Unit II

MSME
As per MSMED Act, 2006, the Micro, Small,&
Medium Enterprises are classified into two
classes:
Manufacturing enterprises: Defined in terms of
investment in Plant and Machinery.
Service enterprises: Defined in terms of
investment in equipment.
 Enterprises

Manufacturing Enterprises
(Ceiling on investment in Service Enterprises
Plant and Machinery)

25 Lakhs Micro 10 Lakhs

5 Crore Small 2 Crore

5 Crore
10 Crore Medium
Characteristics of MSMEs:
❖ Capital investment is less
❖ Number of people employed per unit is less.
❖ Generally they are family owned and organized as sole proprietorship
organizations.
❖ Employees are generally unorganized
❖ Fixed assets forms largest components of small units.
❖ Success depends on entrepreneurial abilities of the owners.
❖ Competition is very high among the owners.
❖ Incidents of infant mortality is very high.
❖ Financial discipline is very weak among the units
❖ Profit margins are very low
❖ Generally engage in the production of light consumer goods
❖ Entrepreneur’s savings contribute to the major portion of the investment
❖ High capacity to innovate export (Niche markets): India stands at 62 nd
position as per Global Innovation Index.
❖ Utilization of locally available human and material resources
Need of MSMEs:

Important to a labour abundant economy like

India and China.
Vibrant sectors of employment generation and
strong entrepreneurial base.
MSMEs act as a nursery for the development of
entrepreneurial talent.
Necessary to meet social objectives.
Adequate supply of goods and services that are
consumed by the mass at a competitive price.
MSMEs supply capital goods as inputs to large and
heavy industries. (45% of the manufacturing
output)
By fostering competitiveness, they will bring down
cost and prices of goods and services making it
affordable to the purchasing power of the
general masses.
Directly attack poverty by providing employment
opportunities.
Promote equitable income distribution on one
hand and diversified production of goods and
services.
Objectives of MSMEs:

Creation of greater employment opportunities

Reduction of regional imbalances by
encouraging set up of units in
underdeveloped regions.
Contributing utilization of skills at local level.
To meet consumer needs by supplying products
and services at reasonable prices.
Optimum utilization of skills at local level
To provide substitute for imported needs and
thus save foreign exchange.
To reduce disparities in income and wealth.
Attainment self-reliance.
To improve standard of living.
To create decentralized pattern of ownership.
To encourage growth of local entrepreneurship.
Advantages of Small Scale
Industries:
They do not require high investment.
To do not require high level technology as they are
labour intensive.
They can be set in shorter time and start
production activities in a quick span.
They can save foreign exchange needs of the
country by producing products which can
substitute to imports.
They can understand local customer needs well and
meet those needs.
They make use of local resources.
They create huge employment opportunities.
Help in the development of backward and rural
regions.
They help in meeting demand for many consumer
goods.
They help in reducing imbalance by ensuring
equitable distribution of national income.
They also contribute to promotion of exports.
They can cater to the needs of LSI.
They offer wide variety of products.
They help in bringing social equilibrium.
They encourage innovation.
Scope of MSME
List of items reserved exclusive for manufacture: Food and Allied Industries
Textile Products including Hosiery
Art Silk/Man-made fibre Hosiery
Wood and wood products
Paper products
Leather and leather products including footwear
Injection moulding thermo plastic products
Basic Dyes
Natural essential oils
Glass and Ceramics
Mathematical and survey instruments
Sports goods
Stationery items
Electrical Machines, Appliances and apparatus
Steps in setting up an MSME:

1. Decision to be self-employed
2. Selection of the product based on market
survey
3. Location of the enterprise
4. Land & Building
5. Preparation of the project report
6. Registration
7. Finance
8. Statutory Licenses/ clearances
9. Purchasing of Machinery
10. Recruitment of personnel
11. Installation of machinery
12. Power connection/ water supply
13. Procurement of raw materials
14. Production
15. Marketing
16. Repayment of loans
17. Profit generation
18. Avoiding sickness/ Modernization
Institutional support to
MSMEs
❖ The current Indian GDP is $ 1.847 trillion, out
of it, 26% is contributed by manufacturing
sector. Out of this, 40% is contributed by
MSMEs.
❖ Total no.of MSMEs in India: 30,011 lakhs.
➢ 95% of Micro industries
➢ 0.17% of Medium industries
➢ Rest by Small industries.
❖ 1: 60 lakhs issues in IPO
Since MSMEs are the second largest employer
of human resources after agriculture, the
development of MSME is important in India’s
national plans.
In order to protect, support and support small
enterprises, and also become self-supporting,
a number of protective and promotional
measures have been undertaken by the
government.
The promotional measures
cover:
✓ Industrial extension cover.
✓ Institutional support in respect of credit facilities
✓ Provision of developed sites for construction of
sheds
✓ Provision of training facilities (Incubation
centres)
✓ Supply of machinery on hire-purchase terms
✓ Assistance for domestic marketing as well as
exports
✓ Special incentives for setting up enterprises in
backward areas.
Supporting Agencies and
Institutional Support: Govt.of
Karnataka:
The following section discusses several schemes
introduced by Government of Karnataka for
encouraging MSMEs in the state:
1. TECSOK: Technical Consultancy Services
Organization of Karnataka
2. KIADB: Karnataka Industrial Areas
Development Board
3. KSSIDC: Karnataka Small Scale Industries
Development Corporation
4. KSFC: Karnataka State Finance Corporation
 TECSOK: Technical Consultancy
Services Organization of Karnataka
TECSOK is a multidisciplinary management consultancy
organization promoted by the Karnataka government. The
TECSOK consultancy is driven by top-notch professionals from
different disciplines; engineers, management experts,
economists and financial consultants, outsourcing expertise for
professional synergy.
Services:
❖ Locate specific identification of investment opportunities.
❖ Assistance in obtaining statutory and procedural
opportunities
❖ Feasibility studies and environment impact studies
❖ Market survey and research
❖ Project implementation and turn key
assistance
❖ Valuation of assets, man power planning &
budgetary control system
❖ Energy management & audit, corporate plan,
technology transfer.
❖ Diagnostic studies and rehabilitation of sick
industries.
❖ Consultancy for merger/ takeovers
❖ Infrastructure development project reports.
 Projects
✓ Karnataka Urban Development Project-Shelter
and Water Supply for World Bank assistance.(Project
Conceptualization & Monitoring)

✓ Entrepreneurship training for Project Sea Bird,

Karwar *.(Project Conceptualization & Monitoring)
✓ Feasibility study of Hassan Airport.(Viability Report for
Infrastructure Development)

✓ Market Intelligence Report on Packaged Tender

Coconut Water. (Market Survey & Assessment)
✓ Study of Socio-Economic Impact of Indo Danish
Fisheries Project, U.K District. (Evaluation of Impact Assessment)
Project Sea Bird, Karwar

Project Sea Bird is India’s Navy ‘s 3rd major base,

after Mumbai and Vishakapatnam. One of the
unique aspects of Project Sea Bird is its Rs 150
crore Shiplift and Ship Transfer System for
underwater maintenance of the ship’s hull.
Township and Amenities: Community Centre,
Shopping complex, Swimming Pool, Kendriya
Vidyalaya, Bank and Post Office, Secondary
and Primary Schools..etc.
Areas of specialization
➢ Electrical, Electronics, Telecommunication, Informatics and
Computer Application
➢ Pollution Control measures, Environment Management
Plan, and Environment Impact Assessment
➢ Metallurgical, Mechanical, Civil, and Infrastructure
Development
➢ Textiles, Sericulture, Garments
➢ Women Development, Women Entrepreneurship, Training
need assessment Design and Delivery of training programs,
Institution Building.
➢ Market Research, Data collection and Market Surveys
➢ Corporate plans, Techno-Economic studies, Management
consultancy
➢ International Trade, Business Development, Chartered
Engineering Services, Valuation Studies
Clients

Ministry of food Processing Industries, Govt. Of

India
Dept.of Scientific and Industrial Research
(DSIR), Govt.of India
Council for Advancement of People’s Action and
Rural Technology (CAPART), New Delhi
Jungle Lodges and Resorts Ltd., Bangalore
Heycarb, Colombo, Sri Lanka
IDBI, Mumbai
Karnataka Industrial Areas Development
Board (KIADB)- Land of Opportunities

