Prepared By: Sitesh Sir

Unit-1

Part:1
Location of Enterprise

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Location
• Location is an enterprise setup for
uninterrupted and least resisted operations
which contributes to smooth and efficient
functioning of an enterprise.

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Need for Enterprise Location

• New enterprise
• Expansion, decentralization and diversification
• Renewal of lease not possible
• Undesirable location is to be abandoned
• Observed (shifting market, depletion of raw materials,
changes in transportation facilities, new processes
requiring different location)
• New branch or branches are to be opened for
increasing the volume of production or distribution .
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Importance of Enterprise location

• Operate smoothly & Efficiently
• Minimum cost of operation/production
• Cost of transportation
• Depends success or failure of the plant
• If wrong location selected, leads to wastage of
money, efforts and talent of the promoters
• Wrong selection - Very high loss (buildings,
machinery and installation)
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Steps in Enterprise Location

1) Selection of the region
2) Selection of the locality
3) Section of the exact site
4) Selection of an optimum site

Note: the site is sometimes determined by the

Government’s licensing regulations and not by the
choice of the promoters. (hazardous chemical
plants, Nuclear Reactor plants, Power Plants)
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Factors affecting LocationPrepared
of By: Sitesh Sir
Enterprise

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Selecting General Area

• Availability of raw materials
• Availability of skilled and unskilled labour
• Nearness to the source of power
• Nearness to market
• Availability of transport facility
• Nuisance problems
• Suitability of the climate
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Selecting General Area (Cont.…)

• Topography
• Soil conditions
• Water supply
• Waste disposal
• Availability of homes for workers
• Local legislation
• Living condition for labour
• Community attitude
• Tax concessions
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Selection of Economic Site

• Model Given by “D.Kimball”
A & B : Sources of Supply
A C: Market Place
D: economic location

B C
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Unit-1

Part:2
Starting a
Small Scale Industry (SSI)

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Starting a Small Scale Industry

• SSI (Small Scale Industries) are basically classified in two
categories,
– Manufacturing
– Rendering of Services
• In 2006, the Micro Small & Medium Enterprise (MSME)
Development Act was introduced.
• In this act, the definitions and nomenclature of various
segments of Small scale industries have been revised.
• The concept of “Enterprises” was introduced as against of
“Industries” used in earlier years.
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MSME Classification
(As per MSME Act 2006)
• MSME Classification (Revised)

Revised Classification applicable w.e.f 1st July 2020

Composite Criteria: Investment in Plant & Machinery/equipment and Annual Turnover

Classification Micro Small Medium

Not more than Not more than Not more than

Manufacturing Investment
Rs.1 crore Rs.10 crore Rs.50 crore
Enterprises and
Enterprises
rendering not more than not more than
Annual not more than
Services Rs. 5 crore Rs. 250 crore
Turnover Rs. 50 crore

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Objectives of SSI
• locally available raw materials.
• To meet local demands
• Utilize locally available skills and technologies
• To contribute to balanced regional development
• To contribute to exports
• To adopt modern techniques
• To integrate with large sector
• To create workforce of self employed professionals
• To bring about the socio-economic change
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Steps for setting up a Small Scale
Industry (from P.N.Reddy Book)
• Selection of the product
• Location of the enterprise
• Preparation of the project report
• Registration with authorities
• Arranging term finance
• Statutory licenses/clearances
• Obtaining land and building
• Procurement of machinery
• Arranging working capital
• Recruitment of staff
• Installation of machinery
• Procurement of raw materials
• Power connection/water supply
• Production
• Marketing/selling
• Repayment of loans
• Profit generation
• Avoiding sickness
• Modernization and upgradationDRB &of
BCPtechnology
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From:
Vasant
Desai Book
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Selection of Product
• List of Reserved Items for MSME
– http://laghu-
udyog.gov.in/publications/reserveditems/resvex.htm
(As on 13 March, 2007.)
– Items De-reserved:
https://dcmsme.gov.in/publications/reserveditems/re
svex.htm
• Items reserved for Handloom sector
– http://laghu-
udyog.gov.in/publications/reserveditems/itemhandi.h
tm

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Selection of product (contd..)

