Entrepreneurial Support System,Entrepreneurial Motivation & Barriers

Entrepreneurial Support System

1. Entrepreneurial Support System 1

2. Learning Objectives (LO): To understand the concept of Micro, Small and Medium Enterprises & their available Export Promotion facilities; To discuss policy & development of the small scale industries in India; To explain concession and Incentive facilities available for small business enterprises; To know the different financial support schemes; To understand the role of DIC (District Industries Centre) 2

3. Micro, Small and Medium Enterprises Development Act 2006. Concessions and Incentives, Financial support schemes, DIC (District Industries Centre’s role and functions), Policies regarding SSI sector, Export Promotion facilities for SMEs and Global Vision for Entrepreneur. 3

4.  Enterprises have been classified broadly into: Enterprises engaged in the Manufacture / production of Goods pertaining to any industry; & Enterprises engaged in providing / Rendering of services. 4

5.  Manufacturing enterprises have been defined in terms of investment in plant and machinery (excluding land & buildings) and further classified into :  Micro Enterprises - investment up to Rs.25 lakh.  Ser vice enterprises have been defined in terms of their investment in equipment (excluding land & buildings) and further classified into: -  Micro Enterprises – investment up to Rs.10 lakh. 5

6.  Manufacturing enterprises  Small Enterprises - investment above Rs.25 lakh & up to Rs. 5 crore  Service enterprises  Small Enterprises – investment above Rs.10 lakh & up to Rs.2 crore. 6

7.  Manufacturing enterprises  Medium Enterprises - investment above Rs. 5 crore & up to Rs.10 crore.  Service enterprises  Medium Enterprises – investment above Rs. 2 crore & up to Rs. 5 crore 7

8. 8

9. As per Ministry of small scale industries notification dated 5th October, 2006 , the investment in Plant & Machinery to in respective limits is the original price , irrespective of whether the plant & machinery are new or second hand. In respect of imported machinery, the following is to be included in calculating the value: Import duty (excluding miscellaneous expenses such as Transportation from the port to the site of the factory); Shipping charges; Customs clearance charges and Sales tax or value added tax. 9

10.  As per the said notification, further, the following are excluded while calculating the investment in plant & machinery: Equipments such as tools, jigs, dies, moulds and spare parts of maintenance and the cost of consumable stores; Installation expenditure for plant & machinery; Research & development equipment and pollution control equipment ; Power generation set and extra transformer installed by the enterprise as per the regulations of the state electricity board; 10

11.  The following are excluded while calculating the investment in plant & machinery: Installation of cables, wiring, bus bars, electrical control panels (not mounted on individual machines), oil circuit breakers or miniature circuit breakers which are necessarily to be used for providing electrical power to the plant & machinery or for safety measures; Gas producer plants ; Fire fighting equipment ; 11

12.  The following are excluded while calculating the investment in plant & machinery: Cha r ges paid f or techn i cal kn o w - h o w for a s s e m b l y of pl a nt & machinery and Such storage tanks which store raw materials and finished products only and are not linked with the manufacturing process. Bank charges and service charges paid to the national small industries corporation of the state small industries corporation; 12

13. SMEs have strategic importance for each national economy due a wide range of reasons such as 13 Simpler way to create new job positions , Increasing GDP and Rising standard of population Therefore government are supporting entrepreneurship and encouraging and supporting people who dare to start their own business. Every surviving and successful business means new jobs and growth of GDP.

