Small_Scale_Industires_in_India

AN OVERVIEW BACKGROUND SMALL SCALE INDUSTRY Worldwide, SMEs are being recognised for their contribution to employment, innovation and economic dynamism. In the Indian context, SSI units are helping generate new jobs, supplying a wide range of products, contributing to exports, helping in more equitable distribution of national income and emerging as outsourcing destinations. The Government has been encouraging and supporting SSIs through policies for infrastructural support, technology upgradation, preferential access to credit, reservation of products for exclusive manufacture in the SSI sector, preferential purchase policy etc. By the end of March 2002, there were over 3.4 million small scale industrial units in the country accounting for more than 40 per cent of the gross value of output in the manufacturing sector and about 35 per cent of the total exports of the country. They provided employment to over19.2 million persons, which is second only to agriculture. During the Ninth Plan period, SSIs created over 3.2 million jobs. Presently, there is no in-built component keeping record of functional registered SSI units. SSI units often shut down due to unforeseen circumstances. The figures provided by District Industries Centres (DICs) may not include closed SSI units. Hence there is an urgent need to introduce a system of de-listing closed registered SSI units. A Study Group on the Development of Small Enterprises was set up under the chairmanship of Dr. S.P. Gupta, Member, Planning Commission, to look into the problems of the SSI sector. The Study Group submitted an Interim Report in July 2000. After inter-ministerial consultations on the Interim Report, the Prime Minister announced a number of new policy initiatives on 30 August 2000. These announcements were followed by other announcements by the Ministry of Small-Scale Industry and Agro and Rural Industries (SSI&ARI). The final report of the Study Group was submitted in March 2001 and the recommendations are being considered. Separate Ministries for Small Scale Industries and Agro and Rural Industries were created by bifurcating the Ministry of SSI&ARI. This would help in giving boost to rural industrialization and development of agro-based tiny units. The scheme of Prime Minister's Rozgar Yojana (PMRY) would now be looked after by the Ministry of Agroand Rural Industries. The small scale industries (SSI) constitute an important segment of the Indian economy in terms of their contribution to the country’s industrial production, exports, employment and creation of an entrepreneurial base. The Government established the Ministry of Small Scale Industries and Agro and Rural Industries (SSI & ARI) in October, 1999 as the nodal Ministry for formulation of policies and Central sector programmes/schemes, their implementation and related co-ordination, to supplement the efforts of the States for promotion and development of these industries in India. The Ministry of SSI & ARI was bifurcated into two separate Ministries, namely, Ministry of Small Scale Industries and Ministry of Agro and Rural Industries in September, 2001.The role of the Ministry of Small Scale Industries is thus to mainly assist the States in their efforts to promote growth and development of the SSI, enhance their competitiveness in an increasingly market-led economy and generating additional employment opportunities. In addition, the Ministry attempts to address issues of country-wide common concerns of this segment and also undertake advocacy on behalf of the SSI for this purpose. The specific schemes/programmes undertaken by the organisations of the Ministry seek to facilitate/ provide one or more of the following: ❖ adequate credit from financial institutions/ banks; ❖ funds for technology upgradation and modernisation; ❖ integrated infrastructural facilities; ❖ modern testing facilities and quality certification laboratories; ❖ access to modern management practices and skill upgradation through appropriate training facilities; ❖ assistance for better access to domestic and export markets; ❖ cluster-wide measures to promote capacity-building and empowerment of to all or some of the above-mentioned to all or some of the above-mentioned SMALL AND MEDIUM ENTERPRISES DEVELOPMENT (SMED) BILL A single comprehensive legislation for promotion, development and enhancement of competitiveness of the SSI has been a longstanding demand of the sector, with a view, inter alia, to reducing the rigours faced by the sector on account of application of a plethora of laws and regulations. In keeping with the declaration in the National Common Minimum Programme (NCMP) of the Government in this regard, the Ministry of SSI drafted the Small and Medium Enterprises Development (SMED) Bill, 2005 which seeks to define “enterprise” as against the restrictive category of “small scale industry”, integrate micro, small and medium enterprises (MSME) as a continuum