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CHAPTER – III

PROFILE OF THE STUDY AREA AND CONCEPT OF

SMALL SCALE INDUSTRIES

Perambalur District came in to existence after trifurcation of

Tiruchirappalli district with effect from 30.09.1995 as per G.O MS.No

913 Revenue / 2003 dated 30.09.1995. It is bounded on the North by

Cuddalore and Salem Districts, South by Tiruchirappalli and Thanjavur, East

by Thanjavur District, West by Tiruchirappalli and Salem Districts.

Brief History of the District 138:

In 1741, the Marathas invaded Tiruchirappalli and took Chanda Saheb

as captive. Chanda Saheb succeeded in securing freedom in 1748 and soon got

involved in the famous war of the Nawabs place in the Carnatic against

Anwardeen , the Nawab of Arcot and his son Mohammed Ali.

Mohamed Ali annexed the two palayams of Ariyalur and

Udayarpalayam located within the present Perambalur District on the grounds

of default in payment of tributes and failure to assist him in quelling the

rebellion of Yusuf Khan. In November 1764, Mohamed Ali represented the

issue to Madras Council and obtained military assistance on 3rd

January 1765.

138 www.Perambalur,online.com.

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The forces led by Umdat-Ul-Umara and Donald Campbell entered Ariyalur and

captured it.

The young Poligar together with his followers there up on fled to

Udayarpalayam. On the 19th

January the army marched upon Udayarpalayam.

The Poligar's troops were defeated and the palayams were occupied. The two

PoligaRs fled their town and took refuge in Tharangampadi, then a Danish

Settlement. The annexation of the pal yam gave the Navab un-interrupted

possession of all his territories extending Arcot to Tiruchirappalli. The history

followed was a power struggle between Hyder Ali and later Tippu Sultan with

the British. After the death of Tippu Sultan, the English took the civil and

military Administration of the Carnatic in 1801. Thus Tiruchirappalli came in

to the hands of the English and the District was formed in 1801. In 1995

Tiruchirappalli was trifurcated and the Perambalur and Karur districts were

formed. Thiru . N. Nanda Kishore I.A.S , was the first Collector of the district.

Perambalur district was divided into Perambalur and Ariyalur district in the year

2001. Ariyalur was again merged with Perambalur in the year 2002.

It was started as village Panchayat in 1886 and major Panchayat in 1946.

It was upgraded as First grade town Panchayat in the year of 1953, and it come

to selection grade in 1985. It is divided in to 14 wards based on 1991

population. It is a centrally located island district of Tamil Nadu. It spreads

over 3609.07 sq.kms. The Perambalur town was upgraded to District from 1st

Nov. 1995. The district bounded by Cuddalore District in North, Trichy District

in South, Tanjavore District in East and Nammakal District in West.

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Agriculture and Soil

The irrigation facilities available in this town is through Koneri Tank

river. The main cultivation crops are paddy, sugarcane, groundnut, onion,

cotton and vegetables in different kinds, cent.The major part of Perambalur

town contain Black cotton soil and clay soil having agriculture field.

Sugarcane is grown as a major commercial crop. The Public Sector

factory Perambalur Sugar Mills at Eraiyur is functioning in the district with a

capacity of crushing 3000 Tonnes per Day. The pre-dominate soil in the district

is red sanding with scattered packets of black soil. The soil in the district is best

suited for raising dry crops. The district has a high means of temperature and

low degree of humidity. In private sector Dhanalakshmi Sugar Mill Ltd started

at Udumbiyam at 4,500 Tonnes per day capacity.

Government Offices

Perambalur is the capital city of Perambalur. It is only town Panchayats

district head quarter in Tamil Nadu. There are so many state government

offices, district level offices, central government offices located in this

jurisdiction. It has a collect orate related to all district level departments and

unit offices like Police station, Head Post Office, EB Office, Talk Office, RTO

Office, Sessions court, Telephone exchange, District Education office, etc.

Banking Facilities

There are 80 Nationalized Banking Branches in district viz. SBI, IDB,

BOI, IB, CB, VBI, PNB and 115 Co-operative Banks are also functioning

through out the District.

103

Communication

National Highway NH: 45, Chennai – Windgall passes through

Perambalur Taluk and thus interlinked the district with Dindugal junction,

Trichy and Chennai. Apart from the National Highway, the district has well

maintained road system connecting all the important towns, taluks and

community development Blocks head quarters with the district as well as

adjoining districts. The buses play a dominant role in the transport system.

Ariyalur Railway station belongs to Southern Railway, which connects

Chennai, Madurai, Tuticorin and Thirunelveli. Perambalur is an important road

junction on the Chennai – Dindugal National Highways. The District has well

knit road system connecting various important centers in the region.

Administration

The district for administrative purpose has been divided into Six taluks

i.e. Perambalur, Kunnam, Veppanthattai, Ariyalur, Sendurai and Jayankondam.

There are further subdivided into ten blocks viz. Perambalur, Veppanthattai,

Alathur, Ariyalur, Thirumanur, Sendurai, jayankondam, Andimadam and

T.Palur. Comprising of 345 Villages, 322 Village Panchayat and 9 town

Panchayat.

Industries

The most important factor that influences the growth of urbanisation and

general economic development in the region is industrialization. It includes

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parallel growth in other opportunities for employment and income. Some of the

industrial units of the district are: The Cement Factory Ariyalur unit of SIDCO

and commenced production from 1979. The project set up a cost of Rs.25 crore

and manufacturing 2.47 lakh units. Pipe product introduced by TANCEM.

There are several other cement factories established in this sectors also i.e.

Dalmia, Vijay, Bharani, etc. One sugar factory is situated in Eraiyur is

PerambalurDistrict. Most of the Agricultural peoples were benefied. It runs

more than 10 years. In addition to one private sugar mill is added.

The industrial activity is mostly centered around the large centered

around the large cement unit and handloom in the tiny sector in Jayankondam

area in recent time quarrying and mining has picked up. All the blocks are

eligible for covering under NEW ANNA MARUMALARCHI THITTAM.

Efforts are now being taken to set up an industrial estate near Perambalur

Town.

The below table shows that the total population compared with the

actual employment during the period. Each number of the employee is having

his or her own brand and its activity. In perambalur more number of the people

are working in cultivations and agriculture, and service sector is occupied

nearby percent . Others list rest of the peoples.

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STUDY OF THE AREA

106

District Profile

Government vide G.O.M.S. No.168 Revenue RA-1 Department dated

19.4.02 have ordered merger of existing Perambalur and Ariyalur District as a

Perambalur District with head quarters at Perambalur with effect from

19.04.2002.

1. Geographical area 3691 sq.km.

No. of Blocks : 10

No. of Taluks : 6

No. of Villages : 347

2. Population

a) Male : 5,88,441

b) Female : 5,92,588

c) Total : 11,81,029

3. Classification of workers

a) Cultivators : 258963

b) Agricultural Laborers : 187210

c) Non-Agricultural Labourers : 56199

4. The area under major corps are furnished below:

Paddy : 54605

Cotton : 23645

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Groundnut : 35260

Sugar Cane : 13597

Miles and Other Cereals : 33873

Pulses : 3599

Religion wise people in perambalur in total

Religion Person Percent

Hindu 1111046 93.44

Muslim 32416 2.73

Christian 44673 3.76

Sikh 62 -

Buddhist 10 -

Jain 42 -

Others 43 -

Not stated 878 0.07

1189170 100.00

From the above table I found that the religion of the respondents in

perambalur, most no. of percent is Hindu (93 percent) , and others is only seven

percent.

POPULATION BY AGE GROUP

Age-Group Total Percentage

Up to 14 339167 28.52

15-29 321134 27.01

30-44 248590 20.84

45-59 169795 14.28

Above 60 108813 9.15

Not stated 2031 0.17

1189170 100.00

Source: Records

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Here population belongs to age group in the respondent related to

various levels that is up to 14, 15-29, 30-44, 45-59, 60 and above. It is seen that

children is occupied 28.52 percent, age group 15-44 years is 47.8 percent, and

45-59 years is 14.28 percent and rest of the people is above 60 and not stated

their age group

RURAL AND URBAN AREA PEOPLE

1991 2001 Difference

1036821 1030965 .06

50592 158205 9.36

1087413 1189170 312.71

Source: Records

In 1991 only two panjayat are declared, but in 2001, 9-town panjayats

most of the peoples were having their residence place only from rural areas. It

clearly indicates most of the people migrating from one place to another for the

purpose of employment and to do business.

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BLOCKWISE PERFORMANCE OF RESPONDENT’S AREA

BLOCK

WISE Density Female R/U Literary Ill literary SC ST

Perambalur. 336.84 972 58.6 81 62 31 .20

Vepanthattai 573.72 1008 18.9 76 54 29 1.37

Ariyalur 326.85 1001 30.0 76 50 20 .59

Thirumanur 349.65 1016 - 76 52 20 .20

Veppur 429.82 1031 7.3 76 48 32 .13

Alathur 417.78 1015 - 76 51 27 .97

Jayakondam 343.81 998 39.3 79 55 24 1.99

T palur 309.45 994 - 75 47 22 1.79

Andimadam 289.43 1018 8.2 77 53 17 1.72

Sendurai 314.84 1009 - 76 46 27 .92

322 1006 1.3 77 52.5 25 1

The above table clearly shows that the performance of the total

respondents in research area, it is found that marital ratio, literary level and s/c

and s/t group of peoples were listed.

MAJOR VALUE AND PRODUCTION

Name of the minerals Quantity (Tones) Value in Rs.

