UNIT-V

LAWS CONCERNING ENTREPRENEUR VIZ, PARTNERSHIP LAWS,

For the long term proposition and to keep the business honest every entrepreneur should keep in
mind certain laws which need to be complied.

Planning to form a company (proprietor, partnership firm, LLP, private limited or limited) or if
you are already in business, then every entrepreneur is liable to follow the basic Indian
government’s legal rules, regulations and laws to function their business in the country. Usually,
most of the entrepreneurs approach a legal business consultant to understand the necessary
documentation required to frame a legal business entity, securing PAN number, GST and opening
a current account and other guidelines to start functioning.

Most entrepreneurs don’t have a team of lawyers following around to help them to make every
decision and going for a legal business consultant would be costly. There is no rule that to be a
successful entrepreneur you need to be a law graduate. It’s just that entrepreneurs must have to
learn the basics/essentials so you don’t get caught off guard.

Here are 5 business law that every entrepreneur should be aware of:

Business licenses and Company formation laws

Company Formation Law

The most important thing is to understand what kind of organization you want to set up and apply
proper business structure as different business structures have different business applications to be
made while carrying out the business. Structuring the organization and business depends upon the
business long term objectives, goals and visions. Before taking the decision of what kind of
business you want to set up it is important to review the practicality, suitability and profits that are
expected from the organization to achieve the goal of the business.

Depending on the nature of the legal business entity, entrepreneurs need to register a business
name. In India, Companies Act 2013 states law for each type of company while starting up a
business; you have to choose the type of company for ex: proprietorship, family business,
partnership, LLP, private or public limited.
However, each entrepreneur needs to carefully evaluate the existing legal framework. Each form
of business is governed by separate laws and not complying with these laws means loss in the
form of heavy fines before an organisation can even start making profit. Read the laws and
regulation governing these set-ups to carefully avoid penalization for non-compliance.

There some legal applications associated with every type of business and entrepreneur must be
aware of it:

Business Licenses

Based on the type of business carried a business needs licenses accordingly. Before launching a
startup the entrepreneur must start applying for appropriate to stay away from the legal battles at
the inception.

All the business licenses vary from business to each other. The common licensing applied for
most of the business under the law is registration under the shop and establishment act, 1953.
Obtaining Professional Tax registration, PAN, TAN registrations for commercial invoice and
billing.

For some specific activities like manufacturing and export-import, you may need a bunch of
licenses like Import and Export Code, STPI, Factory license etc.

For Example if you are starting a restaurant business you require a Food Safety License,
Environmental Clearance certificate, Prevention of Food Adulteration Act, Health Trade License
etc.

Entrepreneur can even register himself under the ‘Startup India programme’ launched by the
Government of India, which offers tax exemptions that can benefit from. But before that, there are
some conditions that needs to be qualified:

Lifespan of the startup should not be more than 7 years and not more than 10 years for a biotech.

Is registered as a Limited Liability Partnership (LLP), Public or Private Limited Company.

Turnover should not exceed 25crores annually.

The existing business shouldn’t be formed by split or reconstructed into a startup.

Accounting and Taxation Laws

Finance laws
Entrepreneurs can fund the business largely in three forms – equity financing or self-financing.

When the business is getting fairer funding from enterprise capital businesses or angel investors
you need to keep records like – letter of intent, shareholders contract and share subscription
agreement.

If business is getting debt financing entrepreneurs have got to get software for mortgage sanction
papers, sanction letter, loan agreement letter and collateral documentation in business location.

Bookkeeping

Businesses need to maintain books of accounts monthly or such intervals which help to analyze
the cost associated with each segment and to improve the performance of the company. Financial
data at the right time can help the entrepreneur to make important decisions which can increase
profitability and reduce cost.

Tax Laws

There are instances where a lot of businesses completely fail on this point and many entrepreneurs
face massive fines, possibility of imprisonment and highly unproductive lawsuits and criminal
cases with respect to tax bills, simply due to their negligence and ignorance, usually both
combined. However, ignorance of law is no excuse.

Every organization, be it involved in any type of business, has to pay some or the other taxes to
the State, Central, local/provincial governments, as the case may be.

Entrepreneur needs to have basic understanding of the Sector and area-specific knowledge of
taxation which helps him in maintaining the financial & legal health of the organization.

Income tax Act

Income tax is the most important form of direct tax which is regulated by The Income Tax Act,
1961.

Computing the income is the first step, which can be carried out via the means listed above. The
second step is to understand tax liability. There are specific schedule of taxes that businesses and
individuals need to refer to in order to know their tax liability, as explained below:

Schedule of Income Tax Rates

Type of business entity The applicable income tax

Proprietorship or individual Taxes apply as per the income tax slab rates

Partnership/ LLP firm 30% of the income

Indian company 25% of the income

It is crucial to file income tax returns before the due date using the forms mentioned below:

Income that has been computed under the ITR 4

presumptive taxation scheme

Income computed by calculating the revenue, ITR 3/ ITR 5/ ITR 6/ ITR7

expense and depreciation

As per section 270A of the Income Tax Act 1961, misreporting of income will have a penalty of
200 percent of the amount of tax payable on unpaid income.

GST Act

Before the implementation of GST, business needs a VAT registration if the turnover is more than
Rs. 5 Lakh business needs to obtain the VAT registration. However now, any business whose
turnover crosses Rs 40 lakh in a financial year is required to register under GST and the limit is
Rs 20 lakh for service providers.

Increase in threshold under GST has brought compliance relief for many small businesses,
including startups in India.

Also government introduced a composition scheme under GST for small businesses operating in
India. Under this scheme business provides for a lower amount of tax having turnover up to Rs
1.5 crore in a year.

Labour or employment Laws

Every organisation irrespective of how big or small have to adhere to labour laws. When a
company has established and has hired people to work for the organization, the organization is
subject to several labour laws regardless of the size of the organization.
If an organization breaches any of the stipulated labour laws, then it will not only attract penal
liabilities but will also have to face negative reviews.

Entrepreneur need to aware of the following Labour laws for the business to prosper:

 Minimum Wages Act, 1948

 Payment of Wages Act, 1936
 Payment of Bonus Act, 1965
 Payment of Gratuity Act, 1972
 The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
 The Employees’ State Insurance Act, 1948.
 Factories Act, 1948
 Maternity Benefits Act, 1961
 Employee Compensation Act, 1923
 The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal)
Act, 2013
 The Industrial Disputes Act, 1947
 The Trade Unit Act, 1926
 Building and Other Constructions Workers’ (Regulation of Employment and Conditions of
Service) Act, 1996
 The Industrial Employment (Standing Orders) Act, 1946
 The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service)
Act, 1979
 The Contract Labour (Regulation and Abolition) Act, 1970

Entrepreneurs should keep an eye on the new rules that are framed by the Central Government
that will replace the existing Labour laws.

