Entrepreneurship development - Institutional Assistance

UNIT 5
MR.T.SOMASUNDARAM
ASSISTANT PROFESSOR
DEPARTMENT OF MANAGEMENT STUIDES
KRISTU JAYANTI COLLEGE (AUTONOMOUS)
BENGALURU1Unit 5 – Institutional Assistance
INSTITUTIONAL
ASSISTANCE

UNIT 5
INSTITUTIONAL ASSISTANCE
Financial Assistance through SFCs,
SIDBI, Commercial bank, KSIDC,
KSSIC, IFCI; Non – financial
assistance from DIC, SISI, EDI, SIDO,
AWAKE, TCO, TECKSOK, KVIC;
Financial Incentives for SSI and Tax
Concessions’ Industrial Estates – its
roles and types.
2Unit 5 – InstitutionalAssistance

Introduction:
 Due to Industrial revolution and reemergence of small –
scale industries, there is change in Indian economy.
 Widening of Small scale industrial structure has been their
for past few decade.
 Small industries increased their installed capacity and
output, but wide range of new small industries has also
came in to existence.
 Small scale industries and its scope of operation have
brought the importance of provisional of administrative and
institutional assistance at various levels.
INSTITUTIONAL SUPPORT
3Unit 5 – Institutional Assistance

Need for Institutional Support:
 Success of small scale industries depends on well
established institutional set up.
 Government gave adequate institutional support to
meet requirements of rapidly expanding small scale
industries to achieve success.
 To promote growth of small scale industries and it is
quite unique.
 It indicates the role of industrial institutions in
promotion of small scale industries.
 Entrepreneur can take assistance from different
institutions for varied purposes.

Institutional Support: (Financial Institutions)
The various institutions offering Financial assistance to SSIs
are -
1. Financial assistance from State Finance Corporations
(SFCs):
 Government of India has established SFC in each state
according to provisions of State Financial Corporations
Act, 1951.
 SFCs are established to fulfill the financial needs of small
and medium scale industries.
 The objective of SFC is to cater to the long term financial
needs of entrepreneurs.
 Loans are extended to industrial units which are engaged in
areas of manufacturing, processed foods, mining, etc.

 Loans are extended to service industry sector like hotels,
tourism services, video recording studios, maintenance of
home appliances, computer services, etc.
SFCs has identified a certain group of beneficiaries for
financial assistance and important beneficiaries are –
a) Purchase machinery.
b) Modernization.
c) Hotels and Restaurants.
d) Hospitals, Nursing homes and diagnostic centers.
e) General loan scheme for technically and feasibly viable
projects.
f) Women entrepreneurs.
g) Tourism and others.

Karnataka State Finance Corporation:
 KFSC evolved loan schemes for extending financial assistance
to suit almost all kinds of industrialists, entrepreneurs and
technocrats, service sectors like hotel, hospitals, etc.
 It gives financial assistance to set up tiny, small, medium and
large scale industrial units in Karnataka state.
 It extends loan to new and existing units up to Rs.500 lakhs
for corporate bodies and registered co-operative societies.
 Term loans up to Rs.200 lakhs are sanctioned for proprietary,
partnership and Hindu undivided family business.
 It extends lease financial assistance and hire purchase
assistance for acquisition of machinery / equipment, etc.
 It has merchant banking department which is approved as
Category I merchant banker by SEBI.

Few schemes of KSFC to SSI sector are -
 Loan scheme for – i) Commercial complexes, ii) development
of Industrial estates, iii) to acquire electro medical equipment,
iv) acquire generators, v) hospitals, nursing homes and
medical stores, vi) acquiring imported second hand
machinery, vii) maintenance and construction of roads and
viii) marketing related activities.
 National equity fund scheme.
 Corporate loan scheme.
 Rental discounting scheme.
 Loan scheme for – i) training institutes, ii) technology parks,
iii) software development, iv) qualified professionals, v)
construction of new office / buildings, vi) transport, vii)
acquisition of ISO certification by SSI units.

2. Financial Assistance from SIDBI:
 SIDBI was established on April 2, 1990.
 Small Industries Development Bank of India (SIDBI) Act
envisaged to be “principal financial institutions for the
promotion, financing and development of industry in small
scale sector and to co-ordinate functions of institutions
engaged in promoting and financing small scale industry.”
 SIDBI is headed by Chairman and Managing Director.
 It is operating different programmes through 5 regional
offices and 33 branch offices.
Range of Services from SIDBI:
a) SIDBI directly finances:
 SSI units for new / expansion / diversification, etc.
 Marketing development projects for expanding SSI products.

