For promoting and strengthening small enterprises, Govt. of India announced policy measures for promoting and strengthening small, tiny and village enterprises on August 5, 1991. The salient features of the new policy are
- Reservation of products for manufacture in the small scale sector to continue, units included in this list not to be subjected to compulsory licensing procedure
- Hike in investment limit in plant and machinery for small scale, ancillary and export-oriented units retained as Rs.60 lakhs, Rs.75 lakhs and above Rs. 75 lakhs respectively;
- Hike in investment limit in plant and machinery for tiny sector from Rs. 2 lakhs to Rs. 5 lakhs irrespective of location of the unit;
- Women enterprises redefined. Stipulation regarding employment of majority of women workers to be dispensed with. Relevant criteria are major share holding and management control by women entrepreneurs;
- A limited partnership act to be introduced to limit the financial liability of new and non-active partners/entrepreneurs to the capital invested;
- Equity participation by other industrial undertakings including foreign companies up to 24 percent;
- Support from National Equity for new projects not exceeding Rs.10 lakhs of project cost (including margin money for working capital) through equity support (up to 15percent). The unit to be located in places up to 5 lakhs population 915 lakhs in case of hilly areas and North eastern region) In case of rehabilitation proposals, population limit is 15 lakhs;
- Single window loan scheme enlarged to cover projects up to Rs.20 lakhs term loan with working capital margin up to Rs. 10 lakhs. The scheme to be channeled through commercial banks in addition to SFCs and twin-function State Small Industries Development Corporations;
- Relaxation of certain provisions of labour laws;
- ‘Factoring’ services to be extended through commercial banks;
- Suitable legislation (delayed payments act) to be introduced to ensure prompt payment of small industries bills;
- Easier access to institutional finance. Efforts to be made to ensure adequate flow of credit on a normative basis and the quality of its delivery for viable operations of the sector. A special monitoring agency to be set up for this purpose;
- Integrated infrastructure development (including technological back-up services) to be pursued for small scale units;
- Technology Development Cell (TDC) to be set up in SIDO;
- Export Development Centre to be set up in SIDO;
- Marketing of mass consumption items by NSIC under common brