Entrepreneurial Managementskpodder.co.in/pdf/em5.pdfIDBI to deal exclusively with the credit...

Entrepreneurial Management

Prof. Suplab Podder E-mail: [email protected] 86

Unit - 5: Implementation of the Project and Sickness in SSIs

Learning Objectives

After reading this unit, you will understand about:

Financial assistance through SFC’s, SIDBI, Commercial Banks, KSIDC, KSSIC, IFCI

Non-financial assistance from DIC, SISI, EDI, SIDO, AWAKE, TCO, TECKSOK, KVIC

Financial incentives for SSI’s and Tax Concessions

Assistance for obtaining Raw Material, Machinery

Land and Building and Technical Assistance

Industrial Estates

Role of Industrial Estates

Types of Industrial Estates

Industrial Sickness

Meaning and definition of a sick industry

Causes of Industrial Sickness

Preventive and Remedial Measures for Sick Industries

Financial Assistance

Finance is one of the essential requirements of any enterprise. Before actually setting up their

units, small entrepreneurs need to know very clearly about the type and extent of their financial

requirements. Given the shortage or lack of entrepreneurs’ own funds/resources, the

Government of India as a part of its policy of promotion of small-scale sector in the country has

set up a host of institutions to meet the financial requirements of small entrepreneurs. The most

striking change in the Indian economy has been the initiation of industrial revolution through

sound policy measures and re-emergence of small scale industries over the year. Financial

institutions are playing a key role in providing finance and counseling to the entrepreneur to

start new ventures as well as modernize, diversify and even rehabilitate sick enterprises. Credit

facilities granted by commercial banks and state finance corporation are covered under the

credit guarantee scheme for small scale industries.

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State Financial Corporations (SFCS)

Origin

The State Financial Corporation Act was passed by the Parliament on September 28, 1951 under

which the State Financial Corporations (SFCs) could be set up. The authorized capital of a SFC

is fixed by State Government within the minimum and maximum limit of 15 lakhs and 5 crores

respectively.

Objectives of SFC’s

The various objectives of SFC’s are as follows:

i) To provide medium and long-term financial assistance to small industrial enterprises

particularly in circumstances when normal banking facilities not available.

ii) To assist for satisfying medium and long-term capital requirements.

iii) To underwrite the issue of shares, bonds and debentures of industrial concerns.

iv) To Subscribe to shares, bonds and debentures of industrial concerns.

v) To provide assistance to new as well as existing industrial concerns for the purpose of

establishment, modernization, renovation, expansion and diversification.

Functions of SFC’s

The SFC’s Provide the following types of assistance to industrial units in their respective

states:

1. The SFC’s while giving loans to industrial units see to it that loans are secured by Mortgage

of movable and immovable property or other tangible assets or guarantee by the state

government or scheduled commercial bank.

2. Grant loans or advances to industrial concern repayable within a period not exceeding 20

years.

3. Providing guarantee for loans raised by industrial units from commercial banks and state

cooperative banks.

4. Providing guarantee for deferred payments in cases where industrial units have purchased

capital goods on a deferred payment basis.

5. Guarantee loans raised by industrial concerns which is repayable within a period not

exceeding 20 years and which are floated in the public market.




6. SFC’s grant loans to industrial units for the purchase of fixed capital assets like land,

machinery. In some exceptional cases, some SFC’s also provide loans for working capital

requirements in combination with loans for fixed capital.

7. SFC’s provide loans in foreign currency for the import of machinery and technical know –

how, under the IDA (International development association) and World Bank tie up.

8. SFC’s however are prohibited from subscribing directly to the shares or stock of any

company having limited liability except for underwriting purposes and granting any loans or

advance on the security of its own shares.

Small Industries Development Bank of India (SIDBI)

Origin

The industrial Policy Statement 1977 recommended the setting up of a separate wing under the

IDBI to deal exclusively with the credit requirements of the small-scale sector. In line with this

decision, the Small Industries Development Bank of India Act, 1989 was enacted under which

the SIDBI was set up in 1991.

Objectives of SIDBI

a) To promote marketing of products of small scale sector.

b) To upgrade technology and also undertaking modernization of small scale units.

c) To provide more financial assistance to small scale ancillary and tiny sector.

d) To encourage employment oriented industries.

e) To coordinate all the other institutions involved in the promotion of small scale

industries.

Functions of SIDBI

Coordinating and financing the various institutions involved in the development of small

industries are undertaken by SIDBI.

Refinance to SSI: Refinancing loans and advances provided by commercial banks to small

scale industrial units. Different types of loans are given to small scale industries and as per the

recommendations of Nayak Committee, additional funds have been given to commercial banks




for promoting more borrowings of small scale industries. In fact, there are commercial banks

with separate branches meant exclusively for small scale industries.

Discounting the bills of SSIs: Apart from discounting the bills of small scale industries, even

hurdles arising out of financing small scale industries are being discounted. The bank credit has

gone up to Rs. 2,18,219 crores. The percentage of bank credit to SSI has gone up to 17.5.

SIDBI offers assistance to exports: Direct assistance to export oriented units and also to

import substituting units in the small scale sector is given the highest priority. There has been a

simplified procedure for the exports of small scale industries.

Seed capital and also soft loan Assistance: Seed capital is provided for starting of SSI units.

Under this, the initial expenditure in starting the small scale units are being met by SIDBI.

Factoring, Leasing and HP finance: In factoring services, SIDBI finances 80% of the bills to

the seller and after obtaining the remaining 20% balance, it repays to the seller and for this

service it obtains a factoring commission.

Assistance to other financial institutions: In every State, State Finance Corporations have

been promoted for financing small scale industries. They are under the control of respective

state governments. At the national level, a separate corporation is promoted for financing small

scale industries called National Small Scale Industries Corporation

Automatic finance scheme: Refinance facilities under automatic finance scheme is also

provided which was initially for Rs. 50 lakhs. Now with the increase in the capital limit of small

scale industries, this finance scheme has also increased its limit to Rs. 2 crores.

Modernization: The technology development which has taken place in various industries has

also spread to small scale industries and to meet the requirements of technology upgradation, a

separate fund has been set up by SIDBI, through which it provides Technology upgradation

equipment finance.




State Industrial Development Corporations (SIDC’s)

Small Industries Development Corporation (SIDC) was set up in 1971. The prime function of

SIDC was to identify potential growth centers in various parts of India. The State Industrial

Development Corporations act as catalyst for the promotion and development of medium and

large enterprises in their respective states.

Objectives of State Industrial Development Corporations

The various objectives of State Industrial Development Corporations are as follows:

The main objective of SIDC is to stimulate the growth of industries in the small scale sector

a) To provide infrastructure facilities like roads, drainage, electricity, water supply, etc is

one of the primary objectives of SIDC.

b) To promote industrial estates which will provide industrial sheds of different sizes with

all basic infrastructure facilities.

c) To provide technical assistance through training facilities to the entrepreneurs.

d) To promote skilled labor through the setting up of industrial training institutes.

Functions of State Industrial Development Corporations

The various functions of State Industrial Development Corporations are as follows:

1. State Industrial Development Corporations provide the financial assistance to the state

level organizations to develop the organizational activities.

2. They are involved in developing industrial infrastructure like industrial estates, industrial

parks and setting up industrial projects either on their own or in the joint sector in collaboration

with private entrepreneurs or as wholly owned subsidiaries.

3. SIDCs exist in all the States and have developed industrial infrastructure facilities to

enable prospective entrepreneurs to set up their industries in the states.

4. These corporations render technical assistance to the entrepreneurs in the formulation of

the project reports and also provide common facilities in the industrial estates.

5. These corporations provide loans and advances to the industrial units in the medium and

large sectors to the maximum of Rs. 400 lakhs.

6. State Industrial Development Corporations ensures the interest rate ranges between

13.5% to 17% depend upon the size of the loan.




Commercial Banks

Commercial bank refers to a bank that lends money and provides transactional, savings and

money market accounts and that accepts time deposit. A commercial bank is a type of financial

institution and intermediary. Commercial banks engage for providing documentary and standby

letter of credit, guarantees, performance bonds, securities underwriting commitments and other

forms of off balance sheet exposures.

Definitions of Commercial Bank

According to Crowther, “A Commercial Bank is an institution which collects money from those

who have it to spare or who are saving it out of their income and lends this money out to those

who require it.

Objectives of Commercial Bank

1. To increase of authorized capital, raising size of own capital.

2. Expansion of activity of the Bank by obtaining a License providing right to carry out

transactions in foreign currencies and further entry into the deposit insurance system.

3. Constant expansion of customer base with a priority on attracting small and micro-businesses.

4. Formation of a diversified and sustainable resource base.

5. Commencement and active development of cooperation with financial institutions and

mortgage systems.

6. To increase in capitalization of the Bank.

7. To introduce the international standards of banking operations.

8. To improve the risk management system.

Functions of Commercial Banks

i) Capital formation: Banks facilitate capital formation by promoting savings.

ii) Innovation: Bank credit enables the enterprises to innovate and invest and thus uplift

economic activity.

iii) Monetary policy: A well-developed banking system is required to promote economic

development by controlling a period of inflation and deflation.




iv) Credit creation: Credit creation enables the expansion of business and mitigation of

unemployment and raises production.

v) Encouragement of trade and industry: Banking system encourages trade and industry by

providing long-term loans to traders and industrialists at low rates.

vi) Promotion of habit of thrift: Banks encourage savings habit by accepting, deposits and

giving interests on it.

vii) Volume of production: Production volume can be increased by expansion of credit by

banks. Banks expand credit during the process of credit creation.

Karnataka State Industrial & Infrastructure Development Corporation

(KSIIDC)

Established in 1964, Karnataka State Industrial & Infrastructure Development Corporation

Limited has been greatly instrumental in the industrialization of the State, especially in the large

and medium sector.

Objectives of KSIIDC

The main objectives of KSSIDC are as follows:

i) To provide a package of services to SSI units in the State, include establishment and

maintenance of industrial estates all over the State.

ii) To provide a package of services to SSI units in the State, include establishment and

maintenance of Industrial Estates all over the State.

iii) To provide basic infrastructure facilities to small scale industries in the State, construction

and allotment of sheds/plots to SSI units.

iv) To provide financial assistance to the industrial estates located in Karnataka, procurement

and distribution of raw materials to SSI units.

v) To provide technical information and support, and also participation in the SSI development

schemes of the Govt. of Karnataka.

Functions of KSIIDC

i) Identification of lands suitable for establishment of Gems & Jewellary Parks, Apparel

Parks, Comprehensive Industrial Estates, and Housing establishment for industrial workers.




ii) Establishment of functional industrial estates throughout the State.

iii) To set up permanent industrial exhibition and convention centers in and around

Bangalore.

iv) Marketing vacant properties throughout the State of Karnataka.

v) Identification of ideal locations and suitable lands for establishing projects of the

Corporation.

vi) Preparation of Project reports for the various projects.

vii) Negotiations with Banks/Financial Institutions for arranging finance and for completion

of the projects of the Corporation.

viii) Negotiations with statutory and other agencies for implementation of the projects.

Karnataka State Small Industries Development Corporation Ltd. (KSSIDC)

KSSIDC is a small company set up by the Government of Karnataka for development of small-

scale industries in the State. The Corporation is registered under the Companies Act, 1956 and

came into being on 21st April, 1960.

Objectives of KSSIDC

Initially Corporation started with the following main objectives:

i) To establish and manage the industrial estates.

ii) To procure and distribute raw material.

iii) To disseminate information by participating in the internal and international exhibitions.

iv) To assist towards marketing.

v) To supply machinery under hire-purchase scheme.

vi) To promote exports.

Functions of KSSIDC

a) KSSIDC Land is for Industrial Purpose. So no need to waste time for N.A./NOC.SSIDC

establishes its estates after verifying the viability and Water, Power, Linkages,

Communication, disposal of waste the entrepreneur gets a really developed and planned

area.




b) KSSIDC estates are provided with required amenities like Training institute, P&T office,

dispensary, police chowky, community garden banks canteen etc.,

c) All titles related to land/building within KSSIDC estates are free from any

encumbrances and are easily transferable.

d) An entrepreneur can start the industry by collecting necessary possession certificate and

by paying necessary EMD.

e) KSSIDC provides ready to occupy sheds for immediate starting of industries and also

provide Gowdown for storage of its materials.

f) KSSIDC being a Government Organisation is, transparent and of the prices of

land/building. The prices so fixed are accepted by Financial Institutions for quick

approval of loans.

g) KSSIDC estates, provides a unique opportunity to entrepreneur cluster benefits related

to Raw material, market technology services, linkages etc.,

h) Any upgradation programme undertaken in KSSIDC estate will be advantage to all

industries located therein.

i) KSSIDC provides special services in acquiring and allotting land to SSI entrepreneurs.

j) KSSIDC allots land on top priority basis to start industry by SC/ST/SEDC applicants,

further to needy SC & ST units of Backward areas will be paid subsidy amount and also

reduced payment of EMD / application / scrutiny fee.

k) KSSIDC divisional offices established in the state will have raw-material depots to

distribute raw materials to SSI units.

l) KSSIDC estate provides ISI testing units to help SSI units to process quality products.

Industrial Finance Corporation of India Ltd. (IFCI)

It was established in the year 1948 with the objective of providing medium and long term credit

to industrial concerns in India. IFCI has been converted into a public limited company under the

Companies Act, 1956.

Objectives of Industrial Finance Corporation of India

1. To guarantee loans raised by industrial concerns;

2. To grant loans and advances to or subscribe to the debentures of industrial concerns;




3. To underwrite the issue of stocks, shares, bonds or debentures by industrial concerns;

4. To extend guarantee in respect of deferred payments by importers;

5. To subscribe directly to the stock or shares of any industrial concern.

Functions of IFCI

The corporation performs functions like:

1. It extends financial assistance to the industrial sector through rupee and foreign currency

loan.

2. It guarantees loans raised by the industrial concerns from the schedule bank.

3. Underwriting of shares and debentures issue.

4. Financial services for procurement of equipment suppliers credit, equipment leasing and hire

purchase.

5. Interest subsidy scheme for women entrepreneurs.

6. Marketing assistance to SSI’s

7. Modernization of tiny and small scale units

8. Management Development Institute (MDI) for management training and development.

Industrial Development Bank of India (IDBI)

The Industrial Development Bank of India (IDBI) was established on 1 July 1964 under an Act

of Parliament as a wholly owned subsidiary of the Reserve Bank of India.

