Small Scale and Village Industry

8/4/2019 Small Scale and Village Industry

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Small Scale and Village Industry

Presented by-Nishant guptaSiddharth narayan

Sudhanshu shekhar rai


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All the industrial policy resolutions have emphasized theimportance of developing the village and small industries. TheSmall scale industries have a place of pride in our economy.

They have a high potential for generating employment, dispersalto semi-urban and rural areas, promoting entrepreneurship andearning foreign exchange.

The importance of the small scale industries has beenhighlighted by its inclusion in the Twenty Point programme whichhas reiterated the need for giving all facilities to the SSIs.

The village and small scale sector in India consists of a very widespectrum of industries categorized under small, tiny and cottagesegments. It consists of:

Traditional cottage and household industriesModern small scale industries including tiny units andpowerlooms.


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Definition

Small Scale Industrial Undertaking:The conventional definition included cottage and handicraftindustries which employ traditional labor intensive methods toproduce traditional products, largely in village households. Eg:Handloom textile industry.The operational definition includes all those undertakings havingan investment in fixed assets in plant and machinery, whetherheld on ownership terms or by lease or by hire purchase, notexceeding Rs. 60 lakhs. The investment ceiling has been raisedto Rs. 3 crore for SSI units. However, in 1999 the Governmentdecided to lower the investment ceiling to Rs. 1 crore.

The third definition relates to national income accounting. Thisincludes all manufacturing and processing activities, includingmaintenance and repair services, undertaken by both householdand non-household small-scale manufacturing units, which arenot registered under the Factories Act, 1948.


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Different segments of SSI:

Ancillary Industrial Undertaking:An ancillary undertaking which is engaged or is proposed to be engaged in themanufacture or production of parts, components, tooling or intermediates or therendering of services is termed as Ancillary Undertaking.

Tiny Enterprise:A unit is treated as tiny enterprise where investment in plant and machinery does notexceed Rs. 25 lakhs irrespective of the unit location.

Small scale service and Business Enterprise:Enterprises rendering industry related service/business with investment upto Rs. 5lakhs in fixed assets, excluding land and building are called SSBEs.Export Oriented Units:A unit with an obligation to export 30% of annual production by the end of the thirdyear of commencement of production and having investment ceiling in fixed assets plant and machinery upto Rs. 1 crore is regarded as an EOU.

Organised and Unorganised Sector:Units in the Factory sector Are termed as organized sector units. These units are

registered under the Factories Act, 1948. The remaining units of the SSI segmentand other traditional industries fall under the VSI sector and are termed asunorganized sector. Such units are not registered under the Factories Act as theyemploy either less than 20 workers (if power is not used) or less than 10 workers(ifthe unit is using power) in the industrial units.


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Objectives of the SSITo assist in the growth and widespread dispersal of industries.

To increase the level of earnings by artisans.To sustain and create avenues of self employment.To ensure regular supply of goods and services through use oflocal skills and resources.To develop entrepreneurship in combination with improvedmethods of productionTo preserve craftsmanship and art heritage of the country.

Importance:The Small Scale Industry Sector has emerged as India's engineof growth in the New Millennium. By the end of March 2000, theSSI sector accounted for nearly 40 per cent of gross value ofoutput in the manufacturing sector and 35 per cent of totalexports from the country. Through over 32 lakh units, the sectorprovided employment to about 18 million people.


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The distinguishing features and major advantages of theseindustries particularly khadi and village industries are:

In a country like India, which has abundant labor supply andunemployment and underemployment and a rapidly rising laborforce, the small scale industry assumes significance due itsemployment potential.Another advantage is its ability to provide employment especiallyto the agriculturists in the off season.This also provides considerable employment to women, children,old aged etc. It is also able to provide part-time employment.Some of these industries are able to provide employment withinthe household premises. Thus it has the locational advantage.

In these industries the capital output and the capital labor ratiosare very low which is of advantage to a labor abundant andcapital scarce economy.These industries are of help to the weaker sections of society.


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These industries promote economizing of resource utilizationand conservation of resources. They ensure maximumutilization of locally available raw materials by adopting easily

adaptable techniques.These industries can be developed in all areas includingbackward, hilly and tribal inaccessible areas.Help increase the pace of rural development.They have comparatively less ecological problems in

comparison to the large industries.As they use very little electric power or oil, they do not causeenergy crisis and foreign exchange crisis.These industries account for about one-third of our total exportearnings.

