entrepreneurship management - 18th jan 2011
TRANSCRIPT
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ENTREPRENEURSHIPMANAGEMENT
Mrs. Juilee Katkar
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Small scale industries
Small scale industries are the backbone of Indian industry
Crucial role in the economic development by value addition,
employment generation, equitable distribution of national
income, regional dispersion of industries, mobilisation of capital
and entrepreneurial skills and contribution to export earnings
Contribution next only to agriculture as dynamic and vibrant
sector of the economy
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Micro, Small, and medium Enterprise development Act, 2006
Small industries comprises tiny, cottage, traditional, village and
modern enterprise
Fragmented across various ministries for the purpose of development
and concessions
Handloom, powerloom, handicrafts,khadi suffered neglect compared
to manufacturing and service based enterprise
To correct discrepancies, MSMED Act was acted on June 16, 2006
First ever legal framework recognizing the concept of enterprises and
defining and integrating three tiers; micro, small and medium
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Micro, Small, and medium Enterprises
Provide livelihood
Check rural and urban migration
Generates export earnings
Touch upon the lives of the remotest and the most marginalised people
MSMEs often act as ancillary industries for the large scale industries
providing them with the raw material, vital components and linkages
Manufacturing of engineering and automobile products due to their
expertise in supplying assemblies and subassemblies, components etc
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Concept and definition of SSI
Small scale industries
Is broadly based on the original value of plant and machinery
Any enterprise with the capital investment of Rs. 1.5 cr.
To facilitate technology upgradation and enhance competitiveness ,
the investment limit is increased to Rs. 5 cr in respect of 71 hi-tech
export oriented items in the hosiery, knitwear, hand tool, drug
pharmaceuticals, stationery and goods sector
Also includes small scale service and small scale business
enterprises
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Concept and definition of SSI
Tiny enterprise
Investment limit is Rs. 25 lacs, irrespective of the location of the unit (Prior to this it was
industries situated in villages with a population of less than 5000 and should also cover cottage industries in rural and semi urban area)
Exportoriented Unit
Investment in fixed assets in plant and machinery whether held on ownership terms, or on lease
or on hire-purchase does not exceed Rs. 100 lacs and has an obligation to export 30 percent of
production
Women Enterprises
Small scale units where one or more women entrepreneurs have not less than 51% financial
holding
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Concept and definition of SSI
Artisans, village and cottage
Defined as Artisans irrespective of the location
Small industries activities (viz; manufacturing, processing preservation
and servicing) in villages and small towns with a population not exceeding
50,000 involving utilization of locally available resources and or human
skills ( where individual credit requirements do not exceed Rs. 50,000
Small scale service and business( industry related) enterprises
Investment in fixed assets excluding land and building upto Rs. 10 lakhs
irrespective of locations as on 31stMarch 2001
Eg: advertising agencies, beauty parlours, documentary filming, creches
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Micro enterprises Small and medium enterprises
Generally artisan based , located mostly in
rural and semi urban areas
Use local skills and resources and sell their
products locally
Lower level investment in machinery
Provide largely part time employment
Mostly involved in activities such ashandloom, khadi, handicrafts, sericulture,
bidi making, embroidery, knitting, wood
carving
Use power driven machines and possess
some technological sophistication
Markets are relatively wide and quite
often include export market
Located close to or in urban areas
including large industrial centres
Products include hosiery goods, ready
made garments, motor parts,
electronics, sports goods, rubber goods
and engineering goods
Differences between Micro, small and medium enterprises
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Cottage Industries Small scale industries
Produce mainly traditional goods
Use pre dominantly manual labour
Technically backward
Derive raw materials from local
sources
Household enterprises employing
very little hired labour
Cater to the needs of the local
market
Produce a variety of non-traditional products
such as electrical, engineering goods,
chemical products
Use of power and modern techniques
Use modern methods of production and are
technically advanced
Raw materials from a wide marketing area
Skilled and non-skilled labour
Cater to the needs of national as well as
international market
Cottage V/s Small scale industries
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Ancillary Industries Small scale industries
Investment in plant and machinery
can go upto Rs. 1 Cr
It supplies 50% of the production to
one or more parent units
Engaged in the manufacture of parts,
components, sub assemblies toolings
and render services to the parent unitsfor production purposes
Not controlled by any large unit
Investment in fixed assets in plant and
machinery not exceeding Rs. 1.5 Cr, 5 Cr in
respect of 71 hi-tech export oriented items
in the hosiery, knitwear, hand tool, drug
pharmaceuticals, stationery and goods
