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CHAPTER - III

GROWTH AND WORKING OF SMALL SCALE INDUSTRIES IN

ANDHRA PRADESH

In this chapter an attempt is made to discuss the growth and working

of small-scale industries in Andhra Pradesh in general and Krishna district in

particular. In addition to the growth and development of the small scale

industrial units in sample regions of the selected district, it also presents the

special economic zones and the various special schemes offered to promote the

small scale industrial units.

The industrial sector has gained in strength slowly but surely in many

ways over the last decade or so. This has become possible due to proactive role

of the State, viz., effective policy implementation including single window

clearance and incentives, establishing world class infrastructure and most

important, making available power at the cheapest industrial tariff, thereby

releasing entrepreneurial energies in private as well as public sector. A positive

mindset of the vast labour force across the industries has also played significant

role in this growth process. The State is committed to provide world-class

facilities like shipyards, airports, expressways, and quality power supply, water

supply, etc. The government has taken-up various initiatives to achieve the

desired growth rates in the Industrial sector during the 11th Five Year Plan

period.

The Department of Industries was established in 1960 with the objective

of establishing Cottage and Small Scale Industries, Industrial Co-operatives

and extending credit to artisans. Block-level training-cum-production centers,


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Rural Artisan Complexes and Guilds were established for giving necessary

training to the artisans in rural areas. The Department was transformed into a

technical and promotional agency for providing necessary assistance and

service for establishment of industries. The Department has implemented

several self-employment schemes promoted by State and Central governments

for educated unemployed youth. The Department has rendered its services to

other government agencies, like DRDA, Youth Services, STEP Societies,

SC/ST/BC/Minorities/Womens Finance Corporation, etc., by providing

necessary technical guidance. The Department is now entrusted with the task of

attracting investments (domestic as well as foreign) by preparing suitable

policies for various sectors of the industry, to explore the availability of

resources, to provide conducive industrial environment, to increase in labour

intensive industries and to improve the exports by providing market inputs to

exporters.

The Department is concentrating on development of key sectors like

pharmaceuticals, biotechnology, food processing, agro-based, chemicals,

leather, textiles, precision components, aero-space engineering, electronics,

semi-conductors, automobile and auto-components to accelerate the industrial

growth in the State. It is achieved by creating sector-specific industrial

infrastructure such as biotech parks, textile parks, leather parks, auto parks,

fabcity and hardware parks.


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District Industries Centers:

District Industries Centers were established in 1978 to serve as the nodal

agency in the districts to assist the entrepreneurs for establishment of the

Industries. The District Industries Centers are entrusted with the responsibility

of providing all approvals/ clearances needed for setting up an industry under

single window. The District Industries Centers are implementing agencies of

MSMED Act and issue Entrepreneur Memorandum (EM) for Micro, Small and

Medium Enterprises (MSME) besides maintaining effective liaison with

various financial institutions in arranging required credit facilities. The District

Industries Centers maintain all the data pertaining to the industrial development

of the district.

Single Window Act:

Government has enacted Industrial Single Window Clearance Act in

2002 for speedy processing and issue of various approvals/ clearances/

permissions required for setting-up of industrial undertakings and also to create

an investment friendly environment in the State. Statutory time limits have

been prescribed for various departments and concept of deemed approvals have

been introduced under this Act. Since the beginning of the Single Window Act,

70,302 clearances were issued under single window in respect of 40,129 units

(Micro, Small, and Medium and Large units) with a proposed investment of

Rs.2, 32, 958 crore and an employment potential of Rs.9, 40, 869 as on 30-09-

2009. The District Industries Centers (DICs) have been delegated the powers to


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process the proposals up to Rs.5.00 crore investment in plant and machinery in

District Single Window Clearance Committee (DSWCC).

Growth and Development of Micro, Small and Medium Enterprises:

Investment limits were enhanced with the enactment of Micro, Small and

Medium Enterprises Development (MSMED) Act 2006. Government of India

has unveiled a policy best suited for the micro, small enterprises with the

objective to achieve 15 per cent annual growth rate, increase employment

generation, create congenial and hassle-free environment, help the small scale

industrial sector to acquire new technology and skills, improve the export

performance, promote linkage between the large and small scale sector and to

promote an appropriate institutional mechanism to revive sick industries.

Table - 3.1.

Growth of Micro and Small Enterprises in Andhra Pradesh during

the period 2000-01 to 2010-11

(Rs. in Lakh)

Source:Government of Andhra Pradesh, Bureau of Economic & Statistics, 2010-11.

