Chapter

Small Scale Industries

Small Scale Industries

Historically, villages in India have been self-reliant. So much so, that they are able to fulfil all their requirements. It is probably the reason that in the last 2500 years, many dynasties and rulers changed but the economic and cultural environment of the villages remains the same till today. Every village used to have its own cottage and small industry which fulfilled the requirement of the villages. Not only this, products from small scale industries were also exported all over world specifically to South Asia, Arab, and Central Asia. Indian artisans had developed distinct competencies in the fields of iron, zinc, textile and glass. But the industrial revolution and later the advent of the Brtish, led to the decline of Indian industry.

Definition of Small Scale and Cottage Enterprises

Conventional definition of cottage and handicraft industries means those that employ traditional labour-intensive methods to produce traditional products largely in village households. They employ none or almost a few hired hands. The handloom textile industry is an example. The Fiscal Commission in 1950 stated that: "A cottage industry is thus one which is carried on

wholly or primarily with the help of members of the family either as a whole or a part-time occupation. A small-scale industry, on the other hand is one which is operated mainly with hired labour, usually 10 to 50 hands."

Cont.

Objectives The main objectives of the development of village and small industries have been the following: 1. Assist in the growth and widespread dispersal of industries. 2. Increase income level of artisans. 3. Create new avenues of employment. 4. To use regional resources. 5. Transfer economic power to the grassroot level. 6. Promote balanced regional growth. 7. Preserve craftsmanship and art heritage of the country. 8. Develop entrepreneurial skills at grassroots level. 9. Check concentration of wealth.

Role/Importance of Cottage and Small Scale Industries in the Indian Economy

Small scale and cottage industries have an important role in Indias industrial and economic development. As in 2001-2002 the output of SSI was Rs 6,90,316 crores with the number of units having increased to 34 lakhs in 2001-2002 from 25 in 1994-95. Exports by SSI at current prices have been increased to Rs. 69,797 crore in 2000-01 from 29,068 crore in 1994-95. SSIs played a significant role in Indian economy: 1. Production 2. Employment generation 3. Exports 4. Equitable Distribution of Income 5. Regional Dispersal of Industries 6. Lesser Industrial Disputes

Small Scale and Village Industries in the Plans

Immediately after independence, the government took steps to promote small-scale industries. In 1947,the Cottage Industries Board was set up, which was further split into three boards during First Five year plan--All India Khadi and Village Industries Board, All India Handloom Board, All India Handicraft Board. Besides these, three more boards were set up: Small-Scale Industries Board, Coir Board, and the Central Silk Board. Thus by the end of the First five year Plan, there were a total of six boards catering to small scale industries.

New Small Enterprise Policy 1991

The government announced a policy package for small, tiny and village industries in August 1991 with the primary objective of imparting more vitality and growth impetus to this sector. The main features of this policy are:

1. Tiny Enterprises 2. Financial Support Measures (SIDBI, SSIDC) 3. Infrastructural Facilities 4. Marketing and Exports (NSIC) 5. Modernization, Technological and Quality Upgradation (education & training) 6. Promotion of Entrepreneurship (EDP) 7. Village Industries - Handloom Sector

Comprehensive Policy Package

1. 2. 3. Raising the exemption for excise duty limit from Rs. 50 Lakh to Rs. 1 crore to improve the competitiveness of small-scale sector. Providing credit linked capital subsidy of 12 % against loans for technology upgradation. Conducting of the third census of small scale industries by the Ministry of Small Scale Industries and Agro and Rural Industries after a gap of 12 years. Limit for investing in industry related service and business enterprises has been raised to 10 Lakhs from 5 lakhs. Continuation of the ongoing scheme of granting Rs. 75,000 to each small scale enterprise for obtaining ISO 9000 certification till the end of the Tenth Plan. SSI association encouraged to develop and operate testing laboratories. Limit of composite loans has been raised from Rs. 10 lakh to Rs. 25 lakh. Under the Prime Minister's Rozgar Yogana (PMRY) family income eligibility Cont. has been raised to Rs. 40,000/ per annum from Rs. 24,000/-.

