pme guidelines for prospective entrepreneur

7/28/2019 PMe Guidelines for Prospective Entrepreneur.

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Guidelines for Prospective

Entrepreneur

General Information

Financial Assistance Project Report

Training

Marketing

Promotional Schemes

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General Information• What can be done for self-employment?

A micro or small or medium enterprise can easily be set up for self-employment. You can choose an

activity depending upon your interest and suitability not only to become self-employed but also to

generate employment for others.What is a Micro, Small or Medium Enterprise?

• The earlier concept of ‘Industries’ has been changed to ‘Enterprises’

• Enterprises have been classified broadly into:

(i) Enterprises engaged in the Manufacture / production of goods pertaining to any industry;&

(ii) Enterprises engaged in providing / Rendering of services.

• Manufacturing enterprises have been defined in terms of investment in plant and machinery (excludingland & buildings) and further classified into :

• - Micro Enterprises - investment up to Rs.25 lakh.

- Small Enterprises - investment above Rs.25

lakh & up to Rs. 5 crore

- Medium Enterprises - investment above Rs. 5

crore & up to Rs.10 crore.• • Service enterprises have been defined in terms of their

investment in equipment (excluding land & buildings) and further

classified into:

- Micro Enterprises – investment up to Rs.10 lakh.

- Small Enterprises – investment above Rs.10 lakh & up to Rs.2 crore.

- Medium Enterprises –investment above Rs. 2 crore & up to Rs. 5 crore

It is not necessary to engage in manufacturing activity for self-employment. One can set up

service enterprises as well .



ow do I select an activity for self-employment?

For selecting an activity or enterprise, you will have toconsider the following significant issues:

• Where do you want to promote the enterprise?

• What resources are available near the location of theenterprise?

• What kind of market or consumer pattern exists near the siteof enterprise?

• What kind of contacts you have to exploit to your advantagefor marketing of the product?

• What infrastructure is available at the location of your

enterprise?• How much capital is available?

• There are many other considerations including availability of skilled manpower, raw material, technology etc. before younarrow down your choice for selection of industry or activity.



Who will assist in identifying the activity?

• MSME Development Institutes can assist you inidentifying the activity based on the Industrial PotentialSurvey and product specific market studies. DistrictIndustries Centers/State Directorate of Industries also

facilitate in identification of a suitable activity.• What steps are required for identifying

the activity?

A preliminary market study of product(s) or service(s)needs to be undertaken to analyse consumption andavailability pattern. If there is a gap in demand andsupply, the activity considered ideal for selection.



• Where is market information available?

Market information is available with MSME DevelopmentInstitutes (MSMEDIs) and DIC's of respective states/areas.

Market Survey reports on various items and Industrialpotential surveys of particular areas provide theinformation about the market potential of items. Industryand Trade associations, specialized institutions like PPDCcan also provide such information.

• How can market potential be ascertained?

Market potential can be ascertained by conductingpreliminary study by prospective entrepreneur to get an in

sight of the product/ services to be setup. An entrepreneurcan estimate local demand, demand within the state orcountry, export market and future prospects of product(s)/service(s). Visit to wholesale and retail markets,bulk consumers etc. provides accurate information on

market potential.



• Is there any agency providing guidance onmarketing potential?

MSMEDI and State Governments agencies viz.DICs and SIDCs provide guidance on marketpotential. The gap in demand & supply can beestablished through potential surveys and marketassessments with the help of these agencies.

• Where can the enterprise be set up?

The enterprise can be set up in a designated

industrial areas, where infrastructure facilities areavailable and is near to the market identified. Itcan also be set up in any other area dependingupon nature of activity and local municipal rules.



What are the inputs required for setting up an enterprise?

The following major inputs are required for setting up an enterprise:

• Land, building or shed

•

Machinery and equipments• Raw Materials

• Power and Water

• Skilled manpower

• Capital

• Are there any projects suitable for non-technical and

inexperienced entrepreneurs?

There are many projects, which are suitable for non-technical and inexperiencedentrepreneurs. Skilled manpower and technical personnel can be hired according toneeds. Entrepreneurs can also join special short term training programmes. MSMEDI's,DIC's, NSIC etc. provide intensive consultancy to such first generation entrepreneurs

•

How can a new entrepreneur compete with the existingmanufacturers?

A prospective entrepreneur can take the advantage of opting for the latest technologyand production process and operate at higher volume of operation. This leads toreduced production cost and production of quality goods and services. A newentrepreneur can thus provide improved quality goods and services at lower cost and

further tap the market with innovative marketing approach



Financial Assistance • Which are the agencies providing financial assistance?

Financial assistance is available from institutions such as Nationalised

Banks, Small Industries Development Bank of India, Regional Rural Banks,National Small Industries Corporation, State Financial Corporations etc.depending upon the project requirement and promoters background.Financial assistance has two components. Loan for fixed capital is used toacquire Plant and Machinery, land and building. Working capital loan isused to meet day to day operational cost of the production. State Financial

Corporation and National Small Industries Corporation generally provideworking capital. However under a package assistance, State FinancialCorporations also provide a composite loan covering plant and machineryand working capital.

• How to choose the most suitable source of funding?

Any of the financial institutions can be approached to get funds keeping inview their specific schemes. Evaluate and compare the terms andconditions, including rate of interest and repayment period of loan offeredby the different financial institutions. Select the financial institution, whichoffers funds at minimum interest rate as per your repayment plan to suityour project. Choose the Institution which is in close proximity to the

project site if other terms and conditions are similar.



• What are the eligibility criteria for getting a loan?

The major eligibility criteria is return on the investment and profitability of the project proposed to be set up. Any financial institution will support theproject if repayment is assured.

• How much money the entrepreneur is required to invest out of his ownresources?

Some portion of total investment has to be contributed by theEntrepreneur out of own sources. This is called margin money. Financial

Institutions insist on 10 to 25 per cent margin money depending upon thecategory of the entrepreneur, risk factor and existing scheme under whichthe project will be financed

• What to do if an entrepreneur does not have any money of his own?

It is simple. One can arrange for loan for margin money under the scheme

being operated by the State Commissioner/Directorate of Industries orState Bank of India. But this scheme is generally offered to professionallyqualified entrepreneurs. Alternately you may have to prune down the sizeof your project in tune with available margin money. The financialinstitutions will prefer to support an entrepreneur, who is willing to puthis/her own stake to some extent.



• What is the procedure for getting a loan?

An entrepreneur should approach the concerned financial institution viz.State Financial Corporation, NSIC, Bank branches etc. Application inprescribed proformae has to be submitted along with project report

including proof of ownership/availability of land/building, proof of residence, collateral securities (wherever applicable) etc. The loan is givenby the institution if the application meets the norms.

• Can the loan be used to cover all types of investment in the project?

The amount of loan can be used to cover all types of investment requiredin the project, such as machinery & equipment, and working capital, landand building. The lending agency for each component of loan may besame or different.

• Is there any agency for funding the land and building costs?

The Banks and State Financial Corporations offer assistance forland/building/shed to certain extent. However, some qualifyingparameters have been laid down by these institutions. In addition,Housing Development Corporation also provides funds for land /building.



• What are the general conditions for availing financialassistance?

The general conditions for getting financial assistanceare:

• Eligibility criteria

• Technical /Economic viability

•

Promoters contribution• Capacity to repay loan

• Collateral securities/guarantee

• Is loan available from any other source for small

projects? Loan is also offered under some special schemes likeP.M.R.Y . which are directed towards creation of self-employment.



Project Report • What is a project report?

The project report is a document, which gives an account of the project proposal to ascertain the prospects of theproposed plan/activity. The project report contains detailedinformation about:

• Land & building required

• Manufacturing Capacity per annum• Manufacturing Process

• Machinery & equipment along with their prices andspecifications

• Requirements of raw materials

• Power & Water required.

• Manpower needs

• Marketing

• Cost of the project and production.

• Financial analyses & economic viability of the project.



• How is a Project Report Prepared?

