Entrepreneurship

1. UNIT III
KMBN 302
Dr. Sadhvi Mehrotra

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Sources of Finance

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Introduction
1. Finance is the lifeblood of business.
2. No business can be carried out without Finance.
3. There are several sources of Finance which can
be categorized as Internal or External, Long Term
or Short Term and Fixed and Working
Capital finance.
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4. want big impact?
USE BIG IMAGE
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1.
Long term Financing
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1. Long term financing is a form of financing that is
provided for a period of more than a year.
2. Long term financing is also known as Fixed Capital
Finance.
3. Below are the purpose for which long term finance is
availed:
- finance fixed assets
- Expansion of companies
- Increasing facilities
- Construction of projects on a large scale
- Acquisition of companies
4. Sources: Owner’s equity, term loans from financial
institutions, credit facilities from commercial banks, hire
purchase facilities from specific organisations etc.

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Security Financing
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- These are issued to the general public.
- These may be of three types:
1.Equity shares - Such a shareholder has to share the profits
and also bear the losses incurred by the company. Equity
shareholders are regarded as the real owners of the company.
2.Preference shares - A share which entitles the holder to a
fixed dividend, whose payment takes priority over that of
ordinary share dividends.
3.Debentures: A debenture is a marketable security that
businesses can issue to obtain long-term financing without
needing to put up collateral or dilute their equity. A debenture
is a type of long-term business debt not secured by any
collateral.
4.Public Deposit: It implies any money received by a company
through the deposits or loans collected from the public.

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Retained Earnings:
The company may
not distribute the
whole of its profits
among its
shareholders. It may
retain a part of the
profits and utilize it
as capital for further
long term activities.
Internal Financing
Depreciation Fund: A
fund set up by a
company to provide
money to buy new fixed
assets. Every year, the
fund invests an amount
of money equal to an
existing asset's
depreciation allowance,
giving the company
money that can be used
to buy new assets
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Loan Financing
Term Loans from Banks:
Many industrial
development banks,
cooperative banks and
commercial banks grant
medium term loans for a
period of 3-5 years for
supporting the long term
capital investments by
the company viz.,
purchase of Fixed Assets,
expansion etc
Loan from Financial
Institutions:
There are many
specialized financial
institutions established by
the Central and State
governments which give
long term loans at
reasonable rates of
interest for the long term
capital investments by the
company.
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2.
Short term Financing
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Meaning
Short Term Business Finance are required to meet
its day to day expenses.
It enables continuous availability of liquid cash to
meet day to day expenses.
It is also known as Working Capital Finance.
The purpose of short term business finance is as
below: Purchase of raw material , Paying wages to
workers, Payment of water and electricity charges
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Cash Credit - It is an
arrangement whereby
banks allow the
borrower to withdraw
money upto a specified
limit.
Bank Finance
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Commercial banks grant short-term finance to business firms
which is known as bank credit.
Bank overdraft - When a
bank allows its depositors or
account holders to withdraw
money in excess of the
balance in his account upto
a specified limit, it is known
as overdraft facility.
Bills Discounting - Banks also
advance money by discounting
bills of exchange, promissory
notes and hundies. When these
documents are presented before
the bank for discounting, banks
credit the amount to customer's
account after deducting discount.
Short term Bank Loan -
When a certain amount is
advanced by a bank
repayable after a specified
period, it is known as bank
loan. The period is usually
short like 1 - 3 years.

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Other Sources:
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- Trade credit - Trade credit refers to credit granted to
manufacturers and traders by the suppliers of raw material,
finished goods, components, etc
- Customers’ advances - Customers' advance represents a
part of the payment towards price on the product (s) which
will be delivered at a later date. Customers generally agree
to make advances when such goods are not easily
available in the market or there is an urgent need of goods.
- Instalment credit - Only a small amount of money is paid
at the time of delivery of such articles. The balance is paid
in a number of instalments. Interest is charged by the
supplier for extending credit.