Central Government is in a process of consolidating various labours laws in India into following
four codes, which are yet to be implemented:

1. Code on Wages, 2019: This code was passed by both the houses of Parliament and
received Presidential assent on 8th August, 2019. However, it is yet to be enforced by way
of notification by the Central Government of India. Payment of Wages Act, 1936,
Minimum Wages Act, 1948, Payment of Bonus Act, 1965 and Equal Remuneration Act,
1976 are the Labour laws that are being replaced by new Code.

2. Occupational Safety, Health and Working Conditions Code, 2019: This code has been
placed before the Lok Sabha as 23rd July 2019 and it has been pending before the standing
 committee for its comments. It will replace 13 labour laws relating to health, safety and
working conditions. Factories Act, 1948, Dock Workers Act, 1986, Mines Act, 1952, Inter
Migrant Workers Act, 1979 and Contract Labour Act, 1970 are the laws which are being
replaced.

3. Industrial Relations Code, 2019: The code was placed before Lok Sabha on 28th
November 2019 and it has been pending before the standing committee for its comments.
The Industrial Disputes Act, 1947, The Trade Unit Act, 1926 and Industrial Employment
(Standing Orders) Act, 1946 are the laws which are being replaced.

4. Code on Social Security, 2019: The code was placed before Lok Sabha on 11th December
2019 and it has been pending before the standing committee for its comments. This will
replace 9 labour laws like Employee Provident Fund Act, Maternity Benefit Act and
Unorganized Workers Social Security Act, 2008.

Information Technology and Privacy Laws:

We are living in an advanced technological world and organization should be high in a digitalized
world where IT laws in the business can handle things like e-contracts, digital signatures,
protecting the private data of the organization and this is also an extremely important job. So
having the knowledge of Information Technology laws will help the organization in exploring the
business opportunities. Adapting technology in the organization helps a lot in achieving the goal
of the organization.

The government of India has introduced the Information Technology Act – cyber laws that help
protect on-line privateness and identity. If a business deals with sensitive personal information
from its customers, entrepreneurs must have a sound security plan in place. All the required care
needs to be taken care of to avoid any data leaks.

Intellectual Property Laws:

Intellectual Property is the legal right of the business that every business should have. It deals
with the rules which will secure the invention, innovative idea, and artistic work of any person.
Intellectual property gives a legal right to the innovative idea so that no one can copy the same
and that’s why intellectual property is a very important business. Intellectual property includes,
copyright, trademark, patent, etc.
Intellectual property of the organisation in the form of codes, designs or programs has to get the
right patents and copyright claims to protect such assets. Intellectual property rights such as
patents should be filed at the patents office. Failure in doing so could give a competitor to file for
the same patients first, but there is no punishment for not having IP rights. First person to file for a
patent generally obtains the patent rights. Intellectual property rights can be sold or licensed and
thus has a financial value apart from technological application.

Trademark is a symbol used by a brand/organisation on its goods and services so that customers
can identify with that good and/or service just by looking at the symbol and can differentiate
products based on quality, aesthetics, packaging, etc. No two companies can possess the same
trademark, but its ownership can be changed. A registered trademark holder has legal protection
against infringement on their trademark.

Conclusion

All entrepreneurs embarking a journey of success must search and go through all the legal factors
involved and affect their business and does not face any legal problems while running its
operations. Most entrepreneurs spend a lot of time developing their business and tend to neglect
various legal and regulatory compliances. Therefore, it is important that the entrepreneurs follow
all the legal requirements which are necessary for the proper functioning of the organisation.

BUSINESS OWNERSHIP

sales and income taxes and workman compensation act.

Role of various national and state agencies which render assistance to small
scale industries.

Government Support to Small Scale Industries: Credit Support, Marketing Support,

Technology Upgradation

Central Government Agencies and State Government Agencies

The support system for SSI in India is quite comprehensive. Many of these agencies belong to the
Central Government, while the rest belong to the state governments.

The small scale industry sector output contributes almost 40% of the gross industrial value-added,
45% of the total exports from India (direct as well as indirect exports) and is the second largest
employer of human resources after agriculture. The development of small scale sector has
therefore been assigned an important role in India’s national plans.

In order to protect, support, and promote small enterprises as also to help them become self-
supporting, a number of protective and promotional measures have been undertaken by the
government.

The promotional measures cover the following:

i. Industrial extension services,

ii. Institutional support in respect of credit facilities,

iii. Provision of developed sites for construction of sheds,

iv. Provision of training facilities,

v. Supply of machinery on hire-purchase terms,

vi. Assistance for domestic marketing as well as exports,

vii. Special incentive for setting up enterprises in backward areas, etc.

viii. Technical consultancy and financial assistance for technological up gradation.

While most of the institutional support services and some incentives are provided by the Central
Government, others are offered by the state governments in varying degrees to attract investments
and promote small industries in varying degrees to attract investments and promote small
industries with a view to enhance industrial-production and to generate employment in their
respective states.

1. Central Government Agencies:

i. MSME Board:

Micro, Small, and Medium Enterprises Board (MSME Board, formerly known as Small Scale
Industries Board, SSI Board) is reconstituted every two years and is headed by the minister-in-
charge of Ministry of Micro, Small, and Medium Enterprises in the Government of India.

The Board comprises industry ministers of state governments, secretaries of various departments
of Government of India, the heads/senior representatives of financial institutions, public sector
undertakings, industry associations and eminent experts in the field.

Objectives:

To facilitate coordination and inter-institutional linkages among various ministries, state

governments, banks, financial institutions, MSME asso-ciations, etc., the MSME Board has been
constituted as the apex advisory body to advise the government on all issues pertaining to the
small scale sector.

Functions:

Though a non-statutory body, the MSME Board provides an effective platform for informed
debate and facilitates coordination and inter-institutional linkages.

ii. MSME Development Organization (MSMEDO):

Objective:

Established in 1954, the MSME Development Organization (formerly known as the Small
Industries Development Organization, SIDO) headed by the Additional Secretary and
Development Commissioner (MSME), is one of the apex bodies of the Government of India,
Ministry of MSME, to assist the government in formulation of policies and programmes, projects
schemes, etc., for the promotion and development of MSME in the country and also coordinating
and monitoring the implementation of these policies and programmes, etc.