Objectives of Industrial Development Bank of India

The main objectives of IDBI are to serve as the apex institution for term finance for industry in

India. Its objectives include:

i) To grant loans to any industrial concern.

ii) To guarantee deferred payment due from any industrial concern.

iii) To guarantee loans raised by industrial concerns in the market or from institutions.

iv) To provide consultancy and merchant banking services in or outside India.

v) To provide technical, legal, marketing and administrative assistance to any industrial

concern or person for promotion, management or expansion of any industry.

vi) To act as trustee for the holders of debentures or other securities.




Function of Industrial Development Bank of India

The IDBI has been established to perform the following functions:

i) Co-ordination, regulation and supervision of the working of other financial institutions

such as IFCI, ICICI, UTI, LIC, Commercial Banks and SFCs.

ii) Supplementing the resources of other financial institutions and thereby widening the

scope of their assistance.

iii) Planning, promotion and development of key industries and diversifications of industrial

growth.

iv) Devising and enforcing a system of industrial growth that conforms to national priorities.

v) It grants loans and advances to IFCI, SFCs or any other financial institution by way of

refinancing of loans granted by such institutions which are repayable within 25 year?

vi) It grants loans and advances to scheduled banks or state co-operative banks by way of

refinancing of loans granted by such institutions which are repayable in 15 years.

vii) It contributes loans and advances to IFCI, SFCs, other institutions, scheduled banks, state

co-operative banks by way of refinancing of loans granted by such institution to industrial

concerns for exports.

viii) It ensures discount or rediscount bills of industrial concerns.

ix) It underwrites or to subscribes to shares or debentures of industrial concerns.

x) It subscribes to or purchase stock, shares, bonds and debentures of other financial

institutions.

Non Financial Assistance

District Industries Centre (DICS)

This programme was started on May 8, 1978 with a view to provide integrated administrative

framework at the district level for promotion of small-scale industries in rural areas.

Objective of District Industries Centres

The basic purpose of these DIC’s is to generate more employment opportunities for rural

people. It was intended to make the Centre as a central location for-

1. To grant financial and other facilities to small units.




2. To develop close links with development blocks and specialized institutions providing help to

set up industries in rural areas.

3. To identify and helping new entrepreneurs

Functions of DICs

The DICs role is mainly promotional and developmental. To attain this, they have to

perform the following main functions:

i) It conducts industrial potential surveys keeping in view the availability of resources in terms

of material and human skill, infrastructure, demand for product etc. to prepare techno-economic

surveys and identify product lines and then to provide investment advice to entrepreneurs.

ii) It prepares an action plan to effectively implement the schemes identified.

iii) It guides entrepreneurs in matters relating to selecting the most appropriate machinery and

equipment, sources of its supply and procedure for procuring imported machinery, if needed,

assessing requirements for raw materials etc.

iv) It appraises the worthiness of the various proposals received from entrepreneurs.

v) It assists the entrepreneurs in marketing their products and assesses the possibilities of

ancillarization and export promotion of their products.

vi) It undertakes product development work appropriate to small industries.

Small Industries Service Institutes (SISI)

These are set up to provide consultancy and training to small entrepreneurs – both existing and

prospective. The activities of SISIs are coordinated by the industrial management training

division of the DCSSI’s office. There are 28 SISIs and 30 branch SISIs set up in the state capital

and other places all over the country.

The main objectives of SISIs include:

• To serve as an interface between central and state governments

• To render technical support services

• To conduct entrepreneurship development programmes

• To initiate promotional programmes




Functions of SISIs

The SISIs also render assistance in the following areas:

• Economic consultancy/information/EDP consultancy

• Trade and market information.

• Project profiles

• State industrial potential survey

• District industrial potential surveys

• Modernisation and in plant studies

• Workshop facilities

• Training in various trade/activities

Entrepreneurship Development Institute (EDI)

Entrepreneurship Development Institute of India (EDI), an autonomous and not-for-profit

institute, set up in 1983, is sponsored by the IDBI Bank Ltd., IFCI Ltd., ICICI Bank Ltd. and

State Bank of India (SBI).

Objectives of EDI

i) To create a multiplier effect on opportunities for self-employment.

ii) To augment the supply of competent entrepreneurs through training.

iii) To augment the supply of entrepreneur trainer-motivators.

iv) To participate in institution building efforts.

v) To promote micro enterprises at rural level.

vi) To develop and disseminating new knowledge and insights in entrepreneurial theory and

practice through research.

vii) To facilities corporate excellence through creating entrepreneurs.

Small Industries Development Organization (SIDO)

This is a subordinate office of the department of SSI and ARI. It is an apex body and nodal

agency for formulating, coordinating and monitoring the policies and programmes for

promotion and development of small-scale industries. Development Commissioner is the head

of SIDO. He is assisted by various directors and advisers in evolving and implementing various




programmes of training and management consultancy, industrial investigation, possibilities for

development of different types of small-scale industries, development of industrial estates etc.

Objectives of SIDO

a. To evolve a national policy for the development of small-scale industries,

b. To co-ordinate the policies and programmes of various State Governments,

c. To maintain a proper liaison with the related Central Ministries, Planning Commission, State

Governments, Financial Institutions etc., and

d. To co-ordinate the programmes for the development of industrial estates.

