial banks with their extensive

network of branches operating nationwide are primary channel for working capital requirement. Banks are required to compulsory ensure that defined percentage (currently 40%) of their overall lending is made to priority sectors as classified by RBI. These sectors include agriculture, small industries, export etc. With the liberalisation of the Indian economy, greater emphasis is placed on meeting the credit needs of SSIs. This was manifest through the following initiatives taken by RBIa) In order to ensure that credit is available to all segments of SSI sector, RBI has issued instructions that out of the funds normally available to SSI sector, 40% be given to units with investment in plant and machinery up to Rs.5 lakhs, 20% for units with investment between Rs.5 lakhs to Rs.25 lakhs and remaining 40% for other units. b) Public sector banks have been advised to operationalise more specialised SSI branches at centres where there is a potential for financing many SSI borrowers. c) 'Single Window Scheme' was extended to all districts to meet the financial requirements (both term loan & working capital) of SSIs. d) Laghu Udyami Credit Card (LUCC) Scheme was launched by Public Sector Banks for providing simplified & borrower friendly Credit facilities to SSI, tiny enterprises retail traders & artisans. e) Composite loan limit was enhanced to Rs.50 lakhs from Rs.25 lakhs. f) Limit on collateral free loans was increased to Rs.25 lakhs in deserving cases.

State Financial Corporations (SFCs) State Financial Corporation Act 1951 was brought into force to enable all the state governments (ex J&K) to set up SFCs as regional development banks. It provides following assistance to small & medium scale units: a) Underwriting the issues of stocks, shares b) Subscribing equity and debentures of industrial enterprises. c) Providing financial assistance to small and medium enterprises engaged in service sector. d) Provide working capital loans and meeting various short-term needs of their clients. e) Guaranteeing deferred payments due from any industrial concern (in purchase of capital goods)

ADDRESSES OF INSTITUTIONS
Development Commissioner (Small Scale Industries), A-Wing, 7thFloor, Nirman Bhavan, New Delhi 110011; Phone: 91-11-23022220, 23022221, 23022211, 23022209, and 23022202; Fax: 91-11-23068315, 23066726, and 23061068; Email: dcssi @ sidomail.net; URL: www.laghu-udyog.com SISI, Shaheed Captain Gaur Marg, Okhla, New Delhi 110020 The National Small Industries Corporation Ltd, NSIC Bhavan, Okhla Industrial Estate, New Delhi 110020 Phone: 011-26926275, 26926370; Fax: 011-26926820, and 26920907; Email: cp@ nsicindia.com, info@nsicidnia.com Commissioner, KVIC, 3, Irla Road, Vile Parle (West), Mumbai, PIN 400056. Maharashtra, India. Gram: Khadi Gram Phone: 022-26714320-25, 26716323, 26712324; Email: cvichq@ bom3.vsnl.net.in, dit@kvic.gov.in SIDBI, 10/10. Madan Mohan Malvia Marg, Lucknow 226001, India; Phone: 91-522-274517 to 21; Fax: 91-522-274506