ISO 9001-2000

Contents
Notice 3
Chairman's Address 8
Directors' Report 10
Comments of the Comptroller & 43
Auditor General of India
Statutory Auditors’ Report 44
Accounting Policies 51
Annual Accounts 58

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 ISO 9001-2000

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 ISO 9001-2000

THE NATIONAL SMALL INDUSTRIES CORPORATION LIMITED

( A GOVERNMENT OF INDIA ENTERPRISE )
NSIC BHAVAN, OKHLA INDUSTRIAL ESTATE
NEW DELHI – 110 020

NOTICE
Notice is hereby given that Annual General Meeting of the Members of the National Small Industries Corporation
Limited will be held on 29th Sept.,2006 at 5.00 P.M. at the Registered Office of the Corporation to transact the
following business:

ORDINARY BUSINESS
1) To receive and adopt the Accounts for the year ended 31st March,2006 and Reports of the Directors and Auditors
thereon and also the comments of the Comptroller & Auditor General of India.

2) To consider and if thought fit, to pass the following resolution with or without modifications as Special Resolution:

“RESOLVED THAT the Authorised Capital of the Company be increased from Rs. 220 crores to Rs. 235 crores
by creation of 15 lakh equity shares of Rs. 100/- each ranking pari-passu with the existing shares of the Company
in regard to the rights and privileges.

FURTHER RESOLVED THAT the Board of Directors be and are hereby authorised to allot the shares as and
when equity capital is released by the Government.

FURTHER RESOLVED THAT the Clause V of Memorandum of Association and Article 4 of the Articles of
Association be amended and substituted by the following new clause:

Clause V :- “The Authorised Share Capital of the Company is Rs. 235,00,00,000 (Rupees Two hundred thirty five
crores) divided into 235,00,000 (Two hundred thirty five lac ) equity shares of Rs 100/- (Rupees One
hundred) each”

Article 4 :- “The Authorised Share Capital of the Company is Rs. 235,00,00,000 (Rupees Two hundred thirty five
crores) divided into 235,00,000 (Two hundred thirty five lac ) equity shares of Rs. 100/- (Rupees One
hundred) each”

3) To enhance remuneration of Statutory Auditors of Branch Offices from the financial year 2005-06 onwards.

To consider and if thought fit, to pass with or without modification(s), the following resolution as a SPECIAL
RESOLUTION:

“The audit fee of Statutory Auditors of branches be increased as detailed below from Rs. 1,83,000/- to Rs.
2,42,000/- plus service tax and thus the overall audit fees shall increase from Rs. 3,58,000/- to Rs. 4,17,000/-
plus service tax from the financial year 2005-06 onwards.”

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 ISO 9001-2000

S.No. Zone Branches / Sub-Offices / NTSEC’s Existing Statutory Proposed Statutory

Audit Fees Audit Fees
1. NORTH-I Branch Office at Noida 25,000.00 34,000.00
(including Sub-Office Aligarh),
Kanpur, Naini, Kashipur, NSIC-Indl.
Estate Naini, NTSEC-Aligarh, Kashipur
2. NORTH-II Branch Office at Chandigarh, Delhi, 25,000.00 34,000.00
Faridabad, Jaipur, Ludhiana
(including Sub-Office at Jallandhar
and Jammu ) & NSIC-TSEC, Rajpura
3. SOUTH-I Branch Office at Chennai 30,000.00 40,000.00
(including STP), Cochin, Pondicherry,
Coimbatore & Madurai, NTSC
Chennai and NTSEC, Dindigul
4. SOUTH-II Branch Office at Hyderabad, 18,000.00 24,000.00
Bangalore, NSIC-TSC Hyderabad
5. WEST Branch Office at Mumbai 20,000.00 24,000.00
(including Sub-Office Goa) & Nagpur
6. EAST Branch Office at Kolkata (including 23,000.00 30,000.00
Sub-Office Patna), Rourkela, Cuttack,
Jamshedpur, NTSC Howrah
7. WEST NTSC Rajkot 8,000.00 9,000.00
8. WEST NSIC Office Ahmedabad 12,000.00 17,000.00
Branch Office Rajkot
9. WEST Branch Office Bhopal & Indore 12,000.00 16,000.00
10. EAST NSIC Office Guwahati, including 10,000.00 14,000.00
Sub-Office Imphal & Demonstration-
-cum-Training Centre at Guwahati
Branch Auditors Fees ——— >>> 1,83,000.00 2,42,000.00
11. H.O. Consolidation of Accounts, Head Office 1,75,000.00 1,75,000.00
Marketing Division, NTSC-Okhla
Total Statutory Fees ——— >>> 3,58,000.00 4,17,000.00

By Order of the Board

(Niti Sethi)
Dated: 6th September, 2006 Company Secretary
All the Shareholders of
National Small Industries Corporation Limited
NOTES:
1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote instead of
himself and the proxy need not be a member.
2. Explanatory statement Pursuant to Section 173(2) of the Companies Act, 1956 is enclosed.

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 ISO 9001-2000

Explanatory Statement Pursuant to Section 173 (2) of the Companies Act, 1956
2) At present the Authorised Capital of the Corporation is Rs.220 crores and Paid-up-Capital is Rs.217.988 crores.
The budgetary support approved includes an outlay of Rs. 15 crores towards equity support for the development
of infrastructural projects.
Since the Authorised Capital is only Rs.220 crores, it is essential to increase it so that the Government may release
equity support for 2006-07.
Keeping this in view, it is proposed that subject to the approval from the shareholders the Authorised Capital of
the Corporation be increased from Rs. 220 crores to Rs. 235 crores and consequent changes be made in the
Memorandum and Articles of Association of the Corporation.
The Board of Directors, therefore, commend the above resolution for increase in the Authorised Capital and
consequent changes in the Memorandum and Articles of Association for approval of the Shareholders.
None of the Director is interested in the Resolution.
3) The Comptroller & Auditor General of India had appointed Statutory Auditors for various branch offices for
conducting the Statutory Audit for the financial year 2005-06. The Board had fixed the total audit fee for the
branch auditors amounting to Rs.1,83,000/- in the financial year 2001-02 and the same was being paid to Branch
Auditors since 2001-02.
The Branch Auditors had requested for revision of their audit fees from the financial year 2005-06 onwards due
to increase in workload, introduction of independent branch-wise financial statements, overall increase in volume
of work in comparison to earlier years, inflation and rising cost of audit. Further, in order to restructure the
branches during the year 2004-05, one tier of regional offices had been removed and each branch has been
treated as separate profit centre. Now, they have to audit the branches separately which were earlier consolidated
in the regional office accounts. In addition they have to sign the balance sheet, prepare audit report and notes to
accounts, prepare audit report for C&AG for each branch office separately which was earlier done at regional
office level. Accordingly, Branch Auditors require deployment of more man-hours to complete the audit work.
In view of the above mentioned facts, the request made by the branch auditors seems to be justified. It is proposed
to increase the Statutory Audit fees of branch auditors from Rs. 1,83,000/- to Rs. 2,42,000/-.
As per the provision(s) under section 224(8) (aa) of the Companies (Amendment) Act, 2000, the remuneration of
the Auditors is to be fixed in the Meeting of the Shareholders. The Shareholders approval is being sought for fixing
the remuneration of Statutory Auditors of branch offices, by means of a Special Resolution.
The Board of Directors recommend the above resolution for your approval.
None of the Directors has interest in the resolution.

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 ISO 9001-2000
Chairman-cum-Managing Director
Directors
Chief General Manager (Finance)
General Manager (Finance)
Company Secretary
Statutory Auditors
Branch Auditors
Main Bankers
Registered office
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Shri H.P. Kumar
Shri Pravir Kumar
Shri S.K. Sinha
Shri A. K. Jha
Shri Rakesh Rewari
Shri S.A.T. Rizvi
Shri Dilip Phukan
Dr. Dinesh Awasthi
Shri T. Narayanaswamy
Shri Ravindra Nath
Shri Y.K. Sharma
Ms. Niti Sethi
M/s. D.P. Khosla & Co.
New Delhi
M/s. B.C. P. Jain and Co
Bhopal, Madhya Pradesh
M/s. Chetan Shah & Co.
Mumbai, Maharashtra
M/s. H.P. Mehta & Co.
Rajkot, Gujarat
M/s. Vinod Parveen & Associates
Noida, Uttar Pradesh
M/s. R. Janaki Raman & Co.
Chennai, Tamil Nadu
M/s. D.V. Ramana Rao & Co.
Hyderabad, Andhra Pradesh
M/s. N.C. Das & Co.
Guwahati, Assam
M/s. Aggarwal Chadha & Associates
Chandigarh, Punjab
M/s. Sambhu N De & Co.
Kolkata, West Bengal
M/s. Ashok Chhajed & Associates
Ahmedabad, Gujarat
Punjab National Bank
China Trust Commercial Bank
ICICI Bank
HSBC Ltd.
Induslnd Bank
NSIC Bhawan
Okhla Industrial Estate,
New Delhi-1 10020
 ISO 9001-2000

BOARD OF DIRECTORS

Shri H.P. Kumar

Chairman-cum-Managing Director

Shri Pravir Kumar Shri S.K. Sinha Shri A.K. Jha

Shri Rakesh Rewari Shri S.A.T. Rizvi

Shri Dilip Phukan Dr. Dinesh Awasthi Shri T. Narayanaswamy

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 ISO 9001-2000
CHAIRMAN’S ADDRESS
Dear Shareholders,
I have great pleasure in extending you a warm and
hearty welcome on the 51st Annual General Meeting of
National Small Industries Corporation Limited (NSIC).
With your permission, I take the Directors’ Report and
the Audited Accounts for the year ended 31st March, 2006
which are with you, as read.
Your Company has traversed a long journey of
serving the small scale sector in the country. With its rich
experience of 51 years, it is fully geared up to take up
new roles & responsibilities emerging out of Micro, Small
& Medium Enterprises Development Act, 2006.
The journey of last few years was one of re-
establishing the Corporation both in terms of its operations
as well as its image in the eyes of its stake holders. With
the initiatives taken in the recent past, your Corporation
has confirmed its relevance even after 50 years. All these
measures taken during the last few years have enabled it
to emerge out of its past operational problems. I am
pleased to inform that after continued operating losses
during the last five years, NSIC has posted an operating
profit as well as net profit of Rs. 1.25 crore during the
year 2005-06. Further, during the year, it has recorded
68% growth in its business turnover over the last financial
year i.e. 2004-05.
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I am pleased to inform that various initiatives taken
by the Corporation show its steadfastness in serving the
cause of the small enterprise sector. The initiatives show a
determination of the Corporation to reach out to the small
enterprises for providing them the services at the doorstep.
Changing Role of NSIC
In the last 51 years, NSIC has provided assistance
to the small enterprise sector through its various
schemes of assistance under Marketing, Technology,
Finance and other Support Services. Based on the
strategic guidelines given by the Government with
respect to the future activities of the Corporation, NSIC
has drawn a strategy to assist small enterprises in enhancing
their competitiveness with a set of specially tailored
schemes. In line with current economic changes, NSIC
has introduced many new schemes from time to time for
the development of the small enterprises.
I am pleased to report to you that apart from building
upon the new initiatives taken during the last three years
like tie-up with banks for providing credit support to small
enterprises, opening of new warehouses for distribution
of raw materials, Performance & Credit Rating Scheme
etc., we have taken some more steps for improving the
services for small enterprises like setting up of information
technology incubators, utilisation of idle infrastructure
available with the Company, redeployment of surplus staff
for productive growth and having strategic alliance with
the Export Credit Guarantee Corporation of India Ltd.
(ECGC) for providing export credit insurance to the small
enterprise sector in the country.
We have now revised our business strategies for the
future in order to serve the Micro, Small & Medium
Enterprises and to meet the aspirations of these sub sectors
of the industry as per the MSME Act, 2006. NSIC’s role
is further going to widen to cater to the needs of a larger
number of Micro, Small and Medium Enterprises. For
 ISO 9001-2000

Shri Mahabir Prasad, Hon’ble Union Minister of SSI & A&RI and Mr. Sergio A.G. Zepeda, Minister of Economy, Mexico
signing a Memorandum of Understanding between Ministry of SSI & A&RI, India and Secretariat of Economy,
the United Mexican States. Also present on the occasion are Shri H.P. Kumar, Chairman-cum-Managing Director, NSIC
and Shri R.K. Bhatia, Ambassador of India, Mexico

this, NSIC is drawing up the necessary infrastructure to
meet the increasing requirement of these sub sectors.
I am sure, the new initiatives taken by your Company
would go a long way in providing better service to the
small enterprises in the country and also improving the
Company’s operational performance.
I take this opportunity to re-assure the Government,
the small enterprise sector and other stakeholders that
the Corporation will continue to strive to achieve its vision
of being a premier organisation in the country fostering
the growth of small enterprises including tiny and service
enterprises.
Acknowledgements
I like to place on records my sincere thanks to
Hon’ble Minister of Small Scale Industries and Agro &
Rural Industries for his patronage, valuable guidance and
support. I am grateful to the Secretary to the Government
of India, Ministry of Small Scale Industries and Agro &
Rural Industries, who has always been a source of
inspiration and advice. I am also grateful to Additional
Secretary & Development Commissioner (SSI), Joint
Secretary, Director and other officials of the Ministry of
SSI for their support and guidance.
I am also grateful to Additional Secretary-cum-
Financial Advisor and Director (IF Wing) for their support
and guidance.
Before I conclude, I would like to express my
gratitude to my colleagues on the Board for their valuable
contribution and wise counsel in managing the affairs of
the Company.
I also gratefully, acknowledge the continuous support
extended by Planning Commission, Department of Public
Enterprises, other Departments and State Governments.
I would also like to thank our Bankers for their support.
Last but not the least, my thanks to our employees who
have worked hard with full dedication during the year.

