Policy for Small and Tiny Enterprises, Village Industry, Handloom Etc.
A. SMALL AND TINY
1.1 The Small
Scale Industrial Sector has emerged as a dynamic and vibrant sector of
the economy during the eighties. At the end of the Seventh Plan period,
it accounted for nearly 35 percent of the gross value of output in the
manufacturing sector and over 40 percent of the total exports from the
country. It also provided employment opportunities to around 12 million
1.2 The primary objective of the Small Scale Industrial Policy
during the nineties would be to impart more vitality and growth-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. The
sector has been substantially delicensed. Further efforts would be made
to deregulate and debureaucratise the sector with a view to remove all
fetters on its growth potential, reposing greater faith in small and
1.3 All statutes, regulations and procedures would be reviewed
and modified, wherever necessary, to ensure that their operations do not
militate against the interests of the small and village enterprises.
2.0 TINY ENTERPRISES
have already announced increase in the investment limits in plant and
machinery of small scale industries, ancillary units and export –
oriented units to Rs 6 million, Rs 7.5 million, and Rs 200 thousand
respectively. Such limits in respect of "TINY" ENTERPRISES would now be
increased from the present Rs 200 thousand to Rs. 500 thousand,
irrespective of location of the unit. Limit in plant and machinery for
determining the status of MSME/Ancillary units as on date is Rs 10
million. For tiny it is Rs 2.5 million and for SSSBE Rs 500 thousand.
2.2 Service sub-sector is a fast growing area and there is need
to provide support to it in view of its recognised potential for
generating employment. Hence all Industry-related service and business
enterprises, recognised as small scale industries and their investment
ceilings would correspond to those of Tiny enterprises.
2.3 A separate package for the promotion of Tiny Enterprises is
now being introduced. This constitutes the main thrust of Government’s
2.4 While the small scale sector (other than ‘Tiny Enterprises’)
would be mainly entitled to one-time benefits (like preference in land
allocation/power connection, access to facilities for skill/technology
upgradation), the ‘Tiny’ enterprises would also be eligible for
additional support on a continuing basis, including easier access to
institutional finance, priority in the Government Purchase Programme and
relaxation from certain provisions of labour laws.
2.5 It has also been decided to widen the scope of the National
Equity Fund Scheme to cover projects upto Rs. 1 million for equity
support (upto 15 per cent). Single Window Loan Scheme has also been
enlarged to cover projects upto Rs 2 million with working capital margin
upto Rs 1 million. Composite loans under Single Window Scheme, now
available only through State Financial Corporations (SFCs) and twin
function State Small Industries Development Corporation (MSMEDCs), would
also be channelised through commercial banks. This would facilitate
access to a larger number of entrepreneurs.
3.0 FINANCIAL SUPPORT
access to credit – both short term and long term – remains a perennial
problem facing the small scale sector. Emphasis would henceforth shift
from subsidised/cheap credit, except for specified target groups, and
efforts would be made to ensure both adequate flow of credit on a
normative basis, and the quality of its delivery, for viable operations
of this sector. A special monitoring agency would be set up to oversee
that the genuine credit needs of the small scale sector are fully met.
3.2 To provide access to the capital market and to encourage
modernisation and technological upgradation, it has been decided to
allow equity participation by other industrial undertakings in the MSME,
not exceeding 24 per cent of the total shareholding. This would also
provide a powerful boost to ancillarisation & sub-contracting, leading
to expansion of employment opportunities.
3.3 Regulatory provisions relating to the management of private
limited companies are being liberalised. A Limited Partnership Act will
be introduced to enhance the supply of risk capital to the small scale
sector. Such an Act would limit the financial liability of the new and
non-active partners/entrepreneurs to the capital invested.
3.4 A beginning has been made towards solving the problem of
delayed payments to small industries by setting up of ‘factoring’
services through Small Industries Development Bank of India (SIDBI).
Network of such services would be set up throughout the country and
operated through commercial banks. A suitable legislation will be
introduced to ensure prompt payment of Small Industries’ bills.
4.1 To facilitate
location of industries in rural/backward areas and to promote stronger
linkages between agriculture and industry, a new Scheme of Integrated
Infrastructural Development (including Technological Back-up Services)
for Small Scale Industries would be implemented with the active
participation of State Governments and financial institutions. A
beginning in this direction will be made this year itself.