 Existing well run SSI units and ancillaries / vendor units for
modernization and technology up gradation.
 Infrastructure development agencies for developing
industrial areas.
 Lessing and hire purchase companies for offering leasing /
hire purchase facilities for SSI units.
 Existing export – oriented units to enable them to acquire
ISO – 9000 series certification.
b) SIDBI provides Foreign Currency Loans:
 Import equipment by existing export – oriented SSIs and
new units having definite plans for entering export markets.
 Execute confirmed export orders by way of pre – shipment
credit and provides post – shipment facilities.
1 0Unit 5 – InstitutionalAssistance

c) SIDBI’s venture capital find provides assistance:
 Small scale entrepreneurs using innovative indigenous
technology and expertise.
SIDBI Refinances:
 Loans granted for new SSI projects for expansion, technology
up gradation, modernization and quality promotion.
 Loans sanctioned to small road transport operations, qualified
professions for self – employment, etc. to promote service
sectors.
Micro – finance initiatives of SIDBI:
 Micro finance loans with minimum fund of Rs.25 lakh per
annum for setting up enterprises.
 This assistance is based on relevant experience, potential to
expand business, transparency in operations, etc.

Direct Credit Scheme from SIDBI:
Eligibility • New or existing SSI units.
• SSI grading to medium scale.
• Service sector with overall project cost not
exceeding Rs.25 crore.
• Service sector above Rs.25 crore with bank
assistance not exceeding Rs.50 crore.
Constitution • Unit should be generally be private limited /
public limited.
• Partnership,Societies and Trust can be
considered to certain case.
Assistance • Term loan and Working capital term loan
and bills discounting in foreign or rupee
currency.
• Investment products such as debentures,
preference shares, zero coupon bonds, etc.

Currency of
Loan
purpose
• Assistance for setting new SSI unit / service
sector.
• Expansion / diversification / modernization /
quality certification.
• Acquisition of additionalmachinery /
equipment, marketing related activities.
Minimum
loan amount
• Rs. 50 lakh for setting up new unit and Rs.25
lakh for other purposes.
• Rs.10 lakh for well run existing SSI units.
Rate of
interest
• Applicable from time to time
Debt –
Equity ratio
• Not exceeding 2 : 1 for the company as a
whole

Minimum
Promoter’s
contribution
• New projects – 33%. (lower
contribution accepted in respect of
existing well performing companies).
• Others – 25% (minimum).
Period of
Loan / Limit
• Minimum 6 months to maximum 8 – 10
years for term loan and not exceeding 18
months.
Upfront fee
(Non
refundable)
• 1% of the term loan sanctioned at the
time of issue of loan.

3. Financial Assistance from Commercial Banks:
 SSI sector confronts several problems despite its strategic
importance in any industrialization strategy and potential
for employment generation.
 Government of India recognized need for a focused credit
policy for SSIs for its promotions. It deals with following
components –
a) Priority Sector Lending:
• Credit to small scale sector ensured as part of priority sector
leading by banks.
• It is required to compulsory ensure defined percentage
(40%) of overall lending as classified by Government.
• It includes agriculture, small industries, export, etc.

b) Institutional Arrangement:
• SIDBI was set up as apex refinance bank.
• Term loans are provided by SFCs and scheduled banks.
• Credit lending in direct / indirect forms is also undertaken
by NABARD, NSIC, etc.
Some of the credit needs of SSIs due to liberalization of
Indian economy are –
i) Earmarking of credit for tiny sector within overall lending
to small industries.
ii) Opening of specialized SSI bank branches.
iii) Establishment of National Equity Fund for venture capital
support.
iv) Technology development & modernization fund through
SIDBI.

v) Enhancement of turn over limit for assessing aggregate
working capital requirement.
vi) Enhancement of limit of composite loan to Rs.10 lakhs.
vii) No collateral security for loans upto Rs.5 lakhs.
The comprehensive policy package on this credit needs are –
a) Launch of credit guarantee scheme to cover loans up to
Rs.25 lakhs.
b) Launch of credit linked capital subsidy scheme to provide
for subsidy against loans taken for technology up gradation.
c) Further enhancement of ceiling composite loan limit to
Rs.25 lakhs.
d) Enhancement of project cost limit under National Equity
fund to Rs.50 lakhs.

Major Commercial Banks and its Assistance of SSIs:
Some of the schemes of SBI for SSI sector are –
a) General purpose term loan:
• It grants loan for SSI to meet commercial purposes like high
cost debt, research & development, net worth and funding
business.
• The term loan is for normally 3 years and pricing is tuned to
suit the risk of borrower.
• Repayment is strictly done in monthly or quarterly
installments.
b) Liberalized credit to SSI:
• SBI extends production – linked credit facilities for SSI,
ancillary, cotton industries with certain terms and conditions.
• Price of loan is based on credit assessment, rates, etc.

• Composite loan sanctioned up to Rs.25 lakh combining loan
and working capital.
c) Entrepreneur scheme:
• SBI grants financial assistance to technically qualified,
trained and experienced entrepreneurs.
• Loans are extended to technocrats under liberalized scheme.
• It is applicable to technically qualified person, craftsman,
industrial management, etc.
• Bank provides – term loans, working capital and equity
fund scheme.
d) Equity Fund scheme:
• SBI grants financial assistance to entrepreneurs who are not
able to meet their share of equity, interest free loans
repayable over a long period.

