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Small Industries Department
POLICY NOTE - 2002-2003
DEMAND No. 42
As an important sector of the economy the Small Scale Industries account for 95 percent of the industrial units, 40 percent of output in the manufacturing sector, 35 percent of exports and employment to around 30 lakhs persons. The SSI sector comprises Small Scale Industries, tiny and ancillary units. At one end there are the rural artisans and at the other end of the continuum are modern high-tech Information Technology and biotech units. The inevitability of this sector in the socio-economic welfare of the State is mainly due to its employment and income generation to the rural masses.
Immediately after Independence, Government ventured into various growth measures. The main thrust was industrialisation of this Country that hitherto depended upon import for a majority of products. Effective measures were formulated in various industrial policy resolutions and Small Scale Industries became a vehicle of growth for Indian States. Tamil Nadu is one among very few States that adopted a strategy of industrial growth with an emphasis on the Small Scale Industries.
2. Various policy measures taken by the State Government to support the Small Scale and Tiny Industries have resulted in spectacular industrial growth in this State. Yet, there were some setbacks during the past five years. The effective growth rate in the Small Scale Sector was affected to a greater extent by the adverse impact of the cancellation of the time-honoured price and purchase preferences offered to the Small Scale Industries in Tamil Nadu. This Government, on its assuming power, has cancelled the orders issued in G.O.Ms.No.75, Finance, dated 19.2.1997 and amended the provisions of the Transparency in Tenders Act, 1998, to restore price and purchase preferences to Small Scale Industries of this State. The Government also has cancelled the order that increased the Annual Current Consumption Deposit for the Small Scale Industries. These two actions have had a telling effect on the morale of the Small Scale Industrial Units.
3. Employment generation is the prerequisite for poverty alleviation and this Government is fully aware of the principle that the growth of the Small Scale Industries Sector alone can generate employment the rural sector. Recent studies have concluded that for every crore of Rupees invested in the Small Scale Industries Sector direct employment is provided for 523 persons whereas for a crore invested in the large scale industry sector indirect employment is provided for about 100 persons only. Having this fully in mind, this Government believes in giving impetus to the growth of the Small Scale Industries Sector.
4.Entrepreneurial Training for Women:
Under the scheme of training five lakhs women in entrepreneurial skills in five years, the Industries and Commerce Department was allotted a target of 25,000 women for 2001-2002. Out of this, 5,000 women have been trained under Prime Minister’s Rozgar Yojana. The department has spent Rs.80.00 lakhs for training 20,000 women under this Scheme through the District Industries Centres. This scheme will be continued during 2002-2003 also.
5.Industrial Co-operative Societies:
5.1.The Industries and Commerce Department has industrial cooperative societies for tea, coir, lock, sago, polythene, matches, brick and synthetic diamond industries. There are 324 Industrial Cooperative societies with a total member ship of 61,800 in the State.
5.2. The Industrial cooperatives operate with a 3-tier system. At the primary level workers’ societies or manufacturers’ societies are formed. When products are manufactured by these primary societies, they are serviced by many service societies at the middle tier. At the top level, Federations and Apex Societies may coordinate the marketing, purchase and other important services for the two tiers at the middle and primary level. Coir Societies have three levels of operations whereas in Tea we have two-tiers. But INDCOSERVE successfully combines the cooperative work of the middle and the top tiers. In general, cooperatisation of industrial activities has been rated as success in Tamil Nadu and it has helped various trades in the rural sector and this Government believes in cooperatisation of industrial activities particularly in the rural areas. Many new Societies are being formed and new areas covered. It is a continuous process and much more remains to be done in the next four years. Also steps have been initiated to consolidate the existing societies and their business activities.
6.Incentives to Small Scale Industries
6.1. In order to promote Tiny and Rural Industries, 287 blocks in the State have been declared as Industrially Backward / Most Backward and SSIs located therein are eligible for grant of State Capital Subsidy, Low Tension Power Tariff Subsidy and other concessions. These incentives and concessions are also available to units located in the Industrial Estates and Industrial Complexes sponsored by Government / Government Agencies.
6.2.The various subsidies and incentives are listed below:
- (a) SSIs located in Backward Blocks are eligible for the State Capital Investment Subsidy at 15% subject to a maximum of Rs.15.00 lakhs.
