You are on page 1of 12

DEFININATION OF SMALL SCALE INDUSTRY

Sometimes called a small business, a small-scale enterprise is a business that employs a small
number of workers and does not have a high volume of sales.
Such enterprises are generally privately owned and operated sole proprietorships, corporations
or partnerships. The legal definition of a small-scale enterprise varies by industry and country.
Defining small-scale industry is a difficult task because the definition of small-scale industry
varies from country to country and from one time to the another in the same country depending
upon the pattern and stage of development, government policy and administrative set up of the
particular country.
Rationale of Small Scale industries
The Fiscal Commission, Government of India, New Delhi, 1950, for the first time defined a smallscale industry as, one which is operated mainly with hired labour usually 10 to 50 hands.
The new Policy Initiatives in 1999-2000 defined small-scale industry as a unit engaged in
manufacturing, repairing, processing and preservation of goods having investment in plant and
machinery at an original cost not exceeding Rs. 100 lakhs.
For small-scale industries, the Planning Commission of India uses terms 'village an small-scale
industries'. These include modern small-scale industry and the traditional cottage and
household industry.
The U.S. Small Business Administration states that small-scale enterprises generally have fewer
than 500 employees within a 12-month period in non-manufacturing industries.
A company must consider any individual on its payroll as an employee. In Australia, however, a
small-scale enterprise is one that has fewer than 15 employees on payroll, as defined by the Fair
Work Act.
The Small Business Act for Europe states that small enterprises are those that have 250
employees or less.
Small-scale enterprises in Asian countries generally have 100 or fewer employees, while smallscale African enterprises hire 50 or fewer workers
Objective of Small Scale industries
Small Scale sector can stimulate economic activity and is entrusted with the responsibility of realizing
the following objectives:
To create more employment opportunities with less investment.
To remove economic backwardness of rural and less developed regions of the economy.

To reduce regional imbalance.


To mobilize and ensure optimum utilization of unexploited resources of the country.
To improve standard of living of people.
To ensure equitable distribution of income and wealth.
To solve unemployment problem. Small
To attain self reliance.
To adopt latest technology aimed at producing better quality products at lower costs.
scope of Small Scale industries
The scope for entrepreneurial activities in small business sector can broadly be classified into:
Industrial sector
Agricultural and allied industrial sector
Service sector
INDUSTRIAL SECTOR
Small scale industries occupy an important place in the industrial sector. This sector provides a
wider scope for the potential entrepreneur to develop his or her own industry.
There is a good scope and enormous potential to use technology based products in the smallscale sector. An entrepreneur can exploit a profitable venture in any of the industries reserved
for exclusive department under the small- scale sector.
AGRICULTURAL AND ALLIED INDUSTRIAL SECTOR
There is a vast cope for entrepreneurial activities in the agricultural sector. By establishing a link
between agriculture and allied industries, the rural entrepreneur can exploit opportunities in
areas of farming, agricultural processing and marketing.
The government has given priority to IRDP programme and ensured adequate flow of credit to
small and marginal farmers through re-financing facilities and by establishing national bank for
agriculture and small development.
Trading takes place in wholesaling and retailing. It may be in domestic or overseas market. The
retailer entrepreneur makes the goods available at the time and places the consumer wants
them. He may decide to start single line store, specialty shop, departmental store etc. trade in
overseas market is in wholesale.

