small-scale enterprises author: alpana trehan chapter-7 © 2011, dreamtech press :: chapter 7 1

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SMALL-SCALE ENTERPRISES

AUTHOR: ALPANA TREHAN

CHAPTER-7

© 2011, Dreamtech Press :: Chapter 7

An SSE can be defined as a privately owned and operated business unit that is composed of a small number of employees and has relatively low turnover.

Small enterprises are those in which the management lies in the hands of one or two people who are responsible for the major decisions. --- P. Neck (1977)

DEFINE SMALL-SCALE ENTERPRISES

© 2011, Dreamtech Press :: Chapter 7 2

Small-Scale Industrial Undertaking An industrial undertaking in which the investment in fixed

assets, such as plant and machinery (whether held on ownership terms, on lease, or by hire-purchase) does not exceed ` 1 crore.

Ancillary Industrial Undertaking An industrial undertaking that deals with the production of

spare parts, components, sub-assemblies, and tooling, or the rendering of services.

Micro or Tiny Enterprise An enterprise in which investment limit in plant and

machinery is ` 25 lakhs irrespective of location of the unit.

ENTERPRISES INCLUDED IN SMALL-SCALE SECTOR


Enterprises

Investment in Plant and Machinery in Manufacturing Sector

Investment in Equipment in Service Sector

Micro Enterprises

Does not exceed ` 25 lakhs

Does not exceed ` 10 lakhs

Small Enterprises

More than ` 25 lakhs, but does not exceed ` 5 crores

More than ` 10 lakhs, but does not exceed ` 2 crores

Medium Enterprises

More than ` 5 crores, but does not exceed ` 10 crores

More than ` 2 crores, but does not exceed ` 5 cores

DISTINCTION AMONG MICRO, SMALL AND MEDIUM ENTERPRISES


Labor Intensive SSEs provide employment opportunities to individuals in urban and

rural areas, which, in turn, enhances the economic position of the country.

Flexibility SSEs adapt themselves as per the dynamic industrial environment.

Innovative SSEs use new and innovative materials, methods of production,

markets, sources of materials, and even new forms of organizations, such as sole proprietorship, partnership, and co-operatives.

Decentralization SSEs facilitate a balanced growth of the economy as a whole due to

dispersal of industries. Outlet of Entrepreneurial Spirit

The enthusiasm, perseverance, and creativity of an individual, who establishes the enterprise.

CHARACTERISTICS OF SMALL SCALE ENTERPRISES


Utilization of Domestic Technology

Tapping of Savings

Better Utilization of Local Resources

Poverty Alleviation

Higher Productivity

Complement to Large Industries

Employment Generation

Contribution to Decentralization

Export Contribution

Regional Balance and Rural Development

ROLE OF SSES IN THE DEVELOPMENT OF AN ECONOMY


There is an experienced note-worthy growth of the SSEs after independence.

They have played significant role in economic development, employment generation, and growth in export.

SSEs in India are of the following two types: Traditional

Includes khadi, village industries, handlooms, handicrafts, sericulture, and coir industries

Modern Includes textile products, wood, furniture, paper and printing,

metal products, chemicals, rubber and plastic products, electrical machinery, and transport equipment

SMALL-SCALE ENTERPRISES IN INDIAN ENVIRONMENT


Political Factors

Economic Factors

Technological Factors

Socio-Cultural Factors

FACTORS INFLUENCING THE SMALL-SCALE ENTERPRISES


Providing tax concessions to SSEs to promote investment in the small-scale sector

Granting relief to small-scale entrepreneurs in terms of repayment of loans

De-licensing the small-scale sector substantially Increasing technological facilities Facilitating adequate fl ow of credit Improving infrastructure facilities and promoting

marketing of products Improving access to latest information by automating the

government departments meant for supporting the small-scale sector

Initiating various services, such as advisory and mentoring services, technology business incubators, and supplier rating accreditation services

INDUSTRIAL POLICIES RELATED TO SMALL-SCALE ENTERPRISES


It include plans or schemes meant for the progress of SSEs by the government.

Mahalanobis was the fi rst strategy formulated by the government for the promotion of SSEs and was evolved during the 2ndFive Year Plan.

The strategy envisaged that small-scale sector would have to bear the responsibility of fulfi lling the growing needs of consumer goods in the economy.