New Delhi (H.P. Kumar)

29th September, 2006 Chairman-cum-Managing Director

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 ISO 9001-2000

DIRECTORS’ REPORT
The Shareholders,
The National Small Industries Corporation Ltd. (NSIC)
Dear Shareholders
On behalf of the Board of Directors of your Company, it
is my privilege to present the 51st Annual Report and
Audited Statements of Accounts for the financial year
ended 31st March,2006, together with comments of the
Comptroller and Auditor General of India on the Accounts
of your Company.
1.0 Corporate Performance at a Glance
During the year your Corporation continued to
provide support to small enterprises through its
various schemes. As a result of various new initiatives
taken by NSIC to improve the operational
performance the Corporation has been able to make
a turnaround in its operations and earned a net profit
of Rs. 1.25 crore during the year 2005-06 as against
a net loss of Rs. 11.48 crore in 2004-05. It is also
pertinent to mention that the net profit of Rs. 1.25
crore is after absorbing an amount of Rs. 2.00 crore
being 1/5th of the amortized amount of VRS
(Voluntary Retirement Scheme) expenditure not
reimbursed to the Corporation.
1.1 Operating Performance
The Corporation recorded gross business
turnover of Rs. 1,524.10 crore during the
financial year 2005-06, as against Rs. 908.01
crore during the previous financial year.
Net Operating Profit 359.83 - 704.41
Less- Provisions for - 34.52 - 443.17
doubtful debts
VRS Expenditure - 199.87 -
Written off
Net Profit 125.44 -1147.58
The Corporation earned net profit of Rs. 125.44 lac
during the year 2005-06, as against net loss of
Rs.1,147.58 lac in the previous year.
It may be noted that there is an operating profit of
Rs. 584.41 lac during the year 2005-06, as
compared to net operating loss of Rs. 529.77 lac
incurred in the previous year. It is pertinent to mention
that the Corporation was incurring operational losses
since the year 2000-01. Thus, the operating profit
has been achieved after a period of five years.
Increase in revenue income from sources other than
financing
During the year, the Corporation laid emphasis on
generation of revenue from non-financing activities like
Raw material distribution, marketing of products of small
enterprises, Single Point Registration Scheme,
Exhibitions, Infomediary Services and Software
Technology Park etc. The major sources of revenue
earned from non-financing activities were as follows:

1.2 Profitability Position (Rs. in lac)

(Rs. lac) S.No. Activities 2005-06 2004-05
2005-06 2004-05 1. Service Charges 323.05 223.97
Operating Profit 584.41 - 529.77 2. Discount Earned 263.25 244.31
(before provision for doubtful
3. Single Point Registration 161.65 121.53
debts and deficits in NTSCs,
Okhla, Howrah & Rajkot) 4. Infomediary Services 79.92 66.57
5. Exhibitions 50.07 21.73
Deficits of NTSCs - -224.58 -174.64
Okhla, Howrah & Rajkot 6. Software Technology Parks 398.98 301.51

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With change in focus from financing activities to non-
financing schemes of assistance, the Corporation has been
able to improve its overall operating performance by way
of reducing the risk of non- performing assets (NPAs) on
the one hand and enhancing its support services to small
enterprises by way of other schemes of assistance.
2.0 Schemes of the Corporation
To enhance the competitiveness of small enterprises
NSIC provides integrated support services under
Marketing, Technology, Finance and other Support
services.
2.1 Marketing Assistance
Marketing, a strategic tool for business development
is critical to the growth and survival of small
enterprises in today’s intensely competitive market.
NSIC acts as a facilitator to promote small industries
products and has devised a number of schemes to
support small enterprises in their marketing efforts,
both in and outside the country. These schemes are
briefly described as under :
2.1.1 Consortia and Tender Marketing: Small
Enterprises in their individual capacity face
problems to procure & execute large orders,
which inhibit and restrict their growth. NSIC
accordingly adopts Consortia approach and
forms consortia of units manufacturing the same
products, thereby easing out marketing
problems of SSIs. The Corporation explores
the market and secures orders for bulk
quantities. These orders are then distributed to
small units in tune with their production capacity.
Testing facilities are also provided to enable
units to improve and maintain the quality of their
products conforming to the standard
specifications.
2.1.2 Single Point Registration for Government
Purchase: NSIC operates a Single Point
Registration Scheme under the Government
Purchase Programme, wherein the registered
ISO 9001-2000
SSI units get purchase preference in
Government Purchase Programme, exemption
from payment of Earnest Money Deposit etc.
The units registered under this scheme get the
following facilities :
! Issue of tender sets free of cost.
! Advance intimation of tenders issued by
DGS&D.
! Exemption from payment of earnest
money.
! Waiver of security deposit up to the
monetary limit for which the unit is
registered.
! Issue of competency certificate in case the
value of an order exceeds the monetary
limit, after due verification.
During the year DGS&D placed rate contract
order valuing Rs. 941.81 crore and Ministry of
Home Affairs and Railways placed orders
amounting to Rs. 61.30 crore on small scale
units.
2.1.3 Exhibitions and Technology Fairs: To
showcase the competencies of Indian SSIs and
to capture market opportunities, NSIC
participates in select International and National
Exhibitions and Trade Fairs every year. NSIC
facilitates the participation of the small
enterprises by providing concessions in rental
etc. Participation in these events exposes SSI
units to international practices and enhances
their business prowess.
2.1.4 Buyer - Seller meets: Bulk and departmental
buyers such as Railways, Defence,
Communication departments and large
companies are invited to participate in buyer-
seller meets to enrich SSI unit’s knowledge
regarding terms and conditions, quality
standards, etc. required by the buyer. These
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 ISO 9001-2000
Shri Mahabir Prasad, Hon’ble Union Minister of SSI & A&RI showing interest in the products displayed at Techmart
India’2005 accompanying him is Shri H.P. Kumar, Chairman-cum-Managing Director, NSIC
programmes are aimed at vendor development
from SSI units for the bulk manufacturers.
2.1.5 Export of Products and Projects: NSIC is a
recognized Export House and exporting
products and projects of small industries of India
to other countries. The major areas of operation
are:
! Export of products such as handicrafts,
leather items, hand tools, pipes / fittings,
builders’ hardware etc.
! Supply of Small Industry projects on
turnkey basis.
! Export of IT solutions from India.
2.1.6 Display Centre for SSI Products
In the context of present economic scenario,
marketing support / opportunities plays a pivotal
12
role for small scale industrial development. There
has been a constant demand from large number
of overseas buyers / foreign delegations visiting
India to see the products under a single platform
in capital city, which provided opportunity to
SSI units to exhibit their industrial strength and
output.
This need of hour led to the creation of Display
Centre at NSIC-TSC Complex, Okhla
Industrial Estate, New Delhi to showcase the
strength of Indian small scale industries. Display
Centre exhibits more than 3000 industrial
products free of cost with a sectoral display
keeping in view their potential in International
market. The products have been displayed after
identifying clusters spread across all over the
country which includes:
 ISO 9001-2000

i. Brass Wares ii. Hand Tools ! Common facility support in machining, EDM,
iii. Auto Parts iv. Scientific Instruments CNC, etc.
v. Sports Goods vi. Home Appliances ! Energy and environment services at selected
Centres
vii. Glassware & viii. Builders
Ceramics Hardware ! Classroom and practical training for skill
upgradation
ix. Pharmaceuticals x. Light Engineering
& Chemicals NSIC Technical Services Centres are located
xi. Surgical xii. Sanitary wares at the following places:
Equipments & Fittings
Name of the Focus area
xiii. Leather Products xiv. Garments etc. Centre
Special emphasis has been laid on North East Chennai Leather & Footwear
products and exclusively a complete floor has Howrah General Engineering
been allocated for Handicraft display from the
region, which is in great demand in overseas Hyderabad Electronics & Computer
Application
markets.
New Delhi Machine Tools & related
2.1.7 Seminars & Intensive Campaigns activities
During the year, Corporation organized / Rajkot Energy Audit & Energy
participated in 527 Exhibitions / Buyer Seller Conservation activities
Meets / Seminars / Intensive Campaigns / Rajpura (Punjab) Domestic Electrical
Entrepreneurship Development Programmes. Appliances
2.2 Technology Support Aligarh (UP) Lock Cluster & Die and Tool
making
Technology is the key to enhancing a company’s
competitive advantage in today’s dynamic 2.2.1 NSIC - Technical Services Centres /
information age. Small enterprises need to develop Extension Services Centres
and implement a technology strategy in addition to
financial, marketing and operational strategies and NSIC Technical Services Centres (NTSCs)
adopt the one that helps integrate their operations and NSIC Technical Services Extension
with their environment, customers and suppliers. Centres (NTSECs) provide technology and
common facility support to SMEs. The support
NSIC offers small units the following support is rendered in the field of conventional & Hi-
services through its Technical Services Centres and tech-machining facilities, specialized testing
Extension Centres : facilities and other quality upgradation services.
! Advising on application of new techniques NSIC through its NTSCs & NTSECs provide
institutional support in the areas of technology
! Material testing facilities through accredited
and enterprise building. There are five NTSCs
laboratories
and two NTSECs spread across the country.
! Product design including CAD NTSCs are located in Okhla, Howrah,

13
 ISO 9001-2000
Rajkot, Hyderabad and Chennai, NTSECs at
Rajpura and Aligarh.
The NTSCs & NTSECs have trained 7110
technical personnels and have provided
Common Facilities support to 4797 units
during the year 2005-06. The total income
from the activities was Rs. 657.17 lacs for the
year 2005-06.
2.2.2 NSIC-Technical Services Centre, Okhla is
presently engaged in training activity in
conventional and hi-tech areas such as
machinist, draftsman, electrician, fitter and
material testing, Auto CAD, CAD/CAM based
Pro-E, CATIA and IDEA, Mobile Phone
repairing, DEL-CAM software, E-security and
Cyber Crime. Common facility services are
provided on CNC & conventional machines.
Chemical, Metallurgical and Physical testing of
Ferrous & Non- ferrous materials are also
carried out in the Centre.
The Centre has trained 1281 trainees and
provided common facility services to 617
industries during the year 2005-06. The Centre
achieved 80% placement for its trainees through
campus recruitment. NTSC Okhla also
organised seminars / workshop on financial fraud
in cyber crime and knowledge management
for the benefit of small enterprises.
In order to provide information on the latest
developments in various fields, the Centre has
organised two seminars on “Workshop on
Financial Fraud in Cyber Crime and
“Knowledge Management” in collaboration
with Delhi Productivity Council Institute of
Management.
2.2.3 NSIC-Technical Services Centre, Howrah
specializes for training in conventional areas such
as Fitters, Machinist / Turner, Welder, TV
repairs Hospital-cum-Tourism Management,
14
Catering & Baking Technology etc. Testing
facilities are provided in the areas of Electrical
testing (i.e. High voltage impulse, Temperature
rise test and short term current etc.), Mechanical
Testing (i.e. Tensile strength, Yield test and
elongation etc.) and Chemical testing of Ferrous
and non-ferrous materials. Specialized testing
facility is also available for Hydraulic pressure
testing of pipes, tubes and valves.
The Centre has trained 776 trainees and has
served 553 SSI units during the year 2005-06.
The Centre has also provided training to 681
Voluntarily Retired Personnel under CRR
scheme.
2.2.4 NSIC-Technical Services Centre, Rajkot
provides training in conventional and hi-tech
areas such as CNC Lathe & Milling machine.
Testing facilities are also provided in Diesel
engine testing, submersible & centrifugal pump
testing and metallurgical testing. The Centre also
conducts Energy and Environment audit.
Presently 10 training courses are being
conducted by the Centre and have imparted
training to 250 trainees. The Centre has
provided common facilities services to 1104 units
during the year 2005-06. The Center has
conducted 23 Energy and Environment audits
in the year 2005-06.
The Centre has taken up a project name “Bal
Urja Rakshak Dal” (BURD) sponsored by
Gujarat Energy Development Agency. Under
this project, it has trained 3000 students in the
age group of 13-17 years in 160 schools in the
Saurashtra region on the importance of energy
conservation and energy audit.
NTSC Rajkot has successfully tested Bio-diesel
supplied by Central Salt & Marine Chemicals
Research Institute, Bhavnagar in single cylinder
agricultural engine as per their requirement.