sector
No such restriction placed
Produce mainly consumer goods such as
watches, transistors
Is not a subsidiary to any large unit
Ancillary V/s Small scale industries
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Small scale units Large scale Units
Small fixed investment
Labour intensive
Personal character
Local area operation
Limited scope of expansion
Unorganised labour
Small uneconomic size
Proprietorship and partnership
Decentralized location
Independent management
Large investment
Capital intensive
Impersonal
Wider area
Economies of scale & great scope for expansion
Labour organised
Large economic size
Joint stock company
Centralized location
Divorce between ownership and management
Small scale units V/s Large scale units
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Relationship between small and large units
Supplementary
Fills in the gap between large scale production
Competitive
Industries such as tiles, perishable foods, bakery products require lessengineering skills and more craftsmanship
can co exist and compete with large scale sector
Complementary
Small units produce intermediate products for large units
Enjoy protected market under the cover of the large scale unit
Eg: Plastic dust cover for video recorders, electronic passive components
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Relationship between small and large units
Ancillarisation
Many small firms provide small components, parts, accessories to large firms
Eg: Tata motors, Bajaj
Jobbing
Large enterprises provide components and materials to small scale units.
Small units process these materials into finished parts or sub-assemblies
Merchandising
Small scale units produce products which are then marketed by large companies
Eg: Soaps, refrigerators etc
Servicing
Small firms are assigned the job of repairing and maintenance of products manufactured by large scale units
Eg: Acs , personal computers, etc
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Characterstics of small scale industries
Small capital investment
Cottage industries, artisans can start business with very less capital
Generates employment
Labour intensive and hence generate more employment Helps solve underemployment issues in an under developed economy like India
Personal contact
Personal supervision of all activities such as production, purhase etc is done by
the entrepreneur himself
Location
Generally located in rural and semi urban areas
Local raw material, labour and finance should be readily available
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Characterstics of small scale industries
Exploitation of human resources
Child and women are generally exploited
Entrepreneurial growth
Is a beehive for entrepreneurial growth
Technology
Less use of technology, labour intensive
Uses indigenous technology
Dispersal of manufacturing activity
No scope of manufacturing activity in large cities
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Characterstics of small scale industries
Poor organisation and management
No delegation of authority
Management is poor and negligible
Ownership
Organisations are mostly privately owned and organised as
sole proprietorship
Family forms the largest component of the small scale force
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Objectives of small scale industries
To create vast employment opportunities for the people
To effect decentralisation of industries by creating industrial estates
Redistribution of economic power and income
To raise the standard of living
To facilitate mobilisation of resources for capital and skill
To utilise the available resources
Promoting industrial development of backward areas
To bring about an integration of development of rural economy and
large scale industry
To tap latent resources like entrepreneurial ability, hoarded wealth etc
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Significance of small scale industries
Accounts for 40% of the total value of industrial production
Contributes directly about 33% of the aggregate exports
Labour intensive
Equitable distribution of income and wealth
Production of small sector contributes in large proportion of the national products
Dispersal of manufacturing activities results in balanced regional growth
Linkages creates opportunity for service industry to prosper due to large scale units
Own identity co-exist with the large scale units
Training ground for local entrepreneur
Mobilisation of service offers an opportunity for investment for people living in
under developed economy
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Significance of small scale industries
Facilitation of capital formation
Export potential
Nearly 20% of the total value of export is from small scale industry
Eg: leather, ready made cotton garment, pharmaceuticals etc
Innovative and productive
Products can earn a substantial foreign exchange
Favorable capital output ratio
Meet substantial part of increasing demand for consumer goods
including human consumption goods
Requires only a short gestation period
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Incentives available to SSI units in backward rural
industries project area
Allotment of factory or factory sheds in industrial estates/ areas and industrially
developed colonies on easy terms
An outrightsubsidy of 15% on the fixed capital investment up to a maximum of Rs
15 lakhs is admissible to new units being set up in backward areas
The central/ state government directly or through its subsidiary concern- the state
Industrial Development Corporation-underwrites or participates in preference
shares of public limited companies on a selective basis for setting up medium and
large industrial units. State government also considers cases for setting up of joint
ventures with the private sector
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Incentives available to SSI units in backward rural
industries project area
Loans and advances to SSI units under the State Aid to Industries
Act and Rules framed there under for the construction of factory
buildings, purchase of machinery and equipment and working
capital on easy terms
The state Financial Corporations grant loans of acquisition of
fixed asset up to Rs. 30 lacs in the case of limited companies
and registered co-operative societies and up to Rs. 15 lacs for
other at liberalised margins and rate of interest and this is
done over a longer span of repayment and moratorium
period
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Incentives available to SSI units in backward rural
industries project area
New units are exempted from property tax for a period of 5 years
New units established in the districts are completely exempted from the
payment of electricity duly up to a period of 7 years
Industrial units set up within the municipal limits are exempted form
octroi on capital equipment and building materials subject to a
maximum period of 3 years from the date of regular registration
State government have set up independent testing laboratories on behalf of
the Indian Standard Institution, the export inspection Council, the department
of Defense, Govt of India and various other govt organizations for making
industrial products of good quality
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Incentives available to SSI units in backward rural
industries project area
In order to provide some important and sophisticated common facilities, a
network of industrial development centres, heat treatment centres and
common facility workshops have been set up in the state to equip the SSI Units
with modern techniques and process of manufacturing
Provision of essential, controlled raw material to the SSI units on priority and
at very liberal terms
Interest free loans in lieu of inter-state sales tax paid / payable by SSI units are
available up to 7 years , provided the loan in particular year will not exceed
8% of the capital investment
Special incentives in the form of transport subsidy to concentrate partially of
the higher transport cost of established industries in hilly backward areas is
also being provided by the Union government
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Concessions to SSI
Reservation of products for small scale sector
836 items reserved for small scale sector
List available at the District Industries centre
Purchase of reserved products from SSI
400 items to be only purchased from small scale units
75 % things the government needs is purchased from small scale sector
Price preference to SSI products
15% price preference to assist small scale sector in marketing their products
Assistance for marketing
Govt institutes help the small scale industries in selling their products. Physically help is
given to DGS&D , NSIC, SSIDC, Directorate of Industries, Defence railway and Central
Govt purchase from SSI.
Industries need to register their names with these institutions
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Concessions to SSI- contd
National and International Exhibitions
Small scale sector is given concession in rent for space in exhibition
In Maharashtra , concessions are given by SSIDC, NSSIC
Other schemes for Assistance in Marketing
Tender forms are sent free of cost by DGS&D, Directorate of Industries to registered
small scale units
Concessions in security deposit
Priority is given to products manufactured by small scale sector
Orientation courses for entrepreneurs
Training is provided by the State and the Central government
Has started many institutes for giving guidance in respect of technology and orientation
courses for entrepreneurs
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Concessions to SSI- contd
Financial assistance
Gives loans to small scale sector at lower rate of interest
Govt gives assistance by way ofseed money and loans at lower rate of interest
State government also grants subsidy to this sector under its corporation schemes of
incentives
Grants lands on concessional rental basis or on lease to the SSIs
Place for small scale Industry
Industrial societies sponsored by local industrial estates are encouraged so as to enable
the SSI units to commence their units at earlier stage
At 142 places, SSI estates are established with the help of MIDC in the state of
Maharashtra
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Concessions to SSI- contd
Supply of electricity
MIDC shares part of expenditure on electricity for the units which require less than 100
H.P load for their industry who get the electricity at cheaper state
Concessions in Central Excise Duty
This duty is paid by industries for whom it is made applicable by the government
Small scale industries are exempted from paying any excise duty till their sale does not
exceed Rs. 30 lacs
Import of raw material and machinery
Special concessions are granted to SSI units for import of raw material and machineries
required for the industry
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Concessions to SSI- contd
Export of products of SSI Units
Various concessions for export of their products
Concessions in paying Income tax to SSI
Concessions in paying income tax, concessions in depreciation, capital investment in
their profits
Concessions in Stamp duty
On availing a loan , small scale units are required to mortgage their immovable
properties with such institutions
Govt of Maharashtra has granted concessions for stamp duty on Mortgage deeds to be
executed for that purpose