AGRICULTURAL AND ALLIED INDUSTRIAL SECTOR


There is a vast cope for entrepreneurial activities in the agricultural sector. By establishing a link
between agriculture and allied industries, the rural entrepreneur can exploit opportunities in
areas of farming, agricultural processing and marketing.
The government has given priority to IRDP programme and ensured adequate flow of credit to
small and marginal farmers through re-financing facilities and by establishing national bank for
agriculture and small development.
Trading takes place in wholesaling and retailing. It may be in domestic or overseas market. The
retailer entrepreneur makes the goods available at the time and places the consumer wants
them. He may decide to start single line store, specialty shop, departmental store etc. trade in
overseas market is in wholesale.
Role of SME in Economic Development of India
The small-scale industries sector plays a vital role in the growth of the country. It contributes
almost 40% of the gross industrial value added in the Indian economy.
It has been estimated that a million Rs. of investment in fixed assets in the small scale sector
produces 4.62 million worth of goods or services with an approximate value addition of ten
percentage points.
The small-scale sector has grown rapidly over the years. The growth rates during the various
plan periods have been very impressive. The number of small-scale units has increased from an
estimated 0.87 million units in the year 1980-81 to over 3 million in the year 2000.
Employment
SSI Sector in India creates largest employment opportunities for the Indian populace, next only
to Agriculture. It has been estimated that 100,000 rupees of investment in fixed assets in the
small-scale sector generates employment for four persons.
Export
SSI Sector plays a major role in India's present export performance. 45%-50% of the Indian
Exports is contributed by SSI Sector. Direct exports from the SSI Sector account for nearly 35% of
total exports.
Export
Besides direct exports, it is estimated that small-scale industrial units contribute around 15% to
exports indirectly. This takes place through merchant exporters, trading houses and export
houses. They may also be in the form of export orders from large units or the production of
parts and components for use for finished exportable goods.

Opportunity
The opportunities in the small-scale sector are enormous due to the following factors:
Less Capital Intensive
Extensive Promotion & Support by Government
Reservation for Exclusive Manufacture by small scale sector
Project Profiles
Funding - Finance & Subsidies
Machinery Procurement
Raw Material Procurement
Manpower Training
Opportunity
The opportunities in the small-scale sector are enormous due to the following factors:
Technical & Managerial skills
Tooling & Testing support
Reservation for Exclusive Purchase by Government
Export Promotion
Growth in demand in the dom
REGISTER OF SME
There are two stages of registration-provincial and permanent (final). An enterprise is granted
provincial registration when it is at a pre-investment stage. After getting provincially registered,
an enterprise can apply for permanent registration just before launching its production facilities.
However, an enterprise that is already functioning need not have to apply for provincial
registration as it is eligible to apply for permanent registration.
Enterprises falling under the three categories (micro, small and medium) are further categorized
into two types of industries- manufacturing industry and service industry. The status of an
enterprise under the MSMED Act is determined according to the investment slab under which
an enterprise falls.

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 noted that small
industries 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'.
market size due to overall economic growth
Increasing Export Potential for Indian products
Procedure for Registration
Features of the present procedures are as follows:
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 on 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.
NOC from Pollution BOARD
FUNCTIONS OF THE BOARD :
Issue of No Objection Certificates from the environmental pollution point of view including
adequacy of the site from the environmental angle.
Issue of Consent under provisions of section 25/26 of the Water (Prevention and Control of
Pollution) Act, 1974.

Issue of Consent under provisions of section-21 of the Air (Prevention and Control of Pollution)
Act, 1981.
Assessment and collection of Water Cess, under provision of Water (Prevention and Control of
Pollution) Cess Act, 1977.
Identification and assessment of industrial and municipal pollution sources and control thereof.
Assessment of ambient air quality.
Assessment of quality of inland surface waters.
Mass awareness programmes.
Notification of effluent and emission standards.
Development of Pollution Control technologies.
Identification of isolated storages, onsite crisis management plans etc. under the Manufacture,
Storage and Import of Hazardous Chemicals Rules, 1989.
Implementation of Biomedical Waste Rules, 1998.
Issue of Authorization under the Hazardous Waste Management Rule, 1989.
Project Report Preparation
Establishing a small scale enterprise requires detailed project report so that promoters can
understand that in how many years the endowments can be forfeited.
Project Report for Small Scale Industry helps in identifying the product line and target market
of the sector, besides evaluating the level of skill and accuracy.
Hence, a small scale industry project report must contain 5-7 years evaluations in context of
revenues, expenditures, cash flows and outflows, balance sheet of legal responsibilities and
assets in hand, and reimbursement agendas of working capital and long-term loans, etc.
In this way the endorsers can make use of the estimations provided by the firm in the project
reports and compare it with the real performance and accordingly take remedial steps against
the negative disparities.
The promoters establishing their commercial enterprises without considering the project
reports are taking a big risk as they are equipped with any measuring units to assess the firm's
performance. In the competitive market ambiance, industrialist must not make a foray into a
new sector or set up a new business without preparing Project Reports.