Table-3.1 shows the growth of micro and small enterprises in Andhra

Pradesh during the period 2000-01 to 2010-11. It can be seen from the data that

the no. of micro and small enterprises increased from 1.37 lakh to 1.67 lakh

Particulars 2000 -01 2004 -05 2007 -08 2009-10 2010 -11Average

growth

(%)

Number of

MSEs1.37 1.44 1.49 1.58 1.67 2.2

Fixed

investment

(Rs. crore)

3,425 4,425 5,849 10,504 15847 36.26

Employment 11.95 12.86 13.62 15.32 16.82 4.1


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during the period of study with an average growth rate of 2.2 per year. Further,

the fixed investment also registered a growth of 36.26 per cent from 3,425

crore to 15,847 crore during the period of study. At the same time the rate of

growth in employment recorded as 4.1 per cent from 11.95 lakh to 16.82 during

the same period. The progress of the state in respect of number of enterprises

and employment works out to be less when compared to the increase in fixed

investment. Thus, it can be said from the foregoing discussion that there is a

positive growth and development of micro and small scale enterprises in

Andhra Pradesh during the period 2000-01 to 2010-11.

Table - 3. 2.

Annual Growth Rates of MSEs in Andhra Pradesh (%) during

2001-11

Particulars 2000-01 2004-05 2007-08 2009-10 2010-11

Number of MSEs 1.2 1.9 2.9 3.1 5.63

Fixed investments 6.8 18.7 35.0 33.3 50.86

Employment 1.8 3.6 5.7 6.4 9.85

Source: Computed from the collected data.

The annual growth rates of micro small scale enterprises in Andhra

Pradesh during 2001-11 are shown in table-3.2. The growth rates for specific

periods as given reveal that there are some variations, with 2000-01 recording

the lowest rates, and recovery noticed from 2004-05 onwards, and with the best

results brought about during 2007-08.This phenomenal growth may be due to

the special attention towards small scale industries by the government.


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After the Micro, Small and Medium Enterprises Development Act have

become operational from October 2006, manufacturing and service activities

are covered under the Small and Medium Enterprises (SMEs) Sector. The

investment limits applicable to micro, small and medium enterprises in the

manufacturing and services categories are presented in table-3.3.

Table - 3. 3.

Classification of Micro, Small and Medium Enterprises from

October 2006 Act

Category Micro

Enterprises

Small

Enterprises

Medium

Enterprises

Manufacturing

enterprises in terms of

gross investment in

plant and machinery

Not exceeding

Rs.25 lakh

Rs.25 lakh to

Rs.5 crore

Rs.5 crore

to Rs.10

crore

Service enterprises in

terms of gross

investment in

equipment

Not exceeding

Rs.10 lakh

Rs.10 lakh to

Rs.2 crore

Rs.2 crore to

Rs.5 crore

The pattern of data presentation for the Small Scale Industries (SSIs) of

earlier years is being continued on the same lines even after 2006. Hence, the

activities referred to as small scale industries in early years are now called

Micro and Small Enterprises (MSEs) covering manufacturing and service

segments. The data for medium enterprises are not yet integrated with small

scale enterprises. They continued to be treated as medium and large enterprises

for purposes of data presentation.


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Development of Micro Small Scale Enterprises in Andhra Pradesh

A Regional Analysis:

The development of micro and small scale enterprises has been

analyzed regionwise and for the state as a whole for Andhra Pradesh.

Table - 3.4.

Categorization of regions and sub-regions in Andhra Pradesh for

analysis of industrial development

Source:Commissionerate of Industries, Andhra Pradesh, Hyderabad.

Normally, the State is represented in terms of three regions as shown

above. It is considered advisable to treat the whole State of three regions as

five subregions. Hyderabad and three districts around Hyderabad, influenced

by the metropolis, have many advantages for faster industrialization. Similarly,

North Coastal Andhra region, with Visakhapatnam, as the next level city has

S. No Regions Districts covered

1. Hyderabad region

(4 districts)

Hyderabad, Rangareddy, Medak and

Mahabubnagar

2. Rest of Telangana

(6 districts)

Adilabad, Nizambad, karimnagar,

Nalgonda, Warangal & Khammam

3. Telangana region

(10 districts)

Total of Hyderabad region & rest of

Telangana

4. North Coastal Andhra

(5 districts)

Srikakulam, Vizianagaram, East & West

Godavari, Visakhapatnam.

5. South Coastal Andhra

(4 districts)

Krishna, Guntur, Prakasam and Nellore

6. Coastal Andhra region Total of North and South Coastal sub

Regions

7. Rayalaseema

( 4 districts)

Chittoor, Kadapa, Anantapur, Kurnool

8. Andhra Pradesh

(23 districts)

Total Telangana, Coastal Andhra &

Rayalaseema regions.


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influenced the growth of industrialization in the neighboring districts. Dispersal

of industries is part of the design of industrialization in the small, medium and

large enterprises.

The data collected from the Commissionerate of Industries, Andhra

Pradesh with regard to permanently registered micro and small scale

enterprises in respect of Andhra Pradesh as a whole, with break-up presented

regionwise are analyzed for number of enterprises, gross fixed investment and

employment for the period 1995 to 2010 in spells of 4 to 5 years. The regional

break-up presented for these three parameters for analysis of the levels of

industrialization in MSEs is shown in table-3.5 to 3.10.

Share of Micro and Small Scale Enterprises (MSEs):

The analysis on the share of micro and small scale enterprises for the

three regions including subregions, and the state as a whole for the period

ending March 1995- 2010 is shown in table-3.5.

It can be seen from the data that the share (%) of micro and small scale

enterprises is more in Telangana during all the years of study except in the year

1995. The share of Hyderabad region is the highest, and contributed to the

higher share of Telangana in all the years. Analysis of the share of micro small

scale enterprises in Andhra region is more or less the same during the period of

study. The share of Rayalaseema has declined steadily and remained stationary,

because of the substantial increase in Hyderabad region. It can be concluded

from the foregoing analysis that the Telangana region is attracting more

number of small scale entrepreneurs due to the availability of various required


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facilities to the growth and development of the small scale enterprises in this

region of the state.

Table - 3.5.

Share of Micro Small Enterprises in A. P. : Region wise (%)

Regions 1995 2000 2004 2006 2007 2008 2009 2010

Hyderabad

Region

22.4 26.4 27.2 27.6 27.7 28.3 28.9 34.47

Rest of

Telangana

20.2 19.9 19.7 19.6 19.5 19.3 19.1 14.97

Telangana 42.6 46.3 46.9 47.2 47.2 47.6 48.0 49.45

North Coastal

Andhra

24.7 23.5 23.0 22.8 22.7 22.3 22.0 20.27

South Coastal

Andhra

20.1 18.6 18.5 18.6 18.6 18.6 18.6 20.38

Coastal

Andhra

44.8 42.1 41.5 41.3 41.3 40.9 40.6 40.66

Rayalaseema 12.6 11.6 11.6 11.5 11.5 11.5 11.4 9.89

Andhra

Pradesh

100 100 100 100 100 100 100 100


Growth rate of micro and small scale enterprises:

The cumulative and annual growth rates micro and small scale

enterprises in the selected regions of the State are presented in table-3.6.


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Table - 3. 6.

Growth rate of Micro and Small Scale Enterprises in A P:

Region wiseCAGR (%) during Annual Growth (%)

Region

1995 -00 2000 04 2004-0 9 2006 - 07 2007 - 08 2008- 09

2009-10

Hyderabad

Region7.1 2.0 3.2 2.5 5.1 5.1 43.70

Rest of

Telangana3.4 1.0 1.3 1.0 1.9 2.0 128.61

Telangana 5.4 1.6 2.4 1.9 3.8 3.8 61.91

North

Coastal

Andhra

2.7 0.7 1.1 1.0 1.3 1.9 196.61

South

Coastal

Andhra

2.1 1.1 2.0 2.2 2.9 2.7 139.5

Coastal

Andhra2.4 0.9 1.5 1.5 2.0 2.2 164.44

Rayalaseema 2.0 1.2 1.6 1.3 2.0 2.8 87.08

Andhra

Pradesh 3.7 1.2 1.9 1.7 2.9 3.1 95.41

Source:Computed from the collected data.

Taking the absolute values of the cumulative picture at the respective

periods, Compound Annual Growth Rates (CAGRs) have been worked out in

respect of the number of small scale enterprises in the selected State of the study.

The period 2000-04 recorded lowest growth rates, and recovery has been noticed

from 2004 to 2010 and recorded the fastest growth. Among the three regions,

Telangana region performance has been the highest and thus higher than the

State as a whole. Coastal Andhra and Rayalaseema have recorded lower

performance, though the broad trend is on similar lines. Hyderabad region of four


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districts has recorded the highest performance, even in the period of recession.

Further, it is also observed that the Rayalaseema region performance can be

considered moderate. The performance of North Coastal Andhra is lower

compared to that of South Coastal Andhra. It can be concluded from the

foregoing discussion that Coastal Andhra and Rayalaseema performance can be

considered lower compared to the State as a whole.

Fixed Investment in MSEs:

To analyze the performance of industrial development of any segment, its

fixed investment has to be known. The analysis of share of fixed investment in

micro and small scale enterprises regionwise is presented in table-3.7. The

data in table-3.7 revealed that the share of Telangana has all along been the

highest among the three regions, remaining in the 50.0 to 57.4 per cent range,

and steadily improving every year, with the best performance in 2008 to 2010.