Income generated is dispersed more widely in the communitythan income generation in a few large enterprises which bringsabout greater equality of income distribution


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Policy InitiativesSmall Industry Policies and incentives: All the industrial policy resolutiongave a thrust to the promotion of small units through various incentives.

These incentives pertained to financial, fiscal and infrastructure relatedmeasures targeted at achieving the growth of the SSI sector. In additionthe State Government also design suitable incentives to encourage thegrowth of the SSI sector. There is also a policy of reservation of items forexclusive manufacture by small units. There is also the PreferentialPurchase Policy designed to help SSIs to market their produce better.

Economic Reforms and SSI Policy: Economic reforms initiated since 1991facilitate the growth of the SSI sector. Eg: Foreign Direct Investment isallowed upto 24% in the equity of a SSI unit.

Infrastructural Facilities: The Central and State Governments havedevised schemes for the development of suitable infrastructure toencourage the growth of the SSI sector. There are schemes likeIntegrated Infrastructural Development Scheme and the GrowthSchemes.

Small Industry Clusters: SSIs operating in cluster derive their strengthfrom being together and benefit from backward and forward linkagessince such units have similar cultural and social backgrounds. The GOIhave evolved unique schemes for the development of clusters.


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Industrial Growth Centres: The GOI promotes industries in thebackward areas. There are 66 such centres for which the GOI hasprovided funds. The objective of the scheme was to provide thebest of the infrastructure facilities in these Growth Centres nation

wide. The important prerequisite is that its sphere of influenceshould cover an area of 400 to 800 hectares.

Pollution Control: The GOI has notified 17 industries where an SSIunit needs to obtain clearance from the Central Pollution ControlBoard. For other units, an acknowledgement by the State PollutionControl Board of the application form would serve as consent for theSSI unit.

Women Entrepreneurs: In order to promote and develop units ownedby women, a number of exclusive facilities have been provided.SIDBI and SIDO (Small Industries Development Organisation) havebeen conducting development programmes for the women

entrepreneurs.

Marketing: The marketing infrastructure, for SSIs consists of acombination of agencies and incentives:

National Small Industries Corporation (NSIC) to promote the marketing ofSSIproducts under the preferential purchasing policy.

16 sub contracting exchanges to identify items for ancilliarisation fromvarious PSUs


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Marketing Development Assistance (MDA) to reimburse expenses incurredby SSI delegations that visit foreign countries.Training programmes for export packing.Organising exhibitions and international trade fairs.

Export Promotion CouncilsQuality certification by the Bureau of Indian Standards.


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Major problems of the smallscale units are:

Financial Problems:Problem of inputs: Non availability of quality inputs atreasonable prices is an important problem facing this unit.The increased flow of industrial credit has not covered the artisan sector

adequately which continues to raise credit at high interest rates.In order to achieve performance, small scale units need efficient and willinghuman resources. However these units are unable to provide the packagesrequired by such manpower.Technology modernization has become a problem particularly because ofthe asset limit being fixed at Rs. 50 lakhs. To circumvent this problem manyentrepreneurs set up new units with modern technology.Marketing Problems: Small entrepreneurs do not have the resources andexpertise to market their products effectively.Competition from Large Units: Increasing global competition poses a big

challenge. 550 items on the list reserved for SSI are now freely importable.Institutional Constraints: The small entrepreneurs have to overcome manyhurdles to obtain assistance from the institutions set up for their assistance.The District Industries Centres have not performed as per expectations.There are many criticisms about the functioning of the organizations meantto assist the SSI sector.


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The organizational base of many of the SSI units has remained weak.The recent transformation of the Indian capital market has not benefitedthe SSI sector which continues to operate as proprietary concerns.