Promotion and development of MSME is primarily the responsibility of the States and Union
Territories (UTs) and the role of the Central Government (including the MSME Development
Organization) in this field is to aid and assist the States/UTs in this endeavour.

Functions:

MSME Development Organization functions through a network of MSME development institutes

(formerly known as Small Industries Service Institutes), Branch MSME development institutes,
regional testing centres (RTCs), field testing Stations (FTSs), and autonomous bodies.

The major functions of MSMEDO include:

a. Advising the government in policy formulation for the promotion and development of MSME
and small scale service and business entities (collectively referred to as small enterprises) and for
their graduation to medium enterprises.
b. Providing techno-economic and managerial consultancy, common facilities, and extension
services to small enterprises.

c. Providing facilities for technology up gradation, modernization, quality improvement and

infrastructure of/for small enterprises.

d. Developing human resources through training and skill up gradation of small entrepreneurs as
well as its own manpower.

e. Providing economic information services to the government and small enterprises.

f. Maintaining liaison with other central ministries, planning commission, state governments, and
other organizations concerned with development of small enterprises

iii. MSME Development Institutes:

There are 30 MSME development institutes (formerly Small Industries Service Institutes, SISI)
and 28 branch MSME development institutes set up in state capitals and other industrial cities all
over the country.

Functions:

The main functions of these institutions are as follows:

a. Assistance/consultancy to prospective entrepreneurs

b. Assistance/consultancy rendered to existing units

c. Preparation of state industrial profiles

d. Preparation/up gradation of district industrial potential surveys

e. Project profiles

f. Entrepreneurship development programmers

g. Motivational campaigns

h. Production index

i. Management development programmes

j. Energy conservation
k. Pollution control

l. Quality control and up gradation

m. Export promotion

n. Ancillary development

o. Common facility workshop/labs

p. Preparation of directory of specific industry

q. Intensive technical assistance

r. Coordination with district industries centers

s. Linkage with state government functionaries

t. Market surveys

MSME development institutes and their branches have common facility workshops in various
trades. There is at present 42 such common facility workshops attached to MSME development
institutes.

iv. MSME Technology Development Centers:

There are six MSME technology development centers (formerly known as Product-cum-Process
Development Centers, PPDCs) at Kannauj (U.P.), Firozabad (U.P.), Meerut (U.P.), Agra (U.P.),
Ramnagar (Uttaranchal), Mumbai (Maharashtra).

Functions:

The functions of these technology development centers are:

a. Research and development in areas of dense industry clusters

b. Product design and innovation

c. Product and process improvement and development of improved packaging techniques

d. Common facility centre

e. Manpower development/training
MSME technology development centers – Footwear (formerly central footwear training institutes,
CFTIs) at Agra and Chennai serve the primary objective of human resources development in the
footwear sector.

Both the institutes at Agra and Chennai are modernized with UNDP assistance under national
leather department programme and fully equipped with state-of-the-art machinery to impart
training in the modern methods of footwear manufacturing. The functions of these institutes are to
develop footwear designing to promote exports and to provide training for manpower in footwear
industry.

v. MSME Testing Centers and MSME Testing Stations:

MSME testing centers (formerly known as regional testing centers) provide testing and calibration
facilities to industries in general and small scale industries in particular for raw materials, semi-
finished and finished products manufactured by them. At present, there are four MSME testing
centers located at Delhi, Mumbai, Chennai, and Kolkata. Besides, there are seven MSME testing
stations located at Jaipur, Bhopal, Kolhapur, Bangalore, Hyderabad, and Chenganacherry.

These MSME testing stations provide testing facilities, in the area of cluster of industries and
some strategic industrial locations. These centers as well as stations are equipped with the state-
of-the-art indigenous and important equipments in the disciplines of chemical, mechanical,
metallurgical, and electrical engineering to undertake performance test, type test, and acceptance
test of semi-finished, finished products, etc.

The centers also undertake calibration works for measuring instruments and equipments
conforming to international standards. The MSME testing centers are accredited by internationally
recognized national accreditation board of testing and calibration laboratories (NABL)
certification as per ISO17025.

Functions:

Major functions of MSME testing centers and MSME testing stations are:

a. Provide testing facilities for quality upgradation

b. Training/consultancy in testing, quality control and quality management

c. Process quality control systems, etc.

d. Product specific testing facilities are provided by MSME testing stations

vi. Coir Board:

Coir is the fibre obtained from the husk of coconut, used chiefly in making rope and matting. Coir
Board is a statutory body established by the Government of India under a legislation enacted by
the Parliament namely, Coir Industry Act 1953 (45 of 1953) for the promotion and development
of Coir Industry in India as a whole.

Functions:

Major functions of the Coir Board are:

a. Promoting exports of coir yarn and coir products and carrying on propaganda for that purpose;

b. Regulating, under the supervision of the Central Government, the production of husks, coir
yarn, and coir products by registering coir spindles and looms for manufacturing coir products as
also manufacturers of coir products, licensing exporters of coir yarn and coir products, and taking
such other appropriate steps as may be prescribed;

c. Undertaking, assisting or encouraging scientific, technological and economic research and

assisting the maintenance of one or more research institutes;

d. Collecting statistics from manufacturers of, and dealers in, coir products and from such other
persons as may be prescribed, on any matter relating to the coir industry, the publication of
statistics so collected or portions thereof or extracts thereof;

e. Fixing grade standards, and arranging when necessary, for inspection of coir fibre, coir yarn
and coir products;

f. Improving the marketing of coconut husk, coir fiber, coir yarn, and coir products in India and
elsewhere and preventing unfair competition;

g. Setting up or assisting in the setting up of factories for the producers of coir products with the
aid of power;

h. Promoting cooperative organization among producers of husks, coir fibre and coir yarn and
manufacturers of coir products;

i. Ensuring remunerative returns to producers of husks, coir fiber, and coir yarn and manufacturers
of coir products;

j. Licensing of retting places and warehouses and otherwise regulating the stocking and sale of
coir fiber, coir yarn, and coir products, both for the internal market and for exports;

k. Advising on all matters relating to the development of the coir industry;

l. Such other matters as may be prescribed.

vii. MSME Tool Rooms/Tool Design Institutes:

MSME Tool Rooms/Tool Design Institutes are autonomous bodies under the Ministry of MSME.
There are 10 tool rooms in the country to assist SSI units in their technical up gradation by
providing good quality tooling’s to meet the growing need and to assist SSI units with the
assistance of countries such as Denmark and Federal Republic of Germany who have provided the
sophisticated machines with latest technology.