• Equity fund assistance can be normally repaid over 5 to 7
years after moratorium period.
d) Stree Shakti Package:
• It is unique scheme run by SBI to support women
entrepreneurs by providing certain concessions.
• It should have more than 50% of its share capital owned by
women to qualify for the schemes.
Export Finance Schemes:
1. Pre shipment Finance – Packing credit (PC), Clean
packing credit (CPC) & pre – shipment credit in foreign
currency (PCFC).
2. Post shipment Finance – FDB, FBE & BRD.

3. Foreign Bank Guarantees (FBG) – include deferred
payment guarantees in foreign currency for import capital
goods.
4. Foreign Letters of Credit (FLC) – both for import of raw
materials, capital goods, etc.
Assistance from Canara Bank to SSI Sector:
a) Composite Loan scheme:
• Simplified scheme devised under Single Window concept of
RBI to suit tiny and SSI sector.
• It is to provide credit to entrepreneurs for acquiring
equipment's, construction of work sheds and to meet
working capital.
• It is provided to artisans, village and cottage industries
engaged in manufacturing, processing, etc. not exceeding
Rs.25 lakhs. 2 1

b) Margin Money scheme:
• This is novel scheme for setting up industrial in
rural area focusing on employment opportunities.
• Individuals, societies, trusts, self help groups,
NGOs, etc. owned by Central / State government are
eligible for this scheme.
• Partnership & Private limited are not eligible for
this scheme.
c) Mahila Udyam Nidhi Scheme (MUN):
• Equity type soft loan assistance from SIDBI for
women entrepreneurs for setting up industrial units
in small scale and tiny sector and other service
activities. 2 2Unit 5 – InstitutionalAssistance

4. Financial Assistance from Karnataka State Industrial
Investment and Development Corporation (KSIIDC):
 KSIIDC was established with objective of promoting
industrial growth in State of Karnataka, especially in
medium & large sector.
 It provide financial assistance in terms of medium and long
term loans, equipment financing and direct equity.
 It accepts applications for financing as per standard loan
application format as per Karnataka state.
a) Direct Equity Participation and Underwriting Facility:
• Corporation participates in direct equity share capital in
respect of assisted / joint sector companies.
• It is up to 11% of paid – up equity capital depend on project.
• Maximum period is 3 to 5 years on mutual agreement.

b) Equipment Finance Scheme:
• Objective – assistance available for purchase of identifiable
items of new plant and machinery for modernization /
expansion / replacement / set up new project.
• Eligibility – assistance is available to existing industrial
concerns with good performance record and sound financial
position.
- they should be in operation for atleast 4 years.
- they should not be in default to banks in payment of dues.
• Repayment – 2 to 5 years.
• Moratorium – up to 1 year.
• Security – exclusive hypothecation on capital goods
proposed / financed, with or without first / second charge on
other existing fixed assets.

5. Financial Assistance from Karnataka State Small
Industries Development Corporation (KSSIDC):
 KSSIDC previous known as Mysore Small Industries
Corporation and it provide service to small sector in state
for more than 40 years.
 In 1960, Karnataka State Government with the support of
Department of Industries and Commerce encouraged
development of SSI.
 KSSIDC took over the activities related to management and
setting up of industrial estates and distribution of raw
materials.
 It started with capital of Rs.10 lakhs and State government
contributed during first 10 years with Rs.20 lakhs.
 Paid up capital of KSSIDC is Rs.2466.66 lakhs.

Main service of KSSIDC:
• Establishment and Management of Industrial
Estates.
• Procurement and Distribution of Raw materials.
• Assistance towards marketing.
• Dissemination of information by participating in the
internal and international exhibitions.
• Supply of machinery under Hire Purchase Scheme.
• Providing Guidance to SSI Entrepreneurs.
• Providing Technical Library facilities.

6. Financial Assistance from Industrial Finance
Corporation of India (IFCI):
 IFCI is first development financial institution in India
started in 1948 as per Statutory Corporation to provide credit
to medium and large sized industries.
 It is first public financial institution and converted into
public limited company.
 It plays important role in economic development of nation
and it sanctioned Rs.453 billion to Rs.440 billion to
industry.
 It develops industry and economic level by promoting
organizations like National Stock Exchange (NSE),
Management Development Institute (MDI),
Entrepreneurship Development Institute of India (EDII),
LIC Housing Finance Ltd, etc. 2 7

Activities of IFCI:
a) Project Finance - it provide credit and other facilities to green
field industrial projects (infrastructure projects) and brown field
projects like expansion, diversification and modernization.
b) Financial Services - it provides various schemes like
acquisition of assets for expansion & modernization, procurement
of items from suppliers, import, quick funds, equipment leasing,
etc.
c) Non – project specific assistance - It is provided in form of
corporate / short term loans, working capital, bills discounting,
etc. to meet expenditure.
d) CorporateAdvisory Services.
e) It provide financial assistance in terms of rupee and foreign
currency loans, suppliers credit, leasing and hire purchase, etc.
f) IFCI deals with three financial resources – i) share capital, ii)
Bonds and debentures and iii) other borrowings. 2 8