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Modern Sources of
Finance

15. ANGEL INVESTING: An
angel investor is an
experienced industry
person who provides
needed funds for small
startups or entrepreneurs.
Apart from funds, Angels
invest their time,
experience, network and
energy in business they
invest in. Sanjay Mehta, an
Angel Investor has invested
in several startups viz.,
OYO Rooms, FabAlley,
OrangeScape etc.
VENTURE CAPITAL:
Venture capital (VC) is
money provided to seed
early-stage, emerging
growth companies. Venture
capital funds invest in
companies in exchange for
equity in the companies
they invest in, which usually
have a novel technology or
business model in high
technology industries, such
as biotechnology and IT.
Foodpanda is funded by a
Venture Capital Firm,
Rocket Internet

16. Institutional Finance to Entrepreneurs

17. Introduction
• A number of support institutions set up by central
and state governments help the entrepreneurial
activities in various ways.
• The activities cover a wide range of services like
fi
nancing, technical guidance, equipment support,
training, marketing and providing subsidy and
grants.

18. Financial Institutions
• Industrial Development Bank of India (IDBI)
• Industrial Finance Corporation of India (IFCI)
• Small Industries Development Bank of India (SIDBI)
• National Small Industries Corporation Ltd (NSIC)
• State Small Industries Corporation (SSIC)
• Regional Rural Banks (RRBs)
• State Financial Corporation’s (SFCs)
• State Industrial Development Corporations (SIDCs)
• Cooperative Banks and Gramin Banks

19. Institutions for Technical Guidance
• Small Industries Development Organisation (SIDO)
• District Industries Centres (DICs)
• Technical Consultancy Organisations (TCOs)
• Small Industries Service Institutes (SISIs)
• State Small Industries Development Corporations (SSIDCs)
• Industrial Development Corporation (IDCo)
• Agricultural Promotion and Investment Corporation of
Orissa Limited (APICOI)

20. Training Institutions
• National Institute for Entrepreneurship and Small Business
Development (NIESBUD)
• Entrepreneurship Development Institute of India (EDII)
• Small Industries Service Institute (SISI)
• National Bank for Agriculture and Rural Development
(NABARD)
• Council for Advancement of Peoples Action and Rural
Technology (CAPART)
• District Industries Centre (DIC)

21. Industrial Development Bank of India (IDBI):
The IDBI was established on July 1, 1964 by the Government of India under an Act of
Parliament as the principal financial institution in the country as DFI
Main Functions of IDBI:
1. To provide financial and credit facilities for growth in the Indian industry.
2. The financial assistance has been indirect in the form of refinancing of loans.
3. In order to assist the small scale sector, the IDBI has set up Small Industries Development Fund
(SIDF) in May 1986. This fund basically aims at providing a focal point to co-ordinate financial and
non-financial inputs required for growth of small industries sector.

22. 4. In association with Government of India, IDB1 has constituted National Equity Fund
(NEF) to prevail equity type of support to tiny and small scale units which are engaged
in manufacturing activities. The scheme is administered by IDB1 through nationalized
banks.
5. The IDBI has also introduced the single window assistance ‘scheme for grant of term
loans and working capital assistance to tiny, small and medium scale enterprises.
6. The IDB1 has also set up a Voluntary Executive Corporation Cell (VECC) to use the
services of experts, professionals for counseling small units and for providing
consultancy support in specified areas.

23. Industrial Finance Corporation of India Ltd (IFCI)
• The Industrial Finance Corporation of India was set up by the
Government of India in July 1948.
• It is an important financial institution which gives financial
assistance to the entrepreneurs through rupee and foreign currency
loans, direct subscriptions to shares, debentures and guarantees.
• It also extends other financial facilities like equipment
procurement, equipment finance, buyer’s and supplier’s credit,
equipment leasing and finance to leasing and hire-purchase
companies.

24. The IFCI has devised new promotional schemes such as:
• Consultancy fees, subsidy schemes for assisting small scale
entrepreneurs in marketing sector.
• Interest subsidy schemes for women entrepreneurs.
• Encouraging the modernization of tiny, small and medium
scale industries

25. Small Industries Development Bank of India (SIDBI):
• SIDBI was set up in April 1990 as a wholly owned subsidiary of IDBI
(Industrial Development Bank of India) to provide financial assistance to
the entrepreneurs under an Act of the Parliament, namely Small
Industries Development Bank of India Act 1989.
• The Bank has been delinked from IDBI with effect from March 27, 2002.
The Bank caters all SSIs –tiny, village and cottage—through its Head
Official at Lucknow.