A project report is prepared with the help of prescribed guidelinesavailable with MSMEDI's, DIC's & financial institutions. Informationabout prices of machinery & equipment, raw material and othervarious inputs required for setting up an enterprise need to becollected from the market.

• Is there any standard model for preparing the project report?

A model proforma for preparing the project report is available withMSMEDI's, DIC's & financial institutions. Every institution has itsown model proforma. However contents of all the proforma arealmost similar.

• Is a model project report available?

Yes, Model project profiles are available with theMSMEDIs(formerly Small Industries Service Institute's) & DIC's forthe guidance of entrepreneurs.. However, these project profileshave to be recast in accordance with specific needs of theentrepreneurs and the current prices of inputs.



• Which agency assists in preparation of Project Report?

MSMEDIs, NSIC and State Govt. agencies viz. DICs, SFCs can helpyou in preparing the Project Report. You can also prepare theProject Report yourself by collecting detailed information onvarious points.

• What details are required for preparation of Project Report?

Information in detail is required about the technical process,

requirements of plant and machinery, raw materials, manpowerrequirement, market information and statutory representations(like pollution control and public safety) etc. The details of powerand water tariff, land/shed/building and selling prices etc. needs tobe collected as prevalent in the market.

•

Which agencies can be approached for obtaining information forpreparation of the Project Report?

Entrepreneur can approach MSMEDIs and state Govt. agencies viz.Directorate of Industries, SFCs, DICs and market channels for gettinginformation.



• Who can help in selecting production process,equipment etc?

Micro, Small & Medium Enterprises Development

Institute’s (formerly Small Industries ServiceInstitutes), Design and Development Centers likeMSME Technology Development Center’s(formerly PPDC's) /Tool Room's, Research and

Developmental agencies such as NRDC's andRegional Research Laboratories can help you inselecting the right production process, suitableequipment's etc



Training • What basic training is required for setting up an enterprise?

• Basic training differs from product to product but will

necessary involve sharpening of entrepreneurial skills. Needbased technical training is provided by the Govt. & State Govt.

technical Institutions.

• What are the other types of training relevant for a new

entrepreneur? • One can acquire entrepreneurial skills by under going

Entrepreneurial Development Programme and Management

Development programme.

•What is the duration of such courses?

• These are short-term courses of 2 week's to 4 week's

duration.

• Which are the agencies providing such training?

• There are a number of Government organisations as well as



• Is different type of training available for different categories of entrepreneurs?

• Need based training courses are available for different categories of entrepreneurs. For example, Central Footwear Training Institute's

provide training for footwear. Tool Room and Tool Design Institutesprovide training in Engineering Industry. Likewise other technicaltraining is provided by various institutions of centre and state govt.

• Are there any preferential criteria for imparting training?

• An entrepreneur desirous of setting up of enterprises or hisrepresentative is preferred for attending these training programmes

which are offered on a nominal fee. However, there is no feecharged for imparting training for the entrepreneurs of NE region.Moreover, preference is accorded to weaker sections such as SC/ST,Women, Ex-servicemen. and Physically handicapped persons.

• Are there any short terms courses available?

•

Short term technical training courses are conducted by SISIs andother technical institutions, which vary from 3 to 6 months of duration depending on nature of training. In addition, short-termtraining programmes for managers & supervisors are alsoconducted by MSME's to upgrade their knowledge and skills.



• Does any agency give on the spot training for installation andcommissioning of equipment?

• Normally the suppliers of machinery & equipment provide on thespot training as well as facilities on the spot for installation and

commissioning of equipment. However, SISIs also assist theentrepreneurs for installation and commissioning of machineryequipment at their premises.

• Is there any agency providing training for skill upgradation?

• Skill development/upgradation courses are offered by SISIs, NSIC,PPDCs etc. in different disciplines to skilled workers engaged in themicro, small and medium enterprises with a view to equip themwith better and improved technologies of production.

• Which are the organisations providing training to improvemanagement of an enterprise?

• SISIs, Management Development Institute's, NPC, NSIC etc. offer

Management Development Programmes for acquiring knowledgeabout the different aspects of the management required for anoperation of industry. Short-term courses of two to four weeks areavailable on Production Management, Marketing Management,Financial Management, Export Management, Export Procedure &Documentation, Packaging for Exports, Cost Reduction, Material

Management etc.