Functions of SIDO

(i) To reserve items for production by small-scale industries,

(ii) To collect data on consumer items imported and then, encourage the setting of industrial

units to produce these items by giving coordinated assistance,

(iii) To render required support for the development of ancillary units and

(iv) To encourage small scale industries to actively participate in government stores purchase

programme by giving them necessary guidance, market advice and assistance.

(v) To make provision of technical services for improving technical process, production

planning, selecting appropriate machinery, preparing factory lay-out and design,

(vi) To provide consultancy and training services to strengthen the competitive ability of

small-scale industries,

(vii) To render marketing assistance to small-scale industries to effectively sell their products

and

(viii) To provide assistance in economic investigation and information to small-scale

industries.

Association of Women Entrepreneurs of Karnataka (AWAKE)

AWAKE is a not-for profit, Non-Governmental Organization, established in 1983, with the

mission of 'Empowering Women through Entrepreneurship for Economic Development’. It is an

ISO 9001-2008 accredited organization, totally devoted to Entrepreneurship Development

among women both in rural and urban areas of India.




AWAKE has a unique approach of ‘Entrepreneur guiding Entrepreneur’ through voluntary

efforts of successful women entrepreneurs by counseling, training, business incubation,

mentoring and peer group support. AWAKE is a registered society and exempt from Income

Tax under Sections 12A and 80G of the Income Tax Act, India. AWAKE is a recognized body

in the Policy Advocacy forums of Government of Karnataka and Government of India.

AWAKE is a proud recipient of both National and International awards.

AWAKE strives to promote entrepreneurship among women as a means to achieve self reliance

and socio-economic independence. AWAKE provides support and guidance to aspiring women

from rural, urban, national and international arenas to be successful entrepreneurs, irrespective

of their age, academic, social, economic background. AWAKE’s services are extended to

women Self Help Groups (SHGs), NGOs and other development agencies engaged in Income

Generation Activities and Entrepreneurship Development. AWAKE’s process in

entrepreneurship development involves awareness programs, business counseling, trainings,

skill development, mentoring, business incubation, information sharing and networking,

marketing assistance, credit referral and policy advocacy. The organization comprises of women

entrepreneurs from various sectors as its members. Members of AWAKE contribute their time

and expertise to support women entrepreneurs, based on the approach ‘Entrepreneur guiding

Entrepreneur’. AWAKE has built up a strong support network with Government, non-

government, corporate, developmental agencies, funding and finance agencies, working with

them to provide the expertise in entrepreneurship development for both rural and urban women.

AWAKE collaborates as a resource organization in institutional competence building, training,

policy making and enabling technology transfers for state, national and international agencies.

AWAKE fosters an entrepreneurial culture in women such that their contribution to the global

economy is recognized.

Technical Consultancy Organisation (TCO)

Technical Consultancy Organisations (TCOs) were created for facilitating technical consultancy

for industrial projects. These organisations were established by the All India Financial

Institutions (IDBI, ICICI, IFCI, etc) in collaboration the state level financial/development

organisations and commercial banks. There are in all 18 state-level TCOs across India. Over the

years, the TCOs have transformed from being consultancy firm handling project reports, market




surveys etc. to multi-functional, multi-disciplinary organisations offering a wide range of

services to the industrial and infrastructure sector. Some TCOs such as KITCO have diversified

to offer consultancy services for implementation of projects under one roof from “Concept to

Commissioning”. TECSOK has been considered by the Government of Karnataka, Government

of India, State & Central Financial Institutions, Commercial Banks, Asian Development Bank

and a host of other institutions of the Government and Private as the recognized consultancy

agency.

Functions of TCO

Some of the functions of TCOs can be summed up as below:

i) Development of Industry Clusters.

ii) Conducting Industry Potential Surveys /Techno-Economic Viability (TEV) studies.

iii) Infrastructure Planning.

iv) Energy and Environment Research and Management.

v) NPA Resolution.

vi) Vocational Training.

vii) Technology Facilitation / Preparation of Project Profiles.

viii) Conducting Entrepreneurship Development Programs.

ix) Carrying out Market Research for specific products.

x) Offering Merchant Banking Services.

TECKSOK (Technical Consultancy Services Organization of Karnataka

(KARNATAKA, INDIA)

It was established in the year 1976 by the Government of Karnataka. The primary objective of

founding TECSOK was to provide reliable consultancy support for entrepreneurs to start up self

employment ventures in Karnataka, India.

Functions of the TECKSOK

The functions of the TECKSOK include:

i) Location Specific identification of investment opportunities.

ii) Assistance in obtaining statutory and procedural clearances.




iii) Feasibility studies and environment impact studies.

iv) Preparation of detailed project reports as per investment norms and financial norms..

v) Market survey and research.

vi) Project implementation and turnkey assistance.

vii) Reorganization and restructuring of enterprises.

viii) Valuation of assets, man power planning and budgetary control system.

ix) Energy management and audit, corporate plan, technology transfer.

x) Diagnostic studies and rehabilitation of sick industries.

xi) Designing and organizing training programmes.

xii) Since its inception, TECSOK has catalyzed a large number of industries throughout the

province.