26. FUNCTIONS
The important functions of SIDBI are:
To initiate steps for technological up-gradation and modernization of existing units.
To expand the marketing of the products of SSI sector in domestic and international markets.
To promote employment oriented industries especially in semi- urban areas to create employment
opportunities and thereby checking migration of people to urban areas.
To discount and rediscount bills arising from sale of machinery to or manufactured by industrial units in
the SSI sector.
To provide services like leasing, factoring etc. to industrial concerns in the SSI sector.
To expand financial support to State Small Industries Development Corporation for providing scare raw-
materials to industrial units in SSI sector.
To grant loan and advances to any person engaged in exporting or executing any turnkey project abroad.
To subscribe to or purchasing stocks and shares, bonds and debentures of any state /financial
Corporations.

27. Industrial Credit and Investment Corporation of India Ltd.
(ICICI):
The ICICI was established by the Government of India under the Companies Act
1956, with the objective of providing
fi
nancial assistance to various sectors.
The main functions of ICIC1 are as follows:
Financial assistance is extended by way of rupee and foreign currency loans and
direct subscriptions to shares, debentures and guarantees.
Financial facilities such as deferred credit, leasing credit, installment sale, asset
credit and venture capital are given by ICICI.

28. SMALL SCALE INDUSTRIES (SSI)

29. INTRODUCTION:
• The Small scale industry (SSI) has emerged as India’s engine of growth in the
new millineum. By the end of March 2000, SSI sector accounted for nearly 40 %
of gross value of output in the manufacturing sector and 35 % of total exports
from the country.
•The most important challenge faced by the SSI and tiny sector is that of
growing competition both globally and domestically.
The sector has also been facing problems which relate to
1) Credit 2) Infrastructure3) Technology
4) Marketing 5) Delayed payment

30. “A unit employing less than 50 persons if using power and less than 100 persons without
the use of power and with capital assets not exceeding Rs.
fi
ve lakhs.”
- The Small Scale Industries Board(1955)
“Undertakings having investment in
fi
xed assets in plants and machinery not exceeding
Rs. 15 lakhs and engaged in the manufacturing of parts of components, sub-assemblies or
intermediaries and proposes to supply at least 50% of its production to one or more parent
unit and such ancillary industry shall not be a subsidiary of or owned or controlled by any
other undertaking.”
- Government of India (1980)
Government of India (2000)- “Small scale undertakings are those which are engaged in
manufacturing, processing or preservation of goods and in which investment in plant and
machinery (original cost) does not exceed Rs. 10 crore.”
DEFINITIONS

31. Support Organisations
1. Small industries development organisation (SIDO)
2. Small industries service institute (SISI) - it’s a service agency
3. National small industries corporation Ltd. (NSIC)
4. Small industries development bank of India (SIDBI)
5. Technology bureau for small enterprises ( TBSE)
6. Maharashtra industrial development corpn. (MIDC)
7. Maharashtra small scale industries development corpn. Ltd.
(MSSIDC)
8. Maharashtra industrial & technical consultancy services ltd.
(MITCON)

32. CLASSIFICATION OF SMALL SCALE INDUSTRIES
Traditional sector Modern Sector
1. Handicrafts 1. Power Loom
2. Handlooms
3. Khadi, village and
Cottage industries
4. Coir
5. Sericulture

33. Characteristics of Small Scale Industries
• Small scale industries generally have a single ownership, which means it either
has a sole proprietorship structure or a partnership.
• The management of the small scale industries rests with the owners and
therefore, the owner plays an active role in the day to day functions of the
business.
• Small scale industries are very much labor intensive, hence there is limited use
of technology.
• Small scale industries are flexible and adaptable to a changing business
environment, unlike the large industries.
• Small scale industries work in a restricted area which makes them able to meet
local and regional requirements.
• Small scale industries use resources that are local and readily available, which
helps the economy fully utilise the natural resources and bear minimum
wastage.