• Are there institutions providing consultancy fordevelopment or setting up of project?

• SISIs, DICs and State industrial development corporationscan provide consultancy for development or setting up of

project. Suitable technologies are also offered by CSIRLaboratories, PPDC's, NRDCs, R&D institutions also offerconsultancy at nominal charges.

• What kind of consultancy is offered by these agencies?

• The consultancy provided by these institutions includesidentification of suitable product, market, technologies,Raw Materials, production method, regulatory requirementetc. In fact any problem can be addressed by theseinstitutions for setting up or running of the enterprise.

• Which agencies provide information on plant andmachinery, raw materials and other equipments?

• SISIs, DIC, CSIR Laboratories, PPDC's, NRDC, R&Dinstitutions etc. provide information on plant andmachinery, raw materials and other equipments.



• How does one tackle pollution control needs of the project?

• In case your product is covered under the list of the pollutingindustries as defined by the state government, it will be necessaryto get specific clearance from the state Pollution Control

Board/Committees. Pollution control equipments/measures willhave to be installed by the enterprise as per need. Such pollutingenterprises can only be set up in the designated industrial areas orlocations and may have to link up with the common affluenttreatment facility, if available in the area.

• Which institutions provide details of pollution control

requirements? • Pollution control board/ Committees and State Directorate of

industries provide details of pollution control requirements. SISIs,and DICs also help in understanding of pollution needs.

• Does any agency provide training in pollution control?

•MSME's provide training in pollution control for different type of industries as per their local needs. Pollution Control Boards &Ministry of Environment also support training efforts.



Marketing • How does a new entrepreneur market the product?

• This is an era of globalization and liberalization. The manufacturershave to offer goods and services of desired quality at optimum cost.Select the right market/consumers identified at the time of planning the unit. Establish Direct marketing channels or a networkof dealers as per requirement of the product based upon initialsurvey. Highlight strengths of the product.

• How does one popularise the new product?

• You may create awareness among the buyers or consumers about

your product's strong points in order to convince them of the utilityof the product. Publicity in various available forms has to bearranged within the budgetary constraints. Sell your quality, to gainconsumer's confidence. Review consumer feed back. Resort to livedemonstration. MSME /NSIC help in popularising the productthrough domestic and international trade fairs/exhibitions.

• Are there any specialized agencies which offer marketingassistance?

• There are Governmental and non-governmental specialisedagencies which provide marketing assistance. NSIC & KVIC are thedevoted govt. agencies for providing marketing assistance to MSMEunits.



• Is there any other assistance offered by NSIC for marketing MSMEProduct?

• Besides promotion of MSME products through exhibitions, NSIC directlymarket the MSME produce in the domestic and overseas market. NSICalso manages a single point registration scheme for manufacturers for

Govt. purchase. Units registered under this scheme get the benefits of free tender documents and exemption from earnest money deposit andperformance guarantee.

• Does any agency help in exhibition of the product?

• MSME & NSIC help the micro, small and medium enterprises for exhibitingproducts of MSME in the domestic and international exhibition.

•Does any agency help in promoting exports?

• ITPO, DGFT, FIEO & Chambers of commerce in different countries Ministryof Commerce provide assistance in promoting exports. Office of theDevelopment Commissioner (MSME), Government of India providesfinancial assistance to micro, small and medium scale entrepreneurs todisplay their products in overseas fairs and also for sales-cum-study tours

abroad.• Are there any special benefits for exports?

• MSME units gets special benefits such as duty draw back, advancelicensing for import of capital goods and raw materials, pre- shipment andpost shipment credit against firm export orders and marketingdevelopment assistance. Income tax benefit is available on exports

earning.



Promotional Schemes

• What is the policy of Government for promoting a micro, small and mediumenterprises ?

• Government accords the highest preference to development of MSME by framingand implementing suitable policies and promotional schemes. Besides providingdeveloped land and sheds to the entrepreneurs on actual cost basis withappropriate infrastructure, special schemes have been designed for specificpurposes like quality upgradation, common facilities, entrepreneurshipdevelopment and consultancy services at nominal charges.

