Small Scale Industry

Presented By: Prakhyath Rai

 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
Introduction

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Introduction Cont..

 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

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Introduction Cont..

 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.

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Definition of SSI

“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.”

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Examples of SSI

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Classification of SSI

Small Scale Industries are broadly classified as:

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Traditional Industries

Khadi and Village industry

Handloom
Handicrafts
Coir
Sericulture

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Traditional Industries

Khadi and Village industry

Handloom
Handicrafts
Coir
Sericulture

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Traditional Industries

Khadi and Village industry

Handloom
Handicrafts
Coir
Sericulture

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Traditional Industries

Khadi and Village industry

Handloom
Handicrafts
Coir
Sericulture

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Traditional Industries

Khadi and Village industry

Handloom
Handicrafts
Coir
Sericulture

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Traditional Industries

Khadi and Village industry

Handloom
Handicrafts
Coir
Sericulture

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Modern Industries

Small-scale industrial undertaking

EOU (Export Oriented) SSI units
Ancillary industrial unit
Tiny industrial unit
Small-scale business and enterprises

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

EOU SSI Unit

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Ancillary Industrial Unit

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Tiny Industrial Unit

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.

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Characteristics of SSI

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Characteristics of SSI Cont..

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Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Characteristics of SSI

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Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Need and Rationale of SSI

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Need and Rationale of SSI Cont..

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.

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Need and Rationale of SSI Cont..

Need for Equality

Large scale industries may lead to

concentrate income into few hands
whereas SSI’s ensure equitable
distribution of national income and
wealth.

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Need and Rationale of SSI Cont..

Need for Entrepreneurs

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.

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Need and Rationale of SSI Cont..

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

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Objectives of SSI

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Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Objectives of SSI Cont..

• To generate immediate and large scale employment opportunities in all parts 1

of the country with relatively low investment. 2
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Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Objectives of SSI Cont..

• To reduce the unemployment and underemployment problems in the country 12

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Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Objectives of SSI Cont..

• To encourage setting up of industries in small towns and villages thus

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improving local economy.
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Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Objectives of SSI Cont..

• To bring poor and backward areas to the mainstream of national

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Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Objectives of SSI Cont..

• To ensure a better and equitable distribution of national income and wealth

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Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Objectives of SSI Cont..

• To mobilize the country’s untapped capital and human resources

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Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Objectives of SSI Cont..

• To generally improve the standard of living in our country

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Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Objectives of SSI Cont..

• To encourage small entrepreneurs and help them to grow and realize their
dreams 78

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Scope of SSI

‘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

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Scope of SSI Cont..

 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.

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Scope of SSI Cont..

 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

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Role of SSI in Economic Development

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Role of SSI in Economic Development Cont..

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Advantages of SSI

SSI’s provide self-employment opportunities with low investments

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

Defensive Stocks
Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
Advantages of SSI Cont..

SSI’s make use of the large semi skilled and unskilled labour

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

Defensive Stocks
Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
Weaknesses/Drawbacks/Disadvantages of SSI

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Weaknesses/Drawbacks/Disadvantages of SSI

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Weaknesses/Drawbacks/Disadvantages of SSI

Raw Materials
The problem with respect
Finance to raw materials are as
follows,
Marketing
 Absolute scarcity
 Poor quality
Capacity under-utilization
 High cost
Outdated Technology

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Weaknesses/Drawbacks/Disadvantages of SSI

Raw Materials

Finance
The problem with respect to
Marketing finance are due to,
 Scarcity of Capital
Capacity under-utilization
 Weak creditworthiness of

Outdated Technology small units in country.

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Weaknesses/Drawbacks/Disadvantages of SSI

Raw Materials

Finance

Marketing
SSI units lack professional
Capacity under-utilization
marketing executives as
employed by large sectors,
Outdated Technology
hence marketing can be a
weakness.

