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Q1. What is the Industrial Policy for Small Scale industries?

vibrant sector of the economy during the eighties, the primary objectives of the impetus to the sector to enable it to contribute its mite fully to the economy particularly in terms of growth of output, employment and exports. For the first time government came out with a separate small scale industries policy .The industry which were conflicting should be cleared by resort to economic federalism by a policy of integrated industrial development of nucleus plants in each district identified as industrially backward to generate as many accessories and small scale and cottage units as possible. In order to boost the development of small scale Industries and to ensure their rapid growth the Government increased the limit of investment in the case of tiny units to Rs.5 Lakhs irrespective of the location of units. The policy Statement, 1991, also recognized as small the growth of service sector units. The statement recognized all industry related to service and business enterprises irrespective of their location as small scale Industries and their investments ceiling would correspond to those of tiny units/enterprises.

Q2. What is the Criterion for Small Units?

Criterion for small units - Investment in fixed assets in plant and machinery has been criterion to determine the scale of the industrial sector of unit .It is pertinent that investment in other assets such as administrative building, lands and other fixed assets is not taken into account. The traditional measurement of size by the number of employees is not adopted .the small scale units fall broadly under four categories, namely: - Small scale industrial units, ancillary industrial Units, Tiny Units, Service units.
Small Scale Industrial Units - In the case of small Scale Industrial units the investment in fixed assets in plant and machinery, whether held on ownership terms or on lease or by hire purchase does not exceed Rs.60 Lakhs .In order to enable small scale industries to play an important role in the total export effort such as small scale units which undertake to export at least 30 per cent .of the annual production by the third year are permitted to step up their investment in plant and machinery to rs.7 Lakhs.
Ancillary Industries - In the case of ancillary industries, the investment in fixed assets in plant and machinery, whether held on ownership terms or on lease by the hire purchase shall not exceed Rs.75 Lakhs.
Tiny units -The industrial policy statements, 1977, paid special attention to the units in the tiny sector. In these units investment in machinery and equipment was upto Rs.1 lakh, but were subjected to the locational restriction. They shall be situated in towns with a population of less than 50,000 according to 1971 census figure. The policy envisaged the drawing up of schemes for making available margin money assistance. Investment ceiling in tiny industries was increased upto Rs.5 Lakhs in 1990.However, the condition as to their location in towns with a population limit of 50,000 continued to apply. According to Industrial Policy Statement, 1991, the tiny enterprises would be entitled to preference in land allocation, power connection, Access to facilities or skills/technical upgradation. The tiny enterprises would be eligible, in addition, support on a continuous basis including easier access to institutional finance, priority in the Government purchase programme and relaxation from certain provisions of labour laws.

Q3. What should be organizational setup in SSI?

Organisational Set Up- the small-scale Industrial units may be owned and run by single proprietor, a partnership firm or a corporate body.
Proprietorship -Proprietary organisations are individually operated and a great majority of small-scale industrial units fall under this category. Single individuals run tiny sector units and small-scale units with a low capital investment. These atomistic set ups are the primitive type where there is no orgnisation structure. The proprietor himself carries on the business. In these orgnisational as the business is carried on in a personal way, the accounting is casual and business and personal funds are apt to be mingled. The proprietor bears the entire business loss and his personal assets would also be affected, in case, the business assets are not available to pay off the liability.
Partnership firm - The whole concept of partnership is to embark upon a join venture and for that purpose to bring in as capital money or even property including immovable property. Once that is dine whatever is brought in would cease to be the exclusive property of the person who brought it in. It would be the trading asset of partnership in which all the partners would have interest in proportion to their share in the joint venture of the business of partnership.

Q4. What is the concept of partnership? How to start business in partnership?

Partnership firm - The whole concept of partnership is to embark upon a join venture and for that purpose to bring in as capital money or even property including immovable property. Once that is dine whatever is brought in would cease to be the exclusive property of the person who brought it in. It would be the trading asset of partnership in which all the partners would have interest in proportion to their share in the joint venture of the business of partnership.
Agreement between partners- A Partnership is essentially a contract between the partners and the right during the subsistence of the partnership is to get this share of profits from time to time as may be agreed upon among the partners.
Limits on number of partners- partnership may be formed with any two persons who are capable of entering into an agreement. A partnership cannot be created wit minor, as he is capable of entering into a contract, though of course he would be admitted to the benefits pf the partnership. The Partnership Act does not prescribe any maximum number of partners.

Q5. What is the difference in Private and Public Companies?

Companies- the small-scale industries may also be incorporated as companies complying with the provisions of the Companies Act, 1956. Incorporation is the Act of conferring judicial personality on a group of associated persons.
Private and Public Company- Any seven or more persons or where the company to be formed will be a private company, any two or more persons, associated for any lawful purpose may be subscribing their names to a memorandum of association, form an incorporated company with or without limited liability. A private company means a company which by its articles-

- Restrict the right to transfer its shares if any

- Limits the number of its members to 50 not including-

Persons who are in the employment of the company and
Persons who having been formally in the employment of the company

Q6. What are the categories of Industrial Undertakings?

Categories of industrial undertakings-

Small scale industrial undertaking - Small scale industrial undertaking means an industrial undertaking which in accordance with the requirements specified under section 11B of the IDR Act is entitled to be regarded as a small scale industrial undertaking for the purpose of that act.