Some of the tool rooms have also been set up with the assistance of UNIDO/ ILO. These tool
rooms are located at Indore, Ahmedabad, Ludhiana, Hyderabad, Bhubaneswar, Jamshedpur,
Calcutta, Jalandhar, and Nagpur.

State Government run tool rooms are at Lucknow, Delhi, Bangalore, Mysore, and Goa. These tool
rooms are equipped with latest imported equipments like CAD/CAM and specialized CNC
machines like CNC milling, CNC copy milling, CNC EDM- sparkerosion, CNC wirecut, profile
grinding, jig boring, jig grinding, vacuum heat treatment, etc. to provide tooling of international
standards at competitive rates.

Functions:

These tool rooms serve the industries in areas indicated below:

a. Tool Design and Production:

(a) Design and manufacture of dies and tools, mould, jigs and fixtures, gauges and tool
components, etc. (up to 1 micron accuracy).

(b) Computer aided design and computer aided manufacturing (CAD/ CAM).

(c) Heat treatment of all types of steels.

(d) Quality control and testing.

b. Training and Consultancy:

(a) Industry-based long-term training for tool and die makers.

(b) Short-term training for managers and supervisors, to upgrade their knowledge and skill.

(c) Need-based technical training for skilled workers/tool-makers/machinists, etc.

(d) Training in CNC technology, inspection, quality control, testing, etc. Entrepreneurship
development institutes (EDIs)

viii. Entrepreneurship Development Institutes (EDIs):

There are three national level Entrepreneurship Development Institutes:

a. National Institute of Micro, Small and Medium Industry Extension Training (NIMSMIET),
Hyderabad.

b. National Institute for Entrepreneurship and Small Business Development (NIESBUD), New
Delhi, which conducts national and international level training programmes in different fields and
disciplines.

c. Indian Institute of Entrepreneurship (HE), Guwahati. The main, objective of the institute is to
act as a catalyst for entrepreneurship development with its focus on the North East.

ix. National Small Industries Corporation:

Since its establishment in 1955, the National Small Industries Corporation Ltd (NSIC), has been
working to fulfill its mission of promoting, aiding and, fostering the growth of small scale
industries in the country. Over a period of five decades of transition, growth and development,
NSIC has proved its strength within the country and abroad by promoting modernization, up
gradation of technology, quality consciousness, strengthening linkages with large and medium
enterprises and enhancing exports—projects and products from small industries.

NSIC operates through 9 zonal offices, 33 branch offices, 14 sub-offices, 10 NSIC business
development extension offices, 5 technical services centres, 3 extension centres, and 2 software
technology parks supported by a team of over 500 professionals spread across the country. To
manage operations in African countries, NSIC operates from its office in Johannesburg.

Functions:

NSIC carries forward its mission to assist small enterprises with a set of specially tailored
schemes designed to put them in a competitive and advantageous position. The schemes comprise
of facilitating marketing support, credit support, technology support, and other support services.

x. Small Industries Development Bank of India:

Established on 2 April 1990, the Small Industries Development Bank of India (SIDBI) is the
principal development financial institution for promotion, financing and development of
industries in the small scale sector and for coordinating the functions of other institutions engaged
in similar activities. SIDBI has the mission to empower the MSME sector with a view to
contribute to the process of economic growth, employment generation, and balanced regional
development.

Functions:

SIDBI performs the following major functions:

a. Indirect Finance:

Refinance scheme is used for catering to the need of funds of eligible primary lending institutions
(PLIs) like state financial corporations, state industrial development corporations, scheduled
commercial banks both in the public and private sector, etc. for financing small scale industries.
Under the scheme, SIDBI grants refinance against term loans granted by the eligible PLIs to
industrial concerns for setting up industrial projects in the small scale sector as also for their
expansion/ modernisation/diversification.

b. Direct Finance:

Through 38 of SIDBI’s own offices by means of several tailor-made schemes to provide financial
assistance to specific SSI target groups.

c. Promotional and Developmental Activities:

Like human resource development in SSI sector, technology up gradation, programmes on

environment and quality management, market promotion, information dissemination, etc. by
involving accredited non-governmental organizations, voluntary organizations, scientific and
research institutions, technology institutions, management institutions, etc.

xi. Khadi and Village Industries Commission (KVIC):

Meaning:

Just imagine a cloth 15 meters long, passing through an ordinary finger ring and weighing merely
10 grams per square meter. Sounds like fantasy? Actually it is a stark reality. We are referring to
the handspun, hand-woven cloth — Muslin made by thousands of skilled artisans of rural India
known as “Khadi.”

A Village Industry means:

…any industry located in a rural area which produces any goods or renders any service with or
without the use of power and in which the fixed capital investment per head of an artisan or a
worker does not exceed one lakh fifty thousand rupees for hilly areas and one lakh rupees for
other areas or such other sum as may, by notification in the Official Gazette, be specified from
time to time by the Central Government;

…any other non-manufacturing unit established for the sole purpose of promoting, maintaining,
assisting, servicing (including mother units), or managing any village industry.

The Khadi and Village Industries Commission (KVIC) is a statutory body established by an Act
of parliament (No. 61 of 1956, as amended by Act No. 12 of 1987 and Act No. 10 of 2006). In
April 1957, it took over the work of former All India Khadi and Village Industries Board.

Objectives:

The broad objectives that the KVIC has set before it are:

a. The social objective of providing employment.

b. The economic objective of producing saleable articles.

c. The wider objective of creating self-reliance amongst the poor and building up of a strong rural
community spirit.