Lime stone 7.29065.770 326212.960

Sands 37535.500 638.095

Free clay 119689.900 2034.730

Gypsum 4478.630 98.530

Jelly 457898.620 12815.976

Letric red grail 15.611.496 2420.542

Source: Divisional manager, TAMIN, ARIYALUR 2005-06.

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The above table clearly shows that the name of minerals available in the

research area, for that in found major minerals share from limestone and

second place of the minerals is occupied free glay and rest of other minerals

were found by the geologist for using their product.

PERFORMANCE OF THE SSI, KVIC and VILLAGE INDUSTRIES IN

RESPONDENT’S AREA

Classifications Total units

SSI 324

KVIC 151

Village Industries 101

Total 576

In Perambalur total industry are classified in the namely small scale

industry, KVIC, and Village industries. In the research area total SSI running

units are 324 units, KVIC is 151 and village industries were 101.in rank wise

SSI is first, KVIC is second and village industries were third in manufacturing

units.

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LIST OF SSI IN PERAMBALUR DISTRICT

Detail of the works Units

Paddy culling and rice milling 27

Motor Rewinding 1

Repair house holds 26

Tailoring 195

Wood works 8

Typing and printing 4

Leather products 4

Candles 7

D T P works 7

Others 20

Bricks 7

Fabrics 2

Automobile service 16

Source: DIC, Perambalur

LIST OF HANDICRAFTS IN PERAMBALUR DISTRICT

Activity Units

Woolen sari production 81

Carpenter 01

Stone writing 01

Plastic wire bags 14

Cart board 01

Advisement 01

Coir products 01

Ornaments 01

Total 101

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LIST OF KVIC INDUSTRIES IN PERAMBALUR

Source: Inspector of Industries 2005-06.

LIST OF REGISTERED UNITS IN PERAMBALUR DISTRICT 2005-06

Source: Primary data (data collected from DIC)

It reveals that the total no. of units registered are fifty-three and closing

units are 13, remaining units are well functioning in this area.

Industry style Units

KVIC 08

Sarvothaya 10

Total 18

Information Units

Beginning 53

During 01

Removed 01

Registered 53

Working units 40

Closed 13

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PERFORMANCE OF SSI

Stone mix 15

Pot production 4

Bricks 1

Chapel repairs 1

Wooden furniture 2

DTP works 2

Rubber stamp 9

Food products 3

Cycle repairing 5

Sandal powder -

Aluminum products 19

Mixer products 1

Snakes 2

Paper cover 1

Penal products 2

Doll drying 2

Others -

Source: District Industrial Centre, Perambalur 2005-06.

Physical Features

As per 2001 Census, the combined total of Ariyalur and Perambalur is

1189170. The density of population in the district is 322 per Sq.Km.

Perambalur District is centrally located in TamilNadu and is 267 K.m away in

southern direction from Chennai. The District has an area of 3691 Sq.Km.

spread between 10.54’ and 11.30’ degree Northern latitude and 78.40’ and

79.30’ degree of the Eastern longitude.

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It is an inland district without coastal line. The District has Vellar River

in the North and Kollidam River in the South and it has no well marked natural

divisions. The PACHAMALAI hill situated on the North of Perambalur is the

most important hill in the district.

Minerals and Mining

The district is rich in mineral deposits. Celeste, Lime Stone, Shale,

Sand Stone, Canker and Phosphate nodules occur at various places in the

district. A good deal of building stone is quarried in Perambalur, Kunnam and

Veppanthattai Taluks. Five major Cement factories in the district reveal the

abundant deposit of limestone. The availability of Lignite at Jayankondam and

near by places is a gift by Mother Nature. At Sathanur 15 Km from Ariyalur we

can see a very rare presence of Stone Tree (FOSSIL). The Fossil is said to have

been a national asset according to Geologists.

Tourist Interest

Ranjankudi is located 17 Kms north of Perambalur. The Fort was built

by Jaginthar under Nawab of Carnatic in the 17th

century AD. The Fort was the

scene of the battle of Valikondah between the English and Mohamed Ali on one

side and Chandha Sahib and the French on the other side in 1751 AD. This Fort

is under protection of the ASI.

The ancient Arulmigu Ekambareswarar and Thandayudhapani Swamy

Temples are situated Chettikulam village was built by King Kulasekara

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Pandiyan 500 years ago. Thai Poosam festival and Panguni Uthiram festivals

are celeberated in a grand manner.

The great monument at Gangai Konda Cholapuram, the second

Pragadeeswar Temple rears its head nobly and bespeaks the imperial dignity of

the capital that Rajendra (1012 – 1044) the son of Raja Raja established after

his victorious march to North East India up to the River Ganga.

Mathura Kali Amman at Siruvachur is one of the most popular shrines in

the district. The presiding deity of the temple is known as Sri. Madura Kali

Amman She is one of the forms of Kali.

The Vettakudi Karaivetti tank situated at 52 Kms. East of Perambalur

towns in Thirumanur Block near Ariyalur is a water refuge for many migratory

birds and over 30 species visit this tank every year between December to

March in large congregation. The geologist found that more evidence to lived

Dinosaur in seabeds at Sendurai. It is more useful to research peoples and the

eggs were secured by Government of India.

District Industrial Centre139

The District Industries Centre, Perambalur District at Ariyalur is

functioning from 05.08.1996 on trifurcation from Trichy District. The Motto of

the District Industries Centre is to render all assistance’s under one roof to the

potential entrepreneur’s for starting their own Small Scale Industrial Unit. In

139 DIC records 2005-2006.

116

order to motivate the interested entrepreneurs for starting their bring the

Technical projects & explain the Government concessions available,

Motivation campaigns are being conducted at Block levels.

Activities of the District Industries Centre are as noted below:

1. Registration of Small Scale Industrial Units (Both

Provisional/Permanent).

2. Registration of Handloom Industries/Cottage Industries.

3. Implementation of PMRY scheme.

4. Granting of subsidies to eligible Registered Small Scale Industrial Units.

5. Recommend for District level as well as state level and quality awards to

Registered Small Scale Industrial Units.

District Industries Centre issues Small Scale Industries Provisional

certificate to the enthusiastic entrepreneurs according to their Technical

Projects, which is valid for a period of 5 years from the date of issue and

Permanent Small Scale Registration certificate who started their industry / unit.

District Industries Centre also identifies and issues Cottage Industries and

Handicrafts Industries Registration Certificates.

As per orders contained in the G.O.No.41 Small Industries Department

dated 18.3.96, Industrially Backward & Most Backward areas have been

segregated in all Districts. As far as Perambalur District concerned 1) Alathur

2) Veppanthattai and 3) Veppur are declared as Most Backward blocks and no

backward blocks are available. All newly registered Small Scale Industrial

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units (except conversional and resource based Industrial units (viz) Rice Mill,

Cement, Sugar, Oil Extraction industries) set up, including substantial

expansion / diversification of existing units in specified areas are eligible for 15

percent or 20 percent. State capital subsidy for respect of Backward / Most

Backward blocks as the fixed capital investment subject to a ceiling

Rs.15 Lakh / Rs.20 Lakh respectively as per Government order issued vide

G.O.No 37 Small Industries Department dated: 20.7.2000.

Special Capital Subsidy

Special capital subsidy of 20 Percent on the total investment is being

sanctioned by the Government to the Registered Small Scale Industrial units

engaged in the specified line of 10 activities (viz) Manufacturing of Electronic

instruments, Drugs & Pharmaceutical units, Leather units, Automobile spare

parts manufacturing, Food processing even if these types of Industries are

started in any place of the District.

Similarly, the registered Small Scale Industrial units to be started in

other areas except the urban areas announced by the Government which

consume Low tension power supply are eligible for availing LTPT subsidy at

40 Percent, 30 Percent and 20 Percent for the first year / second year / third

year from the date of commencement of commercial production or date of

availing power connection to their unit whichever is later. All High

Tension/Low tension power consuming SSI Industrial units which have

installed Generator for their captive usage are eligible for 15 percent Generator

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subsidy as the cost of the new Generator set purchased, subject to maximum of

Rs. 5 Lakh.

District Industries Centre implements PMRY, a Nation wide scheme

with the support of Bank officials. Under this scheme educated unemployed

youths may avail financial assistance from Nationalized and Commercial

Banks to start their Industry / service/Business to a maximum limit of

Rs.2 lakhs for Industry sector & Service sector and Rs.1 lakh for Business

sectors. To avail financial assistant under this scheme, the candidate must

possess the following:

Qualifications

1 Minimum Educational

Qualification

Pass in VIII Std.

2 Age Group 18 to 35 and relaxed to SC/ST,Women,

Exservicemen, Physically Handicapped

up to 45 years.

3 Annual income of the family Rs. 40,000/-.

4 Investment by the candidate Has to invest from 5Percent to

17.5Percent on Project cost.

Training to 5 lakh women during the years 2001-2006 under this

scheme. Based on this, target to impart training to 25,000 women candidates

under this scheme per year is fixed. The selected candidates have to undergo

training organized by this Department and they are eligible for stipend during

training period and their applications for financial assistance to set up their own

industry are being recommended to banks.

119

Small Scale Industry Permanent Registration in Perambalur District

The sample respondents are from rural and urban areas. A sample of

sixty respondents from priority sector and sixty from non-priority sector are

selected and data are obtained. The table clearly shows various line of activity

involved in small-scale industry in the respondent’s area.

S.

No.