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Weaknesses/Drawbacks/Disadvantages of SSI

Raw Materials

Finance
Capacity in SSI is not fully
Marketing utilized leading to lower
optimization.
Capacity under-utilization

Outdated Technology

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Weaknesses/Drawbacks/Disadvantages of SSI

Raw Materials

Finance

Marketing
Continued usage of old
Capacity under-utilization technology and no upgradation
brings down their efficiency.
Outdated Technology

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Weaknesses/Drawbacks/Disadvantages of SSI

Over Protection
Most of the SSI units do not
Inefficient Entrepreneurs have desire to grow to medium
and large scale because of the
Zero R & D
benefits of protection and

Lack of Successors reservation given to them.

Low Wages

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Weaknesses/Drawbacks/Disadvantages of SSI

Over Protection

Inefficient Entrepreneurs
Entrepreneurs who are young, and
Zero R & D lack industrial experience, and also
whose financial background is
Lack of Successors
weak and those who are stressed

Low Wages out, are like to fail faster.

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Weaknesses/Drawbacks/Disadvantages of SSI

Over Protection

Inefficient Entrepreneurs

Zero R & D
SSI units hardly invest in R & D

Lack of Successors and hence they lack in

introducing any innovation into
Low Wages the market.

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Weaknesses/Drawbacks/Disadvantages of SSI

Over Protection
Many entrepreneurs who run SSI units may,
Inefficient Entrepreneurs  Transfer the responsibility to their children
who might be inefficient or are unwilling
Zero R & D
to continue family business

Lack of Successors Due to these reasons SSI unit may die

Low Wages

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Weaknesses/Drawbacks/Disadvantages of SSI

Over Protection

SSI’s are labor intensive, the wages paid in

Inefficient Entrepreneurs
SSI’s are low when compared to those paid

Zero R & D in large scale industries. In many SSI’s

because of lack of safety measures and
Lack of Successors proper training to workers, accidents and
injuries are common occurrences.
Low Wages

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Steps to Start a SSI

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.

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Steps to Start a SSI Cont..

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Steps to Start a SSI Cont.

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Steps to Start a SSI Cont.

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Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Steps to Start a SSI Cont..

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.
Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
Steps to Start a SSI Cont..

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

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Steps to Start a SSI Cont..

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
Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
Steps to Start a SSI Cont..

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.
Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
Steps to Start a SSI Cont..

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.

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Steps to Start a SSI Cont..

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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.
Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
Steps to Start a SSI Cont..

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.,.
Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
Steps to Start a SSI Cont..

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.

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.
Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
Steps to Start a SSI Cont..

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Raw materials have to be procured in the right quality, quantity and

delivery schedules.
Preferably raw materials have to be collected from several sources.

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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.
Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
Steps to Start a SSI Cont..

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After the basic trial runs, commercial production has to begin with proper
quality checks in place

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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.

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

 Impact of Liberalization, Privatization and Globalization on SSI

1
m

re 2

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

 Impact of Liberalization, Privatization and Globalization on SSI Cont..

he 4
e,
ry

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

 Impact of Liberalization, Privatization and Globalization on SSI Cont..

t 5

n. 6
of
a
be

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Government Policy towards SSI

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Government Policy towards SSI Cont..

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

 Effect of WTO/GATT on Indian SSI

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e,

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

 Effect of WTO/GATT on Indian SSI Cont..

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h

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Effect of WTO/GATT on Indian SSI Cont..

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Supporting Agencies of Government for SSI

The agencies of government supporting SSI are classified as:

i. Central Level Institutions

ii. State Level Institutions

iii. Other Agencies

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Central Level Institutions

 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
Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007
State Level Institutions

 DI: Directorate of Industries

 DIC: District Industries Centre

 SFC: State Financial Corporation

 SIDC: State Industrial Development Corporation

 SSIDC: State Small Industrial Development Corporation

Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007

Other Agencies

 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
Prakhyath Rai, Asst. Professor, Department of ISE, SCEM, Mangaluru-575007