Functions:

Some of the major functions of KVIC are:

a. The KVIC is charged with the planning, promotion, organization, and implementation of
programs for the development of Khadi and other village industries in the rural areas in
coordination with other agencies engaged in rural development wherever necessary.

b. Its functions also comprise building up of a reserve of raw materials and implements for supply
to producers, creation of common service facilities for processing of raw materials as semi-
finished goods and provisions of facilities for marketing of KVI products apart from organization
of training of artisans engaged in these industries and encouragement of cooperative efforts
amongst them. To promote the sale and marketing of khadi and/or products of village industries or
handicrafts, the KVIC may forge linkages with established marketing agencies wherever feasible
and necessary.

c. The KVIC is also charged with the responsibility of encouraging and promoting research in the
production techniques and equipment employed in the KVI sector and providing facilities for the
study of the problems relating to it, including the use of non-conventional energy and electric
power with a view to increasing productivity, eliminating drudgery and otherwise enhancing their
competitive capacity and arranging for dissemination of salient results obtained from such
research.

d. Further, the KVIC is entrusted with the task of providing financial assistance to institutions and
individuals for development and operation of Khadi and village industries and guiding them
through supply of designs, prototypes, and other technical information.

e. In implementing KVI activities, the KVIC may take such steps as to ensure genuineness of the
products and to set standards of quality and ensure that the products of KVI do conform to the
standards.

f. The KVIC may also undertake directly or through other agencies studies concerning the
problems of KVI besides research or establishing pilot projects for the development of KVI.

g. The 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.

2. State Government Agencies:

All the state governments have their own state-specific policies for the promotion and
development of the small, cottage, medium and large scale industries.

i. Commissioner/Director of Industries:

In each state, the commissioner/director of industries implements the state government policies
and directives for promoting industrial development. The central policies for the SSI sector serve
as guidelines for framing state-level policies as well as the package of incentives. The
commissioner/director of industries also oversees the activities of their field offices, viz. district
industries centers at the district level which are mostly engaged in extension activities, apart from
administrative and regulatory work.

ii. District Industries Centers:

The District Industries Centers (DICs) Programme was initiated in May 1978, as a centrally
sponsored scheme, with the objective of developing the small, tiny and cottage sector industries in
the country and to generate greater employment opportunities especially among rural and
backward areas.

The establishment of the offices of DICs at the district level aimed at providing support
facilities/concessions/services in dispersed rural areas and other small towns. There were 430
centrally approved DICs, which covered almost all parts of the country except the metropolitan
cities at the time of the withdrawal of the central sponsorship in 1993-94. At present, DICs are
being operated by respective states.

Functions:

The extension services provided by the DICs include:

a. Dissemination of information

b. Supply of machinery and equipment

c. Provision of raw materials and quality inputs

d. Arrangements for credit facilities

e. Marketing

f. Consultancy

iii. State Financial Corporations:

The State Financial Corporations (SFCs) are state-level financial institutions, operating as
regional development banks and playing a crucial role in the development of small and medium
enterprises in the states concerned in tandem with national priorities. There are 18 SFCs in the
country, of which 17 were set up under the SFCs Act 1951. Tamil Nadu Industrial Investment
Corporation Ltd established in 1949 under the Companies Act as Madras Industrial Investment
Corporation, also functions as a SFC.

Functions:
The major functions of SFCs are:

a. SFCs provide financial assistance by way of term loans, direct subscription to

equity/debentures, guarantees, discounting of bills of exchange and seed capital.

b. The SFCs operate a number of schemes of refinance arid equity type assistance on behalf of
IDBI/SIDBI in addition to special schemes for artisans and special target groups such as SC/ST,
women, ex-servicemen, physically handicapped, etc.

c. With the increasing diversification/expansion in the Indian industry, SFCs have started
providing assistance to newer types of business activities including floriculture, tissue culture,
poultry farming, commercial complexes and services related to engineering, marketing, etc.

d. SFCs have also started offering facilities such as equipment leasing and have entered the field
of consultancy, merchant banking, debenture trusteeship, and capital-related services.

e. They also provide financial assistance for small road transport operators, hotels, tourism-related
activities, hospitals, nursing homes, etc.

iv. SIDCs/SIICs:

State Industrial Development Corporations / State Industrial Investment Corporations (SIDCs /

SECs) were set up under the Companies Act, 1956 as wholly-owned undertakings of the state
governments to act as catalysts for industrial development in their respective states. At present,
there are 28 SIDCs in the country, of which 11 also function as SFCs and are therefore, termed as
twin-function IDCs. SIDCs develop land and provide industrial infrastructure facilities like roads,
power, water supply, drainage, and other amenities.

Set up primarily for providing assistance to medium and large scale industries, SIDCs/SIICs also
extend assistance to the small scale sector by way of term loans, subscription to equity, and
promotional services.

v. State Small Industries Development Corporations:

State Small Industries Development Corporations (SSIDCs) were established under the
Companies Act, 1956 as state government undertakings to cater to the needs of the small, tiny,
and village industries in the respective states/union territories.

Functions:
Being operationally flexible, SSIDCs undertake a variety of activities for the benefit of the
SSI sector such as:

a. Procurement and distribution of scarce raw materials

b. Supply of machinery to SSI units on a hire-purchase basis

c. Providing assistance for the marketing of products

d. Construction of industrial estates, provision of allied infrastructure facilities and their

maintenance

e. Extending seed capital assistance on behalf of the State Government

f. Providing management assistance to production units

vi. Technical Consultancy Organizations:

Technical Consultancy Organizations (TCOs) were set up in different states with the objective of
providing a package of consultancy services to small and medium scale enterprises, individual
entrepreneurs, government departments, other state-level institutions, and commercial banks for
activities relating to industrial development and financing.

Functions:

The initial thrust of TCOs activities was in the area of pre-investment studies.

Over the years, TCOs have diversified their service domain to include:

a. Preparation of project profiles and feasibility studies

b. Undertaking industrial potential surveys

c. Identification of potential entrepreneurs and provision of technical and management assistance

d. Undertaking market research and surveys for specific products

e. Carrying out energy audits and energy conservation assignments

f. Undertaking export management consultancy for export-oriented projects

g. Conducting entrepreneurship development and skill up gradation programmes, etc.

Other state-level agencies that extend facilities for the promotion of SSIs are state infrastructure
development corporation, state cooperative banks, regional rural banks, state export corporation,
agro industries corporations and hand- loom and handicrafts corporation.

Government Support to Small Scale Industries – 6 Types of Help Extended by Different

Support Agencies of the Government

The various types of help extended by different support agencies of the government. Let us
discuss them in detail.

1. Credit Support:

Of all the elements that go into a business, credit is perhaps the most crucial. The best of plans can
come to naught if adequate finance is not available at the right time. MSEs need credit support not
only for running the enterprise and operational requirements but also for diversification,
modernization/up gradation of facilities, capacity expansion, etc.

In respect of MSEs, the problem of credit becomes all the more critical whenever any episodic
event occurs such as a large order, rejection of consignment, inordinate delay in payment, etc. In
general, MSEs operate on tight budgets, often financed through owner’s own contribution, loans
from friends and relatives and some bank credit.