Ancillary industrial undertaking – No industrial undertaking shall be regarded as an ancillary industrial undertaking unless it is or is proposed to be engaged in –

- The manufacture of parts, components, sub –assemblies toolings or intermediates; or

- Rendering of services or supplying or rendering not more than fifty per cent. Of its production or its total services, as the case may be, to other units for production of other articles.

Q7. What are the requirements to be complied with by an industrial undertaking for being regarded as small-scale industrial undertaking?

Requirements to be complied with by an industrial undertaking for being regarded as small scale industrial undertaking-

1.An industrial undertaking, in which the investment in fixed assets in plant and machinery whether held on ownership terms or on lease or by hire purchase, does not exceed Rs. 60 Lakhs.

2.In case of an industrial undertaking referred to in above, the limit of investment in fix assets in plant and machinery shall be Rs. 75 Lakhs, provided the unit undertakes to export at least 30%. Of the annual production by the end of third year from the date of its commencing production.

Requirements to be compile with by an industrial undertaking for being regarded as an ancillary industrial undertaking-

1.An industrial undertaking which is engaged or is proposed to be engaged in the manufacture or production of parts, component, subassemblies, tooling or intermediate, or the rendering of services and the undertaking supplies or renders or proposes to supply or render not more than 50% of its production or services as the case may be, to one or more other industrial undertakings and whose investment in fixed assets in plant and machinery whether held on ownership terms or on lease or on hire purchase, does not exceed Rs. 75 Lakhs. No small scale or ancillary industrial undertaking referred to above shall be subsidiary of, or own, or controlled by any other industrial undertaking

Q8. What are the types of finance through which SSI can be established?

Small scale industries just like the medium and large scale business require initial start up funds or capital and working capital for day to day working. In case of a company - either private or public company-the funds are contributed by the shareholders and the funds are owned by the corporate person, the company and not by the shareholders.
Proprietary Concerns: In the case of a proprietary concern, the individual proprietor brings the funds required for the business and he borrows on the credit market. He may also borrow funds from the public, but from not more than 25 people.
Partnership Firm: The partner brings their own capital required for the business. In a trading firm a partner has implied authority to borrow money for the purpose of the business on the credit of the firm.

COMPANIES

Share Capital: The shares or other interest of any member in a company shall be movable property, transferable in the manner provided by the articles of the company. Its appropriate number shall distinguish each share in a company having a share capital. The share capital of the industrial undertaking may consist of equity shares and preferences shares. Equity share capital means all share capital, which is not preference share capital.

Raising Finance from Capital Market: In the past many small and medium companies were not able to enter the capital market due to the listing requirement of the Securities Contract (Regulation) Act, 1956, that minimum issued equity capital should be Rs.3 crores. On the Over The Counter (OTC) Exchange of India, the minimum issued capital can be a mere Rs. 30 Lakhs and the maximum value is Rs. 25 crores. The small-scale industries can have access to this exchange.

Eligibility Criteria:

- The issued equity capital of the company should be between Rs.30 Lakhs and Rs. 25 crores;

- The company should make a minimum public offer of 25 per cent of its capital or Rs. 20 Lakhs in face value, whichever is higher;

- The company should not be listed on any other stock exchange in India.

INSTITUTIONAL FINANCE

Guarantee Cover For Loans To Small Scale Industries: Commercial banks including regional rural banks, state financial corporations and industrial development corporations which give loans to small scale industries can get guarantee cover from the Department Insurance and Credit for acquisition of fixed assets/ equipment such as land, building, machinery, furniture and vehicles or their repairs and replacement as well as working capital advances for production and marketing of products.

Q9. What is the role of SIDBI in Small-scale sector?

Small Industries Development Bank of India (SIDBI)

Finance being a major problem faced by small and tiny industrial undertakings there was a standing demand from them that there should be an apex bank for them. The industrial Policy Statement 1977 recommended the setting up of a separate wing under the IDBI to deal exclusively with the credit requirements of the small-scale sector.

In line with this decision, the Small Industries Development Bank of India Act, 1989 was enacted under which the SIDBI was set up in 1991,as a statutory organization for the promotion financing and development of industry in the small scale sector and to co-ordinate the functions of the institutions engaged in the promotion, financing or development of industry in small scale sector.The bank would also give special attention to the export oriented units in that sector.The resources of the SIDBI will mainly comprise contributions from the IDBI in the form of loans and shares and may include market borrowings and loans from the government of India.

The SIDBI covers all industrial concerns in the small-scale sector. The main task of SIDBI is to channelise need based higher flow of credit both by way of term loan and working capital to tiny and rural industries.

Q.10 What are the schemes provided by SIDBI?

The SIDBI offers both direct as well as re-finance schemes. The bank was initially functioning primarily as a refinancing institution, but has since diversified its activities and introduced several new schemes to meet the various needs of the small-scale sector. Schemes are as

1. Foreign currency loan for purchase of imported machinery.

2. Preshipment credit in foreign currency for export oriented units, export houses and trading houses.

3. Short-term loan to well run SSI units for execution of bulk orders.

4. For acquisition of ISO-9000 series of certification.

5. Venture capital fund.

6. Equity assistance to SSI projects.