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Small Scale Industry

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Small Scale Industry

  1. 1. Small Scale Industry Presented By: Prakhyath Rai
  2. 2. Contents Introduction and Definition of SSI Classification of SSI Characteristics of SSI Need and Rationale of SSI Objectives of SSI Scope of SSI Role of SSI in economic Development Advantages and Weaknesses of SSI Steps to Start a SSI Government Policy towards SSI Government Support to SSI during 5 Year Plans Impact of Privatization, Liberalization and Globalization on SSI Supporting Agencies of Government for SSI
  3. 3. Introduction Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
  4. 4. Introduction Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Small scale Industries have occupied an important place in the process of industrialization in the country, resolving certain issues such as:  Abundant manpower  Poor finances  Problem of unemployment and underemployment  Over dependence on agriculture  Transportation difficulty and Lack of modern technology
  5. 5. Introduction Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Small scale industries makes use of local raw materials, local skills, local finance and generally local markets. Small scale industries contribute to socio-economic development of the country. Small scale industries and business sectors have emerged as a dynamic and vibrant sector for the Indian economy. SSI’s account to 35% of Indian industrial exports.
  6. 6. Definition of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 “An industrial undertaking in which the investment in fixed assets, plant and machinery does not ross Rs. 10 million is treated as a SSI unit. This is irrespective of whether the assets are held on ownership terms, on lease or on hire purchase.”
  7. 7. Examples of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
  8. 8. Classification of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Small Scale Industries are broadly classified as:
  9. 9. Traditional Industries Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Khadi and Village industry Handloom Handicrafts Coir Sericulture
  10. 10. Traditional Industries Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Khadi and Village industry Handloom Handicrafts Coir Sericulture
  11. 11. Traditional Industries Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Khadi and Village industry Handloom Handicrafts Coir Sericulture
  12. 12. Traditional Industries Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Khadi and Village industry Handloom Handicrafts Coir Sericulture
  13. 13. Traditional Industries Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Khadi and Village industry Handloom Handicrafts Coir Sericulture
  14. 14. Traditional Industries Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Khadi and Village industry Handloom Handicrafts Coir Sericulture
  15. 15. Modern Industries Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Small-scale industrial undertaking EOU (Export Oriented) SSI units Ancillary industrial unit Tiny industrial unit Small-scale business and enterprises
  16. 16. EOU SSI Unit Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
  17. 17. Ancillary Industrial Unit Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
  18. 18. Tiny Industrial Unit Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Industrial Units where the investment in plant and machinery is limited to Rs. 25 Lakh, irrespective of the location of the unit are referred as tiny industrial units.
  19. 19. Characteristics of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 1 2 3 4 5
  20. 20. Characteristics of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 6 7 8 9 10
  21. 21. Characteristics of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 11 12 13 14 15
  22. 22. Need and Rationale of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
  23. 23. Need and Rationale of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Need for Employment Given scarce capital and abundant labour, it is necessary to provide large scale employment opportunities so as to lift people above poverty line.
  24. 24. Need and Rationale of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Large scale industries may lead to concentrate income into few hands whereas SSI’s ensure equitable distribution of national income and wealth. Need for Equality
  25. 25. Need and Rationale of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 SSI’s basically help in identifying small time entrepreneurs who would have not come up otherwise. SSI’s provide opportunities for unearthing latent entrepreneurial talents. Need for Entrepreneurs
  26. 26. Need and Rationale of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Need for Decentralization Decentralization of industries actually help in taping local resources like raw materials, local labour and talent etc. which in turn helps local economy
  27. 27. Objectives of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 8 7 6 5 4 3 2 1
  28. 28. Objectives of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 8 7 6 5 4 3 2 1 • To generate immediate and large scale employment opportunities in all parts of the country with relatively low investment.
  29. 29. Objectives of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 8 7 6 5 4 3 • To reduce the unemployment and underemployment problems in the country 12
  30. 30. Objectives of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 8 7 6 5 4 • To encourage setting up of industries in small towns and villages thus improving local economy. 23
  31. 31. Objectives of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 8 7 6 5 • To bring poor and backward areas to the mainstream of national development 34
  32. 32. Objectives of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 8 7 6 • To ensure a better and equitable distribution of national income and wealth 45
  33. 33. Objectives of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 8 7 • To mobilize the country’s untapped capital and human resources 56
  34. 34. Objectives of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 8 • To generally improve the standard of living in our country 67
  35. 35. Objectives of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 • To encourage small entrepreneurs and help them to grow and realize their dreams 78
  36. 36. Scope of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 ‘Scope of SSI’ refers to the range of activities and the type of products that come under the SSI. Example: 1) Manufacturing activities 2) Construction activities 3) Public Activities 4) Service/Repairing activities 5) Financial activities 6) Retailing activities 7) Wholesale business
  37. 37. Scope of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007  In India, the small scale sector is protected by the government by way of reservation.  Indian government has made a list of items which are reserved for exclusive production in small sector { No large scale industry may produce any of these items reserved in favor of SSI’s}.  The main objective of this reservation is to insulate the smallsector from unequal competition with the large industrial establishment.