Government of India recognized the need for a focused credit policy for MSEs in the early days of
promotion of MSEs.

This in turn led to a credit policy with the following components:

i. Priority Sector Lending:

Credit to the MSE sector is ensured as part of the priority sector lending by banks. Banks are
required to compulsorily ensure that a specified percentage (currently 40% for domestic
commercial banks and 32% for foreign banks) of their overall lending is made to priority sectors
as classified by the government. These sectors include agriculture, small enterprises, retail trade,
etc.

ii. Institutional Arrangement:

SIDBI is the principal financial institution for promotion, financing, and development of the MSE
sector. Apart from extending financial assistance to the sector, it coordinates the functions of
institutions engaged in similar activities. State financial corporations (SFCs) and twin-function
state industrial development corporations (SEDCs) at the state level are the main sources of long-
term finance for the MSE sector.

With the liberalization of the Indian economy, greater emphasis was placed on meeting the credit
needs of MSEs.

This was manifest through the following initiatives:

a. Earmarking of credit for micro enterprises within overall lending to micro and small
enterprises.

b. Opening of specialized SME branches.

c. Enhancement in the limit for computation of the aggregate working capital requirements on the
basis of minimum 20% of the projected annual turnover.

d. Enhancement of composite loan to Rs.1 crore (Rs.10 million).

e. No collateral security for loans up to Rs.5 lakh (Rs.0.5 million). Banks may on the basis of
good track record and financial position of the units, increase the limit of dispensation of
collateral requirement for loans up to Rs.25 lakh (2.5 million).

2. Marketing Support:

In today’s world, marketing is much more than mere selling. Small enterprises can hardly match
the advertising might or distribution reach of a large corporation. In India, small units sell best in
limited or neighbourhood markets or when they are meeting a low volume specialized demand
which no large player can effectively cater to.

Increasingly, now, the endeavour is to build the marketing activity of small units around their
competitive advantage, i.e. products which are labour intensive, items which cater to niche
markets, low-volume high- margin products, sub-assembly tasks, outsourcing jobs, and
ancillarization.

Subcontracting exchanges are being established through government and industry associations to
promote such interface. After-sales service for imported products, AMCs (Annual Maintenance
Contracts) on electronic equipment, reverse engineering (to the extent that it is WTO compatible)
are the other areas being encouraged.
Activities such as brand building, sustaining loss leaders, extension of product portfolio,
nationwide advertising, huge sales force, competing with large scale imports, are tasks best left to
large players. Small enterprises in India are realizing that the term “marketing” perhaps implies
different things to different people. For new start-ups, head-on competition with established giants
makes little sense. A better mouse trap does not ipso facto lead to increased sales and more
profits.

The government agencies under marketing support provide the following types of help to
SSIs:

i. Subcontracting exchanges – These exchanges enlist SSIs and identify items which can be
supplied to public sector undertakings.

ii. Marketing development assistance scheme – The government reimburses 60% of the
expenditure incurred by SSI delegations that visit foreign countries for the purpose of exploiting
marketing possibilities.

iii. Training programmes for export packaging – Exporters are provided information on the latest
packaging standards and techniques in order to boost exports.

iv. Organizing exhibitions and international trade fairs – Exhibitions and international trade fairs
are organized abroad by the India Trade Promotion Organization. All expenses for SSIs on space
charges, display, shipment, insurance, handling and clearance, publicity, etc. are borne by the
government.

3. Entrepreneurship Development:

Beginning with psychological de-freezing and achievement motivation techniques, knowledge is

imparted to participants on the scope and potential of different items, which can be manufactured
in a small scale industry, its technical feasibility, economic viability and commercial prospects as
a self-employment venture. Efforts are directed not only to inform but to enable them to determine
and identify all these themselves. Thus, they are led towards an entrepreneurial decision of
product browsing and identification.

The critical areas of product/process design, manufacturing practices, testing, quality

control/assurance, appropriate machinery and equipment, project profile preparation, marketing
avenues/techniques, product/services pricing, export opportunities, infrastructural facilities,
finance and financial institutions, cash flow, industrial policy etc. are also dealt with by experts.
This is supplemented by visits to small scale units and hands-on practices on machinery/process.
This enables them to prepare their own project report for which they are helped. Project reports
are duly appraised, evaluated, and corrected in consultation with the experts.

4. Technology Upgradation:

Small enterprises are regarded for their labour intensity and the capability to work with local
resources. In the past, this has often led to less emphasis on technology. Run-of-the-mill coupled
with functional packaging and inadequate, finishing have at times led to small sector products
being labelled as being substandard. This has a cascading impact on competitiveness.

In the Indian context, a desire to cut initial costs led to hand-me-down machines being purchased.
As small enterprises realized the need to link up with large ones, they are having a re-look at
technology options which would improve productivity, effectiveness, and competitiveness.

While sourcing technology, small businesses need to concentrate on the essential issues
discussed below:

i. Information about Technology:

For small units, information about technology options is often through word of mouth or from a
visit to an advanced unit. Only a few have access to technical literature, professional, journals or
information about new product launches. In India, much of this is changing. With the advent of
Internet, new vistas are opening up through electronic journals, catalogue downloads and
advanced search facilities.

The Technology Bureau for Small Enterprises (TBSE) (www(dot)techsmall(dot)com) promoted

with the assistance of the UN offers access to databases and information on technology. In
addition, NSIC has taken up an initiative to enhance technology options for SSIs.

Technology intervention in clusters offers nearby units an opportunity for a look and feel of
advanced technology. Entrepreneurs are also assisted to participate in overseas trade fairs to
update them with the latest technology worldwide. MSME tool rooms, MSME testing centers and
testing stations, MSME technology development centers and workshops also assist in this task.

ii. Actual Procurement of Technology:

Even with information, barriers to import of technology, technology transfer issues, vendor
capability, after-sales support, import procedures impede procurement. In India, the Asia Pacific
Centre for Transfer of Technology promotes match-making between buyer and seller and
facilitates procurement through escort services. Encouragement to import of capital goods has
also helped matters.

iii. Finance for Technology Upgradation:

Small enterprises look to external sources of funding for upgrading technology as withdrawing
money from business entails its own costs. In India, a technology upgradation and modernization
fund and a hire-purchase scheme attempts to meet this requirement. These are, however, funds at
normal lending costs. A new scheme called credit linked capital subsidy scheme for technology
upgradation in small industries has been put into place to reduce the cost of funds.

5. Industrial Infrastructure:

Government agencies have provided the following types of industrial infrastructure to SSIs:

i. Export Processing Zones (EPZ).

EPZ are special areas designated for providing export production or the processing of
manufactured products at low cost. Each EPZ has certain basic infrastructural facilities available
like developed land sites, standard designated factory buildings, roads, power, water, and
drainage.

ii. Industrial Parks:

The new focus in the specialized industrial clusters, both for the domestic and the export market,
is on the development of industrial or technology parks. In this initiative, the government has
created electronics hardware technology parks, software technology parks, biotech parks, etc.

iii. Integrated Infrastructual Development Centers (IIDCs):

IIDCs aim at augmenting infrastructural facilities in the rural and backward areas with a special
emphasis upon the linkage between agriculture and industry. The DODCs have proximity to the
rail head and road links, availability of water, telecommunications facilities, etc. for SSI and tiny
units.

6. Technical Training:

Various agencies provide technical training to SSIs for upgrading the technical skills of their
employees in specific areas. This is imperative to ensure that SSIs produce quality products which
can compete well against the products of the large industrial enterprises and multinational
corporations.

Government Support to Small Scale Industries – Institutional Structures and Assistance

Programmes

Building upon the problems faced by units in the small scale sector, the Government of India
undertook certain measures to assist these units.

These measures may be understood in two broad heads, viz.:

1. Institutional structures and

2. Assistance programmes.

1. Institutional Structure:

It is the responsibility of the state to provide for development in small scale industries sector. The
nodal agency for implementation of various assistance programmes for SSI sector is the State
Director of Industries. It is the director who undertakes measures for development of the sector
through his team of regional and district officers. Alongside, a range of central and state level
institutions also work to look into different aspects of developmental programmes.

The Central Ministry of Industry appoints the Development Commissioner (Small Scale
Industries), who heads the Small Industries Development Organization (SIDO) to formulate
policies, coordinate and monitor the development of SSIs.

It also seeks to provide technical, economic and management consultancy services to small
entrepreneurs through a network of 27 small industries, service institutes (SISIs), 31 branch
institutes, 37 extension centres, 18 field testing centres and a number of training and production
centres.

The National Small Industries Corporation (NSIC) is another central agency which basically
works to provide machinery to small enterprises on a hire-purchase basis. It also promotes
schemes to supply raw materials and components to small enterprises besides assisting them in
marketing their products. State governments have also set up their own State Industries
Corporations in order to provide for development of the sector.
Various All India and State level institutions like All India Handloom Board, the Khadi and
Village Industries Commission, the (Central) Handlooms and Handicrafts Board, the Central Sick
Board and the Coir Board, etc., have been set up primarily to target cottage and traditional
industries.

2. Assistance Programmes:

There are various assistance programmes that have been initiated to develop SSI sector by
Government both at Central and State levels.

These programmes include both:

i. Positive measures, and

ii. Negative measures.

i. Positive Measures:

(a) Technical Assistance:

There is a big room created for Government’s assistance in terms of technology and management
for small scale sector on account of inadequate managerial and technical expertise inbuilt in them.
Technical assistance to these units thus, involve identification of new lines of production,
provision of operational schemes indicating therein the details of production techniques and
equipment required, assistance to plant and machinery installation and timely solution for various
production problems.

Besides performing these extensive tasks, institutes set up especially for development of small
scale sector also organize common workshops and prototype and production centres to undertake
specific manufacturing processes and production of prototypes and machine tools, respectively for
the small scale industries.

Training programmes are also conducted for entrepreneurs, managers and workers. In 1993, a
scheme covering three major areas was introduced in order to promote the adoption of clean
technology by small firms. The areas covered under the scheme were – reduction of waste and
pollution from manufacturing process; recycling; collection, storage and processing of industrial
and household wastes for re-use, and effluent treatment and disposal.

Another project was undertaken by United Nations Industrial Development Organization on

similar lines. This primarily focused at reducing the colossal amount of waste generated by small
scale industries. In order to improve upon the standards of quality of SSI products, a quality
certification scheme was introduced in 1994. SSI units, under the scheme were granted assistance
through financial support and awareness programmes on account of acquiring ISO 9000 or similar
international certifications.

Specialized institutions and commodity boards provided assistance in technology in terms of

design development and improved production methods to traditional cottage industries. KVIC
also conducted special training programmes for supervisor, managers, technicians and artisans in
khadi and village industries.

Similarly, artisans in handicraft, sericulture and coir sector also attended such training workshops.
The Council for Development of Rural Technology (CART) – now renamed as CAPART
(Council for People’s Action and Development of Rural Technology) – acts as a nodal point for
coordination of all efforts for the dissemination of technology relevant for rural areas.

(b) Physical Facilities:

Small scale entrepreneurs receive developed basic infrastructure facilities such as power, water,
transport, etc., through the Industrial Estate Programme which initiated its operation in 1955. The
main objective of the programme is to promote industrialization in backward areas and to provide
the benefits of economies of scale to industries in production process.

A scheme to provide assistance for developing industrial areas has also been introduced by
SIDBI. The scheme works for extending assistance to bodies working to develop SSI sector such
as State Small Industries Development Corporations, State Infrastructure Development
Corporations, etc.

Schemes to develop backward areas will be accorded priority in the programme. NABARD also
launched a District Rural Industries Project in Mid-1993. The Project envisaged creating an
environment and infrastructure conducive to increased production and opportunities for income
generation by establishing commercially viable units in the rural sector. Alongside, about 1000
rural technology parks were developed to provide for infrastructure development in village
through a mega plan.

(c) Financial Assistance:

It is difficult for firms operating on small scale to raise loans from markets. Also, these units are
generally constrained with limited capital. Understanding the difficulties faced by the sector,
Government has accorded priority, to the sector in extending credit by financial institutions.

Learning from the experience of reluctant attitude of commercial banks to provide credit to small
entrepreneurs, the loans provided by banks to State Industrial financial corporations is also
included in priority credit. These financial corporations use these funds to extend credit to units in
SSI sector.

Also, commercial banks have been motivated to provide for medium term loans to these units in
order to meet their working capital needs. The loans to the sector through commercial banks are
provided at concessional rates. Hence, a policy of differential rates of interest has been adopted by
commercial banks.