34. Objectives of Small Scale Industries
• To create job opportunities for the population.
• To help in the development of the rural areas of the economy.
• To play an active role in reducing the regional imbalances in the nation
• To help in improving the standard of living for people in rural areas.
• To ensure there is equal distribution of wealth and income

35. Role of Small Scale Industries in the Indian Economy
• They are the major sources of employment for the people living
in rural areas and therefore, play a vital role in generating
employment in an economy.
• Small scale industries account for almost 40% of the total goods
and services in India hence, is a very important contributor to
the economy.
• Small scale industries help in promoting the Make in India
initiative which helps in increasing demand for local made
products.
• Majority of the export materials are provided to the Indian
companies from the small scale industries. It is estimated that
around 50% of all the material exported are produced from such
industries.

36. Examples of Small Scale Industries
1.Paper Bags industries
2.Leather belt manufacturing industries
3.Small toys manufacturing industries
4.Bakeries
5.School stationeries
6.Water bottles manufacturing industries
7.Beauty parlours
8.Pickle manufacturing industries
9. Incense stick manufacturing industries

37. India’s Top Small Scale Industries
1. Chocolate
Chocolates produced at home have always been a popular treat among people of all ages.
Chocolate is produced by a vast number of small businesses, particularly in hill station
areas. The chocolate market in India is expected to be worth roughly Rs172 billion.
2. Toilet Paper And Paper Napkins
Food, hospitality, and entertainment, three of India’s fastest-growing industries, are rapidly
using paper napkins and toilet paper. A paper napkin manufacturing plant with a capital
investment of Rs. 10 lakhs can generate an annual sales turnover of Rs. 1 crore.
3. Making Candles
The candle-making enterprise only requires a capital investment of roughly Rs.50000. It
helps a lot of women by providing job options in remote areas. From Diwali to Christmas,
lights and candles are an important feature of many Indian ceremonies.

38. India’s Top Small Scale Industries
4. Spices
Spices have an important role in Indian cuisine. As a result, there will always be a high
need for spices. However, India’s spice business is so large that it also caters to foreign
needs. Spices worth $3.65 billion were exported from India in the fiscal year 2021. The
sector is extremely profitable, with annual revenue of over 40000 crores.
5. Incense and Camphor Sticks
India is the world’s largest manufacturer of incense sticks, which it sends to a number of
countries.

39. ROLE OF GOVERNMENT IN
PROMOTING

40. INTRODUCTION
Government plays a very important role in developing entrepreneurship.
The government set programmes to help entrepreneurs in the field of
technique, finance, market and entrepreneurial development so that
they help to accelerate and adopt the changes in Industrial
development.
Various institutions were set up by the Central and State government in
order to fulfill the objectives.
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41. CENTRAL LEVEL INSTITUTIONS IN
PROMOTING

42. STATE INDUSTRIES
DEVELOPMENT ORGANISATION
(SIDO)
42

43. 43
• Established in October 1973 under Ministry of Trade,
Industry and Marketing.
• It is an apex body and nodal agency for formulating,
coordinating and monitoring the policies and
programmes for promotion and development of small-
scale industries.
• To evolve a national policy for the development of small-scale
industries.
• To co-ordinate the policies and programmes of various State
Governments.
• To collect data on consumer items imported and then,
encourage the setting of industrial units to produce these items
by giving coordinated assistance

44. ✣ To provide consultancy and training services to
strengthen the competitive ability of small-scale
industries.
✣ To render marketing assistance to small-scale
industries to effectively sell their products.
✣ To make provision to technical services for
improving technical process, production
planning, selecting appropriate machinery, and
preparing factory lay-out and design.
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45. 45
ALL INDIA SMALL SCALE
INDUSTRIES BOARD (AISSIB)

46. • Small Scale Industries Board (SSIB) was constituted in 1954 by the
government of India.
• Its primary aim was to provide advisory for the growth of small scale
industries in the country.
• The board was constituted to ease coordination and inter-institutional linkages.
• All the issues related to the advancement and development of small scale
industries is identi
fi
ed and proper measures are then suggested to the
government.
• The board is headed by the industries minister of the central government.
• The SSBI is formed by 50 members which comprises of the state industry
ministers, a few member parliament, and secretaries of various departments
including
fi
nance institutions, public sector undertakings, industry associations,
and distinguished people expert in the given arena.
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47. NATIONAL INSTITUTE OF
ENTREPRENEURSHIP AND SMALL
BUSINESS DEVELOPMENT (NIESBUD)
47

48. 48
• The National Institute for Entrepreneurship and Small
Business Development is a premier organization of the
Ministry of Skill Development and Entrepreneurship, engaged
in training, consultancy, research, etc. in order to promote
entrepreneurship and Skill Development.
• The major activities of the Institute include Training of
Trainers, Management Development Programmes,
Entrepreneurship-cum-Skill Development Programmes,
Entrepreneurship Development Programmes and Cluster
Intervention.
• The Institute has been actively delivering International
Trainings for the ITEC nation participants under the aegis of
Ministry of External Affairs. The institute has been financially
self-sufficient since 2007-08.