- (b) SSIs located in the Most Backward Blocks are eligible for the Capital Investment Subsidy at 20% subject to a maximum of Rs.20.00 lakhs.
- (c) Special Investment Subsidy at 20% on the fixed assets is available to SSIs engaged in thrust sectors, i.e. electronic and leather industries subject to a maximum of Rs.20.00 lakhs in all the areas of Tamil Nadu.
- (d) Special Capital Investment Subsidy at 20% on fixed assets is also available to SSIs engaged in the following manufacturing activities anywhere in Tamil Nadu, subject to a maximum of Rs.15.00lakhs.
(1) Auto Ancillaries
(2) Drug and Pharmaceuticals
(3) Food Processing Industries
(4) Solar Energy Equipments
(5) Gold and Diamond Jewellery(for Export only)
(6) Jute Processing Industry (In 6 Select Taluks only)
(7) Pollution Control Equipments
(8) Sports Goods and Accessories, and
(9) Cost effective building material like Aluminium.
- (e) Additional Capital Investment Subsidy of 5% is available to the SSIs located in the most backward / backward blocks which employ more than 30% women workers with a ceiling limit of Rs.5.00 lakhs.
- (f) SSI units, which set up effluent treatment plants, are eligible for subsidy at 10% on investment of Plants subject to a maximum of Rs.2.00 lakhs.
- (g) Generator Subsidy at the rate of 15% on its cost is available to SSIs with an upper limit of Rs.5.00 lakhs.
- (h) Low Tension Power Tariff Concession is given to SSIs for the first 3 years of their inception, at the rate of 40%, 30% and 20% of actual energy charges for the first, second and third years respectively with location restrictions.
7.Tea Crisis
7.1. To overcome the crisis faced by the small tea growers in the Nilgiris District due to fall in price of green tea leaf, the Government took various measures such as reduction of sales tax and central sales tax, grant of subsidy at the rate of Rs.2/- per kg.
7.2. To solve the problem more effectively this Government have introduced, the scheme of sale of 'Ooty Tea' through the Public Distributions System. The sale was 200 MTs per month initially and it has now been stepped up to 250 MTs per month. This has helped the small tea growers by stabilising the price of made tea and hence the green leaf. There are plans to make "Ooty Tea " available to the general public through normal trade channels in this State as its quality is upto the expectations of the middle class people and it is price competitive compared to the leading brands of tea in the market. It has also been proposed to launch "Ooty Tea" outside Tamil Nadu. This tea is being launched in Northern India shortly.
7.3. The Government is also considering to effectively plug the loopholes in the auction system and to form their own auction centre, if necessary. The Government is moving the Government of India for supply of South Indian Tea to the Defence Forces. If this is agreed to, the sale of tea to the defence forces shall act on stabilising tea prices to the benefit of small growers in Nilgiris.
8.OTHER ACTIVITIES:
8.1.Single Window Committee:
The District Single Window Committee has been formed having the District Collector as its Chairman. An entrepreneur can give application to this Committee for getting necessary clearance at one go.
8.2.Prime Minister's Rozgar Yojana Scheme:
The Centrally Sponsored Prime Minister's Rozgar Yojana scheme is implemented to make educated unemployed youth to start their own businesses many of which are self - employment ventures. Under this scheme training is imparted in any trade in Government recognised/approved institutions. For this year, 20,000 candidates are being assisted through this scheme.
8.3.Training Institutions:
The Industries and Commerce Department runs training institutions at Guindy, Dindigul and Virudhachalam for training in the specialised fields of Tool Engineering, Refrigeration, Glass and Ceramics.
8.4.SSI Board:
A Small Scale Industries Board is functioning in the State under the Chairmanship of the Minister for Rural Industries. The SSI Associations and the Officials of various departments serve as Members in the Board. The Board meets once in three months to discuss policy issues on SSIs and their grievances and recommends to the Government for their redressal.
This Board should meet once in three months to redress grievance of Small Scale Industries and tiny units. In the previous period, May 1996 to May 2001, the Small Scale Industries Board met only four times, viz., on 8.12.1997, 22.7.1998, 16.12.1999 and 20.10.2000. But this Government believes that this is an important forum where the views of experts, associations and officers of the department working towards the benefit of Small Scale and Tiny sectors can be expressed and various policy measures evolved. After assumption of office, this Government convened the SSI Board Meeting in December 2001. With a view to further strengthen the institutions of Small Scale Industries Board, the Chief Secretary has himself convened a meeting and orders have been issued in G.O.Ms.No.1, Small Industries, dated 7.1.2002 forming a State Small Industries Committee of the Small Scale Industries, including, for the first time the Chief Secretary, Government of Tamil Nadu as Convenor to meet once in 3 months to have one-to-one interaction with Small Scale Industries association members. Representatives of Small Scale and Tiny Sectors have welcomed this widely.