14.  Therefore, Council of Ministers and entity governments provide full coordination of activities through numerous governmental institutions (like chambers of commerce, employment bureaus , etc.) and NGOs dealing with entrepreneurship and SMEs. 14

15.  Governments create different types of support institutions: T o pr o v i de i nfo r m a tio n o n r eg u l a tio n s, s tan d ar d s, t ax a tio n , c u st o m s d u ties, marketing issues; To advise on business planning, marketing and accountancy, quality control and assurance; To create incubator units providing the space and infrastructure for business beginners and innovative companies, and helping them to solve technological problems, and to search for know-how and promote innovation; and To help in looking for partners. In order to stimulate entrepreneurship and improve the business environment for small enterprises. 15

16.  Training, 16 Marketing Assistance, Promotional Schemes, Concession on Excise Duty and Credit Facility to MSME Credit to micro, small and medium scale sector has been covered under priority sector lending by banks. Small Industries Development Bank of India (SIDBI) has been established as the apex institution for financing the MSME. Loans upto Rs. 5 lakhs are made available by the banks without insisting on security/guarantee. Further Credit Guarantee Fund for micro, small and medium enterprises has been set up to provide guarantee for loans to MSME up to Rs. 25 lakhs extended by Commercial Banks and some Regional Rural Bank.

17. All the State Governments provide technical and other support services to small units through their Directorates of Industries , and District Industries Centers . The details of the scheme vary from state to state, the following are the common areas of support. Development and management of industrial estates Suspension/deferment of Sales Tax Power subsidies Capital investment subsidies for new units set up in a particular district Seed Capital/Margin Money Assistance Scheme Priority in allotment of power connection, water connection. Consultancy and technical support 17

18. Government of India runs a scheme for giving National Awards to micro, small and medium scale entrepreneurs providing quality products in 11 selected industry groups of consumer interest. The winners are given trophy, certificate and a cash price of Rs. 25000/- each . Through framing and implementing suitable policies and promotional schemes, government play supportive role in developing entrepreneurs. 18

19. Have a place of pride in India because they have potential among other for Generating employment, Dispersal of manpower to semi-urban & rural areas, and Earning foreign exchange etc. SSI even would absorb semi or un skilled persons Growth or gestation period of SSI is very short as compare to large scale, Large units mostly concentrated in metropolitan cities as a result people migrate in large nos. from village to cities which creates social, environmental & personal problems. Whereas SSI are mostly established in small towns & villages to satisfy the local demand. 19

20. Government for the first time announced a separate small scale industries (SSIs) policy in August 1991. This policy promises to meet 100% credit demand of small & tiny industries. The policy Highlights are – The Small Industries Development Organization (SIDO) has been recognized as the nodal agency to support the SSIs export promotion. An export development center would be set up in SIDO to serve the SSIs through its network of field officers to further augment export activities of the sector. A Technological Development Cell (TDC) will be set up in SIDO which could provide technology inputs to improve quality & competitiveness of products of SSI sector. 20

21. The policy Highlights are – The Scheme for the Handloom sector which contributed 30% of the total textile production in the country would be redesigned keeping in view the local & regional needs. It would be the policy of government to promote handloom to sustain employment in rural areas & to improve quality of life for handloom weavers. The National Small Industries Corporation (NSIC) would concentrate on marketing of mass consumption items under common brand name & organizational links between NSIC & SSIDCs would be established. The scope of the national equity fund scheme will be widened to cover projects up to Rs. 10 lakhs for Equity Support (up to 15%) 21

22. The policy Highlights are – 22 7) The Single Window Loan Scheme has also been enlarged to cover projects up to Rs. 20 lakhs with working capital margin up to Rs. 10 lakhs. SSIs can have equity support to the extent of 24 % of the investment from the medium & large scale industries, public undertakings, NRIs or foreign investment. Limited partnership act was proposed to be introduced. To avoid delayed payments by the large units, factoring services through SIDBI was proposed. Some of the title of important schemes are – Soft Loan Schemes, Seed Capital Assistance, Risk Capital Assistance, Concessional Schemes,etc.