49. 49
• MAJOR ACTIVITIES:
1.Training
2.Research and Evaluation studies
3.Development of course and
syllabus
4.Publications
5.Training aids
6.Online Learning modules
7.Consultancy services

50. NATIONAL SMALL INDUSTRIES
CORPORATION LTD. (NSIC)
50

51. 51
National Small Industries Corporation (NSIC) was formed under the union
ministry. It was setup in 1955 to help small scale industries in its growth
and expansion. The benefits offered by the enterprise include:
1. Single point registration: Registration under this scheme for enabling
them to participate in government and public sector undertaking tenders
is made to be an easy task.
2. Information service: It’s always updated with the latest relevant
information on
technology, policies, and business leads.
3. Assistance for Procurement of Raw Material: Small scale industries can
get raw material on suitable conditions.
4. Financial Assistance Scheme: Sanctions term loan and working capital
credit limit of
small industries from banks.
5. Performance and credit rating: NSIC provides subsidized credit rating
by international
agencies. It ranges to up to 75% and can help industries get credit terms
from banks to
export orders from foreign buyers.
6. Marketing Assistance: Small Scale Industries registered under the
scheme are provided full guidance on how to market their products.

52. NATIONAL PRODUCTIVITY
COUNCIL (NPC)
52

53. • NPC or the National Productivity Council is an autonomous
institution functioning under the advisory and supervision of the
ministry of Industry.
• It is controlled by a tripartite governing council with equal
representation from the government, industry, and trade unions.
• The objective of the organization can be counted as:
• 1. Enhance productivity – NPC acts a channel to enhance productivity
of all sectors including industries and agriculture based work.
• 2. Advisory body – It has specialized divisions to provide custom
solutions to industries and agricultural units. These divisions consist
of trained consultants who look into various issues related to energy
management, industrial and plant engineering, informal sector, HRD,
and others.
53

54. STATE LEVEL INSTITUTIONS IN
PROMOTING

55. District Industries Centers (DICs)
• DIC program was instituted in May, 1978, as a centrally sponsored scheme.
• DIC aims at extending promotion of small-scale and cottage industries beyond
big cities and state capitals to district headquarters.
• DIC was established with the aim of generating greater employment
opportunities especially in rural and backward areas in the country.
• DICs operate through Sate funding provisions.
• Services provided by DICs are as follows – (i) economic investigation of local
resources (ii) supply of machinery and equipment (iii) provision of raw materials
(iv) arrangement of credit facilities (v) marketing (vi) quality inputs (vii)
consultancy.
55

56. State Financial Corporation (SFCs)
• The State small and medium enterprises function to promote balanced regional growth,
catalyze investment, generate employment and widen ownership base of industry.
• Financial assistance is provided by way of term loans, direct subscription to equity/debentures,
guarantees, discounting of bills of exchange and seed capital assistance.
• SFCs operate a number of schemes of re
fi
nance of IDBI and SIDBI and also extend equity type
assistance.
• SFCs have tailor-made schemes for artisans and special target groups such as SC/ST, women,
ex-servicemen, physically challenged and also provide
fi
nancial assistance for small road
transport operators, hotels, tourism-related activities, hospitals and so on.
• Under Single Window Scheme of SIDBI, SFCs have also been extending working capital along
with term loans to mitigate the dif
fi
culties faced by SSIs in obtaining working capital on time.
56

57. State Industrial Development /
Investment Corporation (SIDC/SIIC)
• SIDC was started as per the regulations laid down by the Companies Act, 1956.
• It acts as a catalyst to the Stale level SSI promotion.
• SIDC promotes industrialization through land and plot development along with
facilities like roads, power, water supply, drainage and other amenities that are
required for industry to develop and
fl
ourish.
• They also extend assistance to small-scale sector by way of term loans,
subscription to equity and promotional services.
• 11 out of 28 SIDCs in the country also function as SFCs and are termed as
Twin-function SIDCs.
57