This is corroborated by the highest performance in terms of share of Hyderabad

region, improving from 35 to 45 per cent of the State total. The share of the rest

of Telangana declined from 15.4 to 11.98 per cent largely due to the fast

growth of Hyderabad region. The share of Coastal Andhra has declined from

40 to 34 per cent over years, and that of Rayalaseema has also declined from 11

to 7.25 per cent. The figures speak of the fast growth of fixed investment in

Telangana region, propelled by the growth of districts around Hyderabad.


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Table - 3. 7.

Share of Fixed Investment in Micro Small Enterprises in A. P:

Regionwise (%)

Regions 1995 2000 2004 2006 2007 2008 2009 2010

Hyderabad

Region

34.5 35.1 36.5 36.6 36.8 41.0 43.8 44.82

Rest of

Telangana

15.2 15.4 14.7 14.7 14.7 14.2 13.6 11.98

Telangana 49.7 50.5 51.2 51.4 51.5 55.2 57.4 56.81

North Coastal

Andhra

24.3 21.7 20.5 20.0 19.6 18.5 17.6 19.81

South Coastal

Andhra

15.0 18.3 18.5 18.7 19.2 17.6 16.6 16.13

Coastal

Andhra

39.3 40.0 39.0 38.7 38.8 36.1 34.2 35.94

Rayalaseema 11.0 9.5 9.8 9.9 9.8 8.7 8.4 7.25

Andhra

Pradesh

100 100 100 100 100 100 100 100


Growth Rate of Fixed Investment: Regionwise analysis:

Taking the absolute values of the cumulative picture at the respective

periods, Compound Annual Growth Rates (CAGRs) have been worked out in

respect of fixed investment in micro and small scale enterprises in Andhra

Pradesh during the period of study. The annual and cumulative growth rate of

fixed investment in micro and small scale enterprises is shown in table-3.8.


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Table - 3. 8.

Growth Rate of Fixed Investment in Micro Small Enterprises in A P:

Region wiseCAGR (%) during Annual Growth (%)

Region

1995 - 2000 2000 04 2004 09 2006 - 07 2007 08 2008 - 09

2009-10

1 2 3 4 5 6 7 8

Hyderabad

Region16.2 7.9 23.1 18.7 50.6 41.9 104.45

Rest of

Telangana16.2 5.5 17.0 16.9 30.4 28.0 116.19

Telangana16.2 7.2 21.5 18.2 44.8 38.3 106.82

North

Coastal

Andhra

13.2 5.3 15.1 15.1 27.1 26.8 255.79

South

Coastal

Andhra

20.7 7.0 16.2 20.8 24.1 25.1 173.008

Coastal

Andhra16.3 6.1 15.6 17.9 25.6 26.0 213.17

Rayalaseema 12.8 7.4 15.2 16.2 20.7 28.3 134.63

Andhra

Pradesh15.9 6.8 18.7 17.9 35.0 33.0 137.90


It can be seen from data that the period 2000-04 has recorded the lowest

growth rates, and recovery has been noticed from 2004. The recent year 2009-

10 has recorded the highest growth rate compared to past years (1995-2009).

2000 04 has been a period of recession for the State as a whole, and for all

regions. Hyderabad region performed reasonably better compared to all other

regions even in the period of recession. Among the three regions, performance

of Telangana in fixed investment is outstanding, being higher than the State as


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a whole, contributed mainly by the high level of growth in Hyderabad region.

The rest of Telangana has performed better, compared to North Coastal

Andhra. Surprisingly, South Coastal Andhra performance is higher compared

to North Coastal Andhra. Rayalaseema performance can be rated as moderate.

The performance of Coastal Andhra and Rayalaseema has been lower

compared to the State picture. Among the three indicators selected for analysis,

fixed investment is a reliable indicator for industrialization, indicating the

nature of industrial activity.

Employment in Micro and Small Scale Enterprises:

The generation of employment opportunities is one of the slogans of

small scale industrial units in any nation and India is no exception. The analysis

on the employment in micro and small scale enterprises for the three regions

including subregions, and the State as a whole for the period ending March

1995- 2010 is shown in table-3.9.

It can be seen from the data that the share of Telangana has been all

along the highest being in the range of 46 to 49 per cent, with the exception of

1995. Coastal Andhra recorded 45 per cent compared to 42.4 per cent in

Telangana. The share of Telangana has increased faster over the years because

of faster growth, particularly in districts of Hyderabad region. Employment

share of the rest of Telangana districts has been in the range of 20 to 12 per

cent, declining over the years, with North and South Coastal Andhra also

recording declining trends. The North Coastal Andhra share in employment is

better, compared to that of South Coastal Andhra and the rest of Telangana, but


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showing slight decline over the years. The share of Hyderabad region has been

steadily improving from 22 to 37 per cent over the years. It can also be found

from the data that the shares of Coastal Andhra and Rayalaseema have declined

over years.

