MSME

1.  Industrial Policy Resolution (IPR) 1956 stated:
“They provide immediate large scale employment, they offer a
method of ensuring a more equitable distribution of the
national income and they facilitate an effective mobilization of
resources of capital and skill which might otherwise unutilized.
Some of the problems that unplanned urbanization tends to
create will be avoided by the establishment of small centres of
industrial production all over the country”.

2. What is SSI (Small Scale Industries)
 A small scale industry (SSI) is an industrial
undertaking in which the investment in
fixed assets in plant & machinery, whether
held on ownership term or on lease or hire
purchase, does not exceed Rs. 1Crore.
However, this investment limit is varied by
the Government from time to time.

3. Micro Small and Medium
Enterprise Act 2006
Manufacturing Sector
Enterprise Investment in Plant and Machinery
Micro Enterprise Does not exceed 25 lakhs Rupees
Small Enterprise More than 25 lakhs Rupees but does not exceed 5
crore Rupees
Medium Enterprise More Than 5 crore Rupee but does not exceed 10 crore
Rupees
Service Sector
Enterprise Investment in Plant and Machinery
Micro Enterprise Does not exceed 10 lakhs Rupees
Small Enterprise More than 10 lakhs Rupees but does not exceed 2
crore Rupees
Medium Enterprise More Than 2 crore Rupee but does not exceed 5 crore
Rupees

4. ANCILLARY UNIT
 Industrial units having an investment in plant and machinery,
whether held on ownership or by lease or by hire purchase does not
exceed Rs. 1 crore and engaged or is proposed to be engaged in the
manufacture or production of parts, components, sub assemblies,
tooling and intermediaries, or the rendering of service and supply or
render at least 50 per cent of its production or services as the cases
may be to one or more other industrial undertakings.
TINY INDUSTRY
 The investment limit for tiny industry is Rs. 25 lakh in plant and
machinery. There is no restrictive condition of the location of the unit
in small towns.
 COTTAGE INDUSTRIES: These are also called household industries.
They are organized by individuals’ and with the help of members of
the household (including family labour) and are pursued as full time
or part time occupation.

5. CHARACTERISTICS OF SSI
The following are the characteristics of SSI
• A small unit is generally a one-man show. Even if SSI is run on partnership or
company, the activities are carried by one of the partners or directors; the others are
as sleeping partners.
• In case of SSI, the owner himself or herself is a manager also and hence an SSI is
managed in a personalized fashion. The owner takes effective participation in all
matters of business decision making.
• The scope of operation of SSI is generally localized, catering to the local and
regional demands.
• The gestation period i.e., the period after which return on investment starts is
relatively lower when compared to large units.

6. CHARACTERISTICS OF SSI
 SSI’s are fairly labour intensive with comparatively smaller capital
investment.
 Small units use indigenous resources and therefore, can be located
anywhere subject to the availability of these resources like raw materials,
labour etc.
 Using local resources Small Units are decentralized and dispersed to rural
areas. Thus small units promote balanced regional development and
prevent the influx of job seekers from rural areas to cities.
 Small scale units are more change susceptible and highly reactive and
receptive to socio-economic conditions. They are more flexible to adopt
changes like introduction of new products, new method of production, new
materials, new markets and new form of organization etc.

7. TYPES OF SSI According to
Planning Commission Of India

9. The policy of reservation of products exclusive
manufacture in SSI sector was initiated in 1967
Year Items Reserved Items Deserved
1967 47
1984 873
1990 836
1997 851
1999 821
2001 799
2002 749 51
2003 674 75
2004 604 85
2005 497 108

10. SCOPE
– Manufacturing activities
– Servicing/repairing activities
– Retailing activities
– Financial activities
– Whole-sale business
– Construction activities
– Infrastructural activités like transportation,
communication etc.

11. STEPS TO START AN SSI
 Decision to be self-employed
 Analyzing strengths, weaknesses, opportunities and threats
(SWOT analysis)
 Scanning of business environment
 Training
 Product selection
 Market survey
 Form of organization
 Location
 Technology
 Machinery and equipment
 Project report preparation

12. POLICY INITIATIVES IN SSI
DURING 2006-07
 Employment : 5 Industries, namely, textiles, food processing, petroleum,
chemicals and petro-chemicals, leather and automobiles, with employment
opportunities have been identified.
 Textiles: Fund allocation for Technology Up gradation Fund (TUF)
Scheme increased from Rs. 435 crore to Rs. 535 crore. Rs. 189 crore has
been allocated for Scheme for Integrated Textiles Parks (SITP); Jute
Technology Mission will be launched; a National Jute Board shall be
established.
 Handlooms: 100 more clusters to be added to cluster development as a
cost of Rs. 50 crore; provision for handloom sector shall be increased to
Rs. 241 crore from Rs. 195 crore; a handloom ‘mark’ will be launched.
 Small Enterprises: 180 items identified for dereservation; corpus of Credit
Guarantee Fund to be raised to Rs. 2,500 crore from Rs. 1132 crore in five
years; Credit Guarantee Trust for Small Industries to reduce guarantee fee
from 2.5% to 1.5% for all loans; 10 schemes drawn up under Five Year
National Manufacturing Competitiveness Programme.