Khadi and Village Industries Commission (KVIC)

The development of Khadi and village industries provides opportunity to reduce rural

unemployment and underemployment. With this end in view, the khadi and village industries

commission was established in April 1957, under the Khadi and village industries commission

Act-1956, The Khadi programe was thus closely linked with struggle for freedom.

Functions of KVIC

(i) To promote the sale and marketing of khadi products.

(ii) Encourage and promote research in the production techniques and provide facilities for

the study of problems relating to each.

(iii) KVIC was entrusted with the task of providing fund assistance.

(iv) It takes steps to ensure genuineness of the products and set-up standards of quality and

ensure that the products confirm to the standards.

(v) It also undertakes directly or through other agencies studies concerning the problems of

khadi and village industries.

(vi) KVIC is authorized to establish and maintain separate organizations for the purpose of

carrying out any or all of the above matters besides carrying out any other matters incidental to

its activities.




National Small Industries Corporation Limited (NSIC)

The National Small Industries Corporation Ltd (NSIC) an enterprise under the union ministry of

industries, was set up in 1955 to promote, aid and foster the growth of small scale industries in

the country. NSIC provides a wide range of services, predominantly promotional in character to

small scale industries.

Functions of NSIC

Its main functions are:

1. To provide machinery on hire-purchase scheme to small scale industries.

2. To provide equipment leasing facility.

3. To help in export marketing of the products of small scale industries.

4. To participate in bulk purchase programme of the Government.

5. To develop prototype of machines and equipments to pass on to small scale industries for

commercial production.

6. To distribute basic raw material among small scale industries through raw material

depots.

7. To help in development and upgradation of technology and implementation of

modernization programmes of small scale industries.

8. To impart training in various industrial trades.

9. To set up small scale industries in other developing countries on turn-key basis.

10. To undertake the construction of industrial estates.

Incentives in Karnataka

Incentives are the financial and promotional assistance provided by the government to the

industries for boosting up industrial development in all regions, which is given particularly to

backward areas for industrial development.

These are provided mainly to achieve the following:

(i) To spread industrial development in all regions uniformly.

(ii) To encourage tiny, small scale entrepreneurs to start industries.

(iii) To encourage export-oriented units to get foreign exchange.

(iv) To spread industrial entrepreneurship in all areas.




Tax Concessions Given To SSI

The concession is for 5 years from the commencement of production. New industry undertaking

in SSI are exempted from the payment of Income Tax under 80J of the act on their profit up to

6% per annum of the capital employed.

The following are the tax concessions given to SSI:

• Concessional finance

• Central investment subsidy

• Tax holding for power sector

• Machinery on hire-purchase from NSI

• Transport cost subsidies

Taxation Benefits

Industrial development may however be stimulated by means of a reduction in the normally

applicable tax liability in the form of either and exemption from income-tax on the amount

invested or a concession in the tax rate. In the present context of rapid economic development

particularly in the rural hinterland, taxation benefits must be biased in relation to the need for

increasing, investment in small scale and ancillary industries and discouraging speculative

investments in unproductive activities. At the same time there is a need for increasing the

productivity of the various factors of production utilized in the industrial advancement of the

country.

Taxation benefits relate to:

a. Income tax

b. Excise duty

c. Sales tax

d. Electricity duty

e. Octroi




Assistance for Obtaining Raw Material, Machinery, Land and Building and

Technical Assistance

Assistance for obtaining raw materials

Every registered small unit, on obtaining the registration certificate is required to submit all the

requirements to the Directorate of Industries (DoI) for procuring essential raw materials. Many

organizations are also lending a helping hand in this regard such as NSIC and others.

Supply of plant and machinery on hire-purchase basis

There are organizations like National Small Industries Corporation (NSIC) or State level Small

Industries Corporations who give financial assistance to purchase plant and machinery to the

entrepreneurs on their own or on hire-purchase basis. They also provide 100% finance to

facilitate SSIs in diversification and technology upgradation. Entrepreneurs can also avail tax

rebate on full year rentals.

Technical Assistance

The Technical assistance and guidance are provided by various organisations such as NSIC,

through TTC, SIDO, through Small Industries Service Institutes and Extension Centres. These

institutes are manned by experts in different fields/ trades/industries. These experts visit these

industries, study their problems on the spot and give technical assistance and guidance.

Assistance for obtaining Land and Building

Financial assistance for land, land development, cost of construction of buildings, Interior

decoration, swimming pool, club house etc. thereon and purchase of plant and machinery such

as lifts, air conditioning plant, fire fighting equipments, electrification, etc.

1. The applicant/promoter(s) should have experience in construction line in last 5 years period

and also should have successfully completed at least two projects of minimum built up area of

1000 m2 each in the period.