58. India’s efforts at promotion
Entrepreneurship and Innovation

59. START UP INDIA
Startup India is an initiative of
the Government of India. The campaign
was
fi
rst announced by Indian Prime
Minister, Narendra Modi during his speech
on 15 August 2015.
The action plan of this initiative is
focussing on three areas:
• Simpli
fi
cation and Handholding.
• Funding Support and Incentives.
• Industry-Academia Partnership and
Incubation
• 10,000 crore startup funding pool.
• Reduction in patent registration fees.
• Improved Bankruptcy Code, to ensure a 90-
day exit window.
• Freedom from inspections for the
fi
rst 3 years
of operation.
• Freedom from Capital Gain Tax for
fi
rst 3
years of operation.
• Freedom from tax for the
fi
rst 3 years of
operation.
• Self-certi
fi
cation compliance.
• New schemes to provide IPR protection to
startup
fi
rms.
• Built Startup Oasis as Rajasthan Incubation
Center.

60. Make in INDIA
The Make in India initiative was launched
by Prime Minister in September 2014 as
part of a wider set of nation-building
initiatives. Devised to transform India into
a global design and manufacturing hub,
Make in India was a timely response to a
critical situation.
The three major objectives were:
(a) To increase the manufacturing sector’s
growth rate to 12-14% per annum in order
to increase the sector’s share in the
economy
(b) To create 100 million additional
manufacturing jobs in the economy by
2022
(c) To ensure that the manufacturing
sector’s contribution to GDP is increased
to 25% by 2022 (revised to 2025) from the
current 16%.

61. ATAL INNOVATION MISSION
❖ Atal Innovation Mission (AIM) is Government of India’s
fl
agship initiative to create and promote a culture of innovation
and entrepreneurship across the length and breadth of our country. AIM’s objective is to develop new programmes and
policies for fostering innovation in different sectors of the economy, provide platforms and collaboration opportunities for
different stakeholders, and create an umbrella structure to oversee the innovation & entrepreneurship ecosystem of the
country.
❖ Atal Innovation Mission (AIM), NITI Aayog is Government of India's
fl
agship initiative to promote a culture of innovation
and entrepreneurship in the country and was setup in 2016.
❖ Over the last 4 years, AIM has launched the Atal Tinkering Lab (ATL) program. ATL is a state-of-the-art space established
in a school with a goal to foster curiosity and innovation in young minds, between grade 6th to 12th across the country
through 21st century tools and technologies such as Internet of Things, 3D printing, rapid prototyping tools, robotics,
miniaturized electronics, do-it-yourself kits and many more.

62. Support to Training and Employment Programme for Women
❖ STEP Scheme aims to provide skills that give
employability to women and to provide
competencies and skill that enable women to
become self-employed/entrepreneurs. The Scheme
is intended to bene
fi
t women who are in the age
group of 16 years and above across the country.
❖ The scheme has 2 fold objectives:
❖ To provide skills that give employability to
women.
❖ To provide competencies and skills that enable
women to become self-employed/entrepreneurs.

63. DIGITAL INDIA
• The Indian Government launched the Digital India campaign to make government services available to
citizens electronically by online infrastructure improvement and also by enhancing internet connectivity. It
also aims to empower the country digitally in the domain of technology. Prime Minister Narendra Modi
launched the campaign on 1st July 2015.
• Digital India Mission is mainly focused on three areas:
• Providing digital infrastructure as a source of utility to every citizen.
• Governance and services on demand.
• To look after the digital empowerment of every citizen.
• Digital India was established with a vision of inclusive growth in areas of electronic services, products,
manufacturing, and job opportunities.
• Nine pillars of Digital India are: Broadband highways, Universal Access to Mobile Connectivity, Public
Internet Access Programme, e-governance, e-kranti, Information for All, Electronics Manufacturing, IT for
Jobs and Early Harvest Programmes.