Table - 3. 9.

Share of Employment in Micro Small Enterprises in A. P:

Regionwise (%)

Region 1995 2000 2004 2006 2007 2008 2009 2010

Hyderabad

Region

22.4 25.7 26.8 27.2 27.5 28.8 30.1 36.78

Rest ofTelangana

20.0 20.2 19.9 19.8 19.6 19.2 18.7 11.94

Telangana 42.4 45.9 46.7 47.0 47.1 48.0 48.8 48.73

North Coastal

Andhra

23.6 22.5 21.9 21.7 21.6 21.1 20.7 23.71

South Coastal

Andhra

21.4 20.0 19.9 19.9 20.0 19.9 19.5 16.68

Coastal

Andhra

45.0 42.5 41.8 41.6 41.6 41.0 40.2 40.40

Rayalaseema 12.6 11.6 11.5 11.4 11.3 11.0 11.0 10.87

Andhra

Pradesh

100 100 100 100 100 100 100 100


Growth Rate of Employment in Micro and Small Scale Enterprises:

Regionwise analysis:

The cumulative and annual growth rates of employment in micro and

small scale enterprises in the selected regions of the state are shown in table-

3.10. As it is said one of the objectives of any welfare State is to provide

employment to the youth through which development can be achieved. Taking

the absolute values of the employment, compound and annual growth rates


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(CAGRs) have been worked out in respect of employment in micro and small

scale enterprises in Andhra Pradesh during the period of study.

Table - 3. 10.

Growth Rate of Employment in MSEs in Andhra Pradesh RegionwiseCAGR (%) during Annual Growth (%)

Region1995 -00 2000 04 2004 09 2006 - 07 2007 - 08 2008 - 09

2009-10

1 2 3 4 5 6 7 8

Hyderabad

Region6.7 3.0 6.0 4.0 10.7 11.0 25.47

Rest of

Telangana4.2 1.5 2.3 1.4 3.0 4.5 47.89

Telangana 5.5 2.3 4.5 2.9 7.5 8.4 30.32

North Coastal

Andhra2.9 1.1 2.4 2.2 3.6 4.4 177.66

South Coastal

Andhra2.5 1.8 3.1 3.3 5.0 4.0 125.02

Coastal

Andhra2.8 1.4 2.7 2.7 4.3 4.2 153.19

Rayalaseema 2.2 1.5 2.7 1.7 3.5 5.7 85.68

Andhra

Pradesh

3.9 1.8 3.6 2.7 5.7 6.4 68.91


It can be seen from the data in table-3.10 that the annual growth rate of

employment in micro and small scale enterprises is showing an increased trend

during the period of study. The period 200004 recorded the lowest growth

rates, and recovery has been noticed from 2004 in employment picture, on the

same lines as in the other two indicators. In recent years 2009-10 has recorded

the highest growth rate was recorded, compared to the previous years 1995-

2009. The position of Telangana region has been the most dominant in growth


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of employment during all the periods. Coastal Andhra and Rayalaseema

regions have shown lower performance compared to Telangana and also in

relation to the State total. South Coastal Andhra has shown better record over

North Coastal Andhra in respect of employment intensity of enterprises, with a

combination of labourintensive and capitalintensive enterprises operating in

various districts. The Telangana performance has been higher than the state as

a whole in all the years, propelled by the fastest growth in districts around

Hyderabad.

It is also found from the foregoing discussion that the CAGRs and

annual growth rates for all categories registered a positive trend in respect of

number of MSEs, fixed investment and employment during the period of study.

Special Economic Zones in Andhra Pradesh:

India formulated the Special Economic Zone (SEZ) Policy from the year

2000 for accelerating exports. The Special Economic Zone (SEZ) Act, 2005

along with SEZ Rules, 2006 became operational from February 10, 2006. The

number of SEZ approvals given by the Board of Approval of the Union

Department of Commerce of the Ministry of Commerce and Industry has

increased in leaps and bounds since then. The objectives of SEZs are

generation of additional economic activity, promotion of exports of goods and

services, attracting investment from domestic and foreign sources, developing

worldclass infrastructure facilities, and creation of employment opportunities.

Along with faster pace of industrialization with focus on export promotion, and


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attracting foreign technology, dispersal of economic activity across regions is

another objective.

Role of SEZs in Andhra Pradesh:

SEZs notified in the State are spread over 16 out of 23 districts in the

state. Out of them, four districts fall in Telangana region. These four districts

together account for 61.1 per cent as notified SEZs in the State. The dominance

of Telangana region in notified SEZs is thus evident. All these SEZs assist the

small scale units for financing and exporting their products.

