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 Comprehensive policy package for
Small Scale Industries and Tiny Sector
(Announced on 30th and 31st August, 2000)
1.0 Introduction
1.1 The Small Scale Industry Sector has emerged as India's engine
of growth in the New Millennium. By the end of March 2000, the
SSI sector accounted for nearly 40 per cent of gross value of output
in the manufacturing sector and 35 per cent of total exports from
the country. Through over 32 lakh units, the sector provided
employment to about 18 million people.
1.2 The on going programme of Economic Reforms based upon
the principle of liberalisation, globalisation and privatisation and
the changes at the international economic scene including the
emergence of World Trade Organisation (WTO), have brought certain
schallenges and several new opportunities before the SSI Sector. The
most important challenge faced by the sector is that of
growing competition both globally and domestically. At the sametime
sector has also been facing some problems which relate to
credit, infrastructure, technology, marketing, delayed payment hassels
on account of so many rules and regulations etc. In order to enable
this sector to avail the opportunities and play its role as an engine
of growth, it is essential to address to these problems effectively
and urgently.
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1.3 With a view to provide more focused attention on the
development of SSI, the Government of India created a new Ministry of
Small Scale Industries & Agro and Rural Industries in October
1999. Immediately after the formation of the Ministry, a Mission for
the Millennium giving a blue print for small scale and village
industries was announced. To carve out a road map for this sector in the
New Millennium, the Hon'ble Prime Minister constituted a Group
of Ministers under the Chairmanship of Shri L.K. Advani the
Home Minister of India in June 2000. The background material for
the consideration of the Group of Ministers was provided by the
Interim Report of the S.P. Gupta Study Team constituted by the
Planning Commission.
1.4 The Group of Ministers considered the recommendations and
came out with a Comprehensive Policy Package for the Small Scale
and Tiny Sector which was announced by the Hon'ble Prime
Minister Shri Atal Bihari Vajpayee at first ever National Conference on
the Small Scale Industries organised by the Ministry of SSI & ARI
at Vigyan Bhavan, New Delhi on 30th August 2000.
(Copy of Speech at Annexure-I). A copy of Speech of the Hon'ble Minister of
State (Independent Charge) SSI & ARI, Smt. Vasundhara Raje on
the occasion of National Conference on Small Scale Industries is
placed at Annexure-II. While some components of the policy package
were announced by the Hon'ble Prime Minister on 30th August 2000,
some others including the Tiny Sector Policy Package were
announced by the Ministry of SSI& ARI on 31st August 2000 in the meeting
of the SSI Board.
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SMALL SCALE SECTOR
2.0 Policy Support
2.1 The investment limit for the Tiny Sector will continue to be Rs.
25 lakhs. (Annexure-III)
2.2 The investment limit for the SSI sector will continue to be at Rs.
1 crore. (Annexure-IV)
2.3 The Ministry of SSI & ARI will bring out a specific list of
hi-tech and export oriented industries which would require the
investment limit to be raised upto Rs. 5 crores to admit of suitable
technology upgradation and to enable them to maintain their competitive edge.
2.4 The Limited Partnership Act will be drafted quickly and got
enacted. Attempt will be made to bring the Bill before the next session of
the Parliament.
3.0 Fiscal Support
3.1 To improve the competitiveness of Small Scale Sector,
the exemption for excise duty limit raised from Rs. 50 lakhs to Rs.
1 crore. (Annexure-V)
4.0 Credit Support
4.1 The composite loans limit raised from Rs. 10 lakhs to Rs.25
lakhs. (Annexure-VI)
4.2 The Small Scale Service and Business (Industry Related)
Enterprises (SSSBEs) with a maximum investment of Rs. 10 lakhs will
qualify for priority lending. (Annexure-VII)
4.3 In the National Equity Fund Scheme, the project cost limit will
be raised from Rs. 25 lakhs to Rs. 50 lakhs. The soft loan limit will
be retained at 25 per cent of the project cost subject to a maximum
of Rs. 10 lakhs per project. Assistance under the NEF will be
provided at a service charge of 5 per cent per annum.
(Annexure-VIII)
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4.4 The eligibility limit for coverage under the recently
launched (August 2000) Credit Guarantee Scheme has been revised to
Rs.25 lakhs from the present limit of Rs. 10 lakhs.
(Annexure-IX)
4.5 The Department of Economic Affairs will appoint a Task Force
to suggest revitalisation/restructuring of the State
Finance Corporations. (Annexure-X)
4.6 The Nayak Committee's recommendations regarding
provision of 20 per cent of the projected turnover as working capital
is being recommended to the financial institutions and
banks. (Annexure-XI)
5.0 Infrastructural Support
5.1 The Integrated Infrastructure Development (IID) Scheme
will progressively cover all areas in the country with 50 per
cent reservation for rural areas. (Annexure-XII)
5.2 Regarding upgrading the Industrial Estates, which are
languishing, the Ministry of SSI & ARI will draw up a detailed scheme for
the consideration of the Planning Commission.
5.3 A Plan Scheme for Cluster Development will be drawn up.
5.4 The funds available under the non-lapsable pool for the
North-East will be used for Industrial Infrastructure Development, setting
up of incubation centres, for Cluster Development and for setting
up of IIDs in the North-East including Sikkim. (Annexure-XIII)
6.0 Technological Support and Quality Improvement
6.1 Capital Subsidy of 12 per cent for investment in technology in
select sectors. An interministerial Committee of Experts will be set up
to define the scope of technology upgradation and sectorial
priorities. (Annexure-XIV)
6.2 To encourage Total Quality Management, the Scheme of
granting Rs.75,000/- to each unit for opting ISO-9000 Certification
will continue for the next six years i.e. till the end of the 10th
plan. (Annexure-XV)
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6.3 Setting up of incubation Centres in Sunrise Industries will
be supported. (Annexure-XVI)6.4 The TBSE set up by SIDBI will be strengthened so that it
functions effectively as a Technology Bank. It will be properly networked
with NSIC, SIDO (SENET Programme) and APCTT.