23. Source: http://dcmsme.gov.in 23

24. MSMED act was established to provide for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises . The previous act i.e. Industrial Development Regulation Act ( IDRA) was restricted only to SSI. However, during last 60 years of independence, the norms for the promotions and development have changed and the requirement to motivate the higher and different versions of SSI is felt . The MSMED Act not only addresses these issues but it also takes care of Micro, Small and Medium Scale enterprises (“ MSM enterprises”) . 24

25. The Act is operational from October 2,2006. The MSMED Act was framed with the following objects: T o f a c ilit a te the p r om o tion and d e v elo p men t o f mic r o , small and medium scale enterprises (MSM enterprises); To enhance the competitiveness of MSM enterprises; To concentrate on the related matters of MSM enterprises; 25

26. Schemes implemented directly by the Ministry of MSME Schemes implemented through NSIC Schemes implemented through KVIC (Khadi & Village Industries Commissions) http://www.kvic.org.in Schemes implemented through Coir Board http://coirboard.gov.in Schemes implemented by the Office of the DC(MSME) 26

27.  Any person who intends to establish Micro, Small & Medium enterprise engaged either in manufacturing of products or providing or rendering of services shall file 27 Part-I . Once Enterprise starts the production or starts providing or rendering services then they shall file Part-II of the Entrepreneur Memorandum. Validity of Entrepreneur’s Memorandum (Part-I) is two years. No Renewal shall be granted.  Existing enterprise shall file Part-II of Entrepreneurs Memorandum.

28.  E n t r e p r e n e u r s h al l h a v e t o inf o r m the Dist rict Indus t ries Cen t r e (DIC) in writing within three months of the change 28 In case of change in investment in Plant & Machinery or in equipments , the enterprises, which have already filed Entrepreneurs Memorandum In case of change of products & that of services or addition in product or services , the enterprises which have already filed Entrepreneurs Memorandum  Failure to do so is contravention of law and is punishable as specified in section 27 of MSMED Act.

29. would normally get registered to avail some benefits like – 29 Incentives or support given either by the Central or State Govt. Marketing assistance Technology Training Assistance Arrange exhibitions Domestic exhibitions International exhibitions Space available on lease

30. S r . No . Benefits available under the act Whether available to Micro ente r p r i s es Whether available to Small ente r p r i s es Whether available to Medium ente r p r i s es 1. Protection against delayed payments by buyers of goods/services Yes (see Note 1 below) Yes (see Note 1 below) No 2. Central Governments' measures for promotion and development [Sec 9 of the act] Yes Yes Yes 3. RBI’s progressive credit policies for ensuring timely and smooth flow of credit [Sec 10 of the act] Yes Yes Yes (see Note 4 below) 4. Reservation of items for manufacture and production u/s 29B of the 1951 Act Yes (see Note 2 below) Yes (see Note 2 below) No 30 Note 1: This benefit shall be available only if the micro/small enterprise has filed memorandum u/s 8 of the act. Note 2: This benefit is available only to enterprises engaged in manufacturing or production of goods in any scheduled industry. There is no provision under any law which permits the government to reserve any services for exclusively being rendered only by micro and small enterprises.

31. S r . No . Benefits available under the act Whether available to Micro ente r p r i s es Whether available to Small ente r p r i s es Whether available to Medium ente r p r i s es 5. Preference policies (preference to micro enterprises in respect of goods and services procured by Government Departments/aided institutions/ PSEs) notified by Central/ state government [Sec 11 of the act]. Yes Yes No 6. Simplified exit scheme (winding up the business) u/s 25 of the act. Yes (see Note 3 below) Yes (see Note 3 below) Yes (see Note 3 Below) 31 Note 3: This scheme shall not apply to companies. Note 4: As per RBI’s master circular, dated 2-7-2007 lending by banks to medium enterprises is not considered as “priority sector credit” .