Line of

activity Units

Plant and

machinery

[‘000]

Land

and

Building

[‘000]

Annual

capacity

[‘000]

Employment

1 Rice mill 27 2265 4927 3819 17

2 Tailor 195 12604 1480 9357 235

3 Wooden 7 1178 126 1632 18

4 Leather 4 218 31 1204 6

5 Binding 4 1163 103 520 7

6 Fabrics 2 228 132 367 8

7 DTP 7 247 459 748 11

8 Candles 7 1030 243 131 20

9 Bricks 7 928 45 1001 39

10 Repairs 16 1590 307 2195 42

11 Furniture 1 75 7 190 3

12 Rewinding 1 125 5 361 3

13 Household 20 800 110 957 26

14 Others 13 321 259 1232 17

15 Non metal 4 946 823 2020 27

16 Service TV 4 98 7 823 5

17 Metal 5 228 132 361 8

Total 324 24638 9256 28407 527

Source: DIC Report 2006-2007

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Single Window Committee

To identify the problems faced by Small Scale Industrial units in starting

their industry and solve them by conducting Single Window Committee

meeting under the Chairmanship of the District Collector

Government Awards

In order to encourage the Small Scale Industrialists, applications for

State, District and Quality Awards are being processed every year and

recommended to the Government by the District Industries Centre.

Industrial Estates

For the benefit of the Industrialists of the District, effective steps

have been taken for formation of an Industrial Estate at Elambalur near

Perambalur with the assistance of TANSIDCO.

Rehabilitation of Sick Small Scale Industrial Units

To identify Sick Small Scale Industries among the registered Small

Scale Industrial units and for Rehabilitation of the same effective and beneficial

assistances are being extended by the District Industries Centre in consultation

with the Financial Institutions for refinance or reschedule of interest and

workout of Penal Interest as the case may be by conveying meeting of the

committee constituted for Rehabilitation of registered Small Scale Industrial

units.

121

District industries centre Perambalur at Ariyalur

Target and achievement

Sl.

No. Details 2000-2001 2001-2002

Target Achievement Target Achievement

1 SSI Registration

(Provisional) 750 751 750 136

2 SSI Registration

(PMT) 290 291 290 327

3 Cottage Industries

Registration 150 80 150 84

4 Handicrafts

Industries

Registration 100 80 100 64

5 PMRY Scheme 280 284 350 370

6 Subsidies Rs. in

lakh

No. of units

benefited

Rs. in

lakh

No. of units

benefited

a. Capital Subsidy 21.60 6 8.72 12

b. LTPT Subsidy 2.31 17 4.43 94

c. Generator Subsidy 0.52 1 0.05 1

7 Women Entrepreneur

Development

Programme

Target No. of trained Target No. of

trained

20 20 400 400

8 Motivation Campaign --- 18 --- 21

122

Performance of banks in Perambalur District

S. No. Ownership of Banks Number of

Units Ranks

1 Nationalized Banks 55 I

2 Cooperative Banks 18 II

3 Private Banks 12 III

Total 85

Source: Primary data

It reveals that the banking sector in the respondent’s area namely

Government Banks, Cooperative Banks and Private Banks. Here, Nationalized

Banks secured first place. The second place goes to cooperative banks and third

place kept by private sector banks.

Target and Achievement in Sector wise in Perambalur District.

Rupees in ‘000

Agriculture Industry Service

Target Achieve

ment Target

Achieve

ment Target

Achieve

ment

1999-00 99.62 105.65 7.06 6.20 15.58 11.70

2000-01 120.88 115.80 7.53 3.42 18.92 14.51

2001-02 133.00 104.00 8.80 5.40 19.00 7.50

2002-03 148.00 161.00 7.90 9.38 24.00 13.50

2003-04 160.00 193.00 8.00 7.50 30.00 26.00

2004-05 251.00 336.00 20.00 13.50 22.00 30.00

2005-06 270.00 326.00 25.00 21.00 21.00 24.00

Total 1282.50 1331.45 84.29 67.40 150.50 127.21


123

Percentage of an Achievement [Sector Wise]

Year Agriculture Industry Service

1999-00 6.29 8.46 8.57

2000-01 7.56 5.11 11.40

2001-02 6.10 8.01 5.89

2002-03 1.46 13.91 10.61

2003-04 14.46 11.27 20.43

2004-05 25.23 20.02 23.58

2005-06 24.48 31.57 18.86

Total 100 100 100


It reveals that the government allotted loan amount through commercial

banks and financial institutions. The loan amount allotted by in three sectors

namely Agriculture Industry and Service based activity in agriculture the

government target have been achieved. In Industrial sector should not be

attained expect in the year of 2002-2003. In service sector from the year

2003-2004 performance were achieved.

124

Performance of financial assistance by commercial banks in Perambalur

district

Rupees in crore

Particulars 1999-

2000

2000-

2001

2001-

2002

2002-

2003

2003-

2004

2004-

2005

Agriculture

advances

267.53 290.85 395.16 426.09 497.09 609.89

Priority sectors 187.48 177.07 243.03 285.66 286.21 367.00

SC /ST advance 12.30 20.32 26.25 30.38 34.36 42.16

Weaker sections 102.95 93.03 102.06 106.16 129.83 165.05

Total

570.26 581.27 766.50 84.29 947.49 1124.10

Source: Primary data from DIC records

125

Performance of PMRY Scheme in Perambalur District

Rupees in Crores

Name of the

Banks

1999-

2000

2000-

2001

2001-

2002

2002-

2003

2003-

2004

2004-

2005

2005-

2006

IOB 55 66 67 88 86 84 108

CB 57 64 62 90 91 83 112

SBI 67 68 61 89 90 88 111

BOI 18 22 17 17 31 22 35

IB 28 21 30 30 27 42 45

UBI 16 12 13 18 17 25 31

PNB 4 4 3 3 4 4 5

ICICI 4 4 5 3 3 4 6

CSBL 1 - - 2 2 1 6

CUBL 18 17 22 22 22 20 23

LVBL 6 5 3 8 5 7 10

SIBL 1 1 1 2 - 2 -

Total Year Wise 272 285 284 372 378 384 492

Source: DIC records

126

Performance of THADCO in Perambalur (2002 -2005)

(Rupees in lakh)

S.

No.

Category

2002-2003 2003-2004 2004-2005

A/C

Holders Rs

A/C

Holders Rs

A/C

Holders Rs

1 Individual 164 24.8 207 24.84 199 29.85

2 Revolving

Fund 184 46 50 5 73 7.30

3 Economic

Activity 25 77.26 12 21.60 26 39

4 Land

Purchase - - - - 37 18.50

Total 373 172.26 262 51.44 335 94.65

Source: Primary data from THADCO Records

127

Performance District Credit Plan all sectors (BLOCK WISE)

(Rupees in Crore)

S.

No. Block

2002-

2003

2003-

2004

2004-

2005

2005-

2006 Total

1 Veppanthattai 19.14 22.80 27.59 43.76 113.29

2 Perambalur 27.42 33.29 35.97 49.65 146.33

3 Veppur 23.63 26.35 30.82 48.05 128.85

4 Alathur 16.65 16.31 17.14 38.90 89.00

5 Andimadam 12.78 13.73 14.24 21.51 62.26

6 Jayamkondam 22.19 24.34 30.03 56.48 133.04

7 T. Palur 11.38 13.70 13.44 22.28 60.80

8 Ariyalur 21.45 20.12 21.48 38.80 101.85

9 Sendurai 9.96 11.60 19.93 21.85 63.34

10 Thirumanur 16.50 17.75 20.04 30.41 84.70

Total 181.10 213.30 230.68 371.69 983.46


It reveals that the loan amount increased each and every year in all

blacks by commercial banks and financial institutions. It clearly source the

researchers district slowly develop in all the sectors.

128


(Person in ‘000)

S.

No. Block

2002-

2003

2003-

2004

2004-

2005

2005-

2006

1 Veppanthattai 16.54 13.50 12.02 26.67

2 Perambalur 18.71 14.74 12.74 22.98

3 Veppur 19.63 15.09 14.72 26.63

4 Alathur 13.24 11.09 10.65 20.80

5 Andimadam 12.20 9.41 7.58 13.68

6 Jayamkondam 15.45 15.23 15.50 37.34

7 T. Palur 8.51 8.52 5.86 12.36

8 Ariyalur 9.62 9.43 10.41 19.51

9 Sendurai 6.62 7.32 6.44 14.05

10 Thirumanur 9.80 9.60 7.18 18.61

Total 129.42 129.42 103.15 212.77


129

Performance District Credit Plan Schemes (BLOCK WISE)

(Person in ‘000)

S.

No. Block

2002-

2003

2003-

2004

2004-

2005

2005-

2006

1 Veppanthattai .94 .47 .90 .70

2 Perambalur 1.43 .47 1.35 .60

3 Veppur 1.41 1.84 .74 .17

4 Alathur 1.30 1.47 1.58 .63

5 Andimadam 1.01 1.05 .30 .46

6 Jayamkondam 1.04 .57 1.76 .41

7 T. Palur .38 1.00 .17 .19

8 Ariyalur .74 .75 .33 .28

9 Sendurai 43 .41 17 .28

10 Thirumanur .78 .63 .28 .48

Total 9.53 8.71 7.62 5.78


130


(Rupees in Crore)

S.

