profile of the study area and concept of...
TRANSCRIPT
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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.
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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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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.
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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.
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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
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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
Source: Primary data
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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
Source: Primary data
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.
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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
Source: Primary data
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
Performance District Credit Plan all sectors (BLOCK WISE)
(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
Source: Primary data
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
Source: Primary data
130
Performance District Credit Plan all sectors (BLOCK WISE)
(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
Source: Primary data
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,
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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.
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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.
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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.
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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.