• What is the incentive provided for quality upgradation ?

• Government of India has been executing the incentive scheme for providingreimbursement of charges for acquiring ISO 9000 certification to the extent of 75%of the cost subject to a maximum of Rs. 75,000/- in each case. ISO 9000 is amechanism to facilitate adoption of consistent management practices and

production technique as decided by the entrepreneur himself. This facilitatesachievement of desired level of quality while keeping check on production processand management of the enterprise.



• Is there any concession on Excise Duty payable by small units ?

• MSME units with a turnover of Rs. 1 crore or less per year have been

exempted from payment of Excise Duty. Moreover there is a general

scheme of excise exemption for MSME brought out by the Ministry of

Finance which covers most of the items. Under this, units having turnover

of less than Rs. 3 crores are eligible for concessional rate of Excise Duty.

Moreover, there is an exemption from Excise Duty for MSME units

producing branded goods in rural areas.

• Is priority there any on providing credit to MSME ?

• Credit to micro, small and medium scale sector has been covered under

priority sector lending by banks. Small Industries Development Bank of

India (SIDBI) has been established as the apex institution for financing the

MSME. Specific schemes have been designed for implementation through

SIDBI, SFCs, Scheduled Banks, SIDCs and NSIC etc. Loans upto Rs. 5 lakhs

are made available by the banks without insisting on collaterals. Further

Credit Guarantee Fund for micro, small and medium enterprises has been

set up to provide guarantee for loans to MSME up to Rs. 25 lakhs

extended by Commercial Banks and some Regional Rural Bank.



• What are the policies and schemes for promotion of MSME beingimplemented by State Governments ?

• All the State Governments provide technical and other supportservices to small units through their Directorates of Industries, and

District Industries Centres. Although the details of the scheme varyfrom state to state, the following are the common areas of support.

• Development and management of industrial estates

• Suspension/deferment of Sales Tax

• Power subsidies

•Capital investment subsidies for new units set up in a particulardistrict

• Seed Capital/Margin Money Assistance Scheme

• Priority in allotment of power connection, water connection.

• Consultancy and technical support

•If I perform well, will my efforts be recognized ?

• Yes, Government of India runs a scheme for giving National Awardsto micro, small and medium scale entrepreneurs providing qualityproducts in 11 selected industry groups of consumer interest. Thewinners are given trophy, certificate and a cash price of Rs. 25000/-each.



Registration of Small Scale

Industries(SSIs)

• Registration of an existing or proposed small scaleenterprise is voluntary and not compulsory. It hasno statutory basis. But, registration is beneficialfor the enterprise itself because it makes the unit

eligible for availing the benefits given by theCentral or State Governments for the promotionof SSIs. Some of the incentives so obtained bythem relate to credit guarantee scheme; priority

sector lending; capital subsidy; reduced customsduty; ISO-9000 certification reimbursement;power tariff subsidies; exemptions under taxlaws; etc.



• The State Directorate or Commissioner of Industries or

District Industries Centres (DIC's) are the concerned

authorities for registration of small scale units. This

registration is both location specific and product specific. Likein certain State capitals and metropolitan cities, it is granted

to only those units which are located in the designated

industrial areas/estates.

• A small scale unit is generally subjected to two types of

registration. Initially, a provisional registration is granted for

the proposed enterprise. It is termed provisional because the

enterprise is yet to come into existence. It is granted for a

specified period of time during which the unit is expected to

be setup. A 'Provisional Registration Certificate (PRC)' enablesthe unit to obtain :- (i) term loans and working capital from

financial institutions, banks under priority sector lending; (ii)

facilities for accommodation, land and other approvals; (iii) no

objection certificates (NOCs) and clearances from regulatorybodies such as ollution control board labour re ulations

F liti i d t b l t d f ki t

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Formalities required to be completed for seeking permanent

registration are :-

• Clearance from the municipal corporation

•

State pollution control board clearance• Sanction from the electricity board

• Ownership/tenancy rights of the premises where unit is

located

•

Copy of partnership deed/Memorandum of articles of association in case of a private limited company

• Sale bill of product manufactured

• Sale bill of each end product

• Purchase bill of each raw material• Purchase bill of machinery installed

• BIS/QC certificate if applicable

• An affidavit giving status of the unit, machinery installed,

power requirement, etc.

h i i ifi i d b h



• The registration certificate so issued by theconcerned authority is seen as a proof of the unitbeing a small scale unit. It enables the unit to getseveral concessions like :-

• Income tax exemption and Sales tax exemption asper the State Government policy.