No. Block

2002-

2003

2003-

2004

2004-

2005

2005-

2006

1 Veppanthattai 1.63 1.18 1.83 1.99

2 Perambalur 2.25 1.49 2.96 1.41

3 Veppur 3.15 1.36 1.32 13.61

4 Alathur 1.94 .94 2.70 1.61

5 Andimadam 1.33 2.48 .56 1.26

6 Jayamkondam 1.14 1.26 3.24 2.13

7 T. Palur .66 .51 .25 .82

8 Ariyalur 1.26 1.02 .71 .89

9 Sendurai .65 .59 .22 1.05

10 Thirumanur 1.47 1.96 1.30 1.22

Total 15.53 12.84 15.14 22.59


131

DIFFICULTIES EXPERIENCED BY DIC

PMRY

i) Training

An important and nation wide scheme (viz) PMRY is being

implemented by the District Industries Centre, with the active support of Bank

officials. Applications received in this office are scrutinized and candidates are

selected by Task Force Committee. Applications of selected candidates are sent

to Banks for issue to sanction tickets for having sanctioned of loan amount. On

receipt of sanction orders from Banks PMRY Training is imparted to the

candidates through approved Training institutions. For imparting said PMRY

Training M/s. Trecstep, Trichy and Thanthai Hans Roever College, have been

approved by the Industries Commissioner and Director of Industries and

Commerce, Chennai-5. However, one approved Training Institution M/s

Trecstep have expressed their inability to continue to conduct the training

programmes entrusted to them due to certain administrative reasons. The

another institution M/s Thanthai Hans Rover College which is located at

Elambalur Village 3 kms away from Perambalur. Further interest shown by

Roever College is not keen and their arrangements for Training classes are

nowadays not up to the entire satisfaction, as they are not willing to conduct

training at Ariyalur and hesitate to take up training programme. Moreover this

is an Educational Institute involved in academic courses only. In view of the

132

above one approved and interested Training Institute to take up training

programmes entrusted to them is very essential for Perambalur District for

providing effective training to the PMRY beneficiaries.

ii) Sanction Orders

Bank Officials are not issuing sanction orders to PMRY beneficiaries on

prorate basis. They are issuing sanction orders in bulk only at the end of the

financial year. Due to which it is find very difficult by this Department to

organize training programme to PMRY beneficiaries and so also disbuRsement

of sanctioned loan amount is affected, Reserve Bank of India and our

Department insists for achieving 100 Percent target in sanction before 31st

December. If sponsored applications are sent by banks to DIC Office before the

end of II Quarter of the respective Financial year, selection of candidates by

Bank to DIC Office before the end of II Quarter of the respective Financial

year, selection of candidates by Task Force Committee may be restricted to the

extend possible, which will also pave way for achieving proportionate Target.

iii) Application received from candidates securing financial assistance to setup

own venture under PMRY scheme are scrutinized by District Industries Centre

and selection of candidates is done by Task Force Committee constituted by

Government which also consists one Bank Official of the Banks of the

respective jurisdiction as a member. Selected applications dispatched to Banks

as per norms are returned immediately the District Industries Centre, office

stating the flimsy reasons "does not come under the service area", scheme is

133

not viable. It is very painful to mention that the application of the applications

of the candidates selected by the Task Force committee consisting of Bank

Officials, which creates way for unnecessary correspondence. If such unhealthy

practice is curtailed more number of sanction tickets would be received from

Banks.

KVIC

Separate office for KVIC exclusively for Perambalur District is

necessary for coordination, distribution of applications, wide publicity and for

the benefit of the public. At present only one office is functioning at Trichy

both for Perambalur and Trichy Districts.

CAPITAL SUBSIDY

Applications received from SSI Unit holders are processed by the

general Manager. District Industries Centre and eligibility of Capital Subsidy

amount is arrived. Based on the eligibility worked out, requirements of funds

are furnished to the Industries Commissioner and Director of Industries and

Commerce, Chennai-5. But funds are not being allotted by the Government for

the requirements of this office. Because of receipt of insufficient funds, subsidy

could not be disbursed to all the units of whom applications are processed and

kept ready and the units have to wait for further allotment. Thus subsidy

benefits could not be availed by the SSI unit, before which the unit becomes

sick. The Registered SSI unit has to send their application for subsidy within a

134

period of 12 months from the date of commencement of commercial

production and if subsidy is sanctioned and released to them at least within one

year period from the date of their applications it would be more helpful and

beneficial to them, as this District is industrially backward one.

LTPT SUBSIDY

Registered SSI units which consume Low Tension Power Supply are

eligible for availing LTPT subsidy at 40 Percent, 30 Percent and 20 Percent for

the first year/second year/and third year respectively from their date of

commencement of commercial production. Very long pending cases are not

getting their power subsidy, as funds are not allotted by the Government as per

our requirements.

INDUSTRIAL ESTATE

For the benefit of the Industrialists with the assistance of the SIDCO

effective steps have been taken for the formation of Industrial Estate at

Elambalur near Perambalur. Proposals submitted to Government through

Revenue Department are under active consideration of the Government.

LEGAL FRAME WORK

The legal frame work is an evidence to carry out the industrial activities

systematic and satisfied manner, efficient and fruitfully as for as carry out

possible.

135

I. IDRA – 1951

II. Company Act – 1956

III. MRTP – 1969

IV. FERA – 1994

V. FEMA – 2005

VI. Banking Regulation Act - 1969

PERFORMANCE OF SSI

Production

The small-scale industrial sector plays a vital role in the growth of the

country. It contributes almost 40 Percent of the gross industrial value added in

the Indian economy. It has been estimated that 1 million Rupees 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.When the performance of this sector is viewed

against the growth in the manufacturing and the industry sector as a whole, it

installs confidence in the resilience of the small-scale sector.

136

Employment

SSI Sector in India creates largest employment opportunities for the

Indian populace, next only to Agriculture. It has been estimated that

Rs. 100,000 of investment in fixed assets in the small-scale sector generates

employment for four persons.

Generation of Employment - Industry Group-wise

Food products industry has ranked first in generating employment,

providing employment to 0.48 million persons (13.1 Percent). The next two

industry groups were Non-metallic mineral products with employment of 0.45

million persons (12.2 Percent), Metal products with 0.37 million persons

(10.2 Percent).In Chemicals & chemical products, Machinery parts except

Electrical parts, Wood products,

Basic Metal Industries, Paper products & printing, Hosiery & garments,

Repair services and Rubber & plastic products, the contribution ranged from

9Percent to 5 Percent, the total contribution by these eight industry groups

being 49 Percent. In all other industries the contribution was less than

5 Percent.

Per unit employment

Per unit employment was the highest (20) in units engaged in beverages,

tobacco & tobacco products mainly due to the high employment potential of

this industry particularly in Maharashtra, Andhra Pradesh, Rajasthan, Assam

137

and Tamil Nadu. Next came Cotton textile products (17), Non-metallic mineral

products (14.1), Basic metal industries (13.6) and Electrical machinery and

parts (11.2.).

The lowest figure of 2.4 was in Repair services line Per unit

employment was the highest (10) in metropolitan areas and lowest (5) in rural

areas. However, in Chemicals & chemical products, Non-metallic mineral

products and Basic metal industries per unit employment was higher in rural

areas as compared to metropolitan areas/urban areas. In urban areas highest

employment-metallic products contributed 22.7 percent to employment

generated in rural areas. Food Products accounted for 21.1 Percent, Wood

Products and Chemicals and chemical products shared between them

17.5 Percent.

Urban

As for urban areas, Food Products and Metal Products almost equally

shared 22.8 Percent of employment. Machinery parts except electrical, Non-

metallic mineral products, and Chemicals & chemical products between them

accounted for 26.2 Percent of employment. In metropolitan areas the leading

industries were Metal products, Machinery and parts except electrical and

Paper products & printing (total share being 33.6 Percent).

138

Export

SSI Sector plays a major role in India's present export performance. SSI

Sector contributes 45 percent - 50 percent of the Indian Exports. Direct exports

from the SSI sector account for nearly 35 percent of total exports. Besides

direct exports, it is estimated that small-scale industrial units contribute around

15 percent 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. It would surprise many to know that non-traditional

products account for more than 95 percent of the SSI exports.

The exports from SSI sector have been clocking excellent growth rates

in this decade. It has been mostly fuelled by the performance of garments,

leather and gems and jewellery units from this sector. The product groups

where the SSI sector dominates in exports are sports goods, readymade

garments, woolen garments and knitwear, plastic products, processed food and

leather products. The SSI sector is reorienting its export strategy towards the

new trade regime being ushered by the WTO.

Opportunity

The opportunities in the small-scale sector are enormous due to the

following factors: Less Capital Intensive, Extensive Promotion & Support by

Government, and Reservation for Exclusive Manufacture by small-scale sector,

139

Project Profiles. Funding - Finance & Subsidies, Machinery Procurement, Raw

Material Procurement, Manpower Training, Technical & Managerial skills and

Tooling & Testing support. Reservation for Exclusive Purchase by

Government, Export Promotion, Growth in demand in the domestic market size

due to overall economic growth, Increasing Export Potential for Indian

products, Growth in Requirements for ancillary units due to the increase in

number of Greenfield units coming up in the large scale sector.

Small industry sector has performed exceedingly well and enabled our

country to achieve a wide measure of industrial growth and diversification.

By its less capital intensive and high labour absorption nature, SSI

sector has made significant contributions to employment generation and also to

rural industrialization. This sector is ideally suited to build on the strengths of

our traditional skills and knowledge, by infusion of technologies, capital and

innovative marketing practices.

This is the opportune time to set up projects in the small-scale sector. It

may be said that the outlook is positive, indeed promising, given some

safeguards. This expectation is based on an essential feature of the Indian

industry and the demand structures. The diversity in production systems and

demand structures will ensure long-term co-existence of many layers of

demand for consumer products / technologies / processes.

There will be flourishing and well grounded markets for the same

product/process, differentiated by quality, value added and sophistication. This

140

characteristic of the Indian economy will allow complementary existence for

various diverse types of units. The promotional and protective policies of the

Govt. have ensured the presence of this sector in an astonishing range of

products, particularly in consumer goods. However, the bugbear of the sector

has been the inadequacies in capital, technology and marketing.