and address the major problems of the MSME. The SMED Bill was introduced in the Lok Sabha on 12 May 2005 and later referred to the Department-related Parliamentary Standing Committee (DRPSC) on Industry. After considering the wide-ranging recommendations of the DRPSC based on its detailed consultation with various stakeholders, notice for official amendments to the SMED Bill, 2005 and enacting the Micro, Small and Medium Enterprises Development (MSMED) Bill was sent to the Lok Sabha on 2 December2005. The MSMED Bill provides, inter alia, for the following important matters: (i) Constitution of the National Micro, Small and Medium Enterprises Board with a much wider and representative composition and wider functions; (ii) Replacement of the existing two-stage system of optional “registration” of the SSI by that of optional filing simplified “memoranda” by micro and small enterprises; (iii) Improving access of micro and small enterprises (MSE) to credit; (iv) Statutory backing for procurement preference policies in favour of the MSE; (v) Simplification and harmonisation of inspection procedures and requirement of maintaining registers and furnishing returns, as applicable to the micro, small and medium enterprises (MSME) under specified Labour laws; (vi) Strengthening of provisions on relating to the problem of delayed payments to micro and small enterprises and widening the unctions of the relevant dispute resolution mechanisms with a view to providing quicker and more effective relies to the MSE in cases of disputes; and (vii) Simpler scheme for closure of business by the MSE. ENHANCEMENT OFINVESTMENT LIMIT FROM RS. 1 CRORE TO RS. 5 CRORE Under the Industries (Development and Regulation) Act 1951 [I (DR) Act] the small scale industry is defined as one with an investment upto Rs. 1 crore in plant and machinery, excluding land and building. However, in the changed economic scenario of liberalisation and globalisation and with a view to increasing the competitiveness of manufacturing SSI, the investment limit in respect of 71 products has been enhanced to Rs. 5 crore to enable the units manufacturing these products to carry out technological upgradation and modernisation of their units. In addition, investment limit for 698hi-tech products as well as thosefor thepharmaceutical sector is also being enhancedto Rs. 5 crore. The final notification in respectof this is under issue. RESERVATION POLICY Reservation of items for exclusive production in the SSI sector was introduced in the1970s to ensure bulk production of consumer products and enhanced employment generation. Presently, there are 749 items reserved for the SSI sector. It has been found that though the SSI sector is manufacturing around 8,000 items, the reserved list items constitute around 15 per cent of the total SSI production. Taking into account the WTO regime and economic liberalisation, the Study Group recommended continuation of reservation and dereservation only in a phased manner so that the SSI units engaged in the production of reserveditems are not affected. It would be prudent to consult the stakeholders while de-reserving items. With a view to providing to the SSI opportunities for technological upgradation, promotion of exports and economies of scale, items reserved for exclusive manufacture by the SSI have been dereserved from time to time. The dereservation process involves extensive consultation with all the stake holders, including the SSI associations and various Ministries/Departments concerned and the Planning Commission. As per the provisions of the I (DR) Act, an Advisory Committee has been constituted which recommends reservation/ dereservation of items from time to time. Based on consultations with the stake holders and on the recommendations of the Advisory Committee, 193 items were dereserved during 2004-05. INDUSTRIAL MOTIVATION CAMPAIGNS (IMC) Industrial Motivation Campaigns (duration 1 – 2 days) are conducted to identify and motivate traditional / non-traditional entrepreneurs having potential for setting up SSI units so as to lead them to self-employment. During 2005-06 (upto November 05). 220 IMCs were conducted and 18,000 prospective entrepreneurs motivated to start their units Around 480 IMCs are expected to be conducted during the remaining months of the financial year for benefiting about 32,000 entrepreneurs. WTO CELL A WTO Cell was set up in the SIDO headquarters in 1999 to co-ordinate the latest developments in regard to World Trade Organisation. The objectives of the Cell inter alia include (a) Keeping abreast with the recent developments in the WTO agreements, (b) Disseminating information to SSI Associations and other stakeholders on various aspects of WTO agreements and their likely implications for the SSI, (c) Coordinating with other Ministries and Departments of the Government of India in this context, (d) Assisting policy formulation for SSIs in conformity with the provisions of WTO agreements and (e) Organising workshops/seminars for the SSI to create awareness and sensitisation, capacity building and sectoral studies. As a part of this process, three awareness programmes are planned during 2005-06. Six one-day workshops on Intellectual Property Rights (IPRs) have been organized during the current year so far. It is further proposed to organise 8 more such programmes. Various SSI related issues, which came up during previous WTO Ministerial Conference were handled in the WTO Cell for appropriate response. Requisite feedbacks on the modalities for negotiations on nonagricultural products were provided to the Department of Commerce, Ministry of Commerce & Industry. NATIONAL SMALL INDUSTRIES CORPORATION LTD. ORGANISATIONAL SET -UP The Corporation is manned by a team of professionals at different levels and delivers its assistance through: _ 6 Zonal Offices located at Mumbai, Chennai, Kolkata, Hyderabad, Delhi and Noida. _ 27 Branch Offices and 19 Sub-Offices over States. _ 5 Technical Service Centres located atChennai, Howrah, Hyderabad, Okhla and Rajkot. _ 3 Technical Service Extension Centres located at Aligarh, Rajpura and Guwahati. _ 2 Software Technology Parks – one at Okhla, New Delhi and the other at Chennai. _ 2 Offices outside India – at Dubai (UAE) and Johannesburg (South Africa). SCHEMES OF THE CORPORATION (1) Marketing Services Marketing is critical to the growth and survival of small enterprises in today’s intensely competitive market. NSIC acts as a facilitator to promote SSI products and has devised a number of schemes to support small enterprises in their marketing efforts, both within and outside the country. These schemes are briefly described below: _ Consortia and Tender Marketing: In their individual capacity, small enterprises face problems to procure and execute large orders, which inhibit their growth as well as graduation. NSIC, accordingly, forms consortia of units manufacturing the same products, explores the market and secures orders for bulk quantities. These orders are then distributed among the SSI units in tune with their production capacity. Testing facilities are also provided to help these units ensure that the quality of their products conforms with the standard specifications. _ Single Point Registration for Government Purchases : NSIC operates a Single Point Registration Scheme, wherein the registered SSI units get purchase preference in Government purchases. The units registered under this scheme get the following facilities : ▪ Advance intimation of tenders issued by DGS&D. Issue of tender sets free of cost ▪ .Exemption from payment of earnest money deposit. ▪ Waiver of security deposit up to the monetary limit for which the unit is registered. ▪ Issue of competency certificate in case the value of an order exceedsthe monetary limit, after due verification. ▪ Exhibitions and Technology Fairs: To showcase the competencies of the SSI and to enhance their market access, NSIC participates in select International and National Exhibitions and Trade Fairs every year and facilitates participation of the small enterprises by providing them concessions in rentals, etc. Participation in these events exposes the SSI units to international practices and enhances their marketing prospects. Export of Products and Projects: NSIC facilitates exports of products and projects of the SSI to other countries. (2) Financing: Facilitation of Finance through Commercial Banks: In order to ensure mooth credit flow to small enterprises, SIC has entered into strategic alliances with commercial banks for providing longterm/working capital financing of the small enterprises across the country. The arrangement envisages forwarding of loan applications of the interested small enterprises by NSIC to the banks for sanction of loans. _ NSIC also provides limited finance for equipment and in addition financing for procurement of raw material and marketing activities (short term) (3) Technology Services: Technology is the key to enhancing a company’s competitive advantage. Small enterprises need to develop and implement suitable technology strategy, in addition to financial, marketing and operational strategies, and adopt that which helps integrate their operations with their environment, customers and suppliers. NSIC offers small units the following support services through its Technical Services Centres and Extension Centres: ▪ Advising on application of new techniques ▪ Material testing facilities through accredited laboratories. ▪ Product design including CAD/CAM ▪ Common facility support in machining,EDM, CNC, etc. (4) Support Services: Infomediary Services Information plays a vital role in the success ofany business. Recognising the importance of information and its relevance to the SSI units, NSIC provides Infomediary Services to small units. Besides hosting a web site (www.nsic.co.in), NSIC hosts sector specific portals for focused information dissemination. Under this scheme, small units can become members and avail of a number of value-added services. Some important services are: _ Supplier database. _ Market intelligence database. _ Energy and environment services at selected centres. _ Classroom and practical training for skill upgradation. NSIC Technical Services Centres are located at the following places: Location Focus area Chennai Leather & footwear Howrah General engineering Hyderabad Electronics & computer application New Delhi Machine tools & related activities Rajkot Energy audit & energy conservation activities Rajpura Domestic electrical appliances Aligarh Lock cluster & die and tool making _ Technology providers’ database. _ Information providers’ database. _ Linkages with relevant institutions. _ E to E services. _ E to B services. _ Value additions like database/ directories on who makes machines, who makes components, spare capacity bulletin boards, discussion forums, virtual exhibitions, etc. _ Mentoring and Advisory Services Inadequate management skills are often the cause of non-performance of small enterprises. NSIC’s mentoring and advisory services are aimed at addressing this impediment to growth. It offers mentor-mentee relationship in which the mentor, a person with wide experience in running his own business, provides his services to an individual or a group of units. An advisor, a senior professional, generally retired and a specialist in a specific area assists in the process. Mentors and advisors provide the necessary professional and moral support in the early lifecycle of an enterprise or to existing units facing critical operational problems. _ Performance and Credit Rating Scheme for Small Industries To enable small enterprises to diagnose the strength and weaknesses of their existing operations and take corrective measures to enhance their organisational strengths, a need was felt for introducing a Rating Scheme specially designed for the small enterprises. The Rating Scheme seeks to encourage the small enterprise increase their productivity, since a good rating would enhance their acceptability in the market and also makeaccess to credit quicker and cheaper and thus help reduce the cost of credit. Besides, therating would also infuse a sense of confidence amongst the buyers of SSI products. With these objectives, Government of India has appointed NSIC as the implementing agency to operate the Performance and Credit Rating Scheme for small enterprises. The scheme is being operated through accredited rating agencies in the country like CARE, CRISIL, D&B, FITCH, ICRA and ONICRA. Government provides financial assistance to small enterprises to the extent of 75 per cent of the cost of rating, subject to a maximum of Rs. 40, 000. _ Software Technology ParksNSIC Software Technology Parks (STPs) facilitate small industries in setting up 100 percent export-oriented units for software exports. They also act as nodal points to activate software exports directly through NSIC. These TPs extend support in terms of the requisite infrastructure to the SSI units to start business perations with a minimum lead time. The cheme is governed by the STPI regulations of the Department of Information Technology, Government of India. NSIC established the first STP at Okhla, New Delhi in 1995 and second in Chennai in 2001. Several small scale units have taken advantage of these parks andcontributed export earnings to the exchequer. _ International Consultancy Services For the last five decades, NSIC has acquired various skill sets in the development process of small enterprises. These skills are being networked to offer consultancy services for other developing countries. This activity was started during 2004-05 and is expected to occupy a place in the future service profile of the Corporation. The areas of consultancy are as listed below: _ Capacity Building _ Policy & Institutional Framework _ Entrepreneurship Development _ Business Development Services (5) HUMAN RESOURCEDEVELOPMENT & TRAINING: Human resource is the essence in any organisation. In order to keep abreast with the changing technology and advancements in various fields, the Corporation strived to keep its human resource current with latest developments relating to their functional areas. NSIC Corporate office and nine major branch offices are certified for ISO 9001-2000. Continuous efforts are put in to identify the training needs and evolve suitable training plans to fulfil the identified needs. Besides, a number of officials were also nominated for domestic training programmes, seminars and workshops conducted by professional bodies like FICCI, CII, NIESBUD, SCOPE, NISIET, Associated Chambers of Commerce & Industry of India, Indo African Society, WASME, IMA, CBI Academy, FIEO, ASSOCHAM, Institute of Socio Economic Research & Action, Indian Machine Tool Manufacturers Association, Logic Consultants (P) Ltd. and PHD Chamber of Commerce and Industry.