•

•

Incentives and concessions in power tariff, etc.•

• Price and purchase preference for goodsproduced.

• • Availability of raw material depending on existing

policy.



• Though, provisional registration is not compulsory for getting a permanent

registration. But, a provisional certificate enables the unit to apply to the

various departments and agencies for assistance in setting up of the

enterprise.

• Such a registration procedures is generally uniform across the States.However, there may be some modifications done by individual States. For

example, certain States may have a 'SIDO registration scheme' and a 'State

registration scheme'. But, whatever be the registration scheme, the main

purpose is to maintain statistics and a roll of such units for providing

incentives as well as to create nodal centres at the Centre, State andDistrict levels to promote SSIs. It gives recognition to the industrial unit

and helps in generating a database for policy planning.

• A small scale unit may also become liable for de-registration, if it crosses

the investment limits; starts manufacturing any new item or items that

require an industrial license or other kind of statutory license; or does notsatisfy the condition of being owned, controlled or being a subsidiary of

any other industrial undertaking.

Illustrative List of Small Scale Service &



Illustrative List of Small Scale Service &

Business (Industry related) Enterprises

• An industry related service/business

enterprise with investment up to Rs. 1 million

(w.e.f. September 2000) in fixed assets,

excluding land and building, is treated as anSmall Scale Service/ Business Enterprise.



List of the activities which are recognised as Small Scale Service

and Business (Industry Related) Enterprises (SSSBEs) - As on 1st

January, 2002:-:-

•

Advertising Agencies• Marketing Consultancy

• Industrial Consultancy

• Equipment Rental & Leasing

• Typing Centres

• Photocopying Centres

• Industrial Photography• Industrial R& D Labs

• Industrial Testing Labs

• Desk Top Publishing

• Internet Browsing/Setting up of Cyber Café

• Auto repair, services and garages

• Documentary Films on themes likeFamily Planning, Social forestry,energy conservation andcommercial advertising

• Laboratories engaged in Testingof Raw Materials, FinishedProducts

• "Servicing Industry"undertakings engaged in

maintenance, repair, testing orelectronic/electricalequipment/instruments i.e.measuring/control instruments,servicing of all types of vehiclesand machinery of any

description includingtelevisions, tape recorders,VCRs, Radios, Transformers,Motors, Watches, etc

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• Laundry and Dry Cleaning

• X-Ray Clinic

• Tailoring

• Servicing of agriculture farmequipment e.g. Tractor, Pump,

Rig, Boring Machine, etc

• Weigh Bridge.

•

Photographic Lab• Blue Printing and enlargement

of drawing/designs facilities

• ISD/STD Booths

•

Teleprinter/Fax Services• Sub-Contracting Exchanges

(SCXs) established by Industry

Associations

• EDP Institutes established

by Voluntary

Associations/Non-

Government Organisation• Coloured, Black and White

studios equipped with

processing laboratory

• Ropeways in hilly areas• Installation and operation of

Cable T.V. Network

• Operating EPABX under

franchises• Beauty Parlours and

Creches

List o t e activities w ic are not recognise as Sma








List o t e activities w ic are not recognise as SmaScale Service and Business (Industry Related)

Enterprises (SSSBEs):-

• Storage (except cold storage

which is recognised as SSI)

• Retail/Wholesale Trade

Establishments

• General Merchandized

Stores

• Sale Outlets for industrial

components

• Health Services including

Pathological Laboratories

• Legal Services

• Educational Services

• Social Services

• Hotels










pme guidelines for prospective entrepreneur

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