Rajkot Centre has installed a Bio-oil Extraction
plant for bio-oil extraction from jetropha seeds.
2.2.5 NSIC-Technical Services Centre,
Hyderabad provides training in hi-tech areas
such as CNC operations & programming,
CAD/CAM based IDEAS, PRO-E,
Multimedia, JAVA & J2EE, C++ and fibre
optics cabling etc. Specialized training is also
imparted on Bio-medical Equipment servicing
and maintenance. Testing facilities are provided
for Electronic equipments, components and
PCBs. The Centre provides common facility
services on CNC milling, turning, wire-cut and
Electric Discharge Machine (EDM) machines
etc.
NTSC Hyderabad has been approved as an
authorised training Centre for conducting
DOEACC ‘O’ level computer training.
NTSC, Hyderabad has trained 1762 trainees
and has provided services to 747 SSI units
during the current year. Presently, 39 training
courses are being conducted in the Centre.
Two new projects namely splicing machine and
bio-medical equipment have been installed for
providing specialized training to small
enterprises.
2.2.6 NSIC-Technical Services Centre, Chennai
provides training in conventional and hi-tech
areas such as Fitter, Mechanist, Hydraulic &
Pneumatic controls, CNC Operations &
programming, Auto CAD. CAD/CAM on
IDEAS & PRO-E, Advance networking, Fibre
optics communication and Electronics circuit
assembling etc. Specialized training is also
imparted on Advance footwear manufacturing.
The Centre provides common facility services
on conventional and Hi-tech machinery such as
Lathe, Milling, Drilling & Grinding machines and
CNC Milling & Lathe machines. Specialized
common facility services are also provided in
ISO 9001-2000
the field of manufacturing of footwear, strap
cutting & clicking. The Centre also conducts
environment audit & energy management.
The Centre has trained 1691 trainees and has
provided common facility services to 615 SSI
units and has conducted Energy Audit for 23
industries during 2005-06. NTSC Chennai has
also provided training to beneficiaries of Tamil
Nadu Slum Clearance Board, (Government of
Tamil Nadu) in “Computer Hardware
Maintenance” course for a period of two
months. NTSC Chennai also trained 41
candidates sponsored by National Backward
Class Finance Development Corporation Ltd. in
the trades of Computer Hardware maintenance
& Networking, Servicing & Maintenance of
Inverters, Stabilizer & UPS etc. A CNC
machine shop consisting of a machining centre
& turning centre has been setup during the current
year, for providing Common Facility Services to
the industries located in and around Chennai.
2.2.7 NSIC-Technical Services Extension
Centre, Rajpura was set up with the objective
of promoting technical upgradation of domestic
electrical appliances. The Centre has a well-
equipped laboratory with variety of instruments
for testing of domestic electrical appliances.
Besides testing facilities the Centre provides
services in the field of training in Computer
Hardware & Networking, PC maintenance,
Desk Top Publishing (DTP), Radio & TV repair
and Electrician etc. Testing facilities are also
provided for Domestic Electrical Appliances.
The Centre has trained 315 trainees and has
served 111 SSI units during the year 2005-06.
2.2.8 NSIC-Technical Services Extension
Centre, Aligarh is engaged in upgradation of
lock manufacturing technologies. It has a well-
equipped workshop to provide training to
personnel working in local lock industries. The
Centre also provides training in computer
courses such as MS office with Internet,
15
 ISO 9001-2000
Finance and Accounting based on Tally.
Specialized training is also provided in the areas
such as press tool design based Auto CAD,
CNC operations & programming. Common
facilities services are provided on conventional
and Hi-tech machinery such as wire-cut, Electric
Discharge Machine (EDM) and Heat treatment
etc. The Centre also undertakes job work in
Designing & Development of press tools dies
& moulds, jigs, fixtures and gauges. Consultancy
services to small enterprises for implementing
ISO 9001:2000 quality management systems
is also provided by the Centre. The Centre has
provided training to 1035 persons and has
provided common facilities services to 1050 SSI
units during the year.
2.2.9 Technology Transfer Centre
NSIC, through its Technology Transfer Centre,
sources and disseminates information on
technology for small enterprises at national and
international level. Main objective is to enhance
enterprise-to-enterprise cooperation among the
small enterprises of India and those of targeted
countries. This is achieved through organizing
business and technology missions of small
enterprises to various countries, partner
matching through one on one-business meetings.
The Centre has established institutional linkages
with National and International R&D institutions,
Industry Associations of the country and abroad
for the purpose of technology sourcing /
dissemination to SME’s. The organisation has
signed Memorandum of Understanding with
partner institutions in different countries for
facilitating Technology Partner matchmaking.
2.3 Financing Schemes
NSIC operates financing schemes for Small
Enterprises in the following areas:
2.3.1 Equipment Financing
The Corporation is operating schemes like Hire
Purchase and Term Loan under which credit
16
support is provided to the units for procurement
of equipments. The exposure of the Corporation
under these scheme is limited to Rs. 5 lac.
Corporation has made tie-up arrangements with
banks to facilitate sanction of loan to small
enterprises.
Financing for procurement of Raw Material
(Short term)
NSIC supports small enterprises by procuring and
supplying raw materials like Steel, Aluminium and
Copper etc. alongwith financial assistance as required
by the small enterprises.
NSIC procures raw material from bulk producers
and distributes the same in the requisite small
quantities to small enterprises ensuring timely delivery
thus, playing a role of the catalyst agency.
Financing for Marketing Activities (Short term)
NSIC facilitates financing for marketing activities such
as Internal Marketing, Exports and Bill Discounting.
2.3.2 Raw Material Distribution
NSIC procures raw materials in bulk by pooling
the requirements of the small enterprises and
distributes the same enabling them to avail the
economies of scale.
For handling the sale of Aluminium on behalf
of NALCO a new godown was opened at
Baddi ( Himachal Pradesh ). This godown was
opened in the month of December,2005 in the
face of stiff competition posed by other players
in the market like Central Warehousing
Corporation (CWC) and State Ware Housing
Corporation. Four new godown operations
were also started on behalf of Sterlite group
for handling their material at Delhi, Faridabad,
Baddi and Tarapur.

2.4 Support Services
2.4.1 Infomediary Services
Information plays a vital role in the success of
any business. Recognizing the importance of
information and its relevance to SSI units, NSIC
provides Infomediary Services to small units.
Besides hosting a website (www.nsic.co.in),
NSIC hosts sector specific portals for focused
information dissemination. Under this scheme,
small units can become members and avail a
number of value added services. Some
important services are:
! Supplier database
! Market intelligence
! Technology providers
! Information providers
! Linkages with relevant institutions
! E to E services
! E to B services
! Value additions like directories on who
makes machines, who makes components,
spare capacity bulletin boards, discussion
forums, virtual exhibitions, etc.
2.4.2 Mentoring and Advisory Services
Inadequate management skills are often the
cause of non-performance of small enterprises.
NSIC’s mentoring and advisory services are
aimed at effectively addressing this impediment
to growth. It offers mentor-pupil relationship in
which the mentor, a person with wide
experience in running his own business, provides
his services to individual or a group of units -
the pupil.
2.4.3 International Cooperation
For the last five decades, NSIC has acquired
various skill sets in the development process of
small enterprises. The inherent skills are being
ISO 9001-2000
networked to offer consultancy services for
other developing countries. This activity has
been started during 2004-05 and is expected
to occupy a place in the future service profile of
the Corporation. The areas of consultancy are
as listed below:
! Capacity Building
! Policy & Institutional Framework
! Entrepreneurship Development
! Business Development Services
One of NSICs objectives is to facilitate
sustainable international partnerships. The
emphasis is on sustainable business relations
rather than on one-way relations. Since its
inception, NSIC has contributed to
strengthening enterprise-to-enterprise
cooperation, south-south cooperation and
sharing best practices and experiences with
other developing countries, especially those in
African, Asian and Pacific regions. Important
initiatives are through setting up of institutional
frameworks for promotion of small enterprises;
conducting techno-economic assessment
surveys; setting up industrial estates, provision
of common facility services; support and
extension services; supply of machinery,
equipment and transfer of technology; ancillary
development and subcontracting relationships;
and technical & entrepreneurial training;
NSIC’s initiatives in this area are:
" Exchange of business/ technology missions
with various countries for facilitating
enterprise-to-enterprise cooperation, Joint
Ventures, Technology Transfers, and other
forms of sustainable collaboration.
" Exploring new markets and areas of
cooperation through :-
! Identification of new export markets by
participating in sector-specific
17
 ISO 9001-2000
exhibitions all over the world.
! Identification of countries in which
India has potential to export its
Technology, Products and Projects,
such as the Sub-Saharan countries,
Central Asia the Indo-China region etc.
! Assistance to these countries in
formulating their policy and institutional
framework.
2.4.4 Software Technology Parks
NSIC Software Technology Parks (STPs)
facilitate small industries in setting up 100%
export-oriented units for software exports. They
3.2 Meeting credit needs of Small Enterprises
also act as nodal point to activate software
exports directly through NSIC. These STPs
extend support in terms of the requisite
infrastructure to the SSI units to start business
operations with a minimum lead time.
The scheme is governed by STPI regulations
of the Ministry of Information Technology,
Government of India. NSIC established the first
STP at Okhla, New Delhi in 1995 and second
in Chennai in 2001. Several small scale units
have taken advantage of these parks and
contributed export earnings to the exchequer.
3.0 New Initiatives
3.1 Implementation of Performance & Credit
Rating Scheme for Small Enterprises
3.3 Insurance of Export Credit for small
NSIC had formulated the “Performance &
Credit Rating Scheme” for small enterprises,
which was launched on 7th April,2005 by Shri
P. Chidambaram, Hon’ble Union Finance
Minister and Shri Mahabir Prasad, Hon’ble
Union Minister of SSI & ARI.
NSIC is the implementing agency and operating
the scheme through accredited rating agencies
i.e. CARE, CRISIL, D&B, FITCH, ICRA,
18
ONICRA and SMERA. The fee to be paid by
the small enterprises for the rating is subsidized
by the Government to the extent of 75% upto a
maximum of Rs. 40,000/-. The scheme has
become quite popular now and getting good
response from the small enterprises. So far more
than 2100 small enterprises have applied for
rating under the scheme.
The rating serves as a trusted third party opinion
on the unit’s capabilities and credit worthiness.
A good rating enhances the acceptability of the
rated unit in the market and also facilitates them
to make access to credit quicker and cheaper
and thus help in economizing the cost of credit.
through tie-up arrangements with Banks
One of the major challenges faced by small
enterprises is inadequate access to finance due
to lack of financial information and non-formal
business practices. In the year 2005-06, NSIC
launched a new scheme for facilitating sanction
of loans for small enterprises from commercial
banks. NSIC has entered into tie-up
arrangements with six banks ( i.e. United Bank
of India, UCO Bank, Oriental Bank of
Commerce, Central Bank of India, Bank of
Maharashtra and YES Bank) for sanction of
term loan and working capital facilities to the
small enterprise as per their requirement. Such
arrangements would facilitate smooth credit flow
to small enterprises.
enterprises under strategic alliance
between NSIC and ECGC:
NSIC has entered, recently, into an
arrangement with Export Credit Guarantee
Corporation of India Ltd. (ECGC) for
facilitating small enterprises to insure their export
credits. Small enterprises would be helped in
insuring their export credits through any office
of the Corporation, located all over the country.

Dr. Syeda Hameed, Member, Planning Commission, Shri Anupam Dasgupta, Secretary (SSI & A&RI) and Shri H.P. Kumar,
Chairman-cum-Managing Director, NSIC at a “Seminar on Innovative Financing for Small Enterprise
Development” at New Delhi.
This arrangement shall strengthen promotion of
exports from small enterprises.
3.4 Reaching out to Small Enterprises
For the purpose of reaching out to the small
enterprises, NSIC, during the year 2006-07,
signed MoUs with various industry associations
located all over the country. The details /
information about the schemes of the
Corporation is being disseminated through the
offices of the industry associations. This
arrangement with the industry association /
federation shall facilitate small enterprises in
getting the services of the Corporation at their
doorstep.
3.5 Redeployment of Surplus Manpower
NSIC has chalked out a plan for retraining and
redeployment of under utilized manpower in B,
C & D categories. The identified employees
were imparted training at In-house Training-
ISO 9001-2000
cum-Motivation Programme. After imparting
necessary training, the identified manpower has
been redeployed in the recently opened five new
offices i.e. Central Marketing Office and Branch
Office at Parliament Street, New Delhi, NSIC
Business Development Extension Offices at
Jhandewalan, Sahibabad and Gurgaon with a
view to increase the reach of NSIC. Five similar
offices have also been opened at Chennai.
3.6 Establishment of Business - Incubator
NSIC has set up a Technology Business
Incubator for the IT sector in the premises of
NSIC-Technical Service Centre at Okhla, New
Delhi. Infrastructure facilities like ready to
move in space, hardware, software etc. have
been provided in the IT incubator. These facilities
are available to the IT Incubator occupants,
which include first generation entrepreneurs,
start-up entrepreneurs having viable business
project, individuals aspiring to venture into new
projects. Once the IT incubates’ projects are
19
 ISO 9001-2000
ready for commercialization, the marketing
services, legal services, advisory services are
also provided to them.
3.7 New infrastructure projects to facilitate
SMEs in marketing their products
NSIC is establishing a Marketing Development
-cum-Business Park at Okhla, New Delhi, and
also developing an Exhibition-cum-Marketing
Development Business Park at Hyderabad. A
Laghu Udyog Mart is also being set up at Okhla,
New Delhi by utilizing the available space and
erecting sufficient number of hangers for
exhibition purposes.
After completion of these projects, adequate
infrastructure facilities shall be provided to the
micro, small & medium enterprises at
economical rates. This will help them in
enhancing their marketing avenues by way of
capturing new markets and expanding existing
market.
4.0 Memorandum of Understandings signed
during the year
The following MoUs to promote business
opportunities and technical co-operation between
small enterprises in India and other developing
countries were signed by NSIC during the year:
1. Pacific Islands Forum Secretariat, Fiji on
November 20, 2005.
2. Small Business Corporation, South Korea on
December 21, 2005.
5.0 Delegations from abroad
! A six-member business delegation from
Association of Small Industries, Ghana visited
NSIC on 2nd May, 2005 for discussing possible
areas of cooperation between the two
organisations.
20
! A two-member business delegation led by Mr.
Padalkar of Coalition of Small Business
Initiatives South Africa visited NSIC on 15th
July, 2005.
! A four-member business delegation led by Prof.
Peter Ouma Maga of Lake Basin Development
Authority, Kenya visited NSIC on 18th July,
2005.
! A seven-member business delegation consisting
of high level officials of Bauchi State of Nigeria
visited NSIC on 12th August, 2005.
! A six-member high level delegation led by Mr.
Theirno Habib DIALLO, Minister of
Cooperation of Guinea visited NSIC on 14th
Sept., 2005. The areas of cooperation for the
development of SMEs in Guinea were
discussed.
! A six member business delegation from Italy
visited India at the invitation of NSIC in the
month of November, 2005. Delegation
comprised of delegates from light engineering,
auto parts sector and metal stamping industry.
Delegation visited Techmart India’2005 and had
an overview of Indian manufacturing
capabilities. NSIC also organized one-to-one
business meetings for the delegation based on
their areas of interest.
! CEO of Small Enterprise Development Agency
(SEDA), South Africa, visited NSIC on 9th
November, 2005 and discussed the role of
NSIC for development of small scale industries
in their country.
! A 30-member delegation led by Dr. Zweli
Mkhize, Hon’ble MEC of Finance and
Economic Development and Leader of
Government Business, KwaZulu-Natal
province, South Africa visited NSIC on 14th
December, 2005. The discussions on possible
areas of cooperation between the two countries