2. Concerns setting up construction projects who have acquired land complying with the norms

of the Corporation and should have obtained all the requisite and valid approvals for setting up

the project of minimum built-up area of 1000 m2

3. The repayment history & past dealings of the promoters/unit /sister concerns/group concerns

with the Corporation/Banks/FIs should have been satisfactory and the loan account classified as

standard for past two consecutive years with bank/financial institution in case of

takeover/repayment of loans.

4. The applicant should have a clear marketable title of the land and be agreeable to mortgage

its immovable property as prime security and hypothecate its moveable assets with first charge

to the Corporation or on parri-passu basis in case of consortium finance.

Industrial Estates

United Nations has defined an industrial estate as “a planned clustering of enterprises, offering

standard factory building created in advance of demand and variety of services and facilities to

the occupants.

According to P.C. Alexander, an industrial estate is “a group of factors, constructed on an

economic scale in suitable sites with facilities of water, transport, electricity, bank, post-office,

steam watch and ward and first aid and provided with special arrangements for technical

guidance and common service facilities.

Objectives of Industrial Estates

1. To provide infrastructure and accommodation facilities to the entrepreneurs;

2. To encourage the development of small-scale industries in the country;

3. To decentralize industries to the rural and backward areas;

4. To encourage ancillarization in surrounding major industrial units;

5. To develop entrepreneurship by creating a congenial climate to run the industries in these

estates/areas/townships etc.




Role of Industrial Estates

1. It is a tract of land sub divided and developed into factory plots or sheds.

2. It provides several common facilities or infrastructural amenities.

3. It is a planned clustering of industrial units

4. It is designed as a tool of industrialization and balanced regional development.

5. It may be developed in Urban, semi-urban or rural areas.

6. It may be large, medium or small

7. It may be by government or by co-operative societies or by private agencies.

Types of Industrial Estates

Industrial estates can be classified on the following basis:

I. On the basis of functions

a) General type industrial estates: These are also called as conventional or composite

industrial estates. These provide accommodation to a wide variety and range of industrial

concerns. The Indian industrial estates are mainly of this type.

b) Special type industrial estates: These types of industrial estates are constructed for

specific industrial units, which are vertically or horizontally interdependent.

II. On the basis of variants

a) Ancillary Industrial Estates: In these only those small-scale units are housed which are

ancillary to a particular large industry.

b) Functional Industrial Estates: Industrial units manufacturing the same product are usually

housed in these industrial estates. These industrial estates also serve as a base for expansion of

small units into larger units.

c) Workshop-bay: Such types of industrial estates are constructed mainly for very small

firms engaged in repair work.

Advantages of Industrial Estates

1) Economies of scale arise because all the industrial units enjoy common infrastructural

facilities. As the size of industrial estate increases, the cost of estate development and

administration per unit of each facility declines.




2) In an industrial estate several industrial units are clustered together. They become

interrelated and interdependent. This enables them to enjoy the benefits of agglomeration and

external economies. These external economies include access to better transportation facility,

availability of hired labour regular supply of power and water, availability of raw materials etc.

3) Industrial estates bear no risk as there is no capital investment and provision of common

facilities and services.

4) An individual entrepreneur is relieved of the trouble of searching for suitable space.

5) Industrial estates reduce risk and increase profitability to internal and external economies.

This induces new entrepreneurs to set-up industrial units.

6) Industrial estates promote the spirit of cooperation and joint efforts.

7) By developing estates in backward regions, the government can ensure the balanced

industrialization of different parts of the country. This will also lead to decentralization of

industries.

Industrial Estates in India

One of the major handicaps faced by small-scale industries in India has been either lack or

insufficient infrastructure facilities. In order to provide small-scale units the readymade

buildings/factory sheds at subsidized rates, infrastructure facilities and the proximity of other

industrial units, the idea of establishing industrial estates was first adopted in India by the

Small-Scale Industries Board (SSIB) at its board meeting in January 1955. As a result, the first

industrial estate in India was set up at Rajkot in Gujarat in September 1955.

The reasons held responsible for poor performance of industrial units working inside the

industrial estates were lack of:

• Essential infrastructure facilities such as roads, power and water.

• Common facilities such as a tool room, heat treatment or testing

• Realistic survey prior to the establishment of the estate.

• A clear idea about the relevance of products to the area.




Meaning of a Sick Industry

Sick Industry is one that had existed for at least five years and had incurred accumulated losses

equal to or exceeding its entire net worth at the end of any financial year.

Definitions of a Sick Industry

According to RBI, “An Industry is considered sick when there is erosion in the net worth due

to accumulated losses to the extent of 50% of its net worth during the previous accounting year

and in the condition of removing the commercial production for at least two years”.

Meaning of Industrial Sickness

Industrial Sickness is the experience characterized by loss of production and employment of

industries. The industrial sickness took place in all industrial groups such as cotton, jute,

engineering, chemicals, rubber, paper, electrical equipments and sugar.