Promotional ideas and their association to the nature of the industry

Contemporary perception of advertising

Promotional method

Service sectors

Demand variable of several kinds of products

Break even assessments

Kinds of values

Chief techniques of costing

Break even ideas of costing

Drawbacks of small scale industries

Fundamentals for initiating a small scale industry

Drawbacks

Reasons of company failure

Explanations for dealing with financial crunch

Management skills
Additional SIDO services
Fiscal Data
Technical support
Quality enhancement and analysis
Sectoral administration and guidance
Expansion programs: DIC and motivation in diffident areas
Technical advisory firm

Excise exclusion allowance


Commercial expansion strategies
Auxiliary development and sub- contracting exchanges
Upgrading plans
Government store procurement plan
Provision of goods for manufacturing
Fiscal aid
Conclusion
References
Bibliography
Project Planning and Scheduling using Networking Techniques of PERT / CPM
Planning, Scheduling (or organising) and Control are considered to be basic Managerial functions,
and CPM/PERT has been rightfully accorded due importance in the literature on Operations Research
and Quantitative Analysis.
Far more than the technical benefits, it was found that PERT/CPM provided a focus around
which managers could brain-storm and put their ideas together. It proved to be a great
communication medium by which thinkers and planners at one level could communicate their
ideas, their doubts and fears to another level. Most important, it became a useful tool for
evaluating the performance of individuals and teams.
Basically, CPM (Critical Path Method) and PERT (Programme Evaluation Review Technique) are
project manageEssentially, there are six steps which are common to both the techniques. The
procedure is listed below:
Draw the "Network" connecting all the activities. Each Activity should have unique event
numbers. Dummy arrows are used where required to avoid giving the same numbering to two
activities.
Assign time and/or cost estimates to each activity
Compute the longest time path through the network. This is called the critical path.
Use the Network to help plan, schedule, monitor and control the project.
The Key Concept used by CPM/PERT is that a small set of activities, which make up the longest
path through the activity network control the entire project. If these "critical" activities could be

identified and assigned to responsible persons, management resources could be optimally used
by concentrating on the few activities which determine the fate of the entire project.
Non-critical activities can be re-planned, rescheduled and resources for them can be reallocated
flexibly, without affecting the whole project.
ment techniques, which have been created out of the need of Western industrial and military
establishments to plan, schedule and control complex projects.
Essentially, there are six steps which are common to both the techniques. The procedure is listed
below:
Draw the "Network" connecting all the activities. Each Activity should have unique event
numbers. Dummy arrows are used where required to avoid giving the same numbering to two
activities.
Assign time and/or cost estimates to each activity
Compute the longest time path through the network. This is called the critical path.
Use the Network to help plan, schedule, monitor and control the project.
The Key Concept used by CPM/PERT is that a small set of activities, which make up the longest
path through the activity network control the entire project. If these "critical" activities could be
identified and assigned to responsible persons, management resources could be optimally used
by concentrating on the few activities which determine the fate of the entire project.
Non-critical activities can be re-planned, rescheduled and resources for them can be reallocated
flexibly, without affecting the whole project.
Five useful questions to ask when preparing an activity network are:
Is this a Start Activity?
Is this a Finish Activity?
What Activity Precedes this?
What Activity Follows this?
What Activity is Concurrent with this?
Some activities are serially linked. The second activity can begin only after the first activity is
completed. In certain cases, the activities are concurrent, because they are independent of each
other and can start simultaneously. This is especially the case in organisations which have
supervisory resources so that work can be delegated to various departments which will be
responsible for the activities and their completion as planned.