INDUSTRIAL INCENTIVES

(i) Industrial Investment Promotion Policy 2005-10:

Government of Andhra Pradesh announced Industrial Investment

Promotion Policy 2005-10, in the year 2005-06, extending various incentives

for the small scale industries and tiny sector and large and medium scale

industries, other than those located in the municipal corporation areas of

Hyderabad, Vijayawada and Visakhapatnam. The objectives of the policy are

to provide quality infrastructureat the doorstep of the industry, facilitate the

industries meet the global quality standards and to support the industries for

acquiring the latest methods and technological advancements taking place all

over the world.The projects involving substantial expansion / diversification

of existing industries in the eligible lines of activities are also entitled for

benefits offered under the policy.

Following are the incentives offered by the government to promote the

small scale industrial units:


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15 per cent investment subsidy on fixed capital investment will be given

subject to a maximum of Rs.15.00 lakh.

100 per cent reimbursement of stamp duty and transfer duty paid by the

industry on purchase of land meant for industrial use.

100 per cent reimbursement of stamp duty for lease of land/shed/

buildings.

100 per cent reimbursement of stamp duty and transfer duty paid by the

industry on financial deeds and mortgages, etc.

25 per cent rebate on land cost limited to Rs.5.00 lakh in industrial

estates/industrial development areas developed by APIIC.

Power cost will be reimbursed @ Rs.0.75 per unit during the first year

of the policy and thereafter for the remaining four years, the rate of

reimbursement would be so regulated on yearly basis, keeping in view

the changes in the tariff structures to ensure that power cost to the

industry is pegged down to the first years level throughout available

period of the benefit. Benefit will be available for 5 years from the date

of commencement of commercial production.

25 per cent of the Value Added Tax paid during one financial year will

be ploughed back as a grant by the government towards the payment of

tax during next year. Benefit will be available for 5 years from the date

of commencement of production, i.e., up to 6th

year.


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3 per cent interest subsidy on Prime Lending Rate (PLR) will be given

on the term loan taken by new Tiny/SSI industrial units subject to a

maximum of Rs.5.00 lakh per year for a period of 5 years.

8 per cent subsidy on capital equipment for technology up-gradation.

50 per cent subsidy limited to Rs.1.00 lakh on the expenses incurred for

quality certification.

25 per cent subsidy on specific cleaner production measures limited to

Rs.5.00 Lakh.

50 per cent subsidy limited to Rs.5.00 lakh on the expenses incurred for

patent registration

(ii) Special Incentives to Women Entrepreneurs:

5 per cent Additional investment subsidy on fixed capital investment

limited to Rs.5 lakh to micro and small scale enterprises.

5 per cent of project cost will be provided as seed capital assistance to

micro and small scale enterprises as a grant for industries, which were

sanctioned seed capital assistance by prime lending institutions under

National Equity Fund Scheme limited to Rs.5.00 lakh.

A 5 per cent interest subsidy on Prime Lending Rate (PLR) will be

given on the term loan taken by new micro and small scale enterprises

subject to a maximum of Rs.5.00 lakh per year for a period of 5 years.


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(iii) Special Incentives to SC/ST Entrepreneurs:

35 per cent subsidy on fixed capital investment, additional 5 per cent

subsidy for SC/ST, Women and additional 5 per cent investment subsidy

for the units set-up in the scheduled areas by ST entrepreneurs and ST

women entrepreneurs. Maximum limit per unit is Rs.50.00 lakh.

100 per cent reimbursement of stamp duty and transfer duty on purchase

of land meant for industrial use.

100 per cent reimbursement of stamp duty for lease of land/shed/

buildings.

100 per cent reimbursement of stamp duty and transfer duty on financial

deeds and mortgages, etc.

33.33 per cent rebate on land cost in IEs/IDAs limited to Rs.5.00 lakh

40 per cent investment subsidy for the units set up in scheduled areas by

ST entrepreneurs or ST women entrepreneurs with a maximum limit per

unit is Rs.50.00 lakh.

Power cost will be reimbursed @ Rs.1.00 per unit for 5 years to all those

units which commence commercial production on or before 31-3-2010.

50 per cent of the VAT / CST reimbursement for 5 years to all those

units which commence commercial production on or before 31-3-2010.

5 per cent Interest subsidy on Prime Lending Rate (PLR) on the term

loan and working capital taken by the micro and small scale enterprises

subject to a maximum of Rs.5.00 lakh per year for a period of 5 years.


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5 per cent of project cost will be provided as seed capital assistance to

new MSEs as a grant under National Equity Fund scheme limited to

Rs.5.00 lakh.