32. INSTITUTIONAL SUPPORT TO ENTREPRENEURS 32

33. Works under the Union Ministry of Industries Was set up in 1955 For aid & foster the growth of SSI in country. Provides a wide range of services to promote SSIs. 33

34.  Its main functions are – To provide machinery on hire-purchase of SSIs. To provide equipment leasing facility. To help in export marketing of product of SSIs. To participate in bulk purchase programme of the government. To develop prototype of machines & equipments to pass on to SSIs for commercial production. To distribute basic raw material among SSIs through raw material depots. 34

35.  Its main functions are – T o help i n d e v elo p men t & up g ra d a tion of te c h n ol o gy & implementation of modernization programmes of SSIs. To impart training in various industrial trades. To set up SSIs in other developing countries on turn-key basis. To undertake the construction of industrial estates. 35

36. SIDO is a subordinate office of the department of Small Scale Industries ( SSI) & Agro and Rural Industries ( ARI). It is an apex body & nodal agency for formulating, co-ordinating & monitoring the policies & programmes for promotion & development of SSIs . The main function of SIDO are classified into Co-ordination, Industrial Development, and Extension 36

37. These functions performed through a national network of institutions & associated agencies created for this reason. The SIDO functions through – 27 offices, 31 Small industries Service Institutes 9sisi0, 37 Extension Centers, 3 Product-cum-Process Development Centers 7 4 Production Centers. 37

38. All SSIs fall under the scope of the SIDO except those falling within the specialized boards & agencies like KVIC, Coir Board, Central Silk Board, etc. 38

39.  Main Functions performed by SIDO in each of its three categories are as follows – Functions relating to Co-ordination To evolve a national policy for the development of SSIs, To co-ordinate the policies & programmes of various state governments, To maintain a proper link with the related Central Ministries, Planning Commission, State Governments, Financial Institutions, etc. To co-ordinate the programme for the development of Industrial estates. 39

40.  Functions relating to Industrial Development 40 To reserve items for production by SSIs, To collect data on consumer items imported & then, encourage the setting of industrial units to produce these items by giving coordinated assistance, To render required support for the development of ancillary units, and To encourage SSIs to actively participate in Government Stores Purchase Programme by giving them necessary guidance, market advice & assistance.

41.  Functions relating to Extension 41 T o m a k e p r o v ision of t e c h n ical se r vi c e s f or im p r o ving t e c hn i cal p r ocess, production planning, selecting appropriate machinery, preparing , To collect data on consumer items imported & then, encourage the setting of industrial units to produce these items by giving coordinated assistance, To render required support for the development of ancillary units, and T o en co urage S S Is t o a c t i v e l y p a r ti c ip a te i n G o v e r n men t S t o r es P u r c h ase Programme by giving them necessary guidance, market advice & assistance.

42. Constituted in 1954 to advice on development of SSIs in the country. It is also called as Central Small Industries Board (CSIB). The Industries Minister of the Government of India is the chairman of the SSIB. It comprises of 50 members including State Industry Minister, some members of parliament, Secretaries of various departments of government of India, Industry associations & Eminent experts in the field. 42

43. set up to provide consultancy & training to small entrepreneurs. All over the country they have 30 branch SISIs in state capital. The main functions SISIs include – To serve as interface between Central 7 state governments. To render technical support services. To conduct Entrepreneurship Development Programs. To initiate promotional programs. 43

44. In each district one agency was created to deal with all requirements of small & village industries which is called as “ District Industries Centre ” 45

45. In Industrial Policy announced by the Government of the India on 23 rd December 1977 laid special stress on the development of Small Scale, Village & Cottage industries. The policy statement indicated that the District would be the main focus of efforts & agency for promotion of small scale, village & cottage industries would be a new organization called as “ District Industries Centre ” 46

46. The District Industries Centers (DIC’s) programme was started in 1978 for promotion of small scale industries in rural areas. The DIC’s are pictured as a single window interacting agency at the district level providing service and support to small entrepreneurs under a single roof. DIC’s are the implementing arm of the central and state governments of the various schemes and programmes. 47

47. To develop Entrepreneurial Skills of people. To motivate for self employment. To provide all the necessary facility under one roof. To reduce regional imbalance of development. To courage in migration. 48