• List of items not permitted for MSME
– https://dcmsme.gov.in/publications/reserveditem
s/reservitems.html#SchII
• List of licensed products
– The industries given in the first schedule of the
industries act, 1951 require to be licensed
irrespective of the capital investment.
• Activities not covered in MSME
– https://taxguru.in/corporate-law/activities-codes-
msmed-act-udyog-aadhaar-registration.html
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Infrastructure
• Director of Industries (industries Commissioner) and/or
MSME-DI (MSME Development Institute) (formerly
known as SISI (Small industries Service Institutes) can
be approached.
• DI and MSME-DI are available for each of the states of
India
• They help in providing factory space in an industrial
estate, or develop the factory site, power etc.
• After the initial clearance from the DI, the Municipality
or Panchayat issues a NOC.
– https://www.suratmunicipal.gov.in/FAQs/HowDoISE
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Machinery
• Necessary machinery can be acquired from
NSIC (national small industries corporation)
under a hire-purchase scheme.
• Update:
– Machinery help and assistance can be obtained
from various “Technology Centers” (formerly
known as Tool rooms)
– http://www.dcmsme.gov.in/Technology_Centres.h
tm
– https://igtrahd.com/
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Raw materials
• Raw materials required by MSME may broadly classified as
under
– Raw material components & Spares
– Non-ferrous materials (Aluminum, copper, lead, zinc, Tin)
– Iron & Steel
– Chemicals
(Both Indigenous and imported)
• NSIC (National Small Industries Corporation) provides
assistance to MSME under various schemes, viz.,
– Raw material procurement scheme.
– Raw material assistance scheme
– Raw material distribution scheme
• http://www.msmemart.com/ (formerly known as
msmeshopping.com)
• http://www.msmediahmedabad.gov.in/services.html
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Marketing
• The NSIC (National Small Industries Corporation) provides
assistance in marketing through “Procurement and Marketing
Support Scheme”.
– https://www.nsic.co.in/Schemes/ProcurementMarketingSuppor
t.aspx
• To avail the support of this scheme and any other scheme, the
enterprise has to be registered on the web portal of NSIC.
• Also the beneficiary MSME should have a valid EM-II, UAM, or
Udyam Registration number.
• http://www.msmemart.com/ (formerly known as
msmeshopping.com)
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Marketing (Contd….)
• Marketing Intelligence Cell
– A web portal
– acquires and analyzes the information to understand the both
existing and potential customers , determine the current and
future needs and preferences, attitudes and behavior of the
market.
– Provides assistance to MSMEs seeking business collaboration and
co-production opportunities, joint ventures, exporters and
importers, and those looking for technology transfer.
– https://www.nsic.co.in/Schemes/Marketing-Intelligence.aspx
– http://www.msmedatabank.com/
– http://www.msmeresearch.com/
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Finance
• The areas where finance would be needed, after the MSME fixes the land
accommodation, are:
– Purchase and installation of machinery
– Procurement of raw materials and components and the manufacture of
products
– Working funds
– Availability of funds until the realization of sales.
• Need for finance can be classified into following types:
http://www.dcmsme.gov.in/howtosetup/finance.htm
– Long and medium term loans
– Short term or working capital requirements
– Risk Capital
– Seed Capital/Marginal Money
– Bridge loans DRB & BCP BBA College,Surat 25
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Finance (Contd…)
• Financial assistance in India for MSME units is available from a variety of
institutions.
• Commercial/Regional Rural/Co-operative Banks.
• SIDBI: Small Industries Development Bank of India (refinance and
direct lending)
• SFCs/SIDCs: State Financial Corporations (e.g. Delhi Financial
Corporation)/State Industrial Development Corporations.
• Long and medium term loans are provided by SFCs, SIDBI and SIDCs.
Banks also finance term loans. This type of financing is needed to fund
purchase of land, construction of factory building/shed and for purchase
of machinery and equipment.
• The short-term loans are required for working capital requirements,
which fund the purchase of raw materials and consumables, payment of
wages and other immediate manufacturing and administrative expenses.
Such loans are generally available from commercial banks.
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