For micro and small scale enterprises infrastructure, like roads, power

and water will be provided at door step for standalone units by

contributing 50 per cent of the cost of infrastructure from IIDF with a

ceiling of Rs.1.00 Crore.

50 per cent of the cost of infrastructure is raised to 75 per cent in respect

of units set up by ST entrepreneurs in scheduled areas.

8 per cent subsidy on capital equipment for technology up-gradation

limited to Rs.50.00 lakh (for MSEs)

50 per cent subsidy on the expenses incurred for quality certification

limited to Rs.1.00 Lakh.

25 per cent subsidy on cleaner production measures limited to Rs.5.00

Lakh

50 per cent subsidy on the expenses incurred for patent registration

limited to Rs.5.00 Lakh.

(iv) Pavala Vaddi Scheme:

Government has introduced a new interest subsidy scheme of Pavala

Vaddi to reduce the financial burden for setting-up of new micro and small

scale enterprises including food processing industries in the State. The scheme

shall be applicable to the term loan availed on fixed capital investment by the

eligible new micro and small scale enterprises on or after 1-4-2008. The new


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micro and small scale enterprises shall commence commercial production after

1-4-2008 and before 31-3-2010. The new micro and small scale enterprises

under IIPP-2005-10, availing term loan from scheduled commercial banks

recognized by Reserved Bank of India, APSFC and SIDBI only are eligible

under this scheme.

(i) The reimbursable interest on term loan is that portion which is in excess

of 3 per cent per annum, subject to a maximum reimbursement of 9 per

cent per annum.

(ii)

The interest amount paid by the new eligible micro and small scale

enterprises to the financial institutions/ banks on the term loan availed

will be reimbursed with a maximum limit of 9 per cent on half yearly

basis through the concerned financial institutions/ banks. Benefit will be

available for a period of 5 years from the date of commencement of

commercial production i.e., up to the first half of 6th year or till the

closure of the term loan account, whichever is earlier.

(iii)

This reimbursement to the unit shall not include penal interest, liquidated

damages etc. paid to the financial institutions / banks.

(iv)

The benefit shall be extended only to the eligible new units, which are

promptly and regularly repaying the loan installments of principal and

interest.

(v)

The loan accounts that are classified as over-due in the books of the bank

at the time of half yearly closing and those which are classified as non-

performing assets at year-end closing are not eligible for incentives.


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However, if they resume on-time repayments and regularize the arrears,

they are eligible for the incentive in the next half yearly period.

(vi)

The benefit shall be extended only to eligible new micro and small scale

enterprises set-up in the State except in the municipal corporation limits

of Visakhapatnam, Vijayawada and Hyderabad. However, units under

expansion/ diversification are not eligible for this benefit.

(vii)

The classification of enterprises as micro and small scale enterprises shall

be as per the MSMED Act, 2006.

(viii)

All the definitions and other guidelines not mentioned in the G.O. shall be

followed as per the operational guidelines of IIPP-2005-10 scheme.

(v) Bio-technology Park:

Government of Andhra Pradesh intends to provide high quality

infrastructure at a reasonable cost with integrated services to biotech

manufacturing units by setting-up a series of biotech parks throughout the

State. Shapoorji Pallonji Biotech Park is such a park set-up at Turkapalli

(Village), Shamirpet (Mandal), Ranga Reddy district in an area of 300 acres

with a private promoter. To cater to the needs of increasing demand for space,

an additional space of 1.2 million sq. ft. is being developed in Phase-II of the

park. There are 15 units in Phase-I and 15 units in Phase-II. This apart, APIIC

has taken up development of Biotech Park at Karakapatla (V), Mulugu (M) of

Medak district in an area of 609 acres, which is adjacent to Phase-I of SP

Biotech Park in Toopran (V). Out of the 609 acres of land, an exclusive extent

of 100 acres is earmarked and developed as biotech Special Economic Zone


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(SEZ). Government has constituted an Advisory Committee for Biotechnology

Park, which will advise the government on the infrastructure to be created,

types of units to be allotted site in the Park, etc.

(vi) Growth Centers:

Government of India has approved growth centers to provide best

infrastructure facilities available in the country in respect of power, water and

telecommunications. These growth centers could be magnets for attracting

industries in backward districts. The cost of each growth centre is Rs.30 crore.

The financing pattern of the growth centre is in the ratio of 2:1. The

Government of India have sanctioned 4 growth centers to the State, which are

being set-up at Bobbili in Vizianagaram district, Ongole in Prakasam district,

Hindupur in Ananthapur district and Jadcherla in Mahabubnagar district.