48.  Registration of small industries is done at the district industries centre and PMRY (Pradhan Mantri Rojgar Yojana) is also implemented by DIC. 49 Prime Minister Rozgar Yojona (PMRY) It is a self-employment scheme for educated unemployed youth with eligibility... Class VIII passed Age – 18 to 35 years (relaxable up to 45 years for SC / ST / Women / Physically handicapped / Ex-Servicemen) Project up to Rs 2.00 lakh for Industries/Service and Rs 1.00 lakh for Business Annual family income – Rs 40,000/- (Max)

49.  The organizational structure of DICs consists of 50 General Manager, Functional Managers and Project Managers to provide technical services in the areas relevant to the needs of the district concerned.  Management of DIC is done by the state government.

50. 51

51. The main functions of DIC are: To prepare and keep model project profiles for reference of the entrepreneurs. To prepare action plan to implement the schemes effectively already identified. To undertake industrial potential survey and to identify the types of feasible ventures which can be taken up in ISB sector, i.e., industrial sector, service sector and business sector. 52

52. To guide entrepreneurs in matters relating to selecting the most appropriate machinery and equipment, sources of it supply and procedure for importing machineries. To provide guidance for appropriate loan amount and documentation. To assist entrepreneurs for availing land and shed equipment and tools, furniture and fixtures. 53

53. T o a p praise the w o r thi n ess o f the p r oje c t - p r o p o sals r e c e i v ed from entrepreneurs. T o hel p the e n t r ep r ene u r s in ob t ainin g r eq u i r ed licenses/permits/clearance. To assist the entrepreneurs in marketing their products. T o c o n d uc t p r o d uc t d e v elo p men t w ork ap p r o p r i a te t o s mall industry. 54

54. To help the entrepreneurs in clarifying their doubts about the matters of operation of bank accounts, submission of monthly, quarterly and annual returns to government departments. To conduct artisan training programme. To act as the nodal agency for the district for implementing PMRY ( Prime Minister RojgarYojana ). To help the specialized training organizations to conduct Entrepreneur development programmes. 55

55. The Department of small-scale industries was created in 1991 , in the Ministry of Industry to exclusively formulate the policy framework for promoting and developing small-scale industries in the country. These activities are supported by a host of other central/state government departments, promotional agencies, autonomous institutions, non- government organizations and so on. The range of services cover consultancy in techno-economic and managerial aspects, training, testing facilities, and marketing assistance through the agencies created for the specified functions. 56

56.  The implementation of policies, programmes and schemes for providing infrastructure and support services to small enterprises is undertaken through these offices, namely Small Industries Development Organization (SIDO), Khadi Village and Industry Commission (KVIC) and Coir Board , National Small Industry Corporation (NSIC) and various training institutes. 57

57.  The in s ti t ut i on a l net w ork ca n be 58 broadly classified as Central level in s ti t utio n s /ag e nci es State level institutions/agencies Other agencies Fig.: Institutions supporting small-scale industries

58. National Productivity Council ( NPC ) Indian Institute of Entrepreneurship ( IIE ) N a tion a l Instit u te f o r Ent r e p r eneu r ship an d Small Bus i ness De v elo p m ent ( NIESBUD ). National Science & Technology Entrepreneurship Development Board ( NSTEDB ). National Institute of Small Industry Extension Training ( NISIET ) State Financial Corporations (SFC ) State Small Industries Development Corporations ( SSIDCS ) 59

59. Review Question Explain in brief the stages in entrepreneurial process. Distinguish between Micro, Small & medium enterprise. Discuss Micro, Small and Medium Enterprises Development Act 2006. What do you mean by Small-Scale industry? Explain the role of SSI. Discuss the support provided by NSIC to small scale industries. Explain various activities of SIDO. Explain the functions of SISI. Enumerate various types of assistances rendered by it. Discuss the important functions of SSIDC. Explain in brief the main functions of DIC. 60

60. A humble efforts…… …….. Dr. Giri 61