13. Organisation Structure of SSI
 1) Decide on the Constitution :
There are 3 Major Alternatives :
a) Proprietary
b) Partnership
c) Company.

14. In fact, this has to be decided at the initial
stages of the Project & necessary formalities
should be completed by the time the
application for Provisional Registration
Certificate (PRC) is made to DIC (District
Industries Centre).
a)Proprietary Enterprise : A
Single Individual is the Owner of such
an Enterprise. The Proprietor may
proceed to obtain PRC from the DIC.

15. b) Partnership Enterprise (Firm):
This is an Association of Two or more Persons,
subject to a Maximum of 20 Persons. They are
governed by the Indian Partnership Act , 1932 &
rules framed there under the State Govt. It is
advisable to have a Partnership Deed Agreement
on Stamp Paper of Appropriate Value.

16. Registration Formalities
of a Partnership Firm :
For Registering a Partnership Firm, an
Application in the prescribed form has to be submitted
to the Registrar of Firms of the District , along with
the authenticated copy of the Partnership deed & the
prescribed fee & must obtain “Form A” & “Form C”
from the Registrar of Firms for having registered the
Partnership Firm.

17. c) Company:
This may be a Private or Public Limited Company.
A Private Limited Company can be formed with a
minimum of 2 Persons & a Maximum of 50
Persons. A Public Limited Company can be
formed with a Minimum of 7 Persons &
Maximum number of Persons is unlimited.
Company is governed by the Companies Act,
1956. For Registering the Company, one has to
approach Registrar of Companies of the State.

18. ROLE of SSI
 1.Expansion of small-scale sector and its share in
industrial output.
 2. Employment generation.
 3. Relative efficiency as compared with large-scale
sector.
 4. Equitable distribution of national income.
 5. Mobilization of capital and entrepreneurial skills.
 6. Regional dispersal of industries.
 7. Less industrial disputes.
 8. Contribution to export earnings.

19. Public Grievances
 In case of any complaint, one may
telephone or send a letter or fax or visit
the Ministry at Udyog Bhavan, New Delhi.
However, before lodging of a complaint,
one may, first of all, use the information
and facilitation counter of the Ministry. In
case, one is not satisfied, the matter may
be taken up with the Grievance Officer in
this Ministry.

20. . To create more employment opportunities with less
investment.
2. To remove economic backwardness of rural and less
developed regions of the economy.
3. To reduce regional imbalances.
4. To mobilize and ensure optimum utilization of unexploited
resources of the country.
5. To improve standard of living of people.
6. To ensure equitable distribution of income and wealth.
7. To solve unemployment problem.
8. To attain self-reliance.
Objectives of Small Scale Industries:

21. Problems of SSI
 Problem of skilled manpower: The success of a small enterprise
revolves around the entrepreneur and its employees, provided the
employees are skilled and efficient. Because inefficient human factor
and unskilled manpower create innumerable problems for the
survival of small industries. Non-availability of adequate skilled
manpower in the rural sector poses problem to small-scale
industries.
 Inadequate credit assistance: Adequate and timely supply of credit
facilities is an important problem faced by small-scale industries.
This is partly due to scarcity of capital and partly due to weak
creditworthiness of the small units in the country.
 Absence of organized marketing: In the absence of organized
marketing, their products compare unfavorably with the quality of the
product of large- scale units. They also fail to get adequate
information about consumer's choice, taste and preferences of the
type of product. The above problems do not allow them to stay in the
market.

22.  Irregular supply of raw material: Small units face severe problems in
procuring the raw materials whether they use locally available raw
materials or imported raw materials. The problems arise due to
faulty and irregular supply of raw materials. Non-availability of
sufficient quantity of raw materials, sometimes poor quality of raw
materials, increased cost of raw materials, foreign exchange crisis
and above all lack of knowledge of entrepreneurs regarding
government policy are other few hindrances for small-scale sector.
 Lack of machinery and equipment: Small-scale units are striving
hard to employ modern machineries and equipment in their process
of production in order to compete with large industries. Most of the
small units employ outdated and traditional technology and
equipment. Lack of appropriate technology and equipment create a
major stumbling block for the growth of small-scale industries.

23.  Absence of adequate infrastructure: Most of the small units and
industrial estates found in towns and cities are having one or more
problems like lack of power supply, water and drainage problem,
poor roads, raw materials and marketing problem. Thus absence of
adequate infrastructure adversely affect the quality, quantity and
production schedule of the enterprises which ultimately results in
under-utilization of capacity.
 Other problems: Besides the above problems, small-scale units
have been of constrained by a number of other problems also. They
include poor project planning, managerial inadequacies, old and
orthodox designs, high degree of obsolescence and huge number of
bogus concerns. Due to all these problems the development of
small-scale industries could not reach a prestigious stage.

24. THANKS