The process of liberalization coupled with Government support will

therefore, attract the infusion of just these things in the sector. Small industry

sector has performed exceedingly well and enabled our country to achieve a

wide measure of industrial growth and diversification. There are two phases in

the registration process of Small Scale Industrial (SSI) units carried out by the

State/ UT Directorates of Industries (SDI) viz. temporary and permanent. In the

Third Census of SSIs, the units, which were permanently registered with the

SDIs till 31st March 2001, were covered on a complete enumeration basis. The

frame of registered SSI units contained SSIs, ancillary units and SSSBEs,

which were under the purview of Small Industry Development Organisation

(SIDO). It did not include those coming under the purview of KVIC, Silk

Board, Handicrafts Board, and Textile Commissioner Etc.

141

Definitions of MSMEs in India140

Enterprises are broadly classifies into two categories

[i] Manufacturing

[ii] Service

Both categories of enterprises have been further classified into Micro,

Small, Medium and Large enterprises based on their investment in plant and

machinery [for manufacturing enterprises] or equipments [for service

enterprises]. The present ceiling on investment to be classified as Micro, Small,

or Medium Enterprises is as under:

Classification

Investment ceiling for Plant and Machinery or

Equipments*

Manufacturing Service

Micro Upto $62500 Upto $ 25000

Small Between $60000-$1.25 mn Between $25000-0.5mn

Medium Between $1.25mn- $2.5mn Between $0.5mn-$1.25mn

Fixed costs are obviously higher

Definitions before 2nd

October 2006

Classification

Investment ceiling for Plant and Machinery or

Equipments*

Manufacturing Service

Micro Upto $62500 Upto $ 25000

Small Between $60000-$0.25 mn

Medium Not defined Not defined

140 Over view of SSI, Govt. publication SISI, Chennai, Page No. 2

142

Profile of MSMEs141

Activity Old definition New definition

Number of enterprises{MSME] 12.8 million 13 million

Employment 31.0 million 41.0 million

Production $140 billion NA

Exports 33 billion NA

Share in GDP 6% 8.9%

Share in output 39% 45%

Share in exports 33% 40%

Source: All India census 2001-02 to 2007-09.[completed in 4th

census]

Annual credit flow during the year 2006-07

Indicators MSEs [Former] MSME Sectors

Public sector banks $5.4 Billion $ 9.5 Billion

Others {pvt. Foreign and FIs] $ 2.4 Billion $ 3.5 Billion

Emerging sources like factoring ------- $ 3.0 Billion

Total $ 7.8 Billion $ 12.0 Billion

Definitions of Micro, Small & Medium Enterprises

In accordance with the provision of Micro, Small & Medium Enterprises

Development (MSSID) Act, 2006 the Micro, Small and Medium Enterprises

(MSSI) are classified in two Classes:

(a) Manufacturing Enterprises-The enterprises engaged in the

manufacture or production of goods pertaining to any industry specified in the

first schedule to the industries (Development and regulation) Act, 1951). The

141 MSME Handbook published by Government of India, 2007.

143

Manufacturing Enterprise are defined in terms of investment in Plant &

Machinery.

(b) Service Enterprises: The enterprises engaged in providing or

rendering of services and are defined in terms of investment in equipment.

The limit for investment in plant and machinery / equipment for

manufacturing / service enterprises, is as notified,

Small Scale Industry in Global

It has been posited that small-scale industry – businesses with less than

30 workers – provides a large share of employment and income in Ghana. This

paper examines the proposition that while such enterprises in the informal

sector are said to act as a sponge to soak up surplus labour in marginal

activities, they are unprofitable. Using data from a survey in 1998 of 175 micro

and small-scale enterprises in the Central Region of Ghana, the paper also

confirms problematic aspects of employment in this sector including the lack of

formal contracts, irregular pay, low remuneration, non-existent social

protection and only marginal employment growth. The implication is that the

small-scale industry sector is not economically sustainable in its present form

in Ghana.

Small-scale industries occupy a place of strategic importance in Indian

economy in view of its considerable contribution to employment, production

and exports. However, since 1991 small-scale industries in India find

themselves in an intensely competitive environment due to globalization,

144

domestic economic liberalization and dilution of sector specific protective

measures.

This paper probes the implications of globalization and domestic

economic liberalization for small-scale industries and analyses its growth

performance in terms of units, employment, output and exports. The paper

concludes with policy recommendations to ensure the sustenance and

competitive growth of small-scale industries in India.

Computer science graduates of most university programs are

knowledgeable of computer science concepts and theories. Most graduates

having experience a variety of languages and associated programming

techniques. Few graduates are exposed to software engineering industrial

strength analysis and design tools. The growth of outsourcing is primarily

prompted by financial criteria, but there are some indicators that U.S. software

professionals do not have sufficient experience with tools that support the first

half of the software engineering life cycle. In order to counteract this situation,

universities need access to software engineering tools that can be incorporated

into the computer science curriculum. This is necessary to ensure the successful

employment of computer science graduates

The World Bank has played an important role in China's economic

transformation since the late 1970s. China used the World Bank well and the

Bank was responsive to China's needs. The Bank did not recommend early or

comprehensive market liberalization or privatization, as it did in some other

145

transition economies, but supported China's pragmatic—learning-by-doing—

approach to economic reform.

It pushed at the margin for critical institutional and policy reforms,

presenting perspective based on international experience, while providing

technical assistance in numerous areas, often through Bank-supported projects.

As the Chinese gained expertise, confidence and access to international capital

markets, the role of the Bank in China inevitably shrank. China now uses the

Bank mainly for selective technical, institutional and conceptual innovations

for development. China and the World Bank both gained from their interaction.

Measures taken for detection of sickness and Rehabilitation of Sick

SSI Units142

The Government form has taken a number of measures time to time for

detection sickness at the incipient stage and towards rehabilitation of sick units

in the small-scale sector.

Financial

Finance is one of the critical inputs for the promotion and development

of the micro and small enterprises. Finance to the MSEs is part of the Priority

Sector Lending Policy of the banks. For the public and private sector banks,

40% of the net bank credit (NBC) is earmarked for the Priority Sector. For the

142 SIDBI Report published by Government of India.

146

foreign banks, however, 32% of the NBC is earmarked for the Priority Sector,

of which 10% is earmarked for the MSE sector. Any shortfall in such lending

by the foreign banks has to be deposited in the Small Enterprise Development

Fund (SEDF) to be set up by the Small Industries Development Bank of India

(SIDBI). The SIDBI is the principal financial institution for promotion,

financing and development of the MSE sector. Apart from extending financial

assistance to the sector, it coordinates the functions of institutions engaged in

similar activities. SIDBI’s major operations are in the areas of (i) refinance

assistance (ii) direct lending and (iii) development and support services.

Commercial banks are important channels of credit dispensation to the sector

and play a pivotal role in financing the working capital requirements, besides

providing term loans (in the form of composite loans). At the State level, State

Financial Corporations (SFCs) and twin-function State Industrial Development

Corporations (SIDCs) are the main sources of long-term finance for the MSE

sector.

The measures in the Policy Package, inter alia, include banks to achieve

a minimum 20% year-on-year growth in credit to the MSME sector and cover

on an average at least 5 new MSMEs at each of their semi-urban/urban

branches per year. In addition, the Ministry of MSME is also implementing the

following major schemes:

Credit Guarantee Scheme: To ensure better flow of credit to MSEs by

minimizing the risk perception of banks/financial institutions in lending

147

without collateral security, the Credit Guarantee Fund Scheme for Micro

and Small Enterprises is being implemented. The scheme covers

collateral-free credit facility extended by eligible lending institutions to

new and existing micro and small enterprises for loans up to Rs.1 crore.

Performance & Credit Rating Scheme: The Performance & Credit

Rating Scheme for manufacturing MSEs is being implemented with the

objective of assisting the MSEs in obtaining performance-cum-credit

rating which would help them in improving performance and also

accessing bank credit on better terms if the rating is high.

However, despite all the efforts, the number of MSEs having accounts

with the banks has been only around 4 million. Taking this into account the fact

that a majority of the MSEs at the lower-end of the sector are outside the ambit

of institutional finance, concerted efforts are being made by the SIDBI to

promote micro finance across the country to enable the unemployed persons to

set up their own ventures. There are more than 100 Micro Finance Institutions

(MFIs) developed by SIDBI that are engaged in implementation of its micro

finance programme. SIDBI has disbursed about Rs.1700 crore (cumulative)

under its programme, benefiting around 50 lakh beneficiaries. The outstanding

loan under the SFMC programme is Rs.950 crore as at the end of March, 2008.

Faced with increased competition on account of globalisation, MSMEs are

beginning to move from an obsession with bank credit to a variety of other

specialized financial services and options. In recent years, the country has

148

witnessed increased flow of capital in the form of primary/secondary securities

market, venture capital and private equity, external commercial borrowings,

factoring services, etc. Some of the measures required for promoting these

emerging sources of finance are: To facilitate the MSME sector to garner

resources, it is imperative that a separate trading exchange be set up

exclusively for the MSMEs; Provide special incentives for encouraging larger

flow of Venture Capital & Private Equity funds into the sector; More liberal

“All-in-Cost Ceilings” for SMEs to raise low-cost funds through the External

Commercial Borrowing route; and Urgent need to bring the legislation on

‘Factoring Services’.