4.2 A Technology Development Cell (TDC) would be set up in the Small
Industries Development Organisation (SIDO) which would provide
technology inputs to improve productivity and competitiveness of the
products of the small scale sector. The TDC would coordinate the
activities of the Tool Rooms, Process-cum-Product Development Centres (PPDCs),
existing as well as to be established under SIDO, and would also
interact with the other industrial research and development
organisations to achieve its objectives.
4.3 Adequacy and equitable distribution of indigenous and
imported raw materials would be ensured to the small scale sector,
particularly the tiny sub-sector. Policies would be so designed that
they do not militate against entry of new units. Based on the capacity
needs, Tiny/Small Scale units would be given priority in allocation of
indigenous raw materials.
4.4 A proper and adequate arrangement for delivery of total
package of incentives and services at the District level will be evolved
5.0 MARKETING AND
5.1 In spite of
the vast domestic market, marketing remains a problem area for small and
tiny enterprises. Mass consumption labour intensive products are
predominently being marketed by the organised sector. The tiny/small
scale sector will be enabled to have a significant share of such
markets. In addition to the existing support mechanism, market promotion
would be undertaken through cooperative/public sector institutions,
other specialised/professional marketing agencies and consortia
approach, backed up by such incentives, as considered necessary.
5.2 National Small Industries Corporation (NSIC) would
concentrate on marketing of mass consumption items under common brand
name and organic links between NSIC and MSMEDCs would be established.
5.3 Government recognises the need to widen and deepen
complementarily in production programmes of large/medium and small
industrial sectors. Parts, components, sub-assemblies, etc. required by
large public/private sector undertakings would be encouraged for
production in a techno-economically viable manner through small scale
ancillary units. Industry associations would be encouraged to establish
sub-contracting exchanges, in addition to strengthening the existing
ones under the SIDO. Emphasis would also be laid on promotion of a
viable and competitive ‘component’ market.
5.4 Though the Small Scale Sector is making significant
contribution to total exports, both direct and indirect, a large
potential remains untapped. The SIDO has been recognised as the nodal
agency to support the small scale industries in export promotion. An
Export Development Centre would be set up in SIDO to serve the small
scale industries through its network of field offices to further augment
export activities of this sector.
TECHNOLOGICAL AND QUALITY UPGRADATION
6.1 A greater
degree of awareness to produce goods and services conforming to national
and international standards would be created among the small scale
6.2 Industry Associations would be encouraged and supported to
establish quality counselling and common testing facilities. Technology
Information Centres to provide updated knowledge on technology and
markets would be established.
6.3 Where non-conformity with quality and standards involves risk
to human life and public health, compulsory quality control would be
6.4 A reoriented programme of modernisation and technological
upgradation aimed at improving productivity, efficiency and cost
effectiveness in the small scale sector would be pursued. Specific
industries in large concentrations/clusters would be identified for
studies in conjunction with SIDBI and other banks. Such studies will
establish commercial viability of modernisation prescriptions, and
financial support would be provided for modernisation of these
industries on a priority basis.
6.5 Indian Institutes of Technology (IITs) and selected
Regional/other Engineering Colleges will serve as Technological
Information, Design and Development Centres in their respective command
7.0 PROMOTION OF
will continue to support first generation entrepreneurs through training
and will support their efforts. Large number of EDP trainers and
motivators will be trained to significantly expand the Entrepreneurship
Development Programmes (EDP). Industry Associations would also be
encouraged to participate in this venture effectively.
7.2 EDP would be built into the curricula of vocational and other
degree level courses.
7.3 Women entrepreneurs will receive support through special
training programme. Definition of "Women Enterprises" would be
simplified. The present stipulation regarding employment of majority of
women workers would be dispensed with and units in which women
entrepreneurs have a majority shareholding and management control, would
be defined as "Women Enterprises".
8.0 SIMPLIFICATION OF
RULES AND PROCEDURES
8.1 The persistent
complaint of small scale units of being subjected to a large number of
Acts and Laws, being required to maintain a number of registers and
submit returns, and face an army of inspectors, would be attended to
within a specified time frame of three months.
8.2 Procedures would be simplified, bureaucratic controls
effectively reduced, unnecessary interference eliminated and paper work
cut down to the minimum to enable the entrepreneurs to concentrate on
production and marketing functions.
B. VILLAGE INDUSTRIES
9.0 HANDLOOM SECTOR
sector contributes about 30 per cent of the total textile production in
the country. It is the policy of Government to promote handlooms to
sustain employment in rural areas and to improve the quality of life for
9.2 Schemes for the handloom sector will be redesigned keeping in
mind the local and regional needs. Constraints of coverage will be
removed so as to include bulk of the weavers who are outside the
9.3 Existing schemes will be re-drawn and suitably revised under
three major heads:
(a) Project Package Scheme: Under this
scheme, area-based projects for product development, upgradation of
technology, improvement of marketing facilities will be drawn up.
