SHIVAJI UNIVERSITY, KOLHAPUR

Yashwantrao Chavan School Of

Rural Development
A presentation of
Concessions available for Small Business in
India

Small Scale Industries play a very vital role in the national economy. They help in
generating employment with minimum possible investment and play a very vital role
in promoting exports. Therefore, the Government has announced various schemes
and policies for the promotion of Small Scale Industries to ensure that control over
production is widely distributed. As per the present definition, an industry having
investment of upto Rs. 1 crore in plant and machinery is defined as Small Scale
Industry.
 Finance to SSI
The advances to SSI are considered as Priority Sector Advances by banks. As per RBI
guidelines, 40 % of the advances of nationalsed bank should be to Priority Sector. Thus SSI
Units are given priority in bank finance. Further, RBI has announced that collateral security will
not be insisted for loans by banks upto Rs. 5 Lakhs.

Collateral Free Loans

Availability of bank credit without the hassles of collaterals / third party guarantees would be
a major source of support to the first generation entrepreneurs to realize their dream of
setting up a unit of their own Micro and Small Enterprise (MSE). Keeping this objective in
view, Ministry of Micro, Small & Medium Enterprises (MSME), Government of India launched
Credit Guarantee Scheme (CGS) so as to strengthen credit delivery system and facilitate flow
of credit to the MSE sector.
Any collateral / third party guarantee free credit facility (both fund as well as non fund based)
extended by eligible institutions, to new as well as existing Micro and Small Enterprise,
including Service Enterprises, with a maximum credit cap of Rs.100 lakh (Rupees Hundred lakh
only) are eligible to be covered. The guarantee cover available under the scheme is to the
extent of 75% / 80% of the sanctioned amount of the credit facility, with a maximum
guarantee cap of Rs.62.50 lakh / Rs. 65 lakh. The extent of guarantee cover is 85% for micro
enterprises for credit up to Rs.5 lakh
 Equity Support
Under National Equity Fund Scheme equity support is available to entrepreneurs for
setting up new projects in tiny/small scale sector, for undertaking expansion,
modernisation, technology upgradation and diversification by existing tiny, SSI and
service enterprises and for rehabilitation of viable sick units in the SSI sector which fulfill
the specified eligibility criteria. The scope of this scheme was widened in 2000-01 raising
the limit of loan from Rs. 6.25 lakhs to Rs. 10 lakhs and project cost limit from Rs. 25
lakhs to Rs. 50 lakhs.

Assistance for Technology Development

SIDBI has set up Technology Development & Modernisation Fund (TDMF) scheme for
direct assistance of small sale industries to encourage existing industrial units in the
sector, to modernise their production facilities and adopt improved and updated
technology so as to strengthen their export capabilities. Assistance under the scheme is
available for meeting the expenditure on purchase of capital equipment acquisition of
technical know-how, upgradation of process technology and products with thrust on
quality improvement, improvement in packaging and cost of TQM and acquisition of ISO-
9000 series certification.
 12 Major Incentives to Small Scale Industries that
Deserves Special Mention

1. Reservation:
To protect the small-scale industries from the competition posed by large-scale
industries, the Government has reserved the production of certain items exclusively for the
small-scale sector. The number of items exclusively reserved for the small-scale sector has
been considerably increased during the Five Year Plan Periods and now stands at 822.
2. Preference in Government purchases:
The Government as well as Government organisations shows preference in
procuring their requirements from the small-scale sector. For instance, the Director
General of Supplies and Disposals purchases 400 items exclusively from the small-
scale sector. The National Small-Scale Industries Corporation assists the SSI units in
obtaining a greater share of Government and defence purchases.

3. Price preference:
The SSI units are given price preference up to a maximum of 15 per cent in
respect of certain items purchased both from small-scale and large-scale units.
4. Supply of raw materials:
In order to ensure regular supply of raw materials, imported components and
equipments, the Government gives priority allocation to the small-scale sector as
compared to the large-scale sector. Further, the Government has liberalised the import
policy and streamlined the distribution of scarce raw materials.

5. RBIs credit guarantee scheme:

In 1960, the RBI introduced a Credit Guarantee Scheme for small-scale industries.
As per the Scheme, the RBI takes upon itself the role of a guarantee organisation for the
advances which are left unpaid, including interest overdue and recoverable charges. This
scheme covers not only working capital but also advances provided for the creation of
fixed capital.
6. Financial assistance:
Small-scale industries are brought under the priority sector. As a result,
financial assistance is provided to SSI units at concessional terms by commercial
banks and other financial institutions. With a view to providing more financial
assistance to the small-scale sector, several schemes have been introduced in the
recent past the Small Industries Development Fund (SIDF) in 1986, National Equity
Fund (NEF) in 1987 and the Single Window Scheme (SWS) in 1988.

7. Technical consultancy services:

The Small Industries Development Organisation, through its network of
service and branch institutes, provides technical consultancy services to SSI units.
In order to provide the necessary technical input to rural industries, a Council for
Advancement of Rural Technology was set up in October, 1982.
8. Machinery on hire purchase basis:
The National Small Industries Corporation (NSIC) arranges supply of
machinery on hire purchase basis to SSI units, including ancillaries located in
backward areas which qualify for investment subsidy. The rate of interest charged in
respect of technically qualified persons and entrepreneurs coming from backward
areas are less than the amount charged to others. The earnest money payable by
technically qualified persons and entrepreneurs from backward areas is 10% as
against 15% in other cases.
9. Transport subsidy:
The Transport Subsidy Scheme, 1971 envisages grant of a transport subsidy
to small-scale units in selected areas to the extent of 75 % of the transport cost of
raw materials which are brought into and finished goods which are taken out of the
selected areas.
10. Training facilities:
The Entrepreneurship Development Institute of India, financial institutions,
commercial banks, technical consultancy organisations, and NSIC provide training to
existing and potential entrepreneurs.

11. Marketing assistance:

The National Small Industries Corporation (NSIC), the Small Industries
Development Organisation (SIDO) and the various Export Promotion Councils help SSI
units in marketing their products in the domestic as well as foreign markets. The SIDO
conducts training programmes on export marketing and organises meetings and
seminars on export promotion.
12. District Industries Centres (DICs):
The 1977 Industrial Policy Statement introduced the concept of DICs. Accordingly
a DIC is set up in each district. The DIC provides and arranges a package of assistance and
facilities for credit guidance, supply of raw materials, marketing etc.