 The various Non – financial institutions are –
1. District Industries Centre (DIC):
 Govt. of India established DIC in every district of country.
 It is focal point at district level to facilitate industrial
development in coordination with other departments /
agencies of Government.
 DIC is the first link of Industry – Government interface
for resolving various issues of industry and healthy growth.
 It accelerate industrial development in all parts of the
country.
NON – FINANCIAL
INSTITUTIONAL SUPPORT
2 9Unit 5 – Institutional Assistance

The objectives of District Industries Centre is –
 To accelerate industrialization process in district
through education, training and support.
 Encourage spread of industries to rural areas through
supporting to cottage industries.
 Decentralize the industrialization process so that
regional economic imbalances are minimized.
 Implement various government schemes in every
districts to encourage entrepreneur.
 It minimize the time required for statutory permissions
like license, registration, financial assistance, etc.

Role of DIC:
a) DIC act as nodal agency to spread industrialization in every
region.
b) Prepare profile of industry located in district.
 Collects statistical data of various industries located in
district.
 DIC prepares list of products and services that can produced
in district.
 Assists entrepreneurs in infrastructure facilities like quality
testing, transport, raw material, packaging technology,
warehousing, etc.
c) Organize Entrepreneurship Awareness program and
Entrepreneurship Development Program through training on
various aspects.

d) Offers marketing support through other Government
agencies, updates entrepreneurs about various tenders by
Government.
e) It helps entrepreneur in exporting their products and
importing required machineries and raw materials.
f) Registers the industrial units under SSI, Tiny and Cottage
industries category.
g) Advices entrepreneurs on various investment opportunities,
production opportunities and marketing opportunities.
h) Acts as a link between entrepreneur and lead banks, credit
co-operative societies, rural banks, agricultural banks, etc.
depend on nature of business.

2. Small Industries Services Institute (SISI):
 SISI is established by Govt. of India to help SSI sector.
 It has 28 SISIs and 30 branch SISIs set up at various State
capitals and other cities all over country.
The main activities of SISI are –
a) Assistance / Consultancy to Prospective Entrepreneurs:
 It assists and guide entrepreneurs in various aspects like
opportunities existing in markets, how to start a business,
what and how to produce, required capital, etc.
b) Assistance / Consultancy rendered to existing units:
 It provide guidance and assistance from time to time on
various issues like raw material procurement, technology
adoption, quality & marketing issues, etc.

c) Preparation of State Economic and Industrial Profiles:
 It collects and publishes various information related to
economic and industrial activities of state through books,
seminars and training programmes.
d) Preparation / Updation of District Industrial Potential
Surveys:
 It conducts survey to identify emerging business
opportunities, which help entrepreneurs to start business.
e) Project Profiles:
 It explains various issues like demand of product /
services, production, marketing, financial issue and
expected growth in demand, etc.
 This is done through research and analysis which help
entrepreneur to decide about their business.

f) Entrepreneurship Development Programme (EDP):
 It bring awareness, to motivate and build skills among
people to take up business of their own.
 It convert ordinary person into risk takers, innovators,
employers, leaders, etc.
g) Production Index:
 It measures monthly / yearly performance of various
industries in country.
 It collects data from industries about production of various
goods and services.
h) Quality Control and Up gradation:
 It conducts various training programmes, workshops and
seminars to bring awareness about quality aspects in
business operations.

i) Export Promotion:
 SISI offers export documentation assistance to
entrepreneurs in case of exporting their goods.
 It updates entrepreneurs about visits of foreign delegations
and trade visits to get change to meet prospective buyers.
j) Ancillary Development:
 It supplies 50% or more of its production to one or more
industrial undertakings.
 It focus on ancillary industries along with development of
small industries.
k) Common Facility Workshop / Lab:
 It offers common facility services like engineering works,
electrical & electronics, product designing, etc.
 It creates such facilities for small – scale industries.

l) Preparation of Directory of Specific Industry:
 It prepares directory on manufacturer of automobile spare
parts, agricultural implements, electrical equipment's, etc.
 It creates awareness and bridging gap between buyers and
sellers.
m) Intensive Technical Assistance:
 It offer technical assistance in terms of choosing right kind
of technology, purchase of machineries from domestic and
international markets, quality improvement, etc.
n) Coordination with DICs:
 It provides extensive back up support to DICs in State in
promoting industrial development by providing technical
and economical information, project profiles on
industries, EDPs, seminars, industrial potential surveys,
etc. 3 7Unit 5 – Institutional Assistance

o) Linkage with State Government Functionaries:
 It acts as a central point of contact and coordinates with
various government functionaries like various ministries,
committees, financial institutions, commercial banks, etc.
p) Market Surveys:
 In coordination with government agencies SISI conducts
market surveys on product and services.
 It helps to understand market trend, guide to potential
entrepreneurs.
q) Other Action plan activities assigned by Headquarters:
 Apart from regular services each SISI takes up other
activities assigned by the central body on various issues.

3. Entrepreneurship Development Institute (EDI):
 EDI is an autonomous body and not-for-institution set up
in 1963, sponsored by Apex financial institutions namely
Industrial Development Bank of India (IDBI), Industrial
Finance Corporation of India (IFCI), ICICI and SBI.
EDI aims at –
 Creating a multiplier effect on opportunities for self –
employment.
 Augmenting supply of competent entrepreneurs through
training, and trainer-motivators.
 Participating in institution building efforts.
 Including spirit of ‘Entrepreneurship’ in youth.
 Promoting micro enterprises at rural level.
 Developing & disseminating new knowledge and insights.

 Facilitating corporate excellence through creating
intrapreneurs.
 Improving managerial capabilities of small scale
industries.
 Sensitizing the support system to facilitate potential and
existing entrepreneurs establish and manage their
enterprises.
 Collaborating with similar organizations in India.
EDI has set up Centre for Research in Entrepreneurship
Education and Development (CREED) to link theory and
practice in field of Entrepreneurship. It supports –
 In house research in areas of major concerns in
entrepreneurship.
 Catalyses process of networking researchers and
institutions in sphere entrepreneurship. 4 0

 Encourages young researchers to make use of
intellectual and other resources at Centre so as to
make valuable contributions to knowledge on
entrepreneurship.
 Promotes collaborative research endeavours with
institutions and individuals outside the centre.
 Disseminate and shares various research findings
among planners, policy-makers and academicians.
 Organizes seminars, workshops and colloquies.

4. Small Industries Development Organization (SIDO):
 SIDO is functioning under Department of SSI, Govt. of
India.
The main functions of SIDO are –
 Framing of policies pertaining to SSI sector.
 Coordination with different bodies / agencies in SSI Sector.
 Monitoring Policy implementation.
 Industrial development.
 Extension services.
a) Market Development Assistance for SSI Exporters:
 This scheme is currently operated by Ministry of Commerce
with a view to encourage to access and develop overseas
market.
 It offers funding for participation in international fairs.

 Office of DC (SSI) has existing scheme to encourage
entrepreneurs to display their products at International
exhibitions.
b) International Exposure to SSI products:
The following schemes are –
i) Participation in International fairs / exhibition:
 Exporters from SSI exhibit their products in exhibitions,
required assistance & support, expenditure on account of
space rent, handling and clearance charges, insurance
charges, etc.
ii) Packaging for Exports:
 It provide training programmes on latest packaging
standards, techniques, etc. as per regulation of SIDO in
various parts of country.

c) Consultancy Services:
i) Technical & Managerial Consultancy services:
 It is provided through network of field offices to ensure
higher level of production and generation of higher
exports.
ii) National Awards for Quality Products:
 To encourage small-scale units for producing quality
goods, national awards for quality products given to
outstanding small scale units.
 This scheme is operated since 1986, Winners get a
Trophy, a certificate and Cash prize of Rs.25,000/-.
 It encourage SSI to produce quality goods and enter
into export market.

d) Testing Services from SIDO:
Regional Testing Centres (RTC):
 It is located at Delhi, Calcutta, Mumbai and Chennai and
extending their testing facilities for raw materials, semi-
finished goods and end products.
 This centre is equipped with basic testing facilities in
disciplines of chemical, mechanical, electrical, metallurgy
and meteorology.
e) Technical Services by SIDO:
Tool Room / Tool Design Institutes:
 SIDO set up 10 Tool rooms in country to assist SSI units in
technical up gradation by providing assistance for producing
good quality products.
 It has collaboration with countries like Denmark and
Germany provided with latest technology. 4 5

f) Extension Services:
Modernization / In-plant studies:
 These are undertaken in units located in dense industry
clusters. Programmes for modernization are prepared and
implemented.
Sub-contract Exchanges (SCXs) for Ancillary Development:
 It gives marketing support and also to facilitate ancillary
industries in their efforts to supply to public sector
undertakings, 35 sub contracting exchanges are
functioning in SISI in country.
g) Technology trends and Trade Reports:
 SIDO and SISI are involved in activities to build database
and reports on technology trends and trade reports.

5. Association of Women Entrepreneurs of Karnataka
(AWAKE):
 Today it is one of India’s premier institutions devoted to
Entrepreneurship Development among Women.
 It was established in 1983 and recognized world wide.
 It aims to empower women through entrepreneur development
to improve their economic condition, enhance social status.
 It helps women entrepreneurs in Karnataka for growth of
small scale units.
 Any woman who is an entrepreneur can join AWAKE for
nominal fee.
 It helps women to set up their enterprises through business
counselling, EDP, etc.
 At present situations, statistics shows that 10% of SSIs are
owned by Women.

The main objectives of seminars and convention by AWAKE –
 To provide an international platform focusing on economic
empowerment of women and international trade.
 To provide an opportunity for interaction between
entrepreneurs to learn about best business practices.
 B2B trade meets.
 Networking of Business Associations.
 To evolve pro-women entrepreneur policies.
 Exposure to new ideas of marketing access to finance /
technology / innovation.
 Exploring business operations.
 In 2002, it conducted 4 day long Asia Pacific Convention of
Entrepreneurial Women based on theme ‘Expanding
Business Horizons and or Exponential Growth’.