64. Export Oriented Units

65. Introduction
• Export-oriented units are units undertaking to export their entire production of goods. EOUs can engage in
manufacturing, services, development of software, repair, remaking, reconditioning, re-engineering
including making of gold/silver/platinum jewellery and articles etc.
• The EOU scheme is formulated by Government of India in the Ministry of Commerce & Industry.
• The Export Oriented Units enjoys the below following bene
fi
ts:
• EOUs has a permit to procure raw material or capital goods duty-free, either through import or through
domestic sources;
• EOUs are eligible for reimbursement of GST;
• EOUs are eligible for reimbursement of duty paid on fuels procured from domestic oil companies;
• Fast track clearance facilities;
• Exemption from industrial licensing for the manufacture of items reserved for SSI sector.

66. Eligibility Criteria of EOU
• For the status of EOU, the project must have a minimum investment of Rs.1 crore in
plant and machinery. This condition does not apply for software technology parts,
electronics hardware technology parks and biotechnology parks. Further, EOU involved
in handicrafts, agriculture, animal husbandry, information technology, services, brass
hardware and handmade jewellery does not have any minimum investment criteria.

67. Objectives of EOU
(a) Boosting exports;
(b)Earning foreign exchange;
(c) Attracting foreign investment;
(d)Generating employment;
(e) Backward and forward linkage by way of sourcing of raw material from
and supply of
fi
nished goods to DTA;
(f) Attracting latest technology into the country;
(g)Upgrading the skill and creating source of skilled man-power;
(h)Development of backward area.

68. MAJOR SECTORS IN EOUs
❖ Granite
❖ Textile/ Garments
❖ Food Processing
❖ Chemicals
❖ Computer software
❖ Pharmaceuticals
❖ Gems and Jewellery
❖ Engineering Goods
❖ Electrical Goods

69. Incentives to EOUs
❖ No import licences are required by the EOU units and import of all industrial inputs exempt from customs
duty.
❖ Supplies from the DTA to EOUs are regarded as deemed exports and are hence exempt from payment of
excise duty which means that high quality inputs are available at lower costs.
❖ On ful
fi
llment of certain conditions, EOUs are exempted from payment of corporate income tax for a block of
5 years in the
fi
rst 8 years of operation.
❖ Industrial plots and standard design factories are available to EOUs at concessional rates.
❖ Single window clearance for EOU. For example, the State Government of Kerala as well of Karnataka has
constituted single window clearance mechanisms such as District Single Window Clearance Board (in Kerala)
and Karnataka Udyog Mitra (in Karnataka) for the purpose of speedy issue of various licences, clearances.
❖ Duty free goods to be utilized over a period of 3 years.

70. Fiscal Incentives
• Fiscal Incentives available to 100% EOUs
• Exemption from Customs and Central Excise duties on import/local procurement of Capital
goods, raw materials, consumables, spares, packing material etc.
• Reimbursement of Central Sales Tax (CST) on purchases made from Domestic Tariff Area (DTA)
• Corporate Tax Holiday upto 2010
• CENVAT ( Central Value added tax) credit on Service Tax paid
• Reimbursement of duty paid on fuels procured from domestic oil companies as per the rate of
Drawback noti
fi
ed by the DGFT ( Directorate general of foreign trade) from time to time.

71. How to get EOU status?
• An EOU can opt out of the scheme after getting approval from the Deputy Commissioner (DC)
of Customs. But, such exit is subject to payment of applicable taxes of Excise and Customs,
IGST, SGST, CGST and compensation cess, if any, as per the industrial policy in force. Also, if
the unit could not meet its obligations, it shall be subject to penalty at the time of exit.
• If the entity ceasing its operations is in the manufacture of gems and jewellery, then all the gold
and other precious metals available for its manufacture are given to an agency as speci
fi
ed by
DC at a price determined by such agency.

72. Attractive policies
• EOU can import second hand capital goods without any restrictions
• Export to third party is permitted
• 100 percent FDI is permitted through the route speci
fi
ed in SEZ
units
• They can process and export rice
• Can obtain foreign currency loans

73. Micro, Small and Medium
Enterprises (MSME)

74. De
fi
nition
After 14 years since the MSME Development Act came into existence in 2006, a revision in MSME
de
fi
nition was announced in the Atmnirbhar Bharat package on 13th May, 2020.
As per this announcement, the de
fi
nition of Micro manufacturing and services units was increased to
Rs. 1 Crore of investment and Rs. 5 Crore of turnover.
The limit of small unit was increased to Rs. 10 Crore of investment and Rs 50 Crore of turnover.
The Government of India on 01.06.2020 decided for further upward revision of the MSME De
fi
nition.
For medium Enterprises, now it will be Rs. 50 Crore of investment and Rs. 250 Crore of turnover.

75. Important Points
• A new composite formula of classi
fi
cation for manufacturing and service units has been noti
fi
ed.
• There will be no difference between manufacturing and service sectors.
• A new criterion of turnover is added.
• In India, MSMEs contribute nearly 8% of the country’s GDP, around 45% of the manufacturing output, and
approximately 40% of the country’s exports. It won’t be wrong to refer them as the ‘Backbone of the country.’
• A provision of
• An arrangement of loans to MSMEs worth of Rs. 3 lac crores
• An offer for MSMEs to get a Moratorium period of 12 months
• Consideration of Manufacturing and Service MSMEs as the same entity.
• MSM is a granted a repayment Tenure of 48 months
• MSMEs are assured a 100% Credit Guarantee
• Reclassi
fi
cation of MSMEs will bene
fi
t approximately 45 Lac units.

76. MSME policy in Uttar Pradesh
• On September 29, 2022, the Department of Micro, Small and Medium Enterprises (MSME) of
Uttar Pradesh issued a government order to implement the MSME Policy-2022. The policy will
remain in force till September 2027.
• MSME Minister Rakesh Sachan said that the state government will bear the one-time guarantee
fee charged by banks on collateral free loans (i.e. loans without collateral) of up to Rs 2 crore to
entrepreneurs investing in micro, small and medium industries in the state.
• For new micro industry, 50 percent of the annual interest payable on the loan (maximum Rs 25
lakh) per unit will be given for
fi
ve years.
• Entrepreneurs will be given a subsidy of 10 to 25 percent on capital investment, 60 percent on
loan interest to Scheduled Castes, Scheduled Tribes and women entrepreneurs.
• Tobacco production, gutka, pan masala, alcohol, aerated beverages, carbonated products,
manufacture of
fi
recrackers, plastic carry bags (less than 40 microns), plastic bags of thickness
classi
fi
ed by the State Government from time to time in the prohibited category and from time to
time- This policy will not be applicable to investment proposals for products categorized in the
Restricted Category List from time to time.

77. MSME SCHEMES launched by Government
1. Udyog Aadhaar Memorandum:
Aadhaar card is a 12 digit number given to all individuals by the government. In this,
the Aadhaar card is a mandatory requirement. The bene
fi
t of registering in this
scheme is the ease in availing credit, loans, and subsidies from the government.
Registration can be done both ways in the online mode or the of
fl
ine mode.
2. Zero Defect Zero Effect
In this model, goods that are manufactured for export have to adhere to a certain
standard so that they are not rejected or sent back to India. T
o achieve this the
government has launched this scheme. In this, if the goods are exported these are
eligible for some rebates and concessions.

78. MSME SCHEMES launched by Government
Quality Management Standards & Quality T
echnology T
ools
Registering in this scheme will help the micro, small and medium enterprises to
understand and implement the quality standards that are required to be maintained
along with the new technology. In this scheme, activities are conducted to sensitize
the businesses about the new technology available through various seminars,
campaigns, activities etc.
Grievance Monitoring System
Registering under this scheme is bene
fi
cial in terms of getting the complaints of the
business owners addressed. In this, the business owners can check the status of
their complaints, open them if they are not satis
fi
ed with the outcome.

79. MSME SCHEMES launched by Government
Incubation
This scheme helps innovators with the implementation of their new design, ideas or
products. Under this from 75% to 80% of the project cost can be
fi
nanced by the
government. This scheme promotes new ideas, designs, products etc.
Credit Linked Capital Subsidy Scheme
Under this scheme, new technology is provided to the business owners to replace
their old and obsolete technology. The capital subsidy is given to the business to
upgrade and have better means to do their business. These small, micro and medium
enterprises can directly approach the banks for these subsidies.
Women Entrepreneurship
This scheme is especially started for women who want to start their own business.
The government provides capital, counselling, training and delivery techniques to
these women so that they manage their business and expand it.