4. 5.

6. 7. 8.

In pursuance of this policy package, the government has undertaken certain steps that can be categorised into five categories: 1. Scheme to address the problem of collaterals and encourage technology upgradation 2. 3. 4. 5. Enhancing the Excise Exemption Limit Improving Credit Dereservation of readymade garments Enhancement of Investment Ceiling

Cont.

Policies and Programmes for Promoting SSI

The government has introduced various schemes and incentives for the promotion of SSI. Some of them are: 1. Reservation of Items for SSI: The government has reserved more than 350 items to be purchased by it only through SSI or the handicraft industry. Some of the reserved items are: Food and Beverage: Pickles and chutneys, bread, pastry, hard boiled sugar candy, rapeseed oil, mustard oil, sesame oil, ground nut oil, ground and processed spices other than spice oil and oleo resin spices. Other Items: Decorative papers, paper bags, paper board cartons (unlaminated), paper cups/ plates, paper envelopes, corrugated fibre board containers, paper napkins including facial tissue napkins, teleprinter rolls, stencil paper, slitting of ordinary paper into rolls. 2. Subcontracting Exchanges for Ancillary Development: Under the programme of ancillary development, sub-contracting exchanges have been set up. Cont.

Subcontracting Exchange The main objectives of these sub-contracting Exchanges are: 1. To register capacities of manufacturing or services available with the small scale and tiny units. 2. To obtain details of items required regularly by other large units, which can be manufactured in the small scale sector. 3. To arrange Buyer-Seller Meets/Vendor Development Programmes so as to display the items/products required by large undertakings/organisations and to discuss the specifications and other requirements with the small scale unit participants in such meets. 4. Vendor Development Programmes 5. Ancillatisation 6. Government Purchase and Price Preference Policy 7. Incentives in Operations 8. Subsidies 9. Assistance Programme

Institutional Infrastructure for SSI

The government has taken various measures to provide Institutional Infrastructure for SSI. Central Level Institutions 1. Small Industries Development Organisation (SIDO) 2. National Small Industries Corporation (NSIC) 3. National Institute of Small Industry Extension Training (NISIET) 4. National Institute for Entrepreneurship and Small Business Development (NIESBUD) 5. National Research Development Corporation (NRDC) 6. Small Industrial Development Bank of India Institutions in the States At the state level there is the Directorate of Industries, The Small Industries Development Corporation (SIDCs), The State Financial Corporation, State Industrial Investment Corporations, etc., to look after and promote small scale Cont. industrial activities in the state.

District Level Centres District Industries centres were established in almost all the districts of the country to support village and small scale industries under one roof. Marketing Marketing their product is a major area of concern for small scale and village industries. There is a combination of agencies and incentive schemes to ease this problem: 1. 2. 3. 4. 5. 6. 7. 8. Sub-Contracting Exchanges Quality Certification Marketing Development Assistance (MDA) Scheme Training Programmes for Export Packaging Organizing Exhibitions and International Trade Fair Export Promotion Councils SIDBI's Marketing Finance and Development Department The Khadi and Village Industries Commission (KVIC)

Drawbacks and Problems

The All -India census of registered small scale industrial units conducted in 198788 showed that 3.05 lakhs units constituting about 31% of total registered units have closed down. A large number of small-scale units are sick. At the end of March 2001, about 2.5 lakh small-scale industrial units with outstanding bank credit of Rs 4,506 crore were sick. Some of the problems are as follows : 1. 2. 3. 4. 5. 6. Finance and Credit Raw Material Availability Machines and Other Equipment Problem of Marketing Inspector Raj Adverse Effects of Economic Reform and Globalisation
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Prospects and Opportunities in SSI 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 and Subsidies  Machinery Procurement  Raw Material Procurement  Manpower Training  Technical and Managerial skills  Tooling and Testing support  Reservation for exclusive purchase by the government  Export promotion  Growth in demand in the domestic market due to overall economic growth  Increasing export potential for Indian products