6. Technical Consultancy Organizations (TCO):
 To cater consultancy needs of small and medium
enterprises, TCO was established by many financial
institutions like ICICI, IFCI, SIDC, IDBI, SFC, etc. in
collaboration with commercial banks.
The main functions of TCO are –
 Advice SMEs about technical aspects of business.
 Prepare project profiles and feasibility reports.
 Technical collaboration and transfer of technology.
 Encourage, assist and offer technology consultancy to new
entrepreneurs.
 Undertake financial potential survey.
 Advice on industrial management.
 Offer merchant banking facilities. 4 9Unit 5 – Institutional Assistance

 Undertake market research and survey for specific
product.
 Conduct survey on behalf of central and state
governments on various issues like power needs,
modernization of plant, rehabilitation of sick
industries, etc.
 Provide consultancy services to new entrepreneurs.
 Opportunity scanning and product selection.
 Market survey, project launching, expansion of
units, etc.
 Conduct entrepreneurship development
programmes.

7. Technical Consultancy Services Organizations of
Karnataka (TECKSOK):
 TECSOK provides ideas of viable projects to suit
entrepreneurs background.
 It is suited in Nrupatunga Road, Bangalore, wing of
Department of Industries and Commerce promoted during
1976.
 It has been recognized as special agency by All India
Financial Institutions like IDBI, IFCI, ICICI, etc.
TECKSOK is a Government of Karnataka organization in
providing following services like -
 Identification of project ideas and selection of investment
opportunities.
 Selection of suitable locations for setting up industrial
units. 5 1Unit 5 – Institutional Assistance

 Conducting market surveys, industrial potential surveys.
 Turnkey assistance.
 Assistance in obtaining necessary licenses and clearances.
 Energy audit and conservation.
 Modernization studies.
 Dissemination of information on industrial policies and
procedures of Central as well as State Government.
 Coordinating and conducting Management Development
Programmes.
 Identification and development of ancillary industries.
 Assistance to Government in providing information about
new policies, programmes and schemes.

Some of the schemes of IFCI operated through TECSOK are –
 Subsidy to small entrepreneurs in rural, cottage and small
scale sector.
 Subsidy for consultancy to industries relating to animal
husbandry, dairy farming, poultry farming and fishing.
 Subsidy for consultancy to industries based on or relating to
agriculture, horticulture, sericulture and pisciculture.
 Subsidy for control of pollution in small and medium scale
industrial units.
 Subsidy to new entrepreneurs for meeting cost of market
research / surveys.
 Subsidy for promotion of ancillary and SSIs.
 Scheme of subsidy for consultancy on use on non –
conventional sources of energy and its measures.

8. Khadi and Village Industries Corporation (KVIC):
 Govt. of India established KVIC as per provisions of
Special parliamentary Act, 1956.
The objectives of KVIC are -
 To preserve traditional arts and crafts in India.
 To equip artisans and craftsmen to take up challenge
of modern market.
 To promote handicrafts, khadi, village and cottage
industry by facilitating them with necessary inputs like
raw materials, equipment, capital, etc.
 To develop a market for these products.
 To introduce products even in the international
market.

The schemes of KVIC are -
 Financial assistance for purchase of land, building,
workshop, shed, machinery and equipment at 4% rate
of interest.
 Working capital provision.
 Equity capital.
 Loan provision for purchase of raw materials.
 Marketing avenues and selling centres for products of
artisans and craftsmen.
 Subsidies for registered societies of artisans and
craftsmen belonging to SC / ST. ex-servicemen,
women, etc.

The government has defined ‘Gramodyog’ (village industry)
concept by following parameters -
 Population of village should not be more than 10,000.
 Investment in place of products, machines and equipment
should not exceed Rs.15,000.
 Manufacturing can be done either with power or without
power.
 It has nearly 96 industries under KVIC in following
categories –
 Material based industries.
 Industries based on products from forests.
 Agro – based industries.
 Polymer and other chemical based industries.
 Khadi and textile industry. 5 6Unit 5 – Institutional Assistance
 Service industry.

Meaning:
Incentives:
“Incentive as a thing that encourages somebody to do
something (i.e.) a concession indicates reduction in price for
particular categories of people.
Subsidies:
“Subsidy denotes a single lump sum given by
Government to an entrepreneur to cover the cost. It is granted to
industry which is considered to be essential in national interest.”
Bounty:
“Bounty implies bonus or financial given by govt. to
industry to help it to compete with other units in country.”
FINANCIAL INCENTIVES FOR
SSIS

Benefits of Incentives and Subsidies:
 It act as a motivational force and push the prospective
entrepreneurs to entrepreneurial line.
 It encourage to take action and decisive decision.
 It encourage to set up their ventures in those state where
incentives are available, especially in rural and backward area.
 It increases the ability of entrepreneur to face competition.
 It encourage young people to become entrepreneurs and exploit
their skills.
Need for Incentives:
 To remove regional disparities in development.
 To strengthen and expand entrepreneurial base.
 To provide competitive strength, survival and growth.
 Ensure employment opportunities.