Credit

Credit is one of the critical inputs for the promotion and development of

MSEs. Some of the features of exciting credit policy are:

Priority sector lending

For the public and private sector banks 40 percent of the net bank credit

[NBC] is earmarked for the priority sector. For the in foreign banks by 32

percent. From the 32 percent 10 percent is MSE sector. Any shortfall in such

lending by foreign banks has to be deposited in the Small Enterprise

Development Fund [SEDF] to be set by Small Industries Development Bank

of India [SIDBI]. Its main function is for promotion, financing, and

development of MSE sector. Its major operations are in the areas [i] Refinance

149

assistances [b] Direct lending scheme and [iii] development and supporting

services. Commercial Banks are important channels of credit dispensation to

the sector and play a vital role in financing the working capital requirements,

besides providing term loans. At state level, State Finance Corporation [SFCs]

and twin function SIDCO are main sources of long term finance for MSE

sector. The Government has announced a “Policy Package for Stepping up

Credit to Small and Medium Enterprises” with objective of doubling the flow

of credit to this sector within a period of five years. The Ministry of MSME is

also implementing the following major schemes:

Emerging sources of finance

More advanced MSMEs have started realizing the importance of these

alternative sources of funding to raise the resources and the need for adopting

better governance norms to take advantage of these funding sources. At the end

of March 2007, the loan outstanding against the MSE sector from banks is

estimated at over Rs.127000 crore and Medium enterprises at over Rs. 90000

crore. In MSME sector is estimated to have received funds from emerging

sources like venture capital, equity, borrowings. Factoring etc, to the tune of

Rs. 12000 crore.

150

Credit Guarantee Scheme

This scheme was launched in August 2000, it covers collateral free

credit facility extended by eligible lending institutions to new and excising

MSE for loan is upto 50 lakh per borrowing unit. The guarantee covers up to 75

percent, 80 percent for women entrepreneurs.

Performance and Credit Rating Scheme

This scheme was launched in April, 2005. it covers assisting the

MSMEs in obtaining performance – cum credit rating which would help them

in improving performance and also accessing bank credit on better terms if the

rating is high. Under this scheme, Government reimburses 75 % of fee charged

by rating agency subject to a maximum of Rs 40000.

State Level Inter-Institutional Committee (SLIIC)

The Reserve Bank of India has set up, advice of the Government of

India, State level Inter-Institutional Committee in all states under the

Chairmanship of secretary. Industries department of the concerned State

Government and the local officer – in charge of the RBI's rural planning and

credit department as convener to provide a useful forum for exchange of

information and discussion on problems faced by small and medium scale

industrial Units. The Committee includes representatives of the Small

Industries Service Institute, Small Industries Development Corporation,

151

Industrial Development Bank of India and Banks with Major Involvement in

the Concerned State.

Other banks / organizations whose association may be considered

necessary for deliberations of the committee are extended special invitation for

particular meeting. The committee meets once in a quarter and brings different

parties connected with rehabilitation of viable sick units together so that

detailed parameters for rehabilitation based on consensus can emerge.

The committee deals with cases where terms of credit are linked with

other problems such as deferment of sales tax, electricity dues, etc. where

viability / feasibility studies have been carried out and unit is not found viable

but the management of the unit is not satisfied with the findings of such study

and cases. Mutual agreement cannot be reached on the package by normal inter

– action among the sick units, the financial institutions and Government

agencies. RBI has advised their regional offices that representatives of local

small scale industries association may be invited for SLIIC meeting at half

yearly intervals in which the issue of policy nature concerning SSI units would

only the taken up for discussion.

With a view to supplementing the efforts of the State Government in

reducing the incidents of sickness amongst small-scale units and ensuring

better utilization of installed capacity, the Central Government evolved a

Margin Money Scheme for revival of sick small-scale units. The Ministry of

Industry (Dep't. of Industrial Development) introduced the Margin Money

152

Scheme with effect from 1st January 1982. The scheme did not make much

headway, as the response from the State Governments was poor. The scheme

was revised and liberalized by increasing the maximum quantum of assistance

from Rs.20,000 to Rs.50,000 in consultation with the State Government in June

1987. Ultimately, the scheme was discontinued with effect from 1.4.93 as the

response from states was still poor.

Role of Reserve Bank of India

Reckoning the relative weaknesses in SSI sector to withstand the

difficulties as also the distinction between the small-scale units and tiny sector

units and further that between tiny sector units and units in the decentralized

sector comprising artisans, village and industrial, units, RBI issued a set of

guidelines in February 1987, which lay down

New Policy for small industries, 1991

The Government of India announced a joint package policy measure for

small, tiny, handloom, handicraft and village industries on August 6, 1991. The

primary objectives of the Small Scale Industrial Policy during the nineties

would be to impart more vitality and growth impetus to the sector to enable it

to contribute its might fully to the economy, particularly in terms of growth of

output, employment and exports. The sector has been substantially delicensed.

Further, efforts would be made to deregulate sector with a view to remove all

153

fetes on its growth potential reposing greater faith in small and young

entrepreneurs.

A series of sweeping changes were announced by the Government in the

form of the New industrial Policy, 1991 with the objectives of consolidating the

strength built up during the last four decades of economic planning, that is [a]

to build on the gains already made,[b] correcting the distortions [c] weaknesses

that may have crept in the industrial structure as it has developed over the last

four decades.

Maintaining a sustained growth in the productivity and gainful

employment; and attaining international competitiveness. Rising of investment

ceiling in plants and machinery for small-scale industries from Rs.35 Lakh to

Rs.60 Lakh, deli censing of new units up to an investment of Rs.25 Crores in

backward areas, and liberalized norms for foreign collaboration are the salient

features of the new Industrial Policy announced during 1991. The new policy is

designed to re-orient industrial growth to ensure employment generation,

dispersal of industry in rural areas and to increase exports of small-scale

industries.

Government Policies and Support Measures

The evaluation of the policy framework and support measures of the

government can be broadly grouped into the following the three periods.

154

1948-1991

In all the policy resolutions from 1948-1991, recognition was given to

the micro and small enterprises in term as an effective tool to expand

employment opportunities, help ensure equitable distribution of the national

income and facilitate effective mobilization of private sector resources of

capital and skill. The Micro, Small and Medium Enterprises Development

Organization [earlier SIDCO] was set up in 1954 as an apex body for sustained

and organized growth of Micro, Small and Medium Enterprises. Within next

two years the National Small Industries Corporation, the KVIC and Coir Board

were also setup. The era provided all supportive measures that were required to

the nature of MSMEs, in the form of reservation of items for their exclusive

manufacture , assess to the bank credit for priority sector lending programme of

commercial bank, excise exemption, reservation under the Government

Purchase Programme and 15% price preference for purchases, infrastructure

development and establishment of institute for entrepreneurial and skill

development. MSME development institutes [earlier SISI were set up all over

India to train youth in skill / entrepreneurship and tool rooms were established

with German and Danish assistance for providing technical services essential to

MSE as also for skill training . At a glance state level, district levels were set

up all over country.

155

1991 -1999

The new policy for Small, Tiny, and Village enterprises of August 1991

laid the framework for government support in the context of liberalization,

which sought to replace protection with competitiveness to infuse more

viability and growth to MSEs in the face of foreign competition and open

market. Supportive measures concentrated on improving infrastructure ,

technology and quality. Testing centre were set up for quality certification and

new tools room as well as sub contracting exchanges were established. The

SIDBI and a technology development and Modernization fund were created to

accelerated finance and financial services to the sector. The delayed payment

act was passed to facilitate prompt payment of dues to MSEs and an Industrial

Infrastructure Development [IID] scheme was launched to set mini industrial

estates for small industries.

1999 onwards

The ministry of MSME [earlier known as Small Scale Industries and

Agro & Rural Industries (SSI & ARI)] came into being from 1999 to provide

focused attention to the development and promotion of the sector. The new

policy package announced in August 2000 sought to address the persisting

problems relating to credit, infrastructure, and technology and marketing more

effectively. A Credit Linked Capital Subsidy Scheme was launched in the MSE

sector and a Credit Guarantee Scheme was started to provide collateral free

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loans to Micro and Small entrepreneurs, particularly first generation

entrepreneurs. The exemption limit for relief from payment of Central Excise

Duty was raised to 1 crore and a Market Development Assistance Scheme for

MSEs was introduced. At the same time, MSEs were slowly reduced each year.

In 2006, the long awaited enactment for this sector finally became a reality

with the passage of the Micro, Small and Medium Enterprises Act. In march

2007 at the third package for the promotion of MSME was announced which

comprises the proposals / schemes having direct impact on the promotion and

development of micro and small enterprises, particularly in view of the fast

changing economic environment, wherein to be competitive is the key of

success.

PRESENT POLICY FRAMEWORK

POLICY

Micro, Small and Medium Enterprises Development Act, 2006

The Act, 2006 seeks to facilitate the development of these enterprises as

also enhance their competitiveness. It provides first legal framework for

recognition of the concept of “enterprise” which comprises both manufacturing

and service entities. It defines medium enterprises for first time and seeks to

integrate the three tiers of these enterprises namely Micro, Small and Medium.

The act also provide for a statutory consultative mechanism at the national

level balanced representation of all sections of stakeholders, particularly the

three classes of enterprises; and with a wide range of advisory functions.

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Establishment of specific funds for the promotion, development and enhancing

competitiveness of these enterprises.

Notification of schemes / programmes for this purpose, progressive

credit policies and practices, preference in Government Procurement to product

,services of Micro and Small enterprises more effective mechanism for

mitigating the problems of delayed payments to micro and small enterprises

and assurance of a scheme for easing the closure of business by these

enterprises are some of the other features of the Act.

The Ministry of MSME has also taken a view in the light of liberalized

provisions of the MSMED Act 2006, 24 percent ceiling prescribed for equity

holding by industrial undertaking. The Ministry has drawn up a road map and

has been holding detailed consultations with stakeholders to generate

consensus.

