GOVT. POLICIESTOWARDS SSIs Fundamentals of EntrepreneurshipTanushree Bhowmick, Astt. Professor,Deptt. of Business Administration,DSMS Group of Institutions
INTRODUCTION The striking feature : Progress of industrialisation over the last 40 years Tremendous stress on development strategy through SSI sector Important element of development strategy : Promotion of industries during 5 year plans SSI sector enjoys the status of priority sector for seeking financial assistance Until 1991 > stress was on indigeneous production, domestic industries protected from both internal & external competition
INTRODUCTION CONTD…… Protection from internal competition by licensing Protection from external competition through import restriction & high tariff barrier The Govt.’s objectives & intentions towards industry including small scale industry were announced through Industrial Policy Resolutions (IPRs) of 1948, 1956, 1977, 1980, 1990 & 1991.
THE IPR, 1948 The importance of small scale industries in overall industrial development of the country was accepted for the first time. The objectives were : Create large scale employment with low capital investment Mobilise unused resources of capital & skill Ensure more equitable distribution of national income Widen opportunities for medium & small units & counter the tendencies towards concentration of economic powerThe Central Govt. set up the Small Industries DevelopmentOrganisation (SIDO) in 1954, under the Ministry Of Industries,to develop SSI sector.
THE IPR, 1956 Aim of the policy : Protection plus development The Govt. reserved 128 items for exclusive production in small sector, to make SSIs self supporting The resolution also reserved 166 items for exclusive purchase by Govt. from small sector The policy puts forth the following arguments in favour of small scale industrial units : The employment argument The equality argument The latent resource argument The decentralisation argument
THE EMPLOYMENT ARGUMENT SSI sector – an important solution for a labour-surplus economy Small enterprises are labour intensive & more employment oriented compared to large scale industries Most small enterprises are run by sole traders or partnership firms which helps in better employer-employee relationships
THE EQUALITY ARGUMENT Large enterprises cause concentration of economic power & monopolistic tendencies , whereas small scale industries bring about equality in income distribution & impulses of self development
THE LATENT RESOURCEARGUMENT Small enterprises are able to tap latent resources like entrepreneurial ability, hoarded wealth, creativity, innovativeness etc. Conducive environment for growth & development if provided to entrepreneurs, can make them more competitive Contribution of SSIs in industrial production: 40%, in country’s export : 35%
THE DECENTRALISATIONARGUMENT Stresses the need of regional dispersal of industries Society & people can take benefit of industries if the location of industries is suitable to them Setting small industries in remote & rural areas can give more benefit than concentration of only large industries in metropolitan cities Decentralization can help in tapping local resources like raw materials, idle savings, local talent
THE IPR, 1977 Main thrust on promotion of cottage & small industries The policy categorized small sector in three categories : Small scale industries Tiny units Cottage & household industries It reserved 504 items for production in small sector Providing special marketing services like quality control, product standardization etc Establishment of District Industries Centres (DICs) in all districts of the country to serve as a focal point of development of small & cottage industries
THE IPR, 1980 The main objective was facilitating an increase in industrial production through optimum utilization of installed capacity & expansion of industries The resolution envisaged: Increase in investment ceiling from Rs. 1 lakh – Rs. 2 lakhs for tiny units, from Rs. 10 lakhs – Rs. 20 lakhs for small scale units & from Rs.15 lakhs – Rs. 25lakhs for ancillaries Promotion of village & rural industries to generate economic viability in villages Nucleus plants replaced District Industry Centres to promote maximum small scale industries, in industrially backward district
THE IPR,1990 The resolution continued to give increasing importance to small scale enterprises for employment generation Investment ceiling in plant & machinery was raised from Rs. 35 lakhs to Rs. 60 lakhs & for ancillary units from Rs.45 lakhs to Rs. 75 lakhs 836 items were reserved for exclusive manufacture in small sector A new scheme of Central Investment Subsidy exclusively for small sector had been implemented in rural & backward areas
THE IPR,1990 Contd…. To improve the competitiveness of products manufactured in small scale sector, programmes of technology up gradation will be implemented under the umbrella of Technology Development Centre in Small Industries Development Organisation (SIDO) The Small Industries Development Bank Of India (SIDBI) was established in 1990, to ensure adequate & timely flow of credit facilities for small scale industries To establish a special cell in SIDO for training of women & youth
THE IPR,1990 Contd… Implementing de-licensing of all new units with investment of Rs. 25 crores in fixed assets in non-backward areas & Rs. 75 crores in centrally notified backward areas De-licensing shall be implemented in case of 100% export oriented units set up in Export Processing Zones (EPZ) up to an investment ceiling of Rs. 75 lakhs
THE SMALL SCALE INDUSTRIALPOLICY, 1991 The main thrust of the policy is to impart more vitality & growth impetus to the small sector, to enable it to contribute towards output, employment & exports The salient features of the policy are : Increase in investment limit in plant & machinery of tiny enterprises from Rs. 2lakhs to Rs. 5 lakhs, irrespective of the location of the enterprise Inclusion of industry related services & business enterprises in small scale industry, irrespective of their location
THE SMALL SCALE INDUSTRIALPOLICY, 1991Contd… Market promotion of small industries products through co- operative / public sector institutions, other specialized professional / marketing agencies To accord priority to small & tiny sector in allocation of indigenous raw materials