Central Government Subsidies and Incentives:
Some of the incentives and subsidies of Central govt. are –
a) Credit linked Capital Subsidy:
 GOI launched in October 2000.
 It is to upgrade technology of SSIs.
 It is applicable to leather products, garments, food
processing, drugs, pharmaceuticals, etc.
b) Capital Investment Subsidy;
 It started in June 1, 1998 by PM for North – Eastern
region.
 It provides 15% of investment in plant & machinery.
 It is payable to i) industry located in growth centres, ii)
new industrial unit, iii) industry going for expansion.

c) Transport Subsidy:
 It was introduced in July 1971 to promote industry in hilly,
remote and inaccessible areas.
 It is applicable to Himachal Pradesh, J & K, Sikkim, Union
territories of Andaman & Nicobar islands, WB, UP, etc.
 It range from 50% to 90%.
d) Capital Subsidy for tannery units:
 It is for modernization of tannery units.
 It gives subsidy for machinery up t0 30% of cost.
 It is for SSI and Non – SSI units.
e) Collateral – free and Third Party Guarantee Free Loans:
 It is for small industries started during 2000 – 01.
 It provides guarantee cover to lending institutions.
 Limit is from Rs. 1 million to Rs.2.5 million. 6 0

f) Power Subsidy:
 It depend on state, their nature, contents, quantum and
period.
g) Incentive for Marketing Development:
 It reimburses expenditure incurred by SSI that visit
foreign countries for exploring marketing possibilities.
 Incentive given up to 50% of expenditure.
h) Price Preferences to SSI Units:
 Availability of tender sets free of cost.
 Exemption from payment of Earnest Money deposit.
 Exemption from payment of Security Deposit.
 Price preference up to 15% over lowest quotation of large
scale units.

i) Availability of Industrial Estate:
 It provides industrial area, plots and sheds for SSI
entrepreneurs.
 It provides subsidy on rent for factory accommodation,
allotment of sheds on hire purchase.
 Concessional charges for water and power, exemption from
sales tax, facilities for road development, canteen, banks, etc.
j) State Capital Investment Subsidy:
 It provides subsidy to priority sector and facilities to UP, J &
K, Sikkim, Karnataka, HP, Gujarat, Punjab, AP, Kerala.
k) Sales Tax concession:
 It is provided to new / sick units for a period of 3 to 15 years.
 It is applicable to UP, J & K, Sikkim, Daman & Diu,
Karanataka, Meghalaya, HP, Gujarat, Nagaland, Rajasthan,
etc. 6 2

l) Exemption from stamp duty and local taxes:
 It provides stamp duty for machinery equipment, raw
materials, packing materials, etc.
m) Rebate in electricity charges and water charges:
 It is applicable to new and existing units in respective states.
n) Interest Subsidy:
 It provide subsidy in terms of loans.
o) State Transport Subsidy:
 It provide subsidy for transportation of raw materials and
finished goods.
p) Subsidy for technical know - how:
 It provide subsidy on know – how obtained for SSI from
reputed and well established research and development
organizations.

q)Marketing Support:
 It was supported by State government departments, semi-
government organizations, autonomous organizations,
Grant-in-Aid institutions, etc.
r) Special facilities for export oriented units:
 It provide special package for exported oriented units and
reimburse costs incurred by SSI for shipment of export
samples.
s) Air Freight Subsidy:
 It is provided on finished goods for any destination.
t) Incentives to Non – Resident Indians (NRIs):
 It provide special subsidy for setting up new unit by NRIs.

u) Special incentives for Women:
 SSI units owned by women entrepreneur having
more than 80% women labourers are provided by
special incentives like 50% subsidy for machinery,
training, etc.
v) Incentive for ISO 9000 / ISO 14001 Certificates:
 This scheme is for quality improvement and
environment management.
 It is provided to get ISO 9000 / ISO 14001
certificate.
 This scheme is reimburse at charge of 75% of
expenditure subject to maximum of Rs.75,000 in
each case. 6 5Unit 5 – Institutional Assistance

w) Foreign Direct Investment in SSI Sector:
 To provide access to capital market and to encourage
modernization and technological up gradation, equity
participation up to 24% of total share holding.
 To encourage and promote acquisition of technological
capability, mechanism for foreign technology agreements.
 Use of foreign brand names / trademarks on goods for
sale.
 Simplified procedure for investment in NRI and Overseas
corporate bodies (OCBs).
 Approval by RBI for NRI and OCBs by permitting up to
100% equity in priority industries.
 100% equity investments in industries reserved for small
scale sector is permitted to NRIs and OCBs.