Technology

Competitive technology

In India today has fast paced global scenario, technology has become

more vital than over before. With a view to faster the growth of MSME sector

in the country, Government has set up ten state of the art Tool Rooms and

Training Centre. It provide a invaluable service to the Indian industry by way

of precision tooling and providing well trained craftsman in the area of Tool

and die making and also offers various training programme to meet the wide

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spectrum of technical manpower required in this sector. The Ministry of

MSME implement the following schemes and programmes for the up gradation

of technology of MSMEs:

Mission

The Ministry is also in the process of establishing a technology mission

with the objectives of promoting new and appropriate technologies for

MSMEs, assessing present levels of technology and their forecasting , setting

up technology information center/banks and an IT portal for information

dissemination, carry out detailed technology audits. It encourages research and

development, motivate MSMEs to obtain BIS / ISO certification and organize

awareness campaigns among the MSMEs for quality, standardization, and

customer satisfaction.

ISO 9000 / 14001 Certification Fee Reimbursement Scheme

The Government introduced the scheme to incentives technology up

gradation, quality improvement and better environment management by the

MSEs. The scheme reimburses 75 percent of fees, subject to a maximum of

Rs. 75000 for acquiring Quality Management System [QMS].

Micro and Small Enterprises Cluster Development Programme

It is implemented for holistic development of clusters of MSEs. The

programme measures for capacity building, skill development, technology up

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gradation of the enterprises, improve credit delivery, marketing support, setting

up common facility center etc.. till October 2007, the ministry of MSME has

undertaken the development of over 400 cluster of village, micro and small

enterprises, while 8 other ministries and agencies of the federal government

have also undertaken similar interactions in about 800 more clusters. India has

now acquired considerable expertise in “Cluster Development Programme” and

UNIDO as well as many developing countries are eager to learn about the

Indian success story.

Credit Linked Capital Subsidy Scheme [CLCSS]

This programme specifically aims at assisting individual Micro and

Small enterprises to replace their existing machinery with modern and

efficient ones, with state assistance of 15 percent of bank credit required to

finance the purchases. The MSME Ministry has assisted hundreds of micro

enterprises in India and over $50 million has already been committed to this

scheme, with more in the pipeline.

Infrastructure Development [ID]

The scheme was launched in1994. it covers rural as well as urban areas

with a provision of 50 percent industrial plots are to be reserved for the

enterprises. The scheme provides for upgradation/ strengthening of industrial

facilities in the industrial estates. Infrastructure relates to power distribution

network, water, telecommunication, drainage and pollution control, roads,

160

banks, raw materials, storage, and marketing outlets, common facilities and

technological backup services etc. the margin amount is 40 percent central

government, 80 percent in north east region. The loan amount received from

SIDBI / Banks / Financial Institutions / state funds.

National Manufacturing Competitiveness Programme

The Government has also launched the National Manufacturing

Competitiveness Programme main aim was addressing the technology,

marketing and skill up gradation needs of the sector , mainly public and private

partnership mode. It provides to MSMEs by expert’s advice, and solution on

real time design problems, continue improvement and value addition for

existing products.

Skill Development

The Ministry of MSME have taken up several initiatives to develop

skills in different trades / disciplines. For skill development of the

entrepreneurs and their employees, the MSME development Institution,

Regional Testing Centre, Field Testing Stations and Autonomous bodies were

conducting courses and training programmes. 1,10,000 persons were selected

for this programme per annum. The package for promotion of Micro and Small

Enterprises announced recently conducted by 50000 persons through

specialized course for MSME new formulation.

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Other supports to motivate MSMEs

Marketing, Procurement of materials, Issue tender, Export Promotion,

Strengthening of Database, Inclusiveness, EDP (Entrepreneurship

Development Programme) and Skill Development Programme.

INDIAN MSMEs: AREAS OF COOPERATION

Initially, India had benefited from the experience of several countries

especially in the field of technology. However, the rich Indian experience

gained in the last sixty years in the MSME sector could also be of equal use for

both developing as well as developed countries. Some of the areas that offer

opportunities for cooperation in the MSME sector are:

Consultancy services are related to Building, Policy, Manpower, EDP

and Business Development Services. Establishment of Turnkey Projects

[Manufacturing] Skill upgradation Programme Tool Room and Training

Centre. Providing Consultancy services to existing process such as Machinery,

Tools, and Technology etc. Providing special training programme for special

parties that are SC/ST, Women Entrepreneurs / tailoring product. Providing

consultancy service for institute to frame course design and curriculum for

trainers and programmers. Assistant to product design Product development

and Rapid prototyping services.

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TRAINING PROGRAMME CONDUCTED BY MSME TOOL ROOMS

S.

No Training programme Duration Intake Fees Requirements

1 Design of jigs and

fixtures

10 weeks 30 US $

1800

Degree /DME

are equivalent

2 Sensor technology for

automation

10 weeks 30 US $

1800

Degree/

diploma in any

discipline

3 CAD / CAM 10 weeks 30 US $

1800

Degree /DME

are equivalent

4 Programmable Logic

Controller For Advanced

Automation

10 weeks 30 US $

1800

Degree/

diploma in any

discipline

5 Design of Die costing &

Plastic Processing Tools

10 weeks 30 US $

1800

Degree /DME

are equivalent

6 3D Modeling using pro/

Eng. software

10 weeks 30 US $

1800

Degree /DME

are equivalent

7 Advanced Computer

Aided Manufacturing

10 weeks 30 US $

1800

Degree /DME

are equivalent

8 Design of sheet metal

forming Tools

10 weeks 30 US $

1800

Degree /DME

are equivalent

9 Mechatronics and its

applications

10 weeks 30 US $

1800

Degree /DME

are equivalent

10 Advanced FEA / FAM

using Ansys

10 weeks 30 US $

1800

Degree /DME

are equivalent

Source: Records From Office Of The Development Commissioner [Msme]-

New Delhi 110 108.

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Financial Support Measures

In adequate access to credit, both short term and long term, remains a

perennial problem facing the small-scale sector. To provide access to the capital

market and to encourage modernization and technological up gradation, it has

been decided to allow equity participation by other industrial undertakings in

the SSI, not exceeding 24percent of the total share holding. This would also

provide a powerful boost to ancillarisation and sub-contracting leading to

expansion of employment opportunities.

A beginning has been made towards solving the problem of delayed

payments to small industries by setting up 'factoring' services through small

Industries Development Bank of India (SIDBI). Network of such services

would be set up throughout the country and operated through commercial

banks. A suitable legislation is to be introduced to ensure prompt payment of

the bills of small industries.

It has also been decided to widen the scope of the National Equity Fund

Scheme to cover projects up to Rs.10 lakh for equity support (Up to 15percent).

Single window loan scheme has been enlarged to cover projects up to Rs.20

Lakh with working capital margin up to Rs.10 Lakh. Composite loans under

Single Window Scheme, now available only through State financial

corporations (SFCs) and twin functions State Small industries development

corporations (SSIDCs) would also be channels through commercial banks. This

would facilitate access to a larger number of entrepreneurs.

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Infrastructural facilities

A Technological Development Cell (TDC) has been set up to in the

Small Incentives development Organisation (SIDO) which would provide

technology inputs to improve productivity and competitiveness of the products

of the small scale sector. Adequate and equitable distribution of indigenous and

imported raw materials would be ensured to the small-scale sector.

Marketing and Exports

National Small Industries Corporation (NSIC) would concentrate on

marketing of mass consumption items under common brand name and organize

links between NSIC and SSIDCs Though the small Scale Sector is making

significant contribution to total exports, both direct and indirect, a large

potential remains untapped. The SIDO has been recognized as the nodal agency

to support the small-scale industries in export promotion. An Export

development centre would be set up in SIDO to serve the small-scale industries

through its network of field offices to further export activities of this sector.

Modernization, Technological and Quality Up gradation

Industry Associations would be encouraged and supported to establish

quality counseling and common testing facilities. Technology and markets

would be established. A reoriented programme of modernization and

technological up gradation aimed at improving productivity, efficiency and cost

effectiveness in the small scale sector would be pursued. Indian Institutes of

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Technology (IITs) and selected Regional/other engineering colleges will serve

as Technological Information, Design and development Centres in their

respective command area.

Promotion of Entrepreneurship

Government will continue to support first generation entrepreneurs

through training and will support their efforts. Large number of EDP trainers

and motivators will be trained to significantly expand the entrepreneurship

development programmes (EDP), Industry Associations would also be

encouraged to participate in this venture effectively. Women entrepreneurs will

receive support through special training programmes. Additional employment

opportunities would be generated through training of multi-disciplinary

"barefoot" managers to suit the special requirements of the small scale sector.

Measures taken by the Government for the growth of SSI

The Government of India has started providing special treatment to

these units in the forms of incentives, concessions and subsidies. Such facilities

and assistance provided by the Government. Small Scale industries face some

problems in obtaining credit; in buying inputs, and in selling their products in

the market. The various measures taken by the Government for the promotion

and development of small-scale industries in India are given below in three

separate headings viz. Development Programmes, Financial Assistance, and

other facilities.

166

District Industries Centres

District Industries Centres were started in May 1978. The DICs provide

a package of assistance and facilities for credit guidance, raw materials,

training, marketing, etc. including necessary help to unemployed educated

young entrepreneurs. As on March 1991 there are 422 DICs covering 431

districts of the country.

Incentives in Backward Areas

The Central Government has provided several incentives such as

confessional finance, outright subsidy on fixed capital investment, preferential

treatment in licensing and others to the small-scale industries in backward

areas. Depending upon the category of the districts, the investment subsidy

provided by the Government will also vary from Rs.10 Lakh to 25 Lakh at the

medium.