for the development of SMMEs of KwaZulu-
Natal province of South Africa were held.
During discussion, the Hon’ble Minister requested
NSIC to cooperate with the province of KwaZulu-
Natal for undertaking the following programmes:
1. To extend consultancy services to KwaZulu-
Natal province for the development of policy
framework for support of SMMEs.
2. Supply of selected small industrial projects to
KwaZulu-Natal province of South Africa on
turnkey basis.
Accordingly, the Corporation has recently executed
Consultancy Services to assist the Ministry of Finance
and Economic Development, KwaZulu-Natal, South
Africa. The Consultancy Services were towards
studying the present policy framework for the SME
development in the province, identifying the gap and
recommending the policy framework including a
feasibility study for setting up an organisation similar
to NSIC in the province of KwaZulu-Natal, South
Africa. The study was at a fee of US$ 1,80,000.
! H.E. Mr. Alhaji Ahmed Mohammad Makarfi,
Executive Governor of Kaduna State of Nigeria along
with accompanying delegation visited Techmart India,
2005 at Pragati Maidan, New Delhi. A detailed
presentation on the role of NSIC for development
of Small Scale Industries of India was made. The
issues of bilateral cooperation between Kaduna State
of Nigeria and NSIC for the development of Small
Industries in Kaduna State of Nigeria were discussed.
! Mr. Fareed Abdul Redha Al Abdulla, Executive Head
SMEs, Department of Economics Development,
Dubai and Dr. Faisal Mohammed El Amir, Industrial
Advisor, Department of Economics Development,
Dubai, visited NSIC on 30th November, 2005.
! Mr. Albert Nkwete, Secretary General of the Ministry
of Commerce of Democratic Republic of Congo
alongwith a delegation visited NSIC on 1st Dec.,
2005. Issues of mutual cooperation for SME
ISO 9001-2000
development in Congo were discussed.
! H.E Mr. Fredrick Mitchell, Minister of Foreign Affairs
and Public Services of the Bahamas alongwith 8
member delegation visited NSIC and met CMD,
NSIC and other senior officials on 24th January, 2006
6.0 Major Events in 2005-06
6.1 International Exhibitions:
a) Techmart India’ 2005 (14-27 November,
2005)
National Small Industries Corporation Ltd.
organized the 13th series of Techmart India,
2005 coinciding with India International Trade
Fair at Pragati Maidan, New Delhi. The event
was sponsored by Ministry of SSI, Government
of India.
Shri Mahabir Prasad, Hon’ble Union Minister
for Small Scale Industries and Agro & Rural
Industries, Govt. of India visited Techmart
India’2005 on November 15, 2005.
195 units including 35 units from North Eastern
states of India participated in Techmart India,
2005. The display covered wide range of
products and services from almost all the
focused sectors.
Some of the items displayed were Powder
coating machine, Automatic filling & packaging
machine, Communication system, P A system,
RO system and Water purifier, Refractories,
Testing machine, Hand tools, Genset & grass
cutting machine, Carpentry tools, Feeder &
coilers machine, Electrical cradle, Rubber
pipes, Plastic moulding machine, Scientific
instruments, Ice cream softy making machine,
Industrial water purification plan, Stainless steel
tubes and pipes, Submersible pumps etc.
Foreign delegates from Congo, Russia,
Mexico, Spain, South Africa, Zimbabwe,
21
 ISO 9001-2000
Nigeria, Sri Lanka, Mauritius, Saudi Arabia,
Cyprus and Bahrain visited Techmart.
NSIC was awarded Gold Medal for Special
Display of North East Sector in Techmart
India,2005 by India Trade Promotion
Organization, the organizer of IITF-2005.
b) SAITEX-2005 Johannesburg, South Africa
NSIC participated in SAITEX-2005 (27th-30th
September, 2005) at Gallagar State,
Johannesburg, South Africa. The focus of the
exhibition was on Small Industries projects /
products. Participating units displayed Diesel
fuel injection spares and Automotive parts,
Engineering goods, Builders hardware and
Hand tools under the banner of NSIC.
Shri Anupam Dasgupta, Secretary (SSI & A&RI) and Shri H.P.Kumar, Chairman-cum-Managing Director, NSIC
during their visit to Techmart India’2005
22
c) India Fair in Mauritius: NSIC participated
in India Fair in Mauritius during 19th–23rd
October, 2005 organized by FICCI in
association with Ministry of Food Processing
Industries, Government of India and Mauritius
Chamber of Commerce. The focus of the
exhibition was on Small Industries’ products and
projects. NSIC got enquiries for supplying
Aluminium Sections, Garments and Rice to
enterprises in Mauritius.
d) International Autumn Trade Fair,2005,
Dubai, UAE: In November,2005 NSIC
participated in the International Autumn Trade
Fair,2005, this exhibition was of general
purpose. Number of small enterprises under the
banner of NSIC participated in the fair.

e) Spring Fair, Birmingham: NSIC participated
in “Spring Fair” Birmingham (UK) from 5th –
9th Feb.,2006 at NEC Birmingham, UK. This
fair is the largest fair of the handicraft products
held in Europe.
6.2 National Exhibitions:
The following national exhibitions were
organised / participated during the year:-
i. NSIC, Noida organised an exhibition
SME-EXPO, 2005 with a view to
strategically position its efforts for
promotion and development of SSI sector
from 24th-26 th June, 2005 at Pragati
Maidan, New Delhi. The products on
display were Engineering, Consumer
Goods, Electrical & Electronics, Printing
& Publications, Handicrafts, Builders
hardware etc. 40 units participated in the
exhibition.
ii NSIC, Coimbatore participated in
INTEC, 2005 Coimbatore from 6th – 12th
July, 2005. INTEC,2005 was inaugurated
by His Excellency the President of India.
NSIC displayed various schemes of
assistance to small enterprises.
iii. NSIC, Bangalore participated in
CLIKTRONIKA, 2005 – the Annual
Electronic & IT exhibition organised by
Consortium of Electronic Industries of
Karnataka from 5th – 7th August,2005 at
Bangalore.
iv. NSIC, Coimbatore participated in
AGRIINTEX,2005,Agriculture
International Exhibition from 11th –16th
August, 2005 organised by CODDISSIA
at Coimbatore.
v. NSIC, Hyderabad participated in the SME
Expo.2005 an International Exhibition
organised by Andhra Pradesh SSI Centre
ISO 9001-2000
in association with the Govt. of Andhra
Pradesh from 26th – 28th August,2005 at
Hyderabad.
vi. NSIC, Chennai participated in WEP Expo
organized by Women Entrepreneurs
Promotion Organisation at Chennai during
17 th-20 th October 2005. 50 women
owned small enterprises participated in the
exhibition. NSIC, displayed various
schemes of assistance to small enterprises
during the exhibition.
vii. NSIC, Bhopal participated in Deep
Utsav’2005 organised by Mahakaushal
Association of Women Entrepreneurs
(MAWE) during 21st - 24th October 2005
at Jabalpur. The focus of the exhibition was
on the development of women
entrepreneurs in the region and active
participation of women in running the small
enterprises. NSIC had displayed various
schemes for the development of small
enterprises during the exhibition.
viii. NSIC, Kashipur participated in exhibition
organised by Bharat Vikas Parishad at
Kashipur on October 26, 2005. Around
80 small enterprises showed interest in
NSIC’s schemes. The enterprises showed
interest in Government Purchase,
Infomediary Services, Performance and
Credit Rating Schemes and Tie-up
arrangement with the banks for making the
finance available to the units from the
banks.
ix. NSIC, Kanpur participated in Diwali
Utsav from 22 nd – 23 rd Nov.,2005
organised by Indian Council of Women
Entrepreneurs, Kanpur. NSIC had
displayed various schemes for the
development of small enterprises during
the exhibition.
23
 ISO 9001-2000
x. NSIC, Hyderabad organised National
Industrial Exhibition from 14th-15 th
December, 2005 in association with SISI
Hyderabad and Department of Industries
& Commerce, Govt. of Andhra Pradesh
at Secunderabad. 220 small enterprises
participated in this exhibition.
xi. NSIC, Kolkata participated in Industrial
India Trade Fair from 21st Dec., 2005 to
1 st Jan., 2006 at Kolkata. 46 small
enterprises participated in this exhibition.
xii. NSIC, Kolkata participated in Kuntall
Basanti Krishi Mela from 20th – 29th Dec.,
2005 at Kolkata.
xiii. NSIC, Mumbai in association with SISI,
Mumbai, Bombay Small Scale Industries
Association, Vasai Industries Association
and All India Association of Industries
organized an exhibition “4th Global Vendor
2006” at Andheri, Mumbai from 18th –
20th Jan., 2006.
xiv. NSIC, Kolkata participated in “Silpa
Baijya Mela” organized by Cottage &
Small Scale Industries Association, Zila
Parishad & Bengal National Chamber of
Commerce & Industries from 6th – 15th
Jan., 2006 at Baruipur. Hon’ble Chief
Minister of West Bengal in the presence
of Hon’ble Union Minister of SSI & ARI
as Chief Guest inaugurated the exhibition.
The focus was on Baruipur surgical
instrument cluster having an existence of
more than 2,000 units in organised and
unorganized sector.
xv. NSIC, Guwahati participated in “Industrial
Exhibition” from 17th – 19th Jan., 2006 at
Aizwal, Mizoram. NSIC facilitated
participation of small enterprises belonging
to ST community.
xvi. NSIC, Coimbatore organized an exhibition
“INDRAW 2006” from 16th– 18th Feb.,
24
2006 at Coimbatore. Indian Oil
Corporation Ltd., Bharat Petroleum
Corporation Ltd., NALCO, Tata Steel
Ltd. and Kirloskar Electric Co. etc.
participated in the exhibition. The event
provided an excellent platform for small
enterprises to identify the right source for
their raw material requirements and for raw
material suppliers to increase their market
share. About 1000 SSI units made use
of this golden opportunity and benefited
by interacting with the raw material
suppliers. All schemes of NSIC were
promoted at the NSIC’s stall in
INDRAW’ 2006.
xvii. NSIC, Delhi participated in “Water
Expo’06" from 9 th–11 th Feb., 2006
organised by E.A. Water Pvt. Ltd. at Delhi
xviii. NSIC, Kanpur participated in “Marketing
Food Expo’06” from 9th – 12th Feb.,2006
at Kanpur wherein NSIC facilitated
participation of 15 small enterprises in the
exhibition.
xix. NSIC, Kanpur participated in “Marketing
Agri Expo” 06 in association with Ministry
of Agriculture from 11th – 14th Feb.,2006
at Kanpur.
xx. NSIC, Naini participated in the exhibition
organised by KVIC on 10th Feb., 2006
at Gorakhpur in which 100 small
enterprises displayed their products, 20
women owned small enterprises
participated. NSIC displayed various
schemes of assistance to small enterprises
during the exhibition.
xxi. NSIC, Guwahati participated in “13th
Guwahati International Trade Fair” from
20th Feb – 7th March,2006 by creating a

special North East Techmart Pavilion at
Guwahati.
xxii. NSIC, Guwahati participated in “North
East Techmart” organised by Guwahati
Trade Fair Association in Guwahati from
21st Feb.– 6 th March,2006. 39 small
enterprises participated from Manipur,
Tripura, Nagaland and Meghalaya and 29
small enterprises from Assam participated.
xxiii. NSIC, Guwahati participated in “North
East Trade Expo” organised by India
Trade Promotion Organisation (ITPO),
New Delhi from 7th– 14th March, 2006
wherein 200 small enterprises participated.
xxiv 2 nd North East Expo-2006: NSIC
organized 2nd North East Expo-2006 at
NSIC Exhibition Ground, Okhla, New
Delhi from 17th- 23rd April 2006. The
exhibition was inaugurated by Shri
Mahabir Prasad, Hon’ble Minister of SSI
& ARI. The main aim of the exhibition
was to give exposure of North Eastern
products in the market of North India.
The exhibition was participated by 68
small enterprises including Assam,
Nagaland, Manipur and Tripura. The
items displayed at exhibition were cane &
bamboo furniture, tea packaging,
traditional jewellery, handloom products,
natural dry flower, spices etc. A delegation
from Congo visited the exhibition and
showed keen interest in doing business with
North Eastern States in cane and bamboo
products.
xxv NSIC, Ahmedabad organised an
“Enhancing Global Competitiveness of
SMEs with International Accreditation” in
association with Industries Commissioner,
Govt. of Gujarat & Gujarat State Small
Industries Federation, Ahmedabad on 26th
ISO 9001-2000
May,2006 wherein 170 members from
SME sector participated.
xxvi NSIC, Chennai participated in “7th Edition
of ACMEE,2006” at Chennai Trade
Centre, Chennai from 8th– 12th June,2006
wherein 10 small enterprises displayed their
products.
xxvii NSIC, Bangalore participated in “KITE,
2006” (KASSIA Industrial & Technology
Exhibition) from 16th– 19th June, 2006 at
Bangalore wherein 120 units including 22
tiny and 32 women entrepreneurs
participated.
7.0 Commonwealth Small Business
Competitiveness Development Programme
The Commonwealth Secretariat and National Small
Industries Corporation of India (NSIC) hosted Pan-
Commonwealth institutional building programme on
Small Business Competitiveness Development. A
series of four biannual programmes have been
organized in India between 2005-06.
The programmes focussed on building and developing
institutional capacity on competitive policies and
strategies for Commonwealth developing states. It
is in line with the Commonwealth’s work in the
sustainable development of small businesses and
NSIC’s mission to enhance the competitiveness of
small enterprises. Programmes were delivered
through a combination of best practices from around
the Commonwealth, case studies and field visits.
! The third program in this series was held from
20th-26th November, 2005 at New Delhi. The
emphasis of this programme was on networking
the Commonwealth SMEs through sharing best
practices for enhanced competitiveness. 50
Policy makers and representatives of small
industries from 35 Commonwealth member
States participated in the programme. The
programme coincided with the 13th International
25
 ISO 9001-2000

