Small Scale and Village Industry

Presented byNishant gupta Siddharth narayan Sudhanshu shekhar rai

All the industrial policy resolutions have emphasized the importance of developing the village and small industries. The Small scale industries have a place of pride in our economy. They have a high potential for generating employment, dispersal to semi-urban and rural areas, promoting entrepreneurship and earning foreign exchange.
The importance of the small scale industries has been highlighted by its inclusion in the Twenty Point programme which has reiterated the need for giving all facilities to the SSIs. The village and small scale sector in India consists of a very wide spectrum of industries categorized under small, tiny and cottage segments. It consists of:

Traditional cottage and household industries Modern small scale industries including tiny units and powerlooms.

Definition

Small Scale Industrial Undertaking: The conventional definition included cottage and handicraft industries which employ traditional labor intensive methods to produce traditional products, largely in village households. Eg: Handloom textile industry. The operational definition includes all those undertakings having an investment in fixed assets in plant and machinery, whether held on ownership terms or by lease or by hire purchase, not exceeding Rs. 60 lakhs. The investment ceiling has been raised to Rs. 3 crore for SSI units. However, in 1999 the Government decided to lower the investment ceiling to Rs. 1 crore. The third definition relates to national income accounting. This includes all manufacturing and processing activities, including maintenance and repair services, undertaken by both household and non-household small-scale manufacturing units, which are not registered under the Factories Act, 1948.

Different segments of SSI:

Ancillary Industrial Undertaking: An ancillary undertaking which is engaged or is proposed to be engaged in the manufacture or production of parts, components, tooling or intermediates or the rendering of services is termed as Ancillary Undertaking. Tiny Enterprise: A unit is treated as tiny enterprise where investment in plant and machinery does not exceed Rs. 25 lakhs irrespective of the unit location. Small scale service and Business Enterprise: Enterprises rendering industry related service/business with investment upto Rs. 5 lakhs 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 third year 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 segment and other traditional industries fall under the VSI sector and are termed as unorganized sector. Such units are not registered under the Factories Act as they employ either less than 20 workers (if power is not used) or less than 10 workers(if the unit is using power) in the industrial units.

Objectives of the SSI

To 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 of local skills and resources. To develop entrepreneurship in combination with improved methods of production To preserve craftsmanship and art heritage of the country.

Importance:

The Small Scale Industry Sector has emerged as India's engine of growth in the New Millennium. By the end of March 2000, the SSI sector accounted for nearly 40 per cent of gross value of output in the manufacturing sector and 35 per cent of total exports from the country. Through over 32 lakh units, the sector provided employment to about 18 million people.

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

In a country like India, which has abundant labor supply and unemployment and underemployment and a rapidly rising labor force, the small scale industry assumes significance due its employment potential. Another advantage is its ability to provide employment especially to 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 within the household premises. Thus it has the locational advantage. In these industries the capital output and the capital labor ratios are very low which is of advantage to a labor abundant and capital scarce economy. These industries are of help to the weaker sections of society.

These industries promote economizing of resource utilization and conservation of resources. They ensure maximum utilization of locally available raw materials by adopting easily adaptable techniques. These industries can be developed in all areas including backward, 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 cause energy crisis and foreign exchange crisis. These industries account for about one-third of our total export earnings. Income generated is dispersed more widely in the community than income generation in a few large enterprises which brings about greater equality of income distribution

Policy Initiatives

Small Industry Policies and incentives: All the industrial policy resolution gave a thrust to the promotion of small units through various incentives. These incentives pertained to financial, fiscal and infrastructure related measures targeted at achieving the growth of the SSI sector. In addition the State Government also design suitable incentives to encourage the growth of the SSI sector. There is also a policy of reservation of items for exclusive manufacture by small units. There is also the Preferential Purchase Policy designed to help SSIs to market their produce better. Economic Reforms and SSI Policy: Economic reforms initiated since 1991 facilitate the growth of the SSI sector. Eg: Foreign Direct Investment is allowed upto 24% in the equity of a SSI unit. Infrastructural Facilities: The Central and State Governments have devised schemes for the development of suitable infrastructure to encourage the growth of the SSI sector. There are schemes like Integrated Infrastructural Development Scheme and the Growth Schemes. Small Industry Clusters: SSIs operating in cluster derive their strength from being together and benefit from backward and forward linkages since such units have similar cultural and social backgrounds. The GOI have evolved unique schemes for the development of clusters.