  38. 38. Scope of SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007  Some of the items in the reserved list are as follows, 1) Leather products 2) Rubber products 3) Cotton hosiery 4) Natural essential oils 5) Auto ancillary 6) Boat making 7) Foundries 8) Khadi products 9) Flour mills 10) Wooden furniture
  39. 39. Role of SSI in Economic Development Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 1 2 3 4
  40. 40. Role of SSI in Economic Development Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 6 7 8 9
  41. 41. Advantages of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Defensive Stocks Most units do nor require high-end technology SSI’s can be located anywhere SSI’s use local resources and manpower thus improving local economy Gestation period of SSI’s are less SSI’s help earn and save foreign exchange SSI’s provide self-employment opportunities with low investments
  42. 42. Advantages of SSI Cont.. Defensive Stocks Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 SSI’s introduce to the world local craftsmanship and handicrafts SSI’s require simple technology and low managerial skills SSI’s assist large and medium industries by acting as ancillaries SSI’s inspire entrepreneurs to start their own ventures SSI’s help in facilitating decentralization of wealth in certain hands SSI’s make use of the large semi skilled and unskilled labour
  43. 43. Weaknesses/Drawbacks/Disadvantages of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
  44. 44. Weaknesses/Drawbacks/Disadvantages of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
  45. 45. Weaknesses/Drawbacks/Disadvantages of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Raw Materials Finance Marketing Capacity under-utilization Outdated Technology The problem with respect to raw materials are as follows, Absolute scarcity Poor quality High cost
  46. 46. Weaknesses/Drawbacks/Disadvantages of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Raw Materials Finance Marketing Capacity under-utilization Outdated Technology The problem with respect to finance are due to, Scarcity of Capital Weak creditworthiness of small units in country.
  47. 47. Weaknesses/Drawbacks/Disadvantages of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Raw Materials Finance Marketing Capacity under-utilization Outdated Technology SSI units lack professional marketing executives as employed by large sectors, hence marketing can be a weakness.
  48. 48. Weaknesses/Drawbacks/Disadvantages of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Raw Materials Finance Marketing Capacity under-utilization Outdated Technology Capacity in SSI is not fully utilized leading to lower optimization.
  49. 49. Weaknesses/Drawbacks/Disadvantages of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Raw Materials Finance Marketing Capacity under-utilization Outdated Technology Continued usage of old technology and no upgradation brings down their efficiency.
  50. 50. Weaknesses/Drawbacks/Disadvantages of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Over Protection Inefficient Entrepreneurs Zero R & D Lack of Successors Low Wages Most of the SSI units do not have desire to grow to medium and large scale because of the benefits of protection and reservation given to them.
  51. 51. Weaknesses/Drawbacks/Disadvantages of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Over Protection Inefficient Entrepreneurs Zero R & D Lack of Successors Low Wages Entrepreneurs who are young, and lack industrial experience, and also whose financial background is weak and those who are stressed out, are like to fail faster.
  52. 52. Weaknesses/Drawbacks/Disadvantages of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Over Protection Inefficient Entrepreneurs Zero R & D Lack of Successors Low Wages SSI units hardly invest in R & D and hence they lack in introducing any innovation into the market.
  53. 53. Weaknesses/Drawbacks/Disadvantages of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Over Protection Inefficient Entrepreneurs Zero R & D Lack of Successors Low Wages Many entrepreneurs who run SSI units may,  Transfer the responsibility to their children who might be inefficient or are unwilling to continue family business Due to these reasons SSI unit may die
  54. 54. Weaknesses/Drawbacks/Disadvantages of SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Over Protection Inefficient Entrepreneurs Zero R & D Lack of Successors Low Wages SSI’s are labor intensive, the wages paid in SSI’s are low when compared to those paid in large scale industries. In many SSI’s because of lack of safety measures and proper training to workers, accidents and injuries are common occurrences.
  55. 55. Steps to Start a SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 As a pre requisite the entrepreneur must familiarize himself on following activities, i. Priorities and policies of government. ii. Assistance, subsidies and facilities offered by various states. iii. Various organizations like KIADB, SIDBI etc., which help budding entrepreneurs. iv. Government incentives available for starting a new industry. v. Licensing and registration requirements. vi. Policies and regulations concerning imports, exports, laws (legal and industrial), taxes etc.
  56. 56. Steps to Start a SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 1 3 2 4
  57. 57. Steps to Start a SSI Cont. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 5 6 7 8
  58. 58. Steps to Start a SSI Cont. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 9 10 11 12 13
  59. 59. Steps to Start a SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 1 Project identification is the process of identifying broad areas where opportunities for new business ventures exits. The following points have to be considered with respect to product identification: i. A new product idea can be pulled from a study of what people need or what people love. This is known as Market – Pull. ii. A new product idea can also be pushed into the market with the help of R & D. This is known as Technology – Pull.. iii. Awareness – market potential, existing competition, availability of raw material, technology, man power, future demand etc.