Entrepreneurial Development Programmes

The small industries development organisation (SIDO) has been

regularly conducting entrepreneurial development programmes since 1970

through the small industries service institutes (SISIs) and their branches with

the help of the State Directorate of Industries, State Financial Corporations,

Commercial banks and other development agencies. The programmes, which

were initially started for graduate engineers, have been later extended to

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women, educated unemployed, artisans, technicians, physically handicapped,

defense personnel, and weaker sections of the community.

Ancillary development and sub-contracting exchanges

Under the ancillary development programme, individual items are

identified for ancillarisation and small scale industries are assisted for securing

sub contract jobs with a view to provide them effective marketing support. As a

part of this programme, 16 sub-contracting exchanges have been set up in SISIs

to promote ancillarisation. These exchanges act as an information house for

matching the requirements of medium/large undertakings looking for sub-

contractors with small units desirous of securing orders from medium/large

undertakings.

Marketing Assistance

The Government being the single largest purchaser of total goods can

assist the small-scale units through buying the products manufactured by them.

Accordingly, 409 items have been exclusively purchased from the small-scale

units. In respect of 13 items, it has been decided to make purchase up to

75percent of the requirements of the Government from the small-scale sector.

Purchases up to 50 percent of the requirements in respect of 28 other items are

also reserved for the small-scale sector.

In order to help the small units market their products, the SSI

corporations in the states can also tender on behalf of the small-scale industrial

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units to the various agencies, including DGS & D., Railways, Defense and

State Stores Purchase authorities, including public sector undertakings.

Modernization Programmes

The modernization programme envisages up gradation of obsolete

technology of small scale industry through identification of their input needs in

rural, urban and backward areas of the country. Under the modernisation

programme, seminars, industrial clinics, industrial workshops modernisation

courses and study visits are organised.

Industrial Estates

Under Industrial Estate Programmes, built-up factory sheds with

infrastructure facilities such as Water, power and other common services to

small scale entrepreneurs on rental basis are provided. One of the objectives of

the programme is to facilitate industrialisation of economically backward and

rural areas.

Reservation of items for production

Another measure designed to promote SSIs is the policy of reservation

of certain product lines for the small sector. The policy was initiated in 1968

when 47 products were reserved for the small-scale sector and the large scale

Industries were not allowed to enter into the field under the industrial licensing

system.

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Export Promotion

Trade exhibitions are held abroad and export worthy S.S.I units are

given opportunity and assistance in exhibiting their selected items in these

exhibitions. SIDO provides assistance towards handling, clearing, insurance,

publicity, freight, etc., without recovering these expenditures from the

participants. The trade enquires generated in these exhibitions are circulated.

Trade delegations and sales-cum-study teams are sponsored from the

small-scale sector under the MDA scheme of the Ministry of commerce, which

provides reimbursement of 60 percent of the expenditure from the funds of

admissible items of expenditure. Under the Advanced Licensing Scheme, small

units are able to import raw materials, components and spare parts required for

export production without payment of export duty and with/without having

export orders on hand.

Further, under the import-licensing scheme, small-scale units can obtain

licenses for imports outside the duty exemption scheme. Import replenishment

under the scheme of registered exports; cash compensatory support; 100

percent export oriented units duty drawbacks and supply of export credit at

confessional rates are the other facilities provided to small scale industries

under the import and export policy.

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Margin Money Scheme

The Margin Money or Seed Capital Scheme was introduced as a

centrally sponsored Scheme in 1973. The scheme was operated through the

state government. The objective of the scheme is to assist the state government

to reduce the incidence of sick units and thereby ensure better utilisation of

installed capacities in the small-scale sector.

National Small Industries Corporation

A small entrepreneur is not able to purchase whatever he requires to set

up an industry from his own monetary resources. National Small Industries

Corporation (NSIC) helps small entrepreneurs to purchase and procure

machinery on hire purchase scheme of NSIC. The corporation was established

to asset the owners of small-scale industrial units to manufacture and supply a

wide variety of stores purchased by the Government of India. Since the growth

of Small Scale Industrial Units in an organised manner demanded certain

facilities and services which no other agency could provide, the NSIC was

called upon to provide these therefore, it had to take up such function as supply

of machinery and equipment on the hire purchase basis, marketing of specific

small industry product of acceptable quality.

Distribution of scarce raw materials, imported components, and the

running of proto-type production-cum- training centers to develop proto-types

of certain machinery, give training to workers in various technical trades.

171

Financial function

Non-availability of credit on easy terms has been one of the major

handicaps of small-scale industries in India. The Government and the Financial

Institutions have introduced various schemes to assist these industries in

obtaining credit facilities. The State Financial Corporation, State Directorates

of Industries and scheduled commercial banks meet long and medium term

credit requirements of small industrial units. These organisations provide

financial assistance to small units on comparatively liberalized terms.

State Financial Corporations (SFCs)

The State Financial Corporations set up under the State Financial

Corporation Act, 1951; render assistance to medium and small-scale industrial

in their respective states. All State Financial Corporations grant term loans for

purchase of land, construction of factory premises and purchase of machinery

and equipment including generating sets from within the country and abroad.

The assistance is granted for setting up new enterprises, for expansion,

diversification or modernisation of existing ones.

State Small Industries Corporations (SSICs)

Many state governments have set up small industries corporations in

order to undertake a number of commercial activities. The most important of

these activities are distribution of scarce raw materials, supply of machinery on

hire-purchase basis, constitution and management of industrial estates,

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procurement of order from Government Departments, and technical assistance

and managerial assistance to small enterprises.

State Directorates of Industries

Directorates of Industries in each state undertake the responsibility for

the development of industries in general and small-scale industries in

particular. The state Directorates run various training schemes, production

schemes and common facilities schemes. They also provide facilities such as

developed industrial land and factory sheds in industrial estates, allocate quota

of scarce raw materials, certify import requirements and organise industrial co-

operatives.

Commercial Banks

Commercial banks provide short-term and medium-term financial

assistance. The medium-term loans are granted for the acquisition of land,

construction of factory premises and purchase of machinery and equipments.

These loans are generally granted for periods ranging from five to seven years.

The short-term credit facilities are granted by the commercial banks for

meeting the working capital needs of small-scale industrial units. Commercial

Banks grant advances usually in three forms: Cash credit facilities against

pledge and /or hypothecation of goods and book debts, etc., purchase and

discount of bills and overdrafts.

173

Margins on various facilities granted by commercial banks vary from 20

to 30 percent. The banks have recently been advised by the Reserve Bank that a

margin of 15 to 25 percent may be stipulated for loans above Rs.25,000

depending upon the purpose and quantum of loan.

Commercial banks also open letters of credit on behalf of their clients

favoring suppliers of raw materials or machinery (both Indian and foreign)

which extend the banker's assurance for payment and thus help their delivery.

Certain transactions, particularly those in contracts of sale to government

departments, may require guarantees being issued in lieu of security/earnest

money deposits for release of advance money, supply of raw materials for

processing, full payment of bills on assurance of performance, etc. Commercial

banks provide such guarantees also.

Industrial Development Bank of India (IDBI)

The IDBI Act envisages a wide range of functions with a considerable

measure of flexibility. The Bank has been authorized to finance all types of

industries, both in the public and private sectors. The IDBI extends assistance

to small scale industries through two major schemes viz.,

i) Bills rediscounting schemes under which the manufacturers of

indigenous machinery/capital equipment can offer deferred payment

facilities to their buyers, (the period of such payment being not less than

six months and not more than five/seven years).

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ii) The relative bills accepted / guaranteed by the buyers and /or the

manufacturer with his own bank to realize the cost of machinery

immediately can discount his banker

iii) Refinance scheme under which IDBI refinances eligible term loans

granted by banks to the SSI Borrowers. Besides, the IDBI can undertake

promotional activities such as marketing and investment research and

surveys as well as techno-economic studies. It can also provide technical

and administrative assistance to any industrial enterprises for promotion,

management or expansion.

iv) There are no restrictions placed on the IDBI regarding the nature and

type of security that may be accepted. The banking system in India

comprises of the Reserve Bank of India. Commercial banks and

cooperative banks and credit societies .

The commercial banks are the premier institutional structure of the

banking system. The principal function of these institutions is to satisfy

simultaneously the portfolio preferences of the borrowers on one side and the

lenders on the other. They mobilize resources from the savers in the form of

deposits and extend credit facilities to borrowers in the form loans, advances

and securities. Loans and advances provided by these institutions can be

categorized into short-term funds and long-term funds. The latter are advanced

for purchase of plant and machinery while the former are provided for purchase

of raw materials, stores, spare parts and the like. However following the

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traditional British banking practice, commercial banks provide more short term

funds to the investors in industry and trade than long term loans. The pattern of

credit disbursement has undergone substantial changes since 1950.

Commercial banks extended credit to commerce and trade to a larger

extend than to manufacturing industry until 1958. Since the commencement of

the second five Year Plan, which laid emphasis on rapid industrialization, the

pattern of credit flow took a new turn in favor of medium and large industry. As

a result, the share of industry, in public and private sectors in total bank credit

increased from 34.8 Percent to 67.5 Percent during the period 1954 to

1968.Since nationalization of 14 major commercial banks in July 1969, the

Government of India assigned new priorities to commercial banks with regard

to the flow of credit to hitherto neglected sectors, called "priority sectors." The

emphasis thus shifted from industry to the priority sectors. Further the supply

of credit was controlled through statutory regulations and monetary regulations.

On the other hand the demand for bank credit has also undergone substantial

increase. Factors such as, large growth in the number of industrial units,

diversification of existing units, increase in industrial and agricultural

production, increasing needs of short and long-term funds to maintain the

increased levels of production, pushed up the demand for banks credit.

Documents

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