Causes of Industrial Sickness

1. External causes

Recession in the Market: Sometimes recession hits the whole industry as a result of which

individual units are unable to sell their products. The availability of credit is also restricted

during such times which jeopardize the production activities of such units. Hence, the work of

these units comes to a standstill.

Decline in Market Demand for the product: A product may reach a stage of maturity and

ultimately a stage of decline. This happens when new better products invade the market and

make the old product redundant.

Excessive competition in the Market: Excessive competition in the market will justify the

survival of only the fittest firm. The high cost units over time will become weak and fall sick.

Erratic supply of Inputs: Erratic and insufficient supply of inputs like raw-materials, power,

skilled manpower, finance, credit and transport at reasonable prices could cause disturbance in

the production schedule and ultimately result in sickness of the firm.

Government Policy: Excessive govt., control and restrictions on capacity utilisation, location,

product mix, product quality, prices, distribution etc. come in the way of smooth functioning of




the firms and often result in sickness of the firm. Further, frequent changes in government

policy relating to industrial licensing, import, exports, taxation, credit can make healthy units

sick overnight.

Unforeseen circumstances: Natural calamities such as droughts, floods earthquakes, accidents

and wars etc. may turn some units sick and enviable.

2. Internal Causes

Faulty planning: At the planning stage itself, weak foundations may be laid, which may

ultimately result in downfall of the unit.

Incompetent Entrepreneurs: Many persons starting new business lack technical knowledge of

the product they want to manufacture. It is the normal case with small scale entrepreneurs. They

sometimes plough into production activity, without bothering to find out the marketing potential

of their product or sometimes they start production without properly calculating the ultimate

cost. Poor maintenance of plant and machinery, constant technical problems with maintenance

of production volume, quality, time schedule and cost limits may ultimately spell doom for the

firm.

Problems relating to Management: Since Production, marketing, finance, etc. are in the hands

of management, any wrong decision by them in regard to these fields may ultimately ruin a

firm. The management may lack business acumen to make demand projections, to push the

product in the market, to build up market image and customer loyalty, to face competition and

so on.

Improper level and use of working capital can also ruin the firm: Similarly, poor industrial

relations, lack of human resources planning, faulty wage and promotional policies can cause

problems for the existence of the firm. So, incompetent management is the most important

reason behind industrial sickness.

Financial problems: These problems are generally faced by small units. Often the financial

base of the small units is very weak. They generally borrow from their own known sources or

banks, rather than approaching market. Generally, they are unable to meet their debt obligations

in time and these debts accumulate. Banks normally do not help at this stage when symptoms

begin to show the problem and sickness becomes chronic.

Labor unrest: Labor unrest for a long period may ultimately spell doom for the firm.




Preventive and Remedial Measures for Sick Industries

1. Steps taken by Bank

a) Giving adequate working capital when there is a shortage.

b) Recovery of interest reduced rate.

c) Defining the special cell in the RBI.

2. Special consideration by Government

a) Giving high facilities to large industry who take over the small sector for revival.

b) High liberalizations in terms of financial rather than intervention.

c) Introduce the scheme for sick industry.

3. B.I.F.R (Board for Industrial & Financial Reconstruction)

a) Deciding on the winding up of the company.

b) Having a scheme prepared through the operating agency in respect of the company.

Important Questions

Section-A

1. What is project assistance?

2. Give the meaning of financial assistance.

3. Expand SFC and SIDBI.

4. What is meant by commercial bank?

5. Expand SIDBI and NSIC.

6. Expand KSIIDC, KSFC, IFCI, NABARD, TCO, KVIC.

7. What are Non-financial assistances?

8. Expand FLO AWAKE and SEWA.

9. State the name of non-financial institutions?

10. State any two financial incentives for SSI.

11. What is tax holding?

12. What is Tax concession?

13. What is the tax concession given to SSI?

14. What is Tax Holiday?

15. What is the technical assistance?

16. Define industrial estate.




Section-B

1. State the name of institution offering financial assistance.

2. Write a note on different financial institutions connected with small industry.

3. Discuss the objectives of State Financial Corporation’s (SFC’s).

4. What are the objectives of (SIDBI) Small Industries Development Bank of India?

5. Discuss the role of SIDBI in promoting small industries in India.

6. Discuss the objectives of KSIIDC.

7. Briefly explain the role of KSIDC in the up-liftment of small scale industries.

8. Write a note on IFCI.

9. Write a note on District Industries Centre.

10. Write a note on Small Scale Services Institute.

11. Write note on (i) AWAKE, (ii) KVIC

12. Mention the tax holiday benefit available to SSI.

13. Write a note on Technical Consultant Organizations.

14. Explain the objectives or role of industrial estates.

15. Explain the types of industrial estates.

Section-C

1. What are the various financial institutions which provide finance to entrepreneurs?

2. Discuss the various function of commercial bank.

3. Explain the different institutions providing non financial assistance to SSIs.

4. Discuss the various financial incentives of SSI’s.

5. What are the various tax concessions given to small scale units?


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