When work is delegated like this, the need for constant feedback and co-ordination becomes an
important senior management pre-occupation.
Methods of Project AppraisalProject appraisal methodologies are methods used to access a
proposed project's potential success and viability. These methods check the appropriateness
of a project considering things such as available funds and the economic climate. A good
project will service debt and maximize shareholders' wealth.
The recommended analytical methods for appraisal are generally discounted cash flow
techniques which take into account the time value of money. People generally prefer to
receive benefits as early as possible while paying costs as late as possible.
Costs and benefits occur at different points in the life of the project so the valuation of costs
and benefits must take into account the time at which they occur. This concept of time
preference is fundamental to proper appraisal and so it is necessary to calculate the present
values of all costs and benefits.
Net Present Value Method (NPV)
In the NPV method, the revenues and costs of a project are estimated and then are discounted
and compared with the initial investment. The preferred option is that with the highest
positive net present value. Projects with negative NPV values should be rejected because the
present value of the strDiscount rate
The discount rate is a concept related to the NPV method. The discount rate is used to convert
costs and benefits to present values to reflect the principle of time preference. The calculation
of the discount rate can be based on a number of approaches including, among others:
The social rate of time preference
The opportunity cost of capital
Weighted average method
Internal Rate of Return (IRR)
The IRR is the discount rate which, when applied to net revenues of a project sets them equal
to the initial investment. The preferred option is that with the IRR greatest in excess of a
specified rate of return. An IRR of 10% means that with a discount rate of 10%, the project
breaks even.
The IRR approach is usually associated with a hurdle cost of capital/discount rate, against
which the IRR is compared. The hurdle rate corresponds to the opportunity cost of capital. In
the case of public projects, the hurdle rate is the TDR. If the IRR exceeds the hurdle rate, the
project is accepted.

eam of benefits is insufficient to recover the cost of the project


Benefit / Cost ratio (BCR)
The BCR is the discounted net revenues divided by the initial investment. The preferred option
is that with the ratio greatest in excess of 1. In any event, a project with a benefit cost ratio of
less than one should generally not proceed. The advantage of this method is its simplicity.
Payback and Discounted payback
The payback period is commonly used as an investment appraisal technique in the private
sector and measures the length of time that it takes to recover the initial investment.
However this method presents obvious drawbacks which prevent the ranking of projects. The
method takes no account of the time value of money and neither does it take account of the
earnings after the initial investment is recouped.
A variant of the payback method is the discounted payback period. The discounted payback
period is the amount of time that it takes to cover the cost of a project, by adding the net
positive discounted cashflows arising from the project. It should never be the sole appraisal
method used to assess a project but is a useful performance indicator to contextualise the
projects anticipated performance.
Sensitivity analysis
Sensitivity analysis is the process of establishing the outcomes of the cost benefit analysis
which is sensitive to the assumed values used in the analysis. This form of analysis should also
be part of the appraisal for large projects. If an option is very sensitive to variations in a
particular variable (e.g. passenger demand), then it should probably not be undertaken. If the
relative merits of options change with the assumed values of variables, those values should be
examined to see whether they can be made more reliable.
Scenario analysis
The scenario analysis technique is related to sensitivity analysis. Whereas the sensitivity
analysis is based on a variable by variable approach, scenario analysis recognises that the
various factors impacting upon the stream of costs and benefits are inter-independent.
Switching values
This process of substituting new values on a variable-by-variable basis can be referred to as
the calculation of switching values. These can provide interesting insights such as what
change(s) would make the NPV equal zero or alternatively, by how much must costs or
benefits fall or rise, respectively, in order to make a project worthwhile.