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Khadi and Village IndustriesKhadi and Village Industry means any cloth woven on

handlooms in India from cotton, silk or woolen yarn handspunin India or from mixture of any two or all such yarns. TheKhadi and Village Industries Commission (KVIC) is a statutoryorganization engaged in the task of promoting and developingkhadi and village industries with a view to creatingemployment opportunities in the rural areas and thereby

strengthening the rural industry. The broad objectives of theKVIC are:The social objective of providing employmentThe economic objective of producing saleable articlesThe wider objective of creating self reliance amongst the

people and building up a rural community


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GOVERNMENT AGENCIES ASSISTING SSI-

SMALL INDUSTRIES DEVELOPMENT ORGANISATION(SIDO)SIDO was established in 1954 on the basis of the recommendations of theFord Foundation. Over the years, it has seen its role evolve into an

agency for advocacy, hand holding and facilitation for the Micro, Small& Medium Enterprises Sector. It has over 60 offices and 21 autonomousbodies under its management. These autonomous bodies include

Tool Rooms, Training Institutions and Product-cum-Process DevelopmentCentres. SIDO provides a wide spectrum of services to the Micro, Small &Medium Enterprises Sector. These include facilities for testing, toolmenting,training for entrepreneurship development, preparation of project andproduct profiles, technical and managerial consultancy, assistance for

exports, pollution and energy audits etc. SIDO provides economicinformation services and advises Government in policy formulation for thepromotion and development of Micro, Small & Medium Enterprises (MSMEs).

Consequent to the increased globalization of the Indian economy, smallindustries are required to face new challenges. SIDO has recognised the

changed environment and is currently focusing on providing support inthe fields of credit, marketing, technology and infrastructure to Micro,
http://www.kvic.org.in/


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Small & Medium Enterprises (MSMEs). Global trends and nationaldevelopments have accentuated SIDOs role as a catalyst of growth

of small enterprises in the country.

The National Small Industries Corporation Limited ( NSIC ) The National Small Industries Corporation Ltd., an ISO 9001:2000 Company,was established in 1955 by the Government of India with a view to promote, aid and foster the growth of Small Industries in the country. NSIC continues to remain at the forefront of industrial development throughout the country,

with its various programs and projects, to assist the Micro, Small & Medium Enterprises Sector in the country. The Corporation provides integrated Technology, Marketing and Financial support to the Micro, Small & Medium

Enterprises Sector.

National Institute for Micro, Small and Medium Enterprises (NIMSME) The National Institute for Micro, Small and Medium Enterprises (NIMSME),since its inception in 1960 by the Government of India, has taken gigantic strides to become the premier institution for the promotion, development and modernization of the SME Sector. An autonomous arm of the Ministry of Micro, Small and Medium Enterprises (MSMEs), the Institute strives to
http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nimsme.org/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/http://www.nsic.co.in/


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achieve its avowed objectives through a gamut of operations ranging fromtraining, consultancy, research and education, to extension and informationservices.

The Indian Institute of Entrepreneurship (IIE) The Indian Institute of Entrepreneurship (IIE) was established in 1993 bythe then Ministry of Industry, Government of India with its Headquarter atGuwahati to undertake training, research and consultancy activitiesin the field of small industry and entrepreneurship. The Institute was

registered under the Societies Registration Act (XXI) 1860. It started itsactivities from April 1994. Besides the Government of India, NorthEastern Council, Small Industries Development Bank of India and

Government of Arunachal Pradesh are its sponsors.

Small Industries Development Bank of India (SIDBI)Small Industries Development Bank of India (SIDBI) was established inApril 1990 under an Act of Indian Parliament as the principal financialinstitution for Promotion, Financing and Development of the units in thesmall scale sector and Co-ordinating the functions of other institutions

engaged in similar activities.
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Since its inception, SIDBI has been assisting the entire spectrum of MSMESector including the tiny, village and cottage industries through suitable

schemes tailored to meet the requirement of setting up of new projects,expansion, diversification, modernisation and rehabilitation of existing units.

The Khadi and Village Industries Commission (KVIC) The Khadi and Village Industries Commission (KVIC) is a statutory body

created by an Act of Parliament (No.61 of 1956 and as amended by Act

No. 12 of 1987). Established in April 1957, it took over the work of theformer All India Khadi and Village Industries Board. The broad objectives

that the KVIC has set before it are : the social objective of providing employment,The economic objective of producing saleable articles and the wider objectiveof creating self-reliance amongst the poor and building up of a strong ruralcommunity spirit. The KVIC is charged with the planning, promotion,

organisation and implementation of programs for the development of khadiand other village industries in the rural areas in coordination with otheragencies engaged in rural development wherever necessary.
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Small Scale and Village Industry