6.5 SIDO, SIDBI and NSIC will jointly prepare a Compendium
of available technologies for the R&D institutions in India and
abroad and circulate it among the industry associations for
the dissemination of the latest technology related information.
6.6 Commercial Banks are being requested to develop Schemes
to encourage investment in technology upgradation and harmonise
the same with SIDBI.
6.7 One time Capital Grant of 50% will be given to Small Scale
Associations which wish to develop and operate Testing Laboratories, provided
they are of international standard. (Annexure-XVII)
7.0 Marketing Support
7.1 SIDO will have a Market Development Assistance
(MDA) Programme, similar to one obtaining in the Ministry of
Commerce & Industry. It will be a Plan Scheme.
7.2 The Vendor Development Programme, Buyer-Seller Meets
and Exhibitions will take place more often and at dispersed locations.
8.0 Streamlining Inspections/Rules and Regulations
8.1 To minimise harassment to Small Scale Sector a Group will be set
up to recommend within 3 months, means of streamlining
inspections. This will include repeal of laws and regulations applicable to
the sector that have since become redundant. (Annexure-XVIII)
8.2 Self-certification will be progressively encouraged in lieu
of inspections, which should be prescribed under the three
following conditions:
l On receipt of specific complaint;
l Selection of unit for sample check (Say 10 per cent of total
units); and
l For audit and safety purposes.
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9.0 Entrepreneurship Development
9.1 Capacity building in the SSI sector, both for entrepreneurs as
well as workers, will be given top priority. The Ministry of SSI &
ARI and Ministry of Labour will work out the strategy jointly.
10.0 Facilitating Prompt Payment
10.1 The Reserve Bank of India is being requested to appoint a Task
Force to go into the question of strengthening and popularising
factoring services, without recourse to the SSI suppliers. The Task Force
shall give its report within six months of its constitution.
10.2 RBI is being requested to take up with the banks, the question
of sub-allocating overall limits to the large borrowers specifically
for meeting the payment obligations in respect of purchases from
the SSIs, either on case basis or on bills basis.
(Annexure-XIX)
11.0 Rehabilitation of sick units
11.1 RBI is being requested to draw up revised guidelines for
the rehabilitation of currently sick but potentially viable SSI units.
Such guidelines should be detailed, transparent and
non-discretionary. (Annexure-XX)
12.0 Promoting Rural Industries
12.1 To support the Handloom Sector "Deendayal Hathkarga
Protsahan Yojna" has been announced. The scheme has a total
financial implication of Rs. 447 crores and will provide
comprehensive financial and infrastructural support to weavers.
12.2 The Government is working out new comprehensive package
to strengthen Khadi and Village Industries that will further
upgrade the skills of Khadi Workers. (Annexure-XXI)
13.0 Improving Data Base
13.1 A fresh Census of Small Scale Industries will be conducted
covering inter-alia, the incidence of sickness and its causes.
(Annexure-XXII)
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TINY SECTOR
14.0 Policy Support
14.1 The investment limit for the tiny sector will continue to be Rs.
25 lakhs.
14.2 Under the Prime Minister's Rozgar Yojna, which finances
setting up of micro enterprises and generates employment for the
educated unemployed, the family income eligibility limit of Rs.
24,000 perannum being revised to Rs. 40,000 per annum.
(Annexure-XXIII)
15.0 Credit Support
15.1 The Nayak Committee's recommendations regarding provision
of 20 per cent of the projected turnover as working capital is
being recommended to the Financial Institutions and Banks. In respect
of Tiny units also 20 per cent of the projected annual turnover
would qualify for working capital loan.
15.2 The National Small Industries Corporation will continue to
give composite loans upto Rs. 25 lakhs to the Tiny Sector and
continue to charge one per cent concessional interest rate.
15.3 SIDBI will continue to give concessional rate of refinance to
the tiny sector which is now at 10.5 per cent as compared to 12 per
cent for the SSI sector. This policy will continue.
15.4 In the National Equity Fund Scheme, the project cost limit will
be raised from Rs. 25 lakhs to Rs. 50 lakhs. The soft loan limit will
be retained at 25 per cent of the project cost subject to a maximum
of Rs. 10 lakhs per project. Assistance under the NEF will be
provided at a service charge of 5 per cent per annum. Under the
National Equity Fund Scheme, 30 per cent of the investment will be
earmarked for the Tiny Sector.
16.0 Infrastructure Support
16.1 The Integrated Infrastructure Development (IID) Scheme
will progressively cover all areas in the country with 50 per cent
reservation for rural areas. Under this Scheme, 50 per cent of
the plots will be earmarked for the tiny sector (as against 40 per
cent done earlier). (Annexure-VII)
16.2 Under the National Programme for Rural Industrialisation,
cluster development is being taken up by KVIC, SIDO, SIDBI
and NABARD. The major beneficiaries of Cluster
Development Programme will be Tiny Sector Units. The sponsoring
organisation for each cluster will provide for design development,
capacity building, technology intervention and consortium marketing.
A Cluster Development Fund will be created under the Plan.
17.0 Technological Support
17.1 Under the Scheme of Capital Subsidy of 12 per cent for
investment in technology upgradation in select sectors, preference will be
given to the Tiny Sector.
18.0 Marketing Support
18.1 Preference will be given to the Tiny Sector while organising
Buyer-Seller Meets, Vendor Development Programmes and Exhibitions.
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