Shri Mahabir Prasad, Hon’ble Union Minister of SSI & A&RI inaugurating the Commonwealth-India Small Business
Competitiveness Development Programme at New Delhi. Shri Anupam Dasgupta, Secretary (SSI & A&RI)
and Shri H.P.Kumar, Chairman-cum-Managing Director, NSIC were also present on the occasion

Technology Fair - Techmart India’ 2005, which
participants had the opportunity to visit. An
Agreement of Mutual Cooperation between
NSIC and Pacific Islands Forum Secretariat,
Fiji for the development of small enterprises in
Pacific Islands was also signed on this occasion.
As a result of this, Pacific Island Forum
Secretariat, Fiji has requested NSIC to carry
out initial assessment survey in Fiji, Samoa,
Tonga and Vanatu to identify key areas of
cooperation for the development small
enterprises in Forum Island Countries. NSIC
has suggested that based on the outcome that
will emerge out of above mentioned initial
assessment survey, detailed assessment studies
for technology transfers and entrepreneurship
development in identified sectors will be
conducted and suitable entrepreneurial training
programmes for respective FICs as per their
needs will be worked out. Initial assessment
survey is expected to be carried out by NSIC
in October, 2006.
! NSIC was the implementing agency for the
fourth Commonwealth-India programme of this
series held at Chennai (three days) and
Pondicherry (two days) from April 23 to April
28, 2006. The theme of the programme was
“Poverty Alleviation through Sustainable SME
Development”. 50 participants from 35
Commonwealth countries participated in this
programme.
Independent evaluations conducted by
Commonwealth Secretariat have concluded that all
the programmes of this series achieved their major
objectives and fulfilled participants’ expectations.
Programmes effectively disseminated knowledge on
small business issues, created a network amongst
participants from Commonwealth countries involved
in small business development and other agencies /

26

development institutions, besides showcasing India’s
achievements in the area.
8.0 Energy Cell
NSIC-Technical Services Centre, Rajkot has been
approved as “Energy Auditor” by Petroleum
Conservation Research Association, Government of
Gujarat, Maharashtra Energy Development Agency
and Gujarat Energy Development Agency.
The Centre has established a full-fledged
Environmental Laboratory and Gujarat Pollution
Control Board has recognized this centre as a
SCHEDULE-I environmental auditor.
9.0 Social Obligation
NSIC Pondicherry has supplied furniture valuing
Rs. 155 lakhs to 70 schools for the Tsunami Relief
operation.
NSIC Cochin & Madurai have supplied kerosene
Shri Mahabir Prasad, Hon’ble Union Minister of SSI & A&RI evincing keen interest in products of
North East Region alongwith Shri H.P.Kumar, Chairman-cum-Managing Director, NSIC
ISO 9001-2000
stoves valuing Rs. 154 lakhs to Tsunami affected
families of Coastal districts in Tamil Nadu.
10.0 North Eastern Region
NSIC has a network of offices in North Eastern
Region. This includes branch office at Guwahati
(Assam) and sub-offices at Imphal (Manipur),
Dimapur (Nagaland), Itanagar (Arunachal Pradesh),
Shillong (Meghalaya) and Agartala (Tripura).
NSIC has a Demonstration-cum-Training Centre at
Guwahati, which provides technical training, skill
upgradation programmes and entrepreneurship
development programmes.
NSIC, Guwahati organised the following programmes
in North East Region:
! An Intensive Motivational-cum-Awareness
Programme was conducted in Association with
Regional Testing Centre, Kolkata & SISI,
Gangtok in June,2005 to bring awareness
27
 ISO 9001-2000
amongst the budding entrepreneurs of Sikkim
for setting up SSI units in Sikkim.
! An Intensive Motivational Campaign was
conducted in association with DIC, Dimapur
and CII at Nagaland in June, 2005.
! An Intensive Campaign was conducted in
association with North East Small Scale
Industries Association (NESSIA) at Jorhat,
(Assam) on 8 th July,2005 in which 60
entrepreneurs participated.
! Entrepreneurs Development Programme was
conducted in association with All Manipur
Entrepreneur’s Association at Ningthoukhong,
Bisnupur, District Manipur wherein 80
entrepreneurs participated.
In its efforts towards development of small
enterprises in North Eastern Region, NSIC,
Guwahati arranged imparting training to 30 small
enterprises at CFTRI, Mysore in January,2006. Skill
upgradation training was imparted for fruit and
vegetable processing, spice processing and
packaged food processing etc.
In its endeavour towards development of small
enterprises in North Eastern Region, NSIC Guwahati
imparted training to 101 small enterprises at NTSC,
Howrah in Hospitality and Tourism Management from
14th Feb.,2006 to 14th April,2006. The training has
helped the enterprises in upgradation of their skills
and technologies.
11.0 Assistance to rationalized workers under
the scheme of Counselling, Re-training and
Re-deployment of employees of CPSUs
The scheme of Counselling, Re-training and Re-
deployment (CRR) for employees of CPSUs was
set up by the Government of India. One of the
objectives of the scheme is to suitably equip the
rationalized workers for purposes of re-deployment
28
so that they continue to be useful and productive.
For this the Govt. of India arranges free training/re-
training of these workers for wage employment and
self-employment. This scheme is being implemented
by the Govt. of India through nodal agencies for
undertaking the training / retraining at different places
in the country. NSIC is the nodal agency at Kolkata,
Howrah, Hooghly, Durgapur, Ranchi, Burnpur,
Bokaro, Dhanbad and Delhi under the CRR scheme.
Under the scheme, 1749 workers were retrained
during the year. NSIC has so far retrained 9259
workers under this programme.
12.0 Signing of Memorandum of Understanding
with the Government
The Corporation has signed an MoU with the Ministry
of SSI for the year 2006-07. The Corporation was
assigned rating of “Good” for the year 2005 – 06.
13.0 Capital Structure & Borrowings
The Paid-up-Capital of the Corporation is Rs.
217.988 crore. Long term loans from Government
of India, financial institutions and banks were of the
order of Rs.163.56 crore as against Rs. 112.02 crore
at the end of the previous year. Repayment of
installments and interest due till 31st March,2006 in
respect of all loans has been made as per the due
dates.
14.0 Fixed Deposit Scheme
The Corporation has not accepted any Fixed
Deposits during the year. The unclaimed deposits as
on 31st March, 2006 were of Rs. 33,000/-.
15.0 Industrial Relations & Human Resource
Management
15.1 The total manpower of the Corporation as on
31st March, 2006 was 889 as against 935 in
the previous year.
The break-up of the manpower is as follows:

S. Description As on As on
No. 31.3.2006 31.3.2005
1. Managerial 284 294
2. Supervisory 129 142
3. Non-Supervisory 476 499
Total 889 935
15.2 Human Resource Development & Training
Human Resource is an important element in any
Organisation. Training human resources to
upgrade the professional skills and knowledge
assumes equal importance. Continuous efforts
are being put in to identify the training needs,
devise training plans and impart training to fulfil
the identified needs.
During the year 2005-06, training activities were also
concentrated on upgrading the professional skills and
knowledge of the employees and to keep abreast
with the fast changing business environment.
Efforts have been made in the past for 100%
computer literacy to those who have access to and
need to use computers in their official work. Since
training is an important element of ISO 9001-2000
standards and as an effort for continuous
improvement a group of officers had undergone Lead
Assessors training on Internal Quality Audit
conducted by TUV India Pvt. Ltd.
Corporation has deputed officials for Study Meeting
on Creative Entrepreneurship: Value Creation –
Taipei, Taiwan, China Productivity Center.
Besides this a number of officials were also
nominated for domestic programmes, seminars and
workshops conducted by professional bodies like
Trade Indian Institute of Foreign, Indo African
Society, Ministry of SSI, CII, The Institute of Cost
& Works Accountants of India, Ministry of IT,
Ministry of Heavy Industries & Public Enterprises,
M/s. CRISIL Ratings, FICCI, International Project
Management Association, PHD Chamber of
Commerce and Industry, Kendriya Hindi Training
Sansthan and Delhi Management Association.
ISO 9001-2000
16.0 Staff Welfare
The Corporation extends a wide range of welfare
activities for its employees. These include house
building advance, vehicle advance, computer
advance, festival advance, conveyance allowance,
subsidized canteen facility, newspaper & magazine
allowance, benefits under small family norms, medical
facilities to working & retired employees, leave travel
concession, employees provident fund and
benevolent fund schemes.
17.0 Representation of SCs/STs and Minorities
The directives of the Government relating to the
reserve categories such as Scheduled Castes and
Scheduled Tribes, Physically Handicapped, Ex-
Servicemen, and Minorities etc. continue to be
adhered to during the year.
18.0 Rajbhasha
The Corporation is making all efforts to promote Hindi
in the official work. To propagate official language
and promote policy of official language in the
Corporation Hindi Cell has been set up at the
Corporate Office. The library has good stock of Hindi
books and incentives are being provided to the
employees to make use of Hindi in official
correspondence. Hindi workshops are regularly
organised. During the year Hindi week was
celebrated from 14th - 30th Sept., 2005 in which
various competitions were organised and cash prizes
were given to the winners of various competitions.
Literature and application forms of various schemes
of NSIC have been prepared bilingually. “New Hindi
Dictation Incentive Scheme” has been implemented.
The language used in the intensive campaigns
conducted in the Hindi speaking areas is Hindi. The
literature is being printed in Hindi for this purpose.
The use of Hindi is being increased gradually in the
Corporation to achieve the targets.
19.0 Investment
Corporation is having 20,34,825 equity shares of
Rs.10/- each in Singer India Ltd. In addition to this
Corporation has made investment of Rs. 10 lac in
equity of SIPPO and Rs. 5 lac in equity of SIPMO.
29
 ISO 9001-2000
Both these Companies were set up for marketing
the products of small industries.
20.0 Vigilance Activities
Vigilance is basically and admittedly a part of
managerial function. Vigilance department works in
cooperation with other divisions/units of the
Corporation at all levels. Besides, the vigilance
department also coordinates with CVC, CBI and
other related outside agencies. The vigilance denotes
watchfulness and alertness, which is most important
and vital for growth of any Corporation. It ensures
that there is no wastage, misuse or pilferage of the
available resources and optimum use of these
resources to fulfil the objective.
The vigilance division not only assists the management/
competent authority in punishing the unscrupulous
employees for their proven acts of misconduct, but
also helps in saving the honest and efficient official(s)
from any harassment by way of false and motivated
complaints made out of personal vendetta.
During the year 2005-06, a Vigilance Awareness
Week was observed from 7th – 11th Nov., 2005, as
a campaign against corruption and to create
awareness among the employees of the Corporation.
A pledge to bring about integrity and eradicate
corruption was administered to all the employees of
the Corporation all over the country. Apart from this
the copies of the NSIC Conduct Rules and NSIC
Control & Appeal Rules, have been placed in the
Library for information and guidance of officials.
The Immovable Property Returns of all the Officers
of the Corporation were scrutinized and action taken
as felt necessary based on such scrutiny. A number
of surprise visits and checks were carried out in
various offices of the Corporation and corrective
steps taken wherever required.
21.0 Citizen Charter
NSIC is committed to efficient and prompt service
on the basis of objectivity, transparency and courtesy
in dealing with our citizens for the promotion and
growth of small scale industries. To inculcate these
values in the employees, NSIC has come out with
30
the Citizen’s Charter. Some officers have been
assigned to work as link between the public and
Corporation and members of public can get in touch
with these officers to get guidance and help.
22.0 Personnel and Industrial Relations
Corporation continues to maintain cordial relationship
with various employees unions all over India / Officers
Association at Head Office. As a result, there is
peace and harmony and no disturbance whatsoever
to industrial peace. Meetings are held with these
unions from time to time to discuss various issues
and to resolve them amicably. It is commendable
achievement of NSIC for ensuring excellent
personnel and industrial relations.
23.0 Particulars of Employees
Pursuant to Section 217(2A) of the Companies Act,
1956 read with Companies (Particulars of
employees) Rules 1975 there was no employee
drawing remuneration above the specified limits.
24.0 Particulars of Energy Conservation,
Technology Absorption
As NSIC does not have manufacturing activities, the
declaration of information as regards conservation
of energy, technology absorption is not required.
25.0 Foreign Exchange
The Corporation is earning foreign exchange by
export of products of small scale sector as well as
supply of turnkey projects to developing countries.
During the year 2005-06, Corporation earned foreign
exchange valuing Rs. 498.60 lac from export
activities.
26.0 Board of Directors
The Board of Directors of the Corporation met ten
times during the year besides four Sub-Committee
and four Audit Committee Meetings.
Shri S.A.T. Rizvi, Shri Dilip Phukan, Dr. Dinesh
Awasthi and T. Narayanaswami were appointed as
non-official Directors on 22nd November., 2005.
Shri S.K. Sinha, was appointed as Director (Planning
& Marketing) of the Corporation w.e.f. 31st May,
2006.

27.0 Audit Committee
The Board Audit Committee consisted of Smt. Stuti
Kacker, Shri A.K. Jha and Shri Rakesh Rewari.
Consequent to the changes in the Board of Directors,
the Board Audit Committee was reconstituted on 30th
Sept., 2005. The members of new Board Audit
Committee were Shri Pravir Kumar, Shri A.K. Jha
and Shri Rakesh Rewari.
Consequent to further changes in the Board of
Directors, the Board Audit Committee was again
reconstituted on 12th December, 2005. The members
of new Audit Committee are Shri A.K. Jha, Shri
Rakesh Rewari and Shri Dilip Phukan.
The Board Audit Committee met four times during
the year.
28.0 Director’s Responsibility Statement
Pursuant to the provisions of section 217(2AA) of
the Companies Act,1956, your Directors hereby
confirm:
a. that in the preparation of the annual accounts,
the applicable accounting standards have been
followed alongwith proper explanation relating
to material departures.
b. that the Directors have selected such accounting
policies and applied them consistently and made
judgements and estimates that are reasonable
and prudent so as to give a true and fair view of
the state of affairs of the Company at the end of
the financial year and of the profit or loss of the
Company for that period.
c. that the Directors have taken proper and
sufficient care for the maintenance of adequate
accounting records in accordance with the
provisions of this act for safeguarding the assets
of the Company and for preventing and
detecting fraud and other irregularities.
d. that the Directors have prepared the annual
accounts on a going concern basis.
New Delhi
29th September, 2006
ISO 9001-2000
29.0 Auditor’s Report to Shareholders
The Report of the Statutory Auditors is annexed. The
Directors have considered the comments of the
Statutory Auditors, and felt that the notes given on
the Balance Sheet, Profit & Loss Account and
Income & Expenditure Account in clarification are
adequate. The observations of the Auditors have
been noted for appropriate action.
The review of the accounts of the Corporation for
the year ended 31st March,2006 by the Indian Audit
and Accounts Department together with comments
of the Comptroller & Auditor General of India under
Section 619(4) of the Companies Act,1956, are also
annexed.
The Directors’ replies to the statutory auditor’s report
& CAG’s report are Annexed.
30.0 Acknowledgement
The Directors wish to place on record their deep
appreciation for the continued support and guidance
provided by Ministry of Small Scale Industries,
Ministry of Finance, Ministry of Steel, Planning
Commission other Ministries and Department of
Public Enterprises. The Directors also thank the DC
(SSI), State Governments and their agencies and
SSIDCs for their co-operation to NSIC in rendering
assistance to the small scale sector. The Directors
are grateful to the Comptroller and Auditor General
of India, Member Audit Board and the Statutory
Auditors for their valued co-operation.
The Directors also acknowledge the valuable
assistance provided by KFW Germany, Punjab
National Bank, Chinatrust Commercial Bank, HSBC
Ltd., ICICI Bank Ltd. and IndusInd Bank.
Your Company’s employees are instrumental in
scaling new heights. Your Directors place on record
their appreciation of the commitment and contribution
of the Company’s employees.
On behalf of the Board of Directors
(H.P. Kumar)
Chairman-cum-Managing Director
31
 ISO 9001-2000
ANNEXURE TO DIRECTOR'S REPORT
COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER
SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF THE NATIONAL
SMALL INDUSTRIES CORPORATION LIMITED FOR THE YEAR ENDED 31ST
MARCH’2006 AND MANAGEMENT’S REPLY THERETO
COMMENTS OF C & AG
Profit &Loss Accounts
Other Income (Sch 16 )-Rs.25.51 crore
This is understated by Rs.16.62 lacs being the discount
accrued for lifting of material from National Aluminum
Company Ltd. as on 31.3.2006. This has resulted in
understatement of current assets & profit for the year by
the same amount.
32
MANAGEMENTS’ REPLIES
The Corporation has entered into MoU with National
Aluminum Company Ltd. (NALCO) for facilitating supply
of Aluminum to small enterprises. As per the terms of the
MoU, the Corporation is eligible to get the MoU discount
from NALCO depending upon the lifting of agreed
quantities and fulfillment of other terms and conditions of
MoU. As per arrangement worked out with the SSI units
a part of MoU discount is passed on to them. The
agreement by NSIC with NALCO and the SSI units is in
vogue for the past several years.
The comment pertains to Branch Office Ludhiana where
the credit notes of MoU discount for the year 2005-06
amounting to Rs.34.27 lac, were issued by NALCO in
the current financial year 2006-07. The net MoU discount
i.e. Rs.16.62 lac, after reducing the share to be passed
on to the SSI units (Rs.17.35 lac), has been treated as
income of 2006-07 since the credit notes were received
by Branch Office in the financial year 2006-07. This
practice had been adopted by the Branch Office in the
earlier financial years also.
Keeping in view the consistency being followed in the
accounting of the MoU discount from earlier years and
the amount involved i.e. Rs.16.62 lac, it is informed that
the understatement though pointed out in the ‘comment’
has no material impact either on ‘Other Income’ or on the
‘Profitability of the Corporation’.
However, the views of the Government Audit have been
noted and the same will be complied with from the financial
year 2006-07.

COMMENTS OF STATUTORY AUDITORS & MANAGEMENT REPLIES THERETO
COMMENTS OF STATUTORY AUDITORS
4. (vii) a Note No.8 of No provision of penalty for
Schedule 24 Government Guarantee
Fees amounting to
Rs.30.33 lac for the
Current Year (Aggregating
to Rs. 464.24 lac upto
31.03.2006) has been
made due to which profit
during the year has been
overstated.
ISO 9001-2000
MANAGEMENTS’ REPLIES
The audit para relates to non provision of penalty on Govt.
Guarantee fee on KFW lines of credit VIIth to XIth.
The KFW, Germany, Lines of Credit VII to XI were
sanctioned upto 11th December1991. Government of India
had guaranteed these Lines of Credit for which no
guarantee fee was stipulated at the time of sanction.
Subsequently, after the availment of these lines of credit,
Government of India vide a general Circular No. F. 12(I)-
B(SD)/92 dated 4th June, 1993 informed that the guarantee
fee @ 1.2% per annum would be charged on the
outstanding amount of loans as at the close of each financial
year. The Ministry of Finance vide its circular no. F-12(1)-
B(SD)/96 dated 22.05.1996, while referring to the earlier
circular dated 4th June, 1993, sought information regarding
guarantee fee in respect of the past cases of the
Government Guarantee (pre April 24th, 1992 on the
domestic borrowings and pre 4th June, 1993 for external
borrowings) before taking a view on imposition of
guarantee fee where original sanctions did not stipulate
levy of annual guarantee fee. The desired information was
furnished on 17.06.1997. While the decision of the
Government in this regard is still awaited, the Corporation
had sought a clarification from Ministry of Finance vide
letter no SIC/KFW/GF/13/2005 dated 13.7.2006 that
no guarantee fee should be levied on KFW lines of credit
VIIth to XIth, as their sanctions did not stipulate charging
of guarantee fee. The Ministry of SSI has also supported
the view of NSIC. The matter is under active consideration
by Govt. of India.
It is pertinent to mention that the issue in respect of
guarantee fee on KFW XIIth line of credit has since been
resolved and the Ministry of Finance has reduced the
guarantee fee charges by 50% i.e. 0.60% p.a. against the
normal rate of 1.20% p.a. with retrospective effect without
imposing any penalty. Even through the Government had
33
 ISO 9001-2000
4. (vii) b Note No.12 of N o p r o v i s i o n a g a i n s t
Schedule 24 receivable from MEA Raj
Biraj Project Rs. 82.08 lac
has been made due to
which profit during the
year has been overstated.
4. (vii) c Note No. 6 of Non-confirmation of
Schedule 24 debit and credit balances
of Schedule 7 & 9 in few
cases.
4. (vii) d Accounting Considering the age of
Policy No.16 the debtors / receivables,
& Note No.17 their rate of recovery and
34
stipulated the charging of guarantee fee in respect of KFW
line of credit XII.
In view of the above, the Corporation shall not be subject
to any liability on account of penalty for non payment of
guarantee fee as the matter is placed for decision with
Ministry of Finance.
An amount of Rs.117.53 lac is recoverable from Ministry
of External Affairs, (MEA), Govt. of India on account of
claims of works executed at Raj Biraj, Nepal. Final claim
amounting to Rs.106.17 lac (including consultancy fee of
Rs.2.47 lac) for the works executed for the Raj Biraj
Project was submitted to the Ministry of External Affairs
(MEA) for releasing the payment. The outstanding issue
of release of payment to NSIC has been taken up with
MEA through the Ministry of SSI. In response, the MEA
has offered an amount of Rs.21.62 lac as full and final
settlement vide letter dated. 20.07.2005.
As the MEA had not accepted the full claim amount, the
Corporation invoked the arbitration clause as per the
agreement and MEA was requested to appoint an
Arbitrator. Accordingly, Ministry of External Affairs have
appointed the Arbitrator in the case, vide letter no. 9/33/
2004-SSI (P)-I dated 08.02.06 and the Arbitration
proceeding has started. The Corporation is confident of
getting full realization of claim amount.
Further, as per accounting policy of the corporation, no
provision for doubtful debts is required to be made for
receivables from Central Government / State Government
/Government Institutions/ Government Companies and
other Central / State Govt. departments / Bodies.
Confirmation of balances has been received in most of
the cases. However, instructions for obtaining balance
confirmations in respect of remaining cases have been
reiterated to all offices. The majority of few cases as
referred to by auditors pertain to Legal / R.C. cases where
no confirmation is given by the parties.
The Corporation has been exempted from the provisions
of RBI Prudential Norms relating to NBFCs as per RBI
circular No.DNBS(PD) No.896/02.59/99-2000 dated

& 26 of lack of adequate security in
Schedule 24. some cases, we are unable
to comment whether the
norms as to provisioning
as approved by the Board
of Directors are adequate
and hence the exact
quantum of doubtful debts
and advances could not be
quantified and
consequently whether the
doubtful Sundry Debtors
and loans and advances
reported in Schedule 7 are
correctly stated.
In view of above
remarks, we are unable
to comment whether
provision of Rs.12681.60
lac on account of doubtful
debts and advances is
adequate or not. Balance
of sundry debtors and
advances after provisions
as on 31.03.2006 amounted
to Rs.15027.14 lac.
ISO 9001-2000
21.01.2000. The Board of Directors had approved the
norms for provisioning against bad & doubtful debts of
the Company for the year 2001-02. While approving the
norms the Board had, however, desired that a firm of
Chartered Accountants should be engaged to review the
said norms for application in future. Accordingly, a firm of
Chartered Accountants i.e. M/s. Suresh Chandra &
Associates was appointed, who after making a detailed
review of the norms of provisioning had recommended
that the said norms as approved by the Board for the
year 2001-02, were adequate and the said report of the
Chartered Accountants was considered by the Board of
Directors. The Board accorded its approval for
continuation of the said norms in the Corporation for the
Financial Year 2002-03 and onwards.
We have, therefore, made provisions for bad & doubtful
debts as per the norms approved by the Board of
Directors, which are considered adequate.
35
 ISO 9001-2000

COMMENTS OF STATUTORY AUDITORS MANAGEMENT’S REPLIES

(i) (a) The Corporation has maintained proper records No comments required.
showing full particulars including quantitative
details and situation of fixed assets.
(b) All the assets have been physically verified by No Comments required.
the management during the year and there is a
regular programme of verification which, in our
opinion, is reasonable having regard to the size
of the Corporation and the nature of its assets.
No material discrepancies were noticed on such
verification. As regards fixed assets on lease, we
have been informed that there has been a system
of physical verification in case of default cases
& in respect of others, verification is done if
necessary. We have been explained that no
serious discrepancy have been noticed on such
physical verification.
(c) During the year, the Corporation has not No Comments required.
disposed off a major part of the plant and
machinery.
(ii) (a) As informed to us the physical verification has No Comments required.
been conducted by the management in respect
of finished goods, raw materials, stores and spare
parts during the year or at the end of the year. In
our opinion, frequency of verification is
reasonable.
(b) The procedure of physical verification of stocks No Comments required.
followed by the Management are reasonable and
adequate in relation to the size of the Corporation
and the nature of its business.
(c) The Corporation is maintaining proper records In respect of Branch office Bhopal, F.I.R. has already
of inventory. However, one Rig Boring Machine been lodged for the missing seized machinery and the
seized from hirer in B.O. Bhopal was found written down value of Rs.2/- was taken in stock of seized
missing for which FIR has been duly lodged machinery. Except this, there was no significant discrepancy
having a W.D.V. of Rs.81180 the value of which on the physical verification of inventory.
has been taken as Rs.2 in stock of seized

36
 ISO 9001-2000

machinery hire purchase. Except this

discrepancies noted above on physical
verification of stocks as compared to book
records were not significant having regard to the
size and nature of operations of the corporation
and have been properly dealt with in the books
of accounts.
(d) The valuations of stocks have been in The land and Building shown as stock at I.E. Naini has
accordance with Para No.2 of Accounting been consistently valued at cost at Rs.19.65 lacs over the
Policy. In case of I.E Naini where valuation of years.
land & building which has been treated as stock
has been done at cost at Rs.19.65 lacs. In our
opinion, except as stated above the valuation of
stocks is fair and proper in accordance with the
normally accepted accounting principles.
(iii) The Corporation had not taken any loan from other No Comments required.
companies covered in the register maintained under
section 301 of the Companies Act, 1956. On the
basis of examination of records and according to
the information and explanations given to us, the
corporation has not either taken/granted any loans,
secured or unsecured from/to companies, firms or
other parties covered in the register maintained u/s
301 of the companies Act,1956. Accordingly, the
provisions of sub clause iii(a), iii (b), iii(c) & iii (d) of
the Companies (Auditors report) Order 2003, are
not applicable.
(iv) In our opinion and according to the information and
explanations given to us, there are adequate internal
control procedures commensurate with the size of
the Corporation and the nature of its business with
regard to purchases of inventory, fixed assets and
with regard to the sale of goods and services. During
the course of our audit, we have not observed any
continuing failure to correct major weaknesses in
internal controls except for the followings:
(a) To ensure proper valuation of the properties be As suggested by statutory auditors, instructions have been
atleast once revalued and the present position reiterated to all the Branch Offices to ensure proper
of creation of charges may be verified. valuation of the properties and to verify the present position
of creation of charges.