(b) Welfare Package Scheme: Number of
welfare schemes and quantum of funds earmarked for them will be
(c) Organisation Development Package:
Schemes for participation in the share capital will be re-drawn under
organisational development scheme for imparting a better management
system in the existing state agencies.
9.4 Janta cloth scheme which sustains weavers often on a minimum
level of livelihood will be phased out by the terminal year of the VIII
Plan ad replaced by the omnibus project package scheme under which
substantial funds will be provided for modernisation of looms, training,
provision of better designs, provision of better dyes and chemicals and
9.5 A vastly expanded role for the National Handloom Development
Corporation (NHDC) is envisaged. NHDC would be the nodal agency for
increasing the supply of hank yarn and of dyes and chemicals. Spinning
capacity in the co-operative sector will be increased. National
Co-operative Development Corporation will provide more assistance for
this in the form of Seed Money, both for cotton growers spinning mills
and weavers spinning mills.
9.6 For improving marketing of handloom products, a more
intensive implementation of schemes for design and product improvement
by national level publicity, exhibitions, and design exercise will be
undertaken. A special scheme will be drawn up to graduate the handloom
production, which is often of low value items, to high value products
suitable for export markets. This will be done by better design inputs,
upgradation of technology, diversion of weavers from cotton to silk and
tassar weaving. Special projects for modernisation of looms for products
suitable for export markets will be drawn up.
10.1 The key areas
in handicrafts that could contribute towards a faster pace of rural
industrialisation are production and marketing. Schemes for training and
design development and for production and marketing assistance will be
10.2 Considering the importance of this sector from the point of
view of employment and exports, it is proposed to provide an integrated
development thrust to this sector with a view to enlarging the
production base, thus enhancing the opportunities for employment and
income through crafts as an economic activity and to giving it necessary
inputs for quality improvement and effective marketing support both
internal and overseas. Efforts will be made not only to preserve the
traditional richness of the crafts but to engage the hereditary skills
of the craftspersons to suit modern requirements.
10.3 Emphasis will be given to the following:-
- Extension of services
like supply of raw materials, design and technical guidance, market
support, training and procuring of related materials/inputs in an
integrated and area-based manner through the setting up of craft
development centres in identified clusters of villages.
- Market development
support in the form of a package of assistance through expansion of
marketing infrastructure, exhibitions, publicity, etc., through Central
and State Handicrafts Corporations, voluntary organisations and support
to direct marketing activity by craftspersons.
- Expansion of training
activities by greater involvement of State Handicrafts Development
Corporations, Co-operatives and voluntary organisations.
- Measures to sustain an
increased exports of handicrafts through new marketing channels like
trading companies, departmental stores, etc.
11.0 OTHER VILLAGE
recognise the need to enhance the spread of rural and cottage industries
towards stepping up non-farm employment opportunities.
11.2 The activities of the Khadi and Village Industries
Commission and the State Khadi and Village Industries Boards will be
expanded and the organisations strengthened to discharge their
responsibilities more effectively.
11.3 There will be greater emphasis on improving the quality and
marketability of the products pari passu with consumer preferences
instead of merely depending on rebates and subsidies.
11.4 While the plan allocation for rural industries will be
augmented, effective steps will also be taken to ensure better flow of
credit from the financial institutions and a more coordinated and
optimal utilisation of different development schemes and agencies
operating in the rural sector. Bankability of projects undertaken in
this sector would be stressed.
11.5 The programmes of intensive development of KVI through area
approach with tie-up with DRDA, TRYSEM and ongoing developmental
programmes relating to weaker sections like Scheduled Castes, Scheduled
Tribes and Women would be extended throughout the country.
11.6 The traditional village industries would be given greater
thrust. Involvement of traditional and reputed voluntary organisations
will be encouraged.
11.7 Agro Processing and food Processing industries in KVI sector
using appropriate technologies would be promoted with a view to utilise
locally available agricultural produce and promote employment/resource
generation in the countryside.
11.8 Functional industrial estates would be established in areas
with concentration of agricultural/horticultural produce.
11.9 R & D in KVI sector would be strengthened through greater
linkages with CSIR and other research institutions in the areas of
production, finishing/packaging, processes and development of new tools
11.10 The training programmes would be upgraded and augmented to
cover the expanded list of industries under the purview of the KVIC.