Most of the financial needs of cottage and village industrial sector are fulfilled through budgetary
resource from the government. These resources from the government are channelized through the
specialized institutions developed to promote specific industries. The Reserve bank, through its
cooperative banking system also provides credit to handlooms and other traditional industries.

Small Industries Development Bank of India, SIDBI was set up in 1990 in order to promote,
finance development of industries in small sector, and coordinate the functions of institutions
engaged in promoting small units. It is an apex All India financial institution with its 25 offices in
different states. The equity worth of the institution at the time of its introduction was about Rs.250
crore.

(d) Supply of Raw Material:

As noted in problems of SSI sector, units in the sector are constrained with unavailability of raw
materials to undertake productive activities. To help the sector on this front, the State Small Scale
Industries Corporations have been delegated the responsibility to distribute these scarce raw
materials in different parts in each state.

However, the system brought with itself the inbuilt limitation to accord priority to relatively
efficient firms. In order to provide for uninterrupted supply of raw materials to small scale sector
so as to have a break free production process, the government has recently launched a scheme to
create buffer stock of these key raw materials. This buffer stock will act as an insurance against
their sudden supply disruption and consequent loss of industrial production.

(e) Marketing Assistance:

Since units in small scale sector are capital deficient, no attention is paid to market the produced
products.

Government assists the units in marketing their products in the following ways:

(i) Exclusive purchase of SSIs products by the government.

(ii) Differential pricing policy followed which provides preference to small scale enterprises in
public sector purchases.

(iii) Provision of quality control and testing facilities with a view to increase the competitiveness
of the products through small scale units.

(iv) State owned cooperatives and other assisted cooperative societies have opened sales emporia
in order to assist products from the sector.

In order to gather information on areas where both large and small sector units work in
partnership, a sub-contract exchange for SSIs has been set up recently. A consortium for small
scale units has been set up which is entrusted with a responsibility to channelize and identify
markets for SSI’s products in India and abroad.

Also, it is the responsibility of consortium to ensure the quality of products as per international
standards. Also, the consortium would provide for proper infrastructure and distribution system
along with timely payment to the sector against the supply of goods.

Also, Government has undertaken high expenditure to provide for obtaining ISO and ISO 9000
Certification to meet international standards of quality.

(f) Direct Industries Centres (DICs):

The scheme for DICs was introduced in May, 1978 to provide a “focal point” for development of
small industries. The main object to set up these centres was to develop modern small scale units
and provide institutional set up for traditional cottage industries.

The DICs were responsible to provide for all the services and support at pre-investment and post-
investment stages including assistance on raw materials, credit, marketing, training, etc. These
centres work as an intermediate party between the developmental blocs and specialized
institutions and small scale enterprises.

(g) Fiscal Incentives:

Numerous fiscal incentives have been provided to small scale industries by governments both at
centre and state level.

Some of them may be numbered as:

(1) Tax holidays for new industrial undertakings.

(2) Capital subsidy to industries in backward areas.

(3) Investment allowances.

(4) Price preference of 15 per cent over medium and large enterprises.

(5) Excise duty exemption, etc.

(h) Other Schemes:

Some special programmes have also been introduced by government along with the above
mentioned programmes of general nature. For example, Rural Industries Projects (RIP) and Rural
Artisan Programme (RAP) have been implemented to disperse small scale enterprises in backward
areas in order to ignite the developmental process in these areas.

The programmes provide subsidiary occupation to small and marginal farmers by upgrading their
skills and use of improved tools and equipments. Another scheme introduced by Government for
development of backward areas was development of ancillary units around large scale industries
in order to produce raw material for them.

However, arguments have been placed both in favour and against the scheme. While some argue
that development of such units would make artisans highly dependent on the parent company.
Others have considered development of such ancillary unit’s nodal agent to bring about
industrialization in backward areas.

ii. Negative Measures:

(a) The most important of the negative measures adopted by Indian government is the policy of
reservations of product lines. The number of reserved product brought down to 21 from about
873. However, the reservation policy of the government could not deliver the projected results.

It could not improve upon the quality and technology of the products in SSI sector. Hence, with
introduction of New Policy for Small Sector in August, 1991, big industries were allowed to float
small firms by holding about 24 per cent share and manufacture reserved products.
Likewise, the government has allowed enhancement of capacities through investments in plant
and machinery in all the reserved areas, provided the additional investments generate incremental
exports of 50 per cent of the total turnover with effect from February 7, 1997 as against the
requirement of 75 per cent stipulated earlier. This will formally do away with the policy of
reservation.

(b) The capacity in a few large industries has been pegged at the exiting level, so as to augment
labour-intensive development in the small sector.

(c) Another negative measure is the Government’s decision not to give industrial licenses to new
industrial units within the limits of large metropolitan cities having population of more than 1
million so as to promote dispersal of industries to the less congested areas.

(d) Likewise, the Government has decided to reserve purchase of a number of items by the public
sector exclusively from Khadi and Village Industries and small scale units. The goods of KVI
would be given preference over the private sector goods in buying or selling of goods from the
public sector.

Government Support to Small Scale Industries – 8 Important Measures Adopted by the

Government to Improve the Lot of Small Business Sector

Small business sector, on the one hand, is crucial for the economic development of the country
and on the other hand, it faces severe financial, technological and managerial problems.

Following is a brief account of the important measures adopted by the Government to

improve the lot of small business sector:

1. The Government has set up a new ministry of Small Scale Industries and Agro & Rural
Industries for looking after small scale business units.

2. The Government gives purchase preference to products manufactured by the small sector.

3. More than 800 items have been reserved for exclusive production by the small scale sector.

4. SIDBI (Small Industries Development Bank of India) has formulated a credit guarantee trust
fund for small industries for guaranteeing the loans and advances up to Rs.10 lakhs, without
collateral or third party guarantees.
5. The investment in small scale business is generally upto Rs.1 crore. However, in case of high-
tech and export oriented units, it has been raised to Rs.5 crores, so as to enable these units to
upgrade technology and gain competitive edge.

6. Government has permitted limited partnership for small businesses to enable them to attract
capital from friends and relatives, who will have only limited liability. In fact, limited
partnerships, otherwise, are not allowed in India.

7. There are many concessions to small scale units in matters of levy of excise duty, custom duty
and sales-tax. The income-tax also grants relief to small scale business units.

8. The Government has announced a new policy package for small scale industries. This package
aims at providing small sector with the same concessions as—raw materials, bank credit, power
and other infrastructure as available to large scale and medium scale industries.