8.5.Testing Laboratories:
Private Testing Laboratories charge exorbitant rates when Small Scale Industries approach them for testing their raw materials, products and processed materials under the provisions of statutory requirements. To help Small Scale Industries for better testing on normal reduced rates, this department is running various testing /servicing laboratories in electrical and electronics, electro-medical equipment and chemical fields.
8.6.Awards:
The State Government have instituted State-level and District-level awards for SSIs, State award for Women Entrepreneur, Award for Quality products and for export oriented SSIs.
8.7.Tamil Nadu Industrial Co-operative Bank Ltd.
To cater to the needs of the Industrial Co-operative Societies and SSI units, the Tamil Nadu Industrial Co-operative Bank Limited has been established in 1961, with the industrial co-operative Societies as its members and the share capital from the State Government. This Bank has been recognized by the Reserve Bank of India for NABARD Refinance Scheme for credit facilities to Industrial Co-operative Societies.
8.8.DELAYED PAYMENT ACT
Four Regional Facilitation Councils have been constituted at Coimbatore, Trichy, Madurai and Chennai where delay in payments to Small Scale Industries is adjudicated under the terms of the Delayed Payment Act.
8.9.FUNCTIONAL INDUSTRIAL ESTATE
There are 8 Functional Industrial estates for Electrical and Electronic industries, which have been established by the Directorate of Industries and Commerce.
ENTREPRENEURSHIP DEVELOPMENT INSTITUTE.
The process of industrial growth starts at the point of Entrepreneurship Development Programmes. Successive Governments have been concentrating on the single issue of training, monitoring and financing new entrepreneurs to start industrial units and business. Once businesses have been started in large numbers, the impressive statistics speak about the "industrial growth". But, the health of units already started and functioning has never been closely monitored or attended to by any Government schemes. The need of the hour is proper "business development" programmes for SSIs, which are facing threat from the globalisation and the WTO regime. Several Entrepreneurship Development Programmes have been conducted through Non-Governmental Organisations with a view to identify the prospective entrepreneurs, train them and guide them to start their own units. This Government announced that an Entrepreneurship Development Institute would be set up in Chennai. Fulfilling the commitment, an Entrepreneurship Development Institute has already been set up in Chennai. The Institute has already conducted Entrepreneurship Awareness Programmes for final years students of Engineering Colleges, Women Entrepreneurship Development Programme sponsored by Tamil Nadu Industrial Investment Corporation Limited and training under PMRY. This Institute will enter into various training programmes for the existing SSI units also guiding them in technology upgradation, and business development so as to enable them to meet the competition posed by the globalisation and WTO environments. This Institute is the first of its kind in South India and will act as a Centre of excellence on EDP and Research & Development for Small Scale Industries.
TAMIL NADU SMALL INDUSTRIES DEVELOPMENT
CORPORATION LTD.(SIDCO)
The development of infrastructure is the basic need for growth of Small Scale Industries sector. The State Directorate of Industries & Commerce was originally in charge of creating Industrial Estates and other infrastructure facilities necessary for the growth of Small Scale Industries. With a view to cut red tape and corporatise the infrastructure background for development Tamil Nadu Small Industries Development Corporation (SIDCO) was formed in the year 1970 for taking up comprehensive promotion programmes. SIDCO has established 73 industrial estates, so far in the State. These estates became the growth centres for Small Scale industries. Such Industrial Estates have the entire infrastructure necessary for the growth of Small Scale Industries and Tiny sector units.
SIDCO also facilitates Small Scale Industrial activities by ensuring raw materials at competitive rates. Having depots, SIDCO ensures supply of the following basic raw materials:
- 1. Iron and Steel.