37
 ISO 9001-2000
(b) In our view it will be safer that the mortgage
should also be intimated to the revenue
authorities for noting in their records.
(c) There is a system in practice of obtaining the
confirmation from Debtors/ Receivables;
however confirmations are not received in few
cases.
(d) Follow up of executions in cases of decrees
awarded in favour of corporation, effective
monitoring in respect of suit filed cases and RC
cases in certain branches.
(e) Deficiencies in recovery of defaulted loan
accounts at B.O. Ahmedabad
i) Deficiencies in follow up for realization of
receivables under Loan and Advances,
Hire Purchase and Leasing Activities.
38
In majority of cases, the Corporation is accepting the
equitable mortgage on the immovable properties of the
borrower units / guarantors to secure its advances. Under
the provisions of Transfer of Property Act., 1882 the
creation of mortgage by deposit of title deeds is not
required to be intimated to the Revenue Authorities. In
the case where equitable mortgage is not available, the
corporation is intimating to revenue authorities for noting
the charge based on the R.C. issued. In case of equitable
mortgage of the properties of a company, the charge is
registered with the Registrar of Companies.
Confirmation of balances has been received in most of
the cases. However, instructions for obtaining balance
confirmation in respect of remaining cases are being
reiterated to all offices. The majority of the few cases as
referred by the Auditors pertain to Legal / RC cases, where
no confirmation is given by the units.
The same para was mentioned by the auditors in the
previous year 2004-05 for all the 30 branches. In the
current year 2005-06, improvement has been made by
25 branches where this para has been dropped by the
auditors. The para mentioned by auditors in the year 2005-
06 pertains to five branches only viz. Bhopal, Kanpur,
Naini, Bangalore & Hyderabad. Instructions are being
issued to these branches to monitor the execution of
decrees awarded in favour of corporation and the suit
filed / R.C. cases.
Cases, where parties are not regular in the repayment are
being constantly followed up by branch office and all efforts
are being made to recover the dues through letters,
personal visits & persuasion. When recovery efforts yield
no result, steps are taken to recover the dues through
legal process by issuing Recovery Certificate. The
Recovery Certificates have been vigorously followed up
for recovery of dues. Defaulted accounts are also being
placed before the Default Review Committee regularly
for remedial action in such cases.

ii) Delay in review and identification of some
of sticky debtors and putting such cases
before Default Review Committee.
iii) Repossession or transfer of Leased Assets
after the expiry of leased period in certain
cases of default. It is informed that recovery
certificates have been filed for these cases.
(v) (a) According to the information and explanations
given by the management, we report that there
has not been any such transactions during the
year which needs to be entered in the register
maintained u/s301 of the companies act, 1956.
(b) Based on the audit procedure applied by us &
according to the information & explanations given
to us, no such transaction has taken place in
pursuance of contracts or arrangements entered
in the register maintained u/s 301 of the
Companies act,1956 and exceeding the value
of 5 lakh rupees in respect of any party during
the year.
(c) In respect of loans and advances in the nature
of loans given by the Corporation, the parties or
employees (other than those left) are generally
regular in repaying the principal amount and
interest wherever applicable.
Except in case of loans and advances to outside
parties, including Hirers, lessees, loan against
hypothecation of machines, Bill of exchange and
under Raw Material Assistance Schemes.
ISO 9001-2000
There has been delay in review and identification of some
of default cases and putting up these cases before the
Default Review Committee. Instructions are being issued
to Ahmedabad office to review & identify such default
cases and to put up the same before Default Review
Committee.
In some cases where lease period has expired, the
machines could not be repossessed as the same were found
missing for which FIR has been filed and in some cases,
machine could not be transferred due to non payment of
outstanding dues. In all such cases, Recovery Certificates
have been issued and the machines would be sold through
process of law. Instructions have been issued to
Ahmedabad office to follow-up with revenue authorities
for execution of Recover Certificates for recovery of dues
and also to dispose off the machine after repossession.
No Comments required.
No Comments required.
No Comments required.
All such cases, where parties are not regular in the
repayment, are being closely monitored by the concerned
departments to ensure recovery of dues. Defaulted
accounts are also put up before the Default Review
Committee regularly for remedial action in such cases.
39
 ISO 9001-2000

(vi) There has not been any acceptance of any No Comments required.
deposits from the public during the year to which
the provisions of sec 58A and/or 58AA of the
companies act,1956 and rules framed there under
apply.
(vii) The internal audit of various offices is carried out by No Comments required.
centralized internal audit department at Head Office.
In our opinion, the company has an internal audit
system commensurate with its size and the nature of
its business.
(viii) We have been explained that the maintenance of No Comments required.
cost records has not been prescribed by the Central
Government, under the Companies Act, 1956 for
any of the products of the Corporation.
(ix) (a) The Corporation is regular in depositing with No Comments required.
appropriate authorities undisputed statuary dues
including provident fund, investor education
protection fund, employees’ state insurance,
income tax, sales tax, wealth tax, custom duty,
excise duty, service tax, FBT, cess and other
material statutory dues applicable to it.
(b) According to the information and explanations The estimated amount of Fringe Benefit Tax (FBT) for
given to us, no undisputed amounts payable in the last quarter ending 31st March, 2006 was deposited
respect of income tax, FBT, wealth tax, sales on 15th March, 2006 as per provisions of the Act. The
tax, customs duty, service tax, excise duty and balance FBT after finalization of Accounts is required to
cess were in arrears, as at 31.3.06 except FBT be deposited before filing of return on 31st October.
of Rs.7.09 lac which has been deposited on Therefore, balance FBT of Rs.7.09 lac has been deposited
25.08.06. on 25.08.2006 before the due date i.e. 31.10.2006.
(c ) According to the information and explanation No Comments required.
given to us, there are dues of sale tax, income
tax, customs duty, wealth tax, excise duty, service
tax, cess etc. which have not been deposited on
account of any dispute in various offices, of the
Corporation as a whole amounting to Rs.312.98
lacs as on 31.03.2006.
(x) In our opinion, the accumulated losses of the No Comments required.
Corporation are more than fifty percent of its net
worth. Further, the corporation has not incurred cash
losses during the financial year covered by our audit.

40
 ISO 9001-2000

However, the Corporation had incurred cash losses

in the immediately preceding financial year.
(xi) In our opinion and according to the information and No Comments required.
explanations given to us, the Corporation has not
defaulted in repayment of dues to financial institution,
bank or debenture holders.
(xii) No loans and advances have been granted on the No Comments required.
basis of security by way of pledge of shares/
debentures and other similar securities. According,
the provisions of clause 4(xii) of the Companies
(Auditor’s Report) Order 2003, as amended by the
Companies (Auditor’s Report) (Amendment) 2004,
are not applicable.
(xiii) In our opinion, the Corporation is not a chit fund or No Comments required.
a nidhi/ mutual benefit fund/society. Therefore, the
provisions of clause 4(xiii) of the Companies
(Auditor’s Report) Order 2003, as amended by the
Companies (Auditor’s Report) (Amendment) 2004,
are not applicable to the Corporation.
(xiv) In our opinion, the Corporation is not dealing in or No Comments required.
trading in shares, securities, debentures and other
investments. Accordingly, the provisions of clause
4(xiv) of the Companies (Auditor’s Report) Order
2003, as amended by the Companies (Auditor’s
Report) (Amendment) 2004, are not applicable to
the Corporation.
(xv) According to the information and explanation given No Comments required.
to us, no guarantee has been given for loans taken
by others from banks or financial institutions.
Accordingly, the provisions of clause 4(xv) of the
companies (Auditor’s Report) Order 2003, as
amended by the Companies (Auditor’s Report)
(Amendment) 2004, are not applicable to
Corporation.
(xvi) In our opinion, the term loans have been applied for No Comments required.
the purpose for which they were raised.
(xvii) According to the information and explanations given No Comments required.
to us and on an overall examination of the balance
sheet of the Corporation, we report that the no funds

41
 ISO 9001-2000

raised on short-term basis have been used for long-

term investment.
(xviii) According to the information and explanations given No Comments required.
to us, the Corporation has not made preferential
allotment of shares to parties and companies
covered in the register maintained under section 301
of the Act. Accordingly Provisions of clause 4(xviii)
of the Companies (Auditor’s Report) Order 2003,
as amended by the Companies (Auditor’s Report)
(Amendment) 2004, are not applicable to the
Corporation.
(xix) Based on the records examined by us the No Comments required.
corporation has not raised monies by public issues
during the year. Accordingly, the provisions of clause
4(xix) of the Companies (Auditors Report) Order
2003, as amended by the Companies (Auditor’s
Report) (Amendment) 2004, are not applicable.
(xx) Based on the records, we have verified that no No Comments required.
money was raised by public issues as disclosed in
the notes to the financial statements.
(xxi) During the course of our examination of books of No Comments required.
accounts carried out in accordance with generally
accepted practice in India and according to the
information and explanations given to us by the
management, we report that no fraud on or by the
Corporation has been noticed or reported during
the year, that causes the financial statements to be
materially misstated.
(xxii) The other clause(ii) of Paragraph 4 of the Companies No Comments required.
(Auditor’s Report) Order 2003, as amended by the
Companies (Auditor’s Report) (Amendment) 2004,
issued by the Central Government of India is not
applicable in the case of the Corporation for the
current year, since in our opinion there is no matter
which arises to be reported in the aforesaid order.

42
 ISO 9001-2000

COMMENTS OFTHE COMPTROLLERANDAUDITOR GENERALOF INDIAUNDER SECTION

619 (4) OFTHE COMPANIESACT, 1956 ON THEACCOUNTS OFTHE NATIONALSMALL
INDUSTRIES CORPORATION LIMITED FOR THEYEAR ENDED 31ST MARCH, 2006

PROFIT & LOSS ACCOUNT

Other Income (Schedule-16) - Rs. 25.51 crore
This is understated by Rs. 16.62 lakh being the discount accured for lifting of material from National Aluminium
Company Limited as on 31st March 2006. This has resulted in understatement of Current Assets and Profit for the year
by the same amount.

(J. Wilson)
Principal Director of Commercial Audit
& ex-officio Member Audit Board-I,
New Delhi
Place : New Delhi
Date : 26th September, 2006

43
 ISO 9001-2000
AUDITOR’S REPORT
Auditor’s Report to the Shareholders of The National Small Industries Corporation Limited.
1. We have audited the attached Balance Sheet of The
National Small Industries Corporation Ltd., Okhla
Industrial Estate, New Delhi- 110 020, as at 31st
March 2006, Profit & Loss Account (Consolidated),
Profit & Loss Account (Commercial) of the
Corporation, Income and Expenditure account
(Promotional) and various other Income &
Expenditure accounts and Cash flow (Consolidated)
statement for the year ended on that date annexed
thereto. These financial statements are the
responsibility of the Corporation’s management. Our
responsibility is to express an opinion on these
financial statements based on our audit.
2. We conducted our audit in accordance with the
auditing standards generally accepted in India. Those
Standards require that we plan and perform the audit
to obtain reasonable assurance about whether the
financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the
accounting principles used and significant estimates
made by management, as well as evaluating the
overall financial statement presentation. We believe
that our audit provides a reasonable basis for our
opinion.
3. In terms of their respective appointments, NSIC
Branches Offices, NTSC’s & NTSEC’s, were
audited by Branch Auditors:
I. In terms of our appointment, the following
Accounting Units were audited by us:
i) Head Office,
ii) Marketing Division at H.O., New Delhi
and Raj Biraj.
iii) NSIC –Technical Services Centre, Okhla.
iv) Other projects & promotional activities
44
at H.O., Marketing Division & NSIC –
Technical Services Centre Okhla.
II. As required by the Companies (Auditor’s
Report) Order, 2003 as amended by the
Companies (Auditor’s Report) (Amendment)
Order, 2004, issued by the Central
Government of India in terms of sub-section
(4A) of section 227 of ‘The Companies Act,
1956’ of India (‘the Act’) and on the basis of
such checks of the books and records of the
Corporation as we considered appropriate and
according to the information and explanations
given to us, we give in the annexure a statement
on the matters specified in paragraphs 4 & 5 of
the said order.
4. Further to our comments in the Annexure referred to
above, we report that:
(i) We have obtained all the information and
explanations, which to the best of our knowledge
and belief were necessary for the purposes of
our audit;
(ii) In our opinion, proper books of account as
required by law have been kept by the
Corporation so far as appears from our
examination of those books and proper returns
adequate for the purposes of our audit have been
received from the branches not visited by us.
(iii) The reports of the Branch Auditors on the
accounts audited by them under Section 228
of the Companies Act, 1956, have been
received by us as required by clause ‘C’ of Sub-
section (3) of the said section which have been
considered and incorporated by us in our report,
wherever necessary.
(iv) On the basis of written representation received
from the Directors other than nominee Directors
to whom the provisions of section 274(1) (g)
of the Companies Act, 1956, are made
 ISO 9001-2000

inapplicable and taken on record by the Board made due to which

of Directors, we report that none of the profit during the year
Directors are disqualified as on 31st March, has been overstated.
2006, from being appointed as a Director in
c. Note No. 6 of Non-confirmation of
terms of clause (g) of Sub-Section (1) of Section Schedule-24 debit a n d c r e d i t
274 of the Companies Act, 1956. balances of Schedule-
(v) The balance sheet, profit and loss account 7 & 9 in few cases.
(consolidated), profit and loss account d. Accounting Considering the age of
(commercial), income and expenditure account Policy No. 16 the debtors/receivables,
(promotional), cash flow (consolidated) & Note No.17 their rate of recovery
statement and various other income and & 26 of and lack of adequate
expenditure accounts referred to in this report Schedule-24 security in some cases,
are in agreement with the books of account and we are unable to
with the audited returns from the branches. comment whether the
norms as to provisioning
(vi) In our opinion, the balance sheet, profit and loss as approved by the
account (consolidated), profit and loss Board of Directors
(commercial), income and expenditure account are adequate and
(promotional), cash flow (consolidated) hence the exact
statement and various other income and quantum of doubtful
expenditure accounts dealt with by this report, debts and advances
comply with the accounting standards referred could not be quantified
to in sub-section (3C) of section 211 of the & consequently
Companies Act, 1956. whether the doubtful
Sundry Debtors and
(vii) a. Note No. 8 of No provision of penalty loans and advances
Schedule 24 for Govt. Guarantee reported in Schedule
Fees amounting to 7 are correctly stated.
R s . 30.33 lac for
In view of above
t h e Current Year
remarks, we are
(Aggregating to Rs.
unable to comment
464.24 lac up to whether provision of
31.03.2006) has been Rs.12681.60 lac on
made due to which account of doubtful
profit during the year debts and advances is
has been overstated. adequate or not.
b. Note No.12 of No provision against Balance of sundry
Schedule-24 receivable from debtors and advances
MEA Raj Biraj Project after provisions as on
31.3.2006 amounted to
Rs. 82.08 lac has been
Rs.15027.14 lac.