Industrial Growth Centres: The GOI promotes industries in the backward areas. There are 66 such centres for which the GOI has provided funds. The objective of the scheme was to provide the best of the infrastructure facilities in these Growth Centres nation wide. The important prerequisite is that its sphere of influence should cover an area of 400 to 800 hectares.
Pollution Control: The GOI has notified 17 industries where an SSI unit needs to obtain clearance from the Central Pollution Control Board. For other units, an acknowledgement by the State Pollution Control Board of the application form would serve as consent for the SSI unit. Women Entrepreneurs: In order to promote and develop units owned by women, a number of exclusive facilities have been provided. SIDBI and SIDO (Small Industries Development Organisation) have been conducting development programmes for the women entrepreneurs. Marketing: The marketing infrastructure, for SSIs consists of a combination of agencies and incentives:

National Small Industries Corporation (NSIC) to promote the marketing of SSIproducts under the preferential purchasing policy. 16 sub contracting exchanges to identify items for ancilliarisation from various PSUs

Marketing Development Assistance (MDA) to reimburse expenses incurred by SSI delegations that visit foreign countries. Training programmes for export packing. Organising exhibitions and international trade fairs. Export Promotion Councils Quality certification by the Bureau of Indian Standards.

Major problems of the small scale units are:

Financial Problems:Problem of inputs: Non availability of quality inputs at reasonable 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 willing human resources. However these units are unable to provide the packages required by such manpower. Technology modernization has become a problem particularly because of the asset limit being fixed at Rs. 50 lakhs. To circumvent this problem many entrepreneurs set up new units with modern technology. Marketing Problems: Small entrepreneurs do not have the resources and expertise 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 many hurdles 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 meant to assist the SSI sector.

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

Khadi and Village Industries

Khadi and Village Industry means any cloth woven on handlooms in India from cotton, silk or woolen yarn handspun in India or from mixture of any two or all such yarns. The Khadi and Village Industries Commission (KVIC) is a statutory organization engaged in the task of promoting and developing khadi and village industries with a view to creating employment opportunities in the rural areas and thereby strengthening the rural industry. The broad objectives of the KVIC are: The social objective of providing employment The economic objective of producing saleable articles The wider objective of creating self reliance amongst the people and building up a rural community

GOVERNMENT AGENCIES ASSISTING SSISMALL INDUSTRIES DEVELOPMENT ORGANISATION(SIDO)

SIDO was established in 1954 on the basis of the recommendations of the Ford 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 autonomous bodies under its management. These autonomous bodies include Tool Rooms, Training Institutions and Product-cum-Process Development Centres. 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 and product profiles, technical and managerial consultancy, assistance for exports, pollution and energy audits etc. SIDO provides economic information services and advises Government in policy formulation for the promotion and development of Micro, Small & Medium Enterprises (MSMEs). Consequent to the increased globalization of the Indian economy, small industries are required to face new challenges. SIDO has recognised the changed environment and is currently focusing on providing support in the fields of credit, marketing, technology and infrastructure to Micro,

Small & Medium Enterprises (MSMEs). Global trends and national developments 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

achieve its avowed objectives through a gamut of operations ranging from training, consultancy, research and education, to extension and information services.

The Indian Institute of Entrepreneurship (IIE)

The Indian Institute of Entrepreneurship (IIE) was established in 1993 by the then Ministry of Industry, Government of India with its Headquarter at Guwahati to undertake training, research and consultancy activities in the field of small industry and entrepreneurship. The Institute was registered under the Societies Registration Act (XXI) 1860. It started its activities from April 1994. Besides the Government of India, North Eastern 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 in April 1990 under an Act of Indian Parliament as the principal financial institution for Promotion, Financing and Development of the units in the small scale sector and Co-ordinating the functions of other institutions engaged in similar activities.

Since its inception, SIDBI has been assisting the entire spectrum of MSME Sector 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 the former 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 objective of creating self-reliance amongst the poor and building up of a strong rural community spirit. The KVIC is charged with the planning, promotion, organisation and implementation of programs for the development of khadi and other village industries in the rural areas in coordination with other agencies engaged in rural development wherever necessary.