2. Wax.
3. Potassium Chlorate.
4. Paper.
Data on SSIs and e- commerce
Though successive Governments have implemented various schemes for the growth of Small Scale Industries, it is unfortunate that there is no complete and reliable data on small scale and tiny sector units of the State. The growth of the new economy has started influencing the industrial and business activities of Small Scale Industries, particularly due to liberalisation, globalisation and WTO regime. We cannot postpone for long stiff competition from imported goods and services to Small Scale Industries. Another area, which will become a reality in the near future, is the employment of information technology in all walks of life. The days are not far off when e-commerce will replace regular commerce and trade. The initial symptoms of e- commerce have already started appearing in the business horizon of Tamil Nadu. When e-commerce shall decide further business development in the State, SSIs will be the first casualty. Almost 90% of them have never been exposed to any culture of trade online or anything to do with a computer based purchase or sales system for their raw materials and end products. With a clear futuristic view, the Government of Tamil Nadu sanctioned a scheme of 100% survey of SSIs in Tamil Nadu to create a database, which will be eventually used for e-commerce purposes.
The data on the SSIs of the State, their products, their production capacity, etc., are not available anywhere now. Such a data will be very much helpful for larger industries, consumers, as well as those in export-business and the small-scale industries themselves. Therefore, SIDCO has been entrusted with the work of 100% survey of small scale and tiny industries in Tamil Nadu for creation of an Electronic Data base. A pilot project of 100% survey in Kancheepuram District has been completed. It is proposed to extend this to other Districts in the coming year.
It has been announced in the last year’s Governor’s Address that an Industrial Estate in an extent of 1000 acres will be formed in Thirumullaivayal in Tiruvellore District by SIDCO. As the first phase 290 acres of Government lands have been placed at the disposal of SIDCO who have started developing the Estate exclusively for women.
In the last year budget speech, this Government announced the formation of 5 industrial estates exclusively for women. The lands for women industrial estates are ready at Madurai, Trichy and Chennai. They shall be inaugurated soon. For Salem and Coimbatore land acquisition is in progress.
THE TAMIL NADU SMALL INDUSTRIES CORPORATION LTD.(TANSI)
During the initial stages of industrialization in this State, model industrial training cum production units to train new entrepreneurs were formed by the Directorate of Industries and Commerce. These industrial units also served as a testing ground for many new products and also on many occasions they have stimulated growth of many Small scale and tiny industrial units in various parts of the State. In the year 1965 it was considered that the role of training played by the units was over, Small Scale Industries have come of age and no more needed such training. Therefore, all these training cum production units were brought under a Corporation called Tamil Nadu Small Industries Corporation (TANSI). TANSI since then has been a collection of production units that function as model manufacturers in the Small Scale sector. Even now their products are famous for their genuineness of the materials used and also for quality because TANSI practices fair trade by using genuine raw materials and consequently their products are priced higher than the competing products in the market.
When purchase preference was denied to TANSI, the business of TANSI got affected. This Government has taken the policy decision to give purchase preference back to TANSI for the reason that Government departments should buy quality products only. TANSI has also the distinction of manufacturing essential infrastructure related products like hand pumps and electricity towers. They are usually not produced by others because the profit margins are low. Yet, these products are essential infrastructure inputs in the economy of the State.
After 20 years TANSI has started turning the corner and this year it will generate gross profit of Rs.3 crores. TANSI has also started looking for other market areas in neighbouring States and making inroads into the private sector. Recently big Corporations like the Tatas and Reliance industries have placed orders with TANSI for the manufacture of telecommunication towers. This will continue and it is expected that TANSI will be a model public sector company in the Small Scale Industries sector.
CM's 15- Point Programme:
The Department of Small Industries has a major role in the implementation of the Chief Minister's 15 Point Programme. Under the point "Livelihood security" the transition of unskilled technicians to skilled ones is a main objective. Also a co-coordinated effort on this will generate more non-farm employment opportunities. Already the Directorate of industries and Commerce is ahead in the learning curve, having 50 years of solid experience in imparting training in specialised fields like tool engineering, refrigeration, glass and ceramic in various centres. This activity will be further strengthened to bring scope for more number of persons. The PMRY training to generate self-employment in educated unemployed youth is a continuous process. This year we have a target of 20,000 persons, which will be completed successfully. Another important item in the 15-point programme is infrastructure development. The provision of basic amenities in rural and urban areas has been adopted as a motto by SIDCO. There are at present 73 industrial estates where necessary infrastructure facilities such as water supply, electricity, roads, etc., are successfully looked after by SIDCO. SIDCO will continue to upgrade the quality of infrastructure in these Estates and also create new industrial infrastructure in many places based on the demands in the rural areas.