  60. 60. Steps to Start a SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Selecting the form of ownership is an important decision taken by the entrepreneur, various forms of ownership that would be chosen for SSI are as follows: i. Sole proprietorship ii. Family ownership iii. Partnership iv. Private limited company 2
  61. 61. Steps to Start a SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Factors for deciding the location of the unit are: i. Proximity to the source of raw materials ii. Nearest to the market iii. Availability of all kinds of manpower iv. Infrastructure available with respect to – factory sheds, industrial estates, transportation facility, water , waste disposal etc. v. General business climate of the region vi. Climate and environmental factors 3
  62. 62. Steps to Start a SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 A project report is a written document pertaining to the investment proposal. A project report should include the following information: i. General information about project ii. Preliminary analysis of alternatives iii. Project description iv. Technical feasibility v. Economic viability vi. Financial analysis vii. Marketing plan etc. 4
  63. 63. Steps to Start a SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 5 The registration of small scale units is inculcated in two stages as follows: i. Provisional Registration – Temporary registration which is needed at the planning stage in order to bring unit into existence. It is issued by district unit of Directorate of industries. Provisional registration is issued for one year initially and then extended by six months for a maximum of four times. ii. Permanent Registration – It is applied when the entrepreneur is ready to commence commercial production.
  64. 64. Steps to Start a SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Arrangement of finance is required for two reasons: i. Fixed capital – Finance required for setting up infrastructure like land, buildings, machinery etc.,. This can be generated by,  Partnership  Bank loans  Venture capitalists  Personal savings ii. Working Capital – Finance necessary for buying raw materials and recurring expenditure, can also be raised by various sources. 6
  65. 65. Steps to Start a SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Depending on the SSI been set up and the area where the unit is located, a number of licences and clearances are required to be procured such as: i. Municipal authorities (If within city limits) ii. Chief Inspector of Factories (If employed more than 10 individuals) iii. Ministry of Agriculture (For food and vegetable processing) iv. State Drug Controller ( For making drugs and cosmetics) v. Collector, Central Excise (Excise items like alcohol, cigarette etc.,) vi. Bureau of Indian Standards (For all measurements) vii. Company law board (For Reg. to corporate body) viii. Pollution Control Board (For pollution control clearances) etc.,. 7
  66. 66. Steps to Start a SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Creating physical infrastructure includes acquiring land and building, selecting, buying and installation of machinery, and so on. In case of setting up a manufacturing unit creating physical structure is time consuming and requires more effort. 8 9 Manpower power is key to success of any organization. The right kind of staff – right from managerial to worker have to be recruited so that all types of work can be accomplished.
  67. 67. Steps to Start a SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 Raw materials have to be procured in the right quality, quantity and delivery schedules. Preferably raw materials have to be collected from several sources. 10 11 Factors to be taken care with respect to power and water supply are:  Application for connection of power (HT and LT) have to be given in advance and alternate sources of power and water supply have to be arranged.
  68. 68. Steps to Start a SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 After the basic trial runs, commercial production has to begin with proper quality checks in place 12 13 Marketing the product is the most important step in realizing the business ambition. Business is not complete without selling the products and eensuring that the revenue flows into the organization.
  69. 69. Impact of Liberalization, Privatization and Globalization on SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 1 m 2re
  70. 70. Impact of Liberalization, Privatization and Globalization on SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 3 4he e, ry
  71. 71. Impact of Liberalization, Privatization and Globalization on SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 5t 6n. of a be
  72. 72. Government Policy towards SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
  73. 73. Government Policy towards SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
  74. 74. Effect of WTO/GATT on Indian SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 1 2 3 e,
  75. 75. Effect of WTO/GATT on Indian SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 4 h 5 6
  76. 76. Effect of WTO/GATT on Indian SSI Cont.. Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 7 8 9
  77. 77. Supporting Agencies of Government for SSI Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007 The agencies of government supporting SSI are classified as: i. Central Level Institutions ii. State Level Institutions iii. Other Agencies
  78. 78. Central Level Institutions Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007  SSI Board: Small Scale Industries Board  KVIC: Khadi and Village Industries Commission  SIDO: Small Industries Development Organization  NSIC: National Small Industries Corporation Ltd.,  NSTEDB: National Science and Technology Entrepreneurship Development Board  NPC: National Productivity Council  NISIET: National Institute for Small Industry Extension and Training  IIE: Indian Institute of Entrepreneurship  EDII: Entrepreneurship Development Institute of India  NIESBUD: National Institute for Entrepreneurship and Small Business Development
  79. 79. State Level Institutions Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007  DI: Directorate of Industries  DIC: District Industries Centre  SFC: State Financial Corporation  SIDC: State Industrial Development Corporation  SSIDC: State Small Industrial Development Corporation
  80. 80. Other Agencies Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007  SIDBI: Small Industries Development Bank of India  HUDCO: Housing and Urban Development Corporation Ltd.,  NGO’s: Non-governmental Organizations  EPC: Export Promotion Council  CII: Confederation of Indian Industries  LUB: Laghu Udyog Bharati  ICSI: Indian Council of Small Industries  CSIR: Council of Industrial and Scientific Research  NABARD: National Bank for Agricultural and Rural Development  FICCI: Federation of Indian Chambers of Commerce and Industry

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