x) Prime Minister’s Rozgar Yojana (PMRY):
 PMRY implemented since 1993, to create and provide
sustainable self – employment opportunities to educated
unemployed youth in country during 8th Plan period.
 One lakh for business sector and two lakh for other sectors.
 Normal rate of interest shall be charged.
 Repayment schedule ranges from 3 to 7 years.
 Scheme was used with the help of DIC and Directorate of
Industries (DIs).
 It covers area of horticulture, piggery, poultry, fishing, small
tea gardens, etc.
 Subsidy component as 15% with an upper ceiling of
Rs.15,000.
 Margin money vary from 5% to 12.5% of project cost.

y) NSIC Schemes:
 Bill Financing Scheme.
 Working Capital Finance Scheme.
 Export Development Finance Scheme.
 Equipment Leasing Scheme.
z) Credit guarantee Trust for Small Industries (CGTIS):
 To encourage banks to lend to borrowers without collateral.
 It provides guarantee of up to 75% of loan to banks.
 A guarantee is provided to banks for loans upto Rs.50 lakh at
concessional rates.
 Guarantee fee reduced from 2.5% to 1.5% as per budget 2006
– 07.
 Banks appraise credit worthiness of borrower only when
decided to extend loan under this scheme.

 Taxes on commodities are called as Indirect Taxes.
 Such indirect taxes are first collected from dealers or
producers by govt.
Taxes on commodities may take following forms –
i) Tax on manufacturer or production of a commodity is
called as excise duty.
ii) Tax on sale of a particular commodity is called General
Sales Tax.
iii) Tax on import or export of a commodity is called Customs
duty.
 Excise duty tends to raise price of a commodity which is
ultimately borne by the consumer.
TAX CONCESSIONS

 SSI are required to fulfill certain conditions in order to
avail excise exemptions and concessions from tax –
i) SSI units for purpose of excise exemption must be a factory
as defined in Factories Act, 1948.
ii) Unit shall be engaged in manufacture of goods.
iii) Factory should not have more than 49 workers working
on any day of preceding 12 months.
iv) SSI must be a factory registered with Directorate of
Industries (DIs).
Exemptions: Excise exemptions of SSI units are –
a) SSI and Tiny industries are not to pay excise duty if value
of clearances for export doesn’t exceed Rs.50 lakh.
b) No separate accounts to be maintained by SSI.
c) No monthly return is required to be sent by SSI units.

Rate of Excise Duty:
 The rates of excise duty applicable to manufacturer whose
turnover doesn’t exceed Rs.3 crores as follows –
 Financial institutions designed by Central Govt. to provide
excise loans to weak industrial units are IDBI, IFCI, IRBI
(Industrial Reconstruction Bank of India). 7 1
Value of Clearances Rate of Duty Remarks
For Home
Consumption:
i) Up to Rs.100 lakhs.
ii) Rs.100 – 300 lakhs
Normal rate of duty.
Not to avail CENVAT
Can avail CENVAT
For Specified goods
i) Up to Rs.100 lakhs.
ii) Rs.100 – 300 lakhs
60% Normal rate of
duty.
CENVAT credit
available.

Meaning:
 It is set by govt. to promote industrialization of an area.
 To provide infrastructural facilities as particular place.
 It help in dispersal of industry in rural and backward areas.
 It is an effective tool for promotion and growth of small
scale industries.
Definitions:
“An Industrial estate is a group of factories constructed
on an economic scale in suitable sites with facilities of water,
transport, electricity, bank, post office, canteen, first aid, etc.
provided with special arrangement for technical guidance and
common services facilities.” - P.C.Alexander
INDUSTRIAL ESTATES

Types of Industrial Estates:
1. Functional Basis: It is divided into –
a) General Industrial Estates:
 It is also known as traditional or conventional industrial
estates.
 It provide accommodation to a wide variety and range of
industrial units.
b) Special on Specific Industrial Estates:
 This type of estates are promoted for specific industrial
units. (E.g.) Leather Complex, Surgical tools complex, etc.
2. Organizational Basis: It is divided into –
a) Government Industrial Estates.
b) Cooperative Industrial Estates.
c) Corporation Industrial Estates. 7 3
d) Private Industrial Estates.

Role of Industrial Estates:
The major objectives of setting industrial estate are –
 To provide accommodation and infrastructural facilities
to the entrepreneurs.
 To assist in the setting up and development of small scale
industries.
 To facilitate the process of dispersal of industries to the
rural and backward areas.
 To assist the ancillary industries in townships surrounding
major industrial undertaking both in private & public
sectors.
 To assist in development of entrepreneurship by creating
healthy conditions for smooth working of various
enterprises.

Role of Industrial Estates:
The various aspects under industrial estate programmes were
–
i) To provide well planned accommodation to SSI at suitable
sites with facilities of power, water, transport, post office,
banks, canteens, first aid, all weather approach roads, etc.
ii) To bring no. of units together and facilitate the
establishment of common service centres, introduction of
modern techniques, purchase of raw materials, sale of
finished goods, advertisement, etc.
iii) To enable enterprises to avail the goods and services of
each other so as to make them complementary and
interdependent.

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