TAMIL NADU TECHNOLOGY MISSION
Upgradation of technology is a must for Small Scale Industries to remain competitive in the market. The Tamil Nadu Technology Mission has recently started working on schemes to help SSIs who need upgradation in technology.
NEW SCHEMES:
This Department has proposed to start the following three new Industrial Co-operatives during 2002-2003:
- 1. Copper Jewels Manufacturers' Industrial Co-operative Society at Chidambaram, Cuddalore District.
- 2. Cashewnut and Allied Products Manufacturers' Industrial Co-operative Society at Jeyankondam.
- 3. Gold Jewellery Manufacturing Industrial Co-operative Society at Coimbatore.
Public Private Partnership in the SSI Sector
Efforts taken by the Government alone will not be sufficient for the growth of the industries and their economic well-being.Modern economic policies have centered on more privatization, democratization, decentralization and participation of various interests, particularly the SSIs themselves. Public Private Partnership (PPP) involves joint activities and initiatives of the public sector in association with private sector for profit as well as non-profit activities.
The Government of Tamil Nadu has decided to give a special thrust to Public Private Partnership, which can be applied for maintenance of infrastructure facilities in Industrial Estates, Business development services, common facility centres and the 100 % survey of SSIs.
The Foundation for Economic Development and Vocational Training (SEQUA), Germany has come forward to assist the Public Private Partnership effort. The German Confederation of Small Business and Skilled Crafts (ZDH) will be a partner in our efforts. The scheme will start functioning from the current year.
Online Registration of SSIs.
A scheme for online registration of Small Scale Industries is being implemented from this year. This scheme will be implemented in two phases. For the first phase provisional Small Scale Industries certificates can be applied online. An entrepreneur can file application for provisional Small Scale Industries certificate through Internet and shall get an immediate acknowledgement for his application. The District Industries Centre concerned with the application shall get it downloaded from the central server in the office of the Director of Industries and Commerce, Chennai, and then the provisional Small Scale Industries certificate will be authenticated and the same will be issued to the entrepreneur. This is the first time in the whole country such provisional Small Scale Industries certificates are obtained through online application by entrepreneurs.
NSIC - SIDCO TIE UP FOR COMPOSITE LOAN SCHEME TO TINY SECTOR INDUSTRIES
National Small Industries Corporation (NSIC) has introduced a new composite term loan scheme for the tiny sector industries. Under this scheme, a total loan upto Rs.25 lakhs is given towards investment in land and building, plant and machinery and working capital required for the tiny sector units. NSIC now joins with SIDCO to extend the above loan under single window concept. The following are the salient features of the NSIC-SIDCO Tie-up Scheme:
- 1. The Tiny Sector Industries having an investment in plant & machinery upto Rs.25 lakhs are eligible under this scheme;
- 2. The entrepreneur will apply to SIDCO for allotment of work shed or developed plot in its Industrial Estates. The unit holder will simultaneously apply to NSIC for sanction of composite term loan towards the cost of work shed or developed plot, plant & machinery and also for working capital requirement;
- 3. A Joint Appraisal Committee consisting of NSIC and SIDCO officials will apprise the project proposed by the applicant and give clearance for sanction of the composite term loan;
- 4. SIDCO will allot the work shed or developed plot to the tiny sector unit under outright purchase and NSIC will sanction the term loan on the basis of the valuation of the work shed/developed plot furnished by SIDCO in its allotment order;
- 5. NSIC will simultaneously sanction the loan for plant & machinery and also for the working capital requirements;
- 6. SIDCO will issue NOC to give first charge for plot/shed in favour of NSIC for releasing the amount.
- 7. SIDCO will assist NSIC for collecting the instalment dues for which service charges will be decided mutually;
- 8. Tiny Sector Units are started mostly by unemployed entrepreneurs and experienced technicians as a self-employment venture. Tiny Sector Industries are set up in rural and semi-urban areas, providing widespread employment opportunities to the local people;
- 9. Availing of the Margin Money Assistance by the Khadhi & Village Industries Commission in eligible cases in rural areas will be facilitated by SIDCO.
R.VILWANATHAN,
MINISTER FOR RURAL INDUSTRES
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