STRATEGIES RELATED TO SMALL-SCALE ENTERPRISES


According to the third census on SSI: 1,05,21,190 units of small-scale enterprises in India 44 lakhs SSEs 61 lakhs SSSBEs Several entrepreneurship development programs have

started by Indian government Crucial factors for rural entrepreneurship development

programs: Communication technology Knowledge management Science and business education Accessibility to information

ENTREPRENEURIAL SUCCESS IN RURAL INDIA


1

• Providing proper infrastructure and related services to enable the establishment of enterprises

2• Imparting entrepreneurial training

3• Providing support and resources to

entrepreneurs

STEPS FOR ESTABLISHING ENTREPRENEURIAL SYSTEM


1•Financial assistance

2•Technical assistance

3•Marketing assistance

ASSISTANCE FOR SMALL-SCALE ENTERPRISES


An SSE cannot exist without the proper arrangement of financing.

The success of SSEs in developing countries, such as India, is laid by several financing programs by the government.

The government through financing programs provides finance to SSEs at less interest rates as compared to prevalent commercial rates.

The Prime Minister’s RozgarYojna is a scheme introduced by the government to encourage the youths of the country to involve in entrepreneurial activity.

FINANCIAL ASSISTANCE


SSEs lack in accessing technology due to poor consultancy support/services for technological information.

Some of the centers established by the government are as follows: National Small Industries Corporation Limited (NSIC) Software Technology Parks (STPs)

TECHNICAL ASSISTANCE


The small-scale sector is characterized by the absence of strong brand presence in the market and unorganized marketing network.

Some of the schemes implemented by the government are as follows: Government Purchase and Price Preference Policy Market Development Assistance (MDA) Scheme Vendor Development Programs (VDPs)

MARKETING ASSISTANCE


One which fails to generate internal surplus on a continuing basis, and depends for its survival on frequent infusion of external funds. --- State Bank of India

A unit may be defined as sick, if it had incurred cash loss for one year and, in the judgment of the bank, is likely to continue to incur cash losses for the current year as well as the following year and which has an imbalance in its financial structure, such as current ratio of less than 1:1 and worsening debt equity ratio. --- Reserve Bank of India (1976)

SICKNESS IN SMALL-SCALE ENTERPRISES


Lack of Management ExpertiseResistance to Apply Basic Management PrinciplesLack of Working Capital Improper Cash Management Inadequate Planning and ControllingLack of Marketing ExpertiseLack of Technical Expertise Improper Assessment of Viability of ProjectsChanges in Government Policy

REASONS FOR SICKNESS IN SMALL-SCALE ENTERPRISES


RBI GuidelinesMonitoring ProgramsGovernment PolicyRehabilitation of Sick UnitsRescheduling/Rephasement of Loans/AdvancesDebt Reconstruction Scheme (DRS)Kapur CommitteeBureau of Industrial and Financial Reconstruction

(BIFR)Negotiated Settlement Scheme

ACTIONS TAKEN BY THE GOVERNMENT TO PREVENT

SICKNESS


Owner

Production

Assistant

Multiplication

Processing Storage

Marketing Assistant

Promotion Distribution Sales

ORGANIZATIONAL STRUCTURE OF A SMALL-SCALE ENTERPRISE


Marketing assistance and export promotion scheme Participation in the International Exhibitions/ Fairs Training Programmes on Packaging for Exports Market Development Assistance Scheme for MSME

exporters (MSME-MDA) National Award for Quality Products

Packaging for exports Technical & managerial consultancy servicesNational awards for quality products

EXPORT PROMOTION MEASURES BY GOVERNMENT OF INDIA


Trade Fair Authority of India Indian Institute of Foreign Trade (IIFT)Export Credit Guarantee Corporation (ECGC)Export houses

INSTITUTIONAL SETUP FOR EXPORT PROMOTION


The small-scale sector strives to make effi cient utilization of capital, land, and labor to produce goods and services.

The small-scale sector contributes around 40% to the total exports of the country; therefore, accounts for an important segment of the Indian economy.

The Indian government has recognized the contributions of the small-scale sector in the socio-economic development of the country.

The government has set the target of annual growth of 12% and creation of 4.4 million additional jobs in the small-scale sector.

RECAP


small-scale enterprises author: alpana trehan chapter-7 © 2011, dreamtech press :: chapter 7 1

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