45
 ISO 9001-2000
We further report that
without considering the
items mentioned at
para No.(vii) c. and (vii)
d. where quantification
and consequent
financial impact, could
not be determined,
profit for the year of
the Corporation in
view of our comments
at para (vii) a. & (vii)
b. would have been
Rs.13.03 lac (as
against reported figure
of Rs.125.44 lac),
accumulated loss
would have been
Rs.15486.88 lac (as
against the reported
figure of Rs.15374.47
lac).
Subject to the above, in
our opinion and to the
best of our information
and according to
explanations given to
us, the said accounts
read together with the
Accounting Policies
and Notes thereon,
give the information
required by the
Companies Act, 1956, in
For D. P. KHOSLA & CO.
Place : New Delhi
Dated : 5th Sept., 2006
46
the manner so required
and give a true and fair
view in conformity with
the accounting principles
generally accepted in
India:
(i) In the case of
Balance Sheet of the
state of affairs of the
Corporation as at
31st March, 2006;
(ii) In the case of Profit
& Loss Account
(Consolidated), Profit
& Loss Account
(Commercial) of the
Profit of the Corpo-
ration, Income and
Expenditure account
(Promotional) of
deficit and various
other Income & Ex-
penditure accounts
referred to above of
the surplus / deficit of
that activity for the
year ended on that
date and
(iii) In the case of Cash
flow (Consolidated)
statement of the Cash
flow for the year
ended on that date.
Chartered Accountants
(PRADEEP BODAS)
Partner
M. No. 82449

ANNEXURE TO THE AUDITOR’S REPORT
Referred to in paragraph 3 of our report of even date.
(i) (a) The Corporation has maintained proper records
showing full particulars including quantitative
details and situation of fixed assets.
(b) All the assets have been physically verified by
the management during the year and there is a
regular programme of verification which, in our
opinion, is reasonable having regard to the size
of the Corporation and the nature of its assets.
No material discrepancies were noticed on such
verification. As regards fixed assets on lease,
we have been informed that there has been a
system of physical verification in case of default
cases & in respect of others, verification is done
if necessary. We have been explained that no
serious discrepancy have been noticed on such
physical verification.
(c) During the year, the Corporation has not
disposed off a major part of the plant and
machinery.
(ii) (a) As informed to us, the physical verification has
been conducted by the management in respect
of finished goods, raw materials, stores and
spare parts during the year or at the end of the
year. In our opinion, frequency of verification is
reasonable
(b) The procedure of physical verification of stocks
followed by the Management are reasonable
and adequate in relation to the size of the
Corporation and the nature of its business.
(c) The Corporation is maintaining proper records
of inventory. However, one Rig Boring Machine
seized from hirer in B.O. Bhopal was found
missing for which FIR has been duly lodged
having a W.D.V. of Rs.81180/-. The value of
same has been taken as Rs.2/- in stock of seized
machinery hire purchase. Except the
discrepancy noted above, physical verification
of stocks as compared to book records were
ISO 9001-2000
not significant having regard to the size and
nature of operations of the corporation and have
been properly dealt with in the books of
accounts.
(d) The valuation of stocks have been in accordance
with Para No.2 of Accounting Policy. In case
of I.E Naini, where land & building has been
treated as stock, valued at cost of Rs.19.65
lacs. In our opinion, except as stated above,
the valuation of stocks is fair and proper in
accordance with the normally accepted
accounting principles.
(iii) The Corporation had not taken any loan from other
companies covered in the register maintained under
section 301 of the Companies Act, 1956. On the
basis of examination of records and according to
the information and explanations given to us, the
corporation has not either taken/granted any loans,
secured or unsecured from/to companies, firms or
other parties covered in the register maintained u/s
301 of the companies Act,1956. Accordingly, the
provisions of sub clause iii (a), iii (b), iii (c) & iii(d)
of the Companies (Auditors report) Order 2003,
are not applicable.
(iv) In our opinion and according to the information and
explanations given to us, there are adequate internal
control procedures commensurate with the size of
the Corporation and the nature of its business with
regard to purchases of inventory, fixed assets and
with regard to the sale of goods and services. During
the course of our audit, we have not observed any
continuing failure to correct major weaknesses in
internal controls except for the followings:
a) To ensure proper valuation of the properties be
atleast once revalued and the present position
of creation of charges may be verified.
b) In our view, it will be safer that the mortgage
should also be intimated to the revenue
authorities for noting in their records.
47
 ISO 9001-2000
c) There is a system in practice of obtaining the
confirmation from Debtors/ Receivables,
however confirmations are not received in few
cases.
d) Follow up of executions in cases of decrees
awarded in favour of corporation, effective
monitoring in respect of suit filed cases and RC
cases in certain Branches.
e) Deficiencies in recovery of defaulted loan
accounts at B.O. Ahmedabad
i) Deficiencies in follow up for realization of
receivables under Loan and Advances,
Hire Purchase and Leasing Activities.
ii) Delay in review and identification of some
of sticky debtors and putting such default
cases before Defaulter Review Committee.
iii) Repossession or transfer of Leased Assets
after the expiry of leased period in certain
cases of default. It is informed that recovery
certificates have been filed for these cases.
(v) (a) According to the information and explanations
given by the management, we report that there
has not been any such transactions during the
year which needs to be entered in the register
maintained u/s 301 of the companies act, 1956.
(b) Based on the audit procedure applied by us &
according to the information & explanations
given to us, no such transaction has taken place
in pursuance of contracts or arrangements
entered in the register maintained u/s 301 of the
Companies act,1956 and exceeding the value
of 5 lakh rupees in respect of any party during
the year.
(c) In respect of loans and advances in the nature
of loans given by the Corporation, the parties
or employees (other than those left) are
generally regular in repaying the principal
amount and interest wherever applicable except
in case of loans and advances to outside parties,
including Hirers, lessees, loan against
hypothecation of machines, Bill of exchange and
under Raw Material Assistance Schemes.
48
(vi) There has not been any acceptance of any deposits
from the public during the year to which the
provisions of sec 58A and/or 58AA of the companies
act,1956 and rules framed thereunder apply.
(vii) The internal audit of various offices is carried out
by centralized internal audit department at Head
Office. In our opinion, the company has an internal
audit system commensurate with its size and the
nature of its business.
viii) We have been explained that the maintenance of
cost records has not been prescribed by the Central
Government, under the Companies Act, 1956, for
any of the products of the Corporation.
(ix) (a) The Corporation is regular in depositing with
appropriate authorities undisputed statuary dues
including provident fund, investor education
protection fund, employees’ state insurance,
income tax, sales tax, wealth tax, custom duty,
excise duty, service tax, FBT, cess and other
material statutory dues applicable to it.
(b) According to the information and explanations
given to us, no undisputed amounts payable in
respect of income tax, FBT, wealth tax, sales
tax, customs duty, service tax, excise duty and
cess were in arrears, as at 31-3-06 except FBT
of Rs.7.09 lac which has been deposited on
25.08.2006.
(c) According to the information and explanation
given to us, there are dues of sale tax, income
tax, customs duty, wealth tax, excise duty,
service tax, cess etc. which have not been
deposited on account of any dispute in various
offices, of the Corporation as a whole,
amounting to Rs.312.98 lacs as on 31.03.2006.
(x) In our opinion, the accumulated losses of the
Corporation are more than fifty percent of its
net worth. Further, the corporation has not incurred
cash losses during the financial year covered by our
audit. However, the corporation had incurred cash
losses in the immediately preceding financial year.

(xi) In our opinion and according to the information
and explanations given to us, the Corporation has
not defaulted in repayment of dues to a financial
institution, bank or debenture holders.
(xii) No loans and advances have been granted on the
basis of security by way of pledge of shares/
debentures and other similar securities. Accordingly,
the provisions of clause 4(xii) of the Companies
(Auditor’s Report) Order 2003, as amended by
the Companies (Auditor’s Report) (Amendment)
2004, are not applicable.
(xiii) In our opinion, the Corporation is not a chit fund
or a nidhi/mutual benefit fund/society. Therefore,
the provisions of clause 4(xiii) of the Companies
(Auditor’s Report) Order 2003, as amended by
the Companies (Auditor’s Report) (Amendment)
2004, are not applicable to the Corporation.
(xiv) In our opinion, the Corporation is not dealing in or
trading in shares, securities, debentures and other
investments. Accordingly, the provisions of clause
4(xiv) of the Companies (Auditor’s Report) Order
2003, as amended by the Companies (Auditor’s
Report) (Amendment) 2004, are not applicable to
the Corporation.
(xv) According to the information and explanation given
to us, no guarantee has been given for loans taken
by others from banks or financial institutions.
Accordingly, the provisions of clause 4(xv) of the
Companies (Auditor’s Report) Order 2003, as
amended by the Companies (Auditor’s Report)
(Amendment) 2004, are not applicable to
Corporation.
(xvi) In our opinion, the term loans have been applied
for the purpose for which they were raised.
(xvii) According to the information and explanations
given to us and on an overall examination of the
balance sheet of the Corporation, we report that
Place : New Delhi
Dated : 5th Sept., 2006
ISO 9001-2000
the no funds raised on short-term basis have been
used for long-term investment.
(xviii) According to the information and explanations given
to us, the Corporation has not made preferential
allotment of shares to parties and companies
covered in the register maintained under section
301 of the Act. Accordingly, provisions of clause
4(xviii) of the Companies (Auditor’s Report) Order
2003, as amended by the Companies (Auditor’s
Report) (Amendment) 2004, are not applicable to
the Corporation.
(xix) Based on the records examined by us, the
corporation has not raised monies by public issues
during the year. Accordingly, the provisions of
clause 4(xix) of the Companies (Auditors Report)
Order 2003, as amended by the Companies
(Auditor’s Report) (Amendment) 2004, are not
applicable.
(xx) Based on the records, we have verified that no
money was raised by public issues as disclosed in
the notes to the financial statements.
(xxi) During the course of our examination of books of
accounts carried out in accordance with generally
accepted practice in India and according to the
information and explanations given to us by the
management, we report that no fraud on or by the
Corporation has been noticed or reported during
the year, that causes the financial statements to be
materially misstated.
(xxii) The other clause (ii) of Paragraph 4 of the
Companies (Auditor’s Report) Order 2003, as
amended by the Companies (Auditor’s Report)
(Amendment) 2004, issued by the Central
Government of India is not applicable in the case
of the Corporation for the current year, since in
our opinion there is no matter which arises to be
reported in the aforesaid order.
For D. P. KHOSLA & CO.
Chartered Accountants
(PRADEEP BODAS)
Partner
M. No. 82449
49
 ISO 9001-2000

The Board of Directors of 5th September, 2006

The National Small Industries Corporation Ltd.
Okhla Industrial Estate,
New Delhi - 110020

Dear Sir,
Subject : Non - Banking, Finance Companies Auditor's Report
(Reserve Bank) Directions, 1998

In addition to our report made under section 227 of the companies Act, 1956 (1 of 1956) on the financial statement of
The National Small Industries Corporation Limited ("the Corporation") as of and for the year ended 31st March 2006
and as required by the Non-Banking Financial Companies Auditor's Report (Reserve Bank) Directions, 1998 dated
2nd January 1998 issued by the Reserve Bank of India (RBI), on the basis of such checks, as we considered appropriate
and as per the information and explanations given to us, we report on the matters specified in paragraph 3 and 4 of the
said direction as follows:
! In pursuance, of section 45-1A of the Reserve Bank of India Act, 1934, the Company has obtained a certificate
of registration from the RBI under Registration Number N-14.03090 dated 29.12.2005 granting the Company to
carry on the business of a non-banking financial company;
! The Board of Directors have passed a resolution on 9th December 1998 for non-acceptance of public deposit in
future without prior permission from Reserve Bank of India; which has been reconfirmed in the Board resolution
passed on 12th December, 2005.
! The Company has not accepted public deposits during year ended 31st March 2006.
! In our opinion and to the best of our information and according to the explanations given to us, the Corporation,
being a Govt. of India Enterprise has been exempted from compliance of RBI prudential norms relating to NBFCs
in view of RBI circular No. DNBS (PD) No. 896/02.59/99-2000 dated 21st January, 2000.
! The Company has an internal audit system and has constituted an audit committee in line with the RBI circular No.
DNBS (PD) CC. No. 12/02.01/99-2000 dated 13th January 2000.
This report is issued to comply with the Non-Banking Financial Companies Auditor's Report (Reserve Bank) Direction,
1998 vide notification number DFC 117/DG (SPT)-98 dated 2nd January 1998, and may not be used for any other
purpose.

For M/s. D.P. Khosla & Company

Chartered Accountants

(Pradeep Bodas)
Partner
Member Ship No. 82449

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