(vii) Critical Infrastructure Balancing Scheme (CIBS):

Government has introduced a new scheme called CIBS under which

funds will be made available to the Industrial Associations /Service Societies/

NGOs for the up-gradation of the infrastructural facilities such as water supply,

power supply, laying of roads, effluent treatment plants, etc., in the existing

IEs/ small scale industrial clusters identified under the small scale industrial

cluster development programs. The funds will be provided / reimbursed in the

ratio of 1:1 between government and IAS/Service Societies/NGOs. In some

cases, where the number of sick and closed units and vacant plots are more

than 50 per cent, APIIC will share 20 per cent of the estimated cost and the

service societies have to contribute only 30 per cent of the project cost.


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(viii) Integrated Infrastructural Development Centers (IIDC):

Integrated Infrastructural Development Centre (IIDC) is to facilitate the

setting-up of industries in rural/backward areas and to provide stronger linkage

between agriculture and industry. The cost of the centre will be financed by the

central government by way of grant and the balance as loan from SIDBI.

Government of India has sanctioned 6 IIDC centers in the State, which will be

developed by the APIIC Ltd.

EXPORT PROMOTION

The exports under computer software contributed more than 50 percent

of the total exports from the State during the year 2008-09. The other major

exports from the State are drugs and pharmaceuticals, fine chemicals, animal,

marine and leather products, engineering items, agriculture and agro-based

products, minerals and mineral products, handlooms, handicrafts, textiles, gems

and jeweler and imitation jeweler items, electronics and electrical items, etc.

The exports from the State increased to Rs.66,698 crore in the year 2008-09

from Rs.57,343 crore of the previous year 2007-08. The growth in exports

during the year 2008-09 is 16.31 per cent over the previous year.

Prime Minister Rozgar Yojana (PMRY):

The educated constitute nearly 40 per cent of the unemployed. Incidence

of unemployment amongthe educated labour force is 11.8 per cent against 3.8

per cent for educated and uneducated taken together. Further, the incidence is

much higher i.e., 26.7 per cent among women than 9.8 per cent among

educated men. Women constitute 27 per cent of the educated unemployed.


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Projection made using alternative techniques put the estimate of educated

unemployed at 6-7 million in 1992. This is out of an estimated educated labour

force of 52 million. Of the new employment opportunities that are being

generated in the economy in recent years, about 45 per cent are estimated to be

going to the educated. But, though relatively high, the employment growth of

the educated still falls short of the growth of labour force by about 7 lakh in a

year. The trend of a higher growth of their employment is likely to continue

with the introduction of modern technologies. There may in fact be a shift

towards employment of the educated in the activities which hitherto were the

preserve of the uneducated. Hence, the problem of the educated needs a special

focus within the overall strategy for tackling unemployment. Prime Ministers

Rozgar Yojana (PMRY) seeks to address itself to this problem.

The PMRY aimed to provide employment to more than a million persons

by setting-up of 7 lakh micro enterprises by the educated unemployed youth

during the last four years of 8thFive Year Plan i.e. 1993-94 to 1996-97. The

scheme continued in the 9thFive year plan. The scheme has been continuing in

the 10th

Five Year Plan. It relates to the setting-up of the self-employment

ventures in all economically viable projects (except direct agricultural

operations like raising of crops & purchase of manure, etc) The scheme also

seeks to associate reputed non-governmental organizations in implementation

of PMRY scheme especially in the selection, training of entrepreneurs and

preparation of project profiles.


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Involvement of Non-Governmental Organizations:

State/UT governments may involve reputed Non-Governmental

Organizations, Chamber of Commerce and Industry, Trade and Industry

Associations, etc, right from the identification, motivation and selection of

beneficiaries by nominating them in the task force, preparation of project

reports. They can also help the borrowers in proper management of the assets,

marketing of the products, repayment of loan installment, etc. Training of

beneficiaries is another area where they can play a very useful role. State/UT

governments should work out the methodologies to associate the reputed NGOs

in a manner which will bring the scheme to the doorstep of the potential

beneficiaries. Industry Associations should also be requested to urge their

members to adopt at least one unit and act as mentor.

State governments may provide necessary infrastructure support like

provision of industrial sites, shops, water on preferential basis to these

entrepreneurs. Provision of sites and sheds at concessional rates to service

ventures in urban areas will be essential for the success of service ventures.

Many governments are providing various tax concessions and incentives under

their Industrial policy. Such concessions should also be extended to the

beneficiaries under the scheme.


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Conclusion:

The foregoing discussion provides a brief survey of the development of

micro and small scale enterprises in Andhra Pradesh. It has sought the highest

growth and development of micro small scale enterprises during the last two

decades across the regions as well as state as a whole. These industrial units are

working with little variations in different regions with reference to number of

enterprises, investment and employment creation. The discussion also focused

on various industrial promotion and investment schemes in the State since 1956

to date.

***

growth and working of small scale industries

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