SMALL SCALE INDUSTRIES

•Conventional definition – It includes cottage and handicraft

industries which employ traditional labour intensive methods to
produce traditional products.

•Operational definition – All undertakings having an investment in

fixed assets, in plant and machinery, whether held on ownership
terms or by lease or by hire purchase, not exceeding Rs.3 crores

•An ancillary undertaking is one whose investment in plant and

machinery does not exceed Rs.3 crores and is engaged in
manufacturing : (a) parts, components, sub assemblies, tooling's
or intermediaries or (b) rendering of services of supplying 1/3 % of
their total service or production to other units for production of
other articles.
•A tiny unit is one whose investment in plant and machinery is Rs.
25 lakhs.

•National Income Accounting – It includes all manufacturing and

processing activities, including maintenance and repair services,
undertaken by both household and non-household small scale
manufacturing units, which are not registered under the Factory’s
Act.
Characteristic features of SSI’s

1.Usually a one man show.

2.Owner is also the manager.

3.Low gestation period.

4.Caters to local needs.

5.Can be located anywhere, subject to the availability of

raw materials.

6.Labour intensive.
Objectives of SSI’s

1.To generate immediate and large scale employment

opportunities with a low investment.

2.To eradicate employment.

3.To encourage dispersal of industries all over the country.

4.To bring backward areas into the mainstream of development.

5.To ensure equitable distribution of income.

6.To encourage effective mobilization of resources.

7.To improve the level of living of the people.

Problems faced by SSI’s

1.Difficulty in obtaining raw materials.

2.Difficulty in obtaining finance.

3.Problems faced in marketing.

4.Underutilization of capacity.

5.Other problems such as : technology, knowledge,

unorganized operations, power, infrastructure, etc.
Role played by SSI’s in India

1.They are suitable for a country like ours where capital

is scarce.
2.They provide employment to a large number of people.
3.The payback period is less compared to large scale
industries.
4.Better organized to counter inflation and recession.
5.Simple and easy to run.
6.No imported machines and technology, so no outflow
of foreign exchange.
7.They bring about balanced regional development.
8.They utilize resources properly and help to mobilize
rural savings.
9.They help to improve the standard of living of the
people.
Methods of promoting SSI’s.

1.Reservation of certain products for the exclusive

manufacture by SSI’s.

2.Promoting the exports of goods manufactured by SSI’s

3.Setting up the National Small Industries

Corporation(NSIC).

4.Providing loans at easy rates, supplying machinery

and equipment at easy rates.

5.Providing technical assistance to SSI’s.

6.Providing economic information to SSI’s.

Steps in starting a SSI

Selection of a project
•Product or Service
•Location
•Prepare project profile

Decide on the Constitution

Obtain clearances from

Obtain registration of departments as
the SSI applicable

Arrange for the land and Arrange for the plant & Arrange for the
shed machinery infrastructure

Prepare a project report

Apply and obtain finance

•Prepare to implement the project

•Obtain final clearances
1.Selection of the Project

•This is the first decision that the entrepreneur has to

take. He has to select the product or service that he
wishes to manufacture or render.

•He has to then decide where he wants to locate the unit

and then he should prepare the project profile.
2. Decide the Constitution

The constitution of the unit can be either:

1.a sole proprietorship
2.a partnership or
3.a joint stock company

•The constitution of the unit should be decided in

advance so that the necessary formalities related to that
type of a unit can be completed.
3. Registration of the SSI

•The entrepreneur must obtain a Provisional Registration

Certificate (PRC).

•The application must be made to the concerned

authorities for obtaining the PRC.

•The PRC is valid for a period of two years and can be

renewed thereafter.
•Once the unit starts full commercial production, a
Permanent Registration Certificate (PMC) should be
obtained by the SSI.

•A PMC helps the SSI to :

(a) Apply for scarce or imported raw materials.
(b) Apply for working capital from banks.
(c)Obtain duty concessions.
(d) Register the unit for the government stores purchase
program in order to get purchase and price preferences,
etc.
(e) Claim sales tax concessions.