A wholly owned infrastructure agency of

Government of Karnataka, set up under
Karnataka Industrial Areas Development Act
of 1996.
First government organization in Karnataka to
obtain ISO 9001
KIADB offers entrepreneurs, an unmatched
convenience of world-class infrastructure to
their new ventures and projects.
Aims and Objectives

1. Promote rapid and orderly development of

industries in the state.
2. Assist in implementation of policies of
government within purview of KIAD Act.
3. Facilitate for establishing infrastructure
projects
4. Function on corporate lines, with “No Profit-
No Loss” policy.
Infrastructure Facilities
1. Approach roads and internal roads with
storm water drains.
2. Power supply of street lighting.
3. Water Supply
4. Technical Training centres and R&D centres.
5. Common facilities.
6. Power Sub-stations.
7. Hotels and Hospitals
Clients

Infosys-Electronic City, Bengaluru and Mysore.

Toyota-Bidadi, Benagluru
Telco- Dharwad
Volvo-Hoskote
Coca-Cola-Bidadi,Bengaluru
Exxon Mobil, EPIP
ABB (Asia Brown Boveri)-Peenya
SIEMANS-Electronic City
KIADB – as a premier
Industrial Area Developer
Till date, KIADB has formed 95 industrial areas
all over the state, and acquired land for nearly
290 single unit complexes. Ex: Peenya,
Electronic City, Export Promotion Industrial
Park (EPIP) in Bangalore, Hebbal in Mysore.
Functional units of KIADB
Acquisition Wing: This section is an arm of
Government that identifies land for
development of industrial areas, for single unit
complexes, projects & schemes.
Engineering Wing: Prepares designs and
development plan taking into consideration
different parameters like: Infrastructure, and
Statutory & Regulatory requirements.
Allotment Wing: Requests of entrepreneurs in the
matters of leasing, issuance of absolute sale
deed, issuance of NOCs for financial assistance,
etc are attended by this section.
Accounts Wing: Controller of finance- this
department is engaged in drawing of
budgetary proposals, project financing &
planning, mobilization of finance for projects,
preparation of final accounts.
Administration Wing: Overall responsibility of
general administration, HRM, and other
administrative and logistic matters.
 KSSIDC: Karnataka Small Scale
Industries Development Corporation
Earlier known as Mysore Small Industries
Corporation was established on 29th April 1960.
Main Services of KSSIDC:
Establishment and Management of Industrial
Estates.
Procurement and distribution of raw materials.
Assistance towards marketing
Supply of machinery under Hire Purchase Scheme
Providing guidance to entrepreneurs
Providing Technical Library facilities.
Advantages in having an MSME unit
under KSSIDC Industrial Estate
1) KSSIDC Land is for Industrial Purpose. So NOC is
not required.
2) Entrepreneur gets a really planned and developed
area
3) Provides ready to occupy sheds and gowdowns.
4) KSSIDC estates are declared as notified area, they
are free from Local Taxes and Octroi
5) Provides Cluster benefits and Incubation centres
6) Provides ISI testing units to process quality
products.
7) Collects the instalment amount due from shed
allottess on annuity method.
 KSFC: Karnataka State Finance
Corporation
KSFC has entered into strategic alliance with
LIC of India. The corporation will help the
customers in identifying the tailor made
policies suitable for their future business and
investment.
It is one of the robust and professionally
managed State Financial Corporations.
 Activities eligible for
Financial Assistance
➢ MSME : Establishment/modernization/expansion/diversificaton.
➢ Establishment of commercial complexes, development of
residential layouts, group housing, industrial estates, software
parks, godowns, warehouses, flyovers, bridges, construction and
development of roads.
➢ Setting up of medium and star category standard hotels.
➢ Setting up of amusement parks, convention parks.
➢ Setting up of clinics, nursing homes, hospitals, and acquiring
electro-medical equipment.
➢ Construction and purchase of cinema halls, multiplexes, production
of short serials and feature films.
➢ Provision of loan for both fixed assets and working capital to tiny
and small-scale units.
➢ Corporate Loan Scheme: For existing successful
units who require urgent working capital.
➢ Assistance for rehabilitation of potentially viable sick
units.
➢ Assistance for qualified professionals for setting up
of business enterprises, private practices and
consultancy services.
➢ Assistance for Marketing Related Activities.
➢ Assistance to Small Road Transport Operators.
➢ Assistance for acquiring Private Vehicles.
➢ Acquisition of ISO 9000 Series certification.
➢ Office Automation.
➢ Assistance for setting up in-house training facilities.
National Schemes

The schemes introduced by Government of

India through its various institutions are
discussed below:
❖ MSME-DI : Micro Small Medium Enterprises-
District Industries
❖ NSIC : National Small Industries Corporation
❖ SIDBI : Small Industries Development Bank of
India
MSME-DI: Micro Small Medium
Enterprises-District Industries
Many countries have established a SME
Development Agency as the nodal agency to
coordinate and oversee all Government
interventions in respect of the development of
this sector. In the case of India, a separate Act,
governing promotion and development of
MSME,i.e. Micro Small Medium Enterprises
development Act,2006 is established. Office of
Development Commissioner (MSMEs) functions
as the nodal Development Agency under the
Ministry of Micro, Small and Medium
Enterprises.
It has over 70 offices and 21 autonomous bodies
under its management. These autonomous
bodies include Tool Rooms, Training Institutions
and Project-cum-Process Development Centres.
They provide facilities such as testing, tool
mending, training for entrepreneurship
development, preparation of project and product
profiles, technical and managerial consultancy,
assistance for exports, pollution and energy
audits etc.
Office of the Development Commissioner provides
economic information services and advises
Government in policy formulation for the
promotion and development of MSMEs.
Services of MSME-DI:
Advising the Government in policy formulation for the
promotion and development of MSMEs.
Providing techno-economic and managerial consultancy,
common facilities and extension of services to MSMEs.
Providing facilities for technology up gradation,
modernization, quality improvement and infrastructure.
Development Human Resources 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 the
development of MSMEs.
Evolving and coordinating Policies and Programmes for
development of MSMEs.
NSIC- National Small Industries
Corporation
❑ Government of India extends the following facilities to the
MSMEs registered with National Small Corporation under
its Single Point registration scheme :
❑ Issue of tender sets free of costs.
❑ Exemption from payments of Earnest Money.
❑ Waiver of security deposit up to the monetary limit for
which the unit is registered.
❑ Price preference up to 15% over the quotation of the large
scale units.
❑ International Programs with focus on enterprise to
enterprise linkages and aiming at internationalization of
Indian small enterprises.
Objectives of NSIC:

1. Stimulated and Support: To develop new

enterprises through financial, marketing and
technology support schemes.
2. Sustenance: Raw material supply, Bill
Financing, Human resource development.
3. Growth: Strategic alliances with institutions,
International programs, Technology
information dissemination and awareness
programs.
Activities of NSIC
✓ Hire purchase scheme
✓ Equipment leasing
✓ Raw Material Assistance
✓ Bill Financing
✓ Working Capital Finance
✓ Export Development Finance
✓ Marketing Assistance
✓ Consortia Approach
✓ Tender Marketing
✓ Government Stores Purchase Program and Single Point registration.
✓ Product Exports
✓ Project Exports
✓ Technology Expositions
✓ Exports to UN System
✓ Technical Services & Training
✓ KSIC- Training Services Centres
SIDBI- Small Industries
Development Bank of India
Origin & Objectives: SIDBI was established in
April 1990 under an Act of Indian Parliament
as the principal financial institution for :
Promotion
Financing
Development of industry in the small scale
sector
Co-ordinating the functions of other institutions
engaged in similar activities.
Schemes of SIDBI

❖ Direct finance schemes: SIDBI takes up financing

MSME projects on a selective basis. It also
supplies a range of products and services to
MSMEs.
❖ Refinance: SIDBI provides refinance to State
Level Finance Corporations/State Industrial
Development Corporations/ Banks etc., against
their loans granted to MSME units.
❖ International Finance: It is being offered in USD
and Euro currencies. SIDBI has a license to deal
in foreign exchange activities as a “restricted “
Authorized Dealer.
❖ Government Subsidy Schemes: Food
processing and Textile Industry
❖ Promotional activities: Rural Industries
Program (RIP), Promotional and
Development Activities, Management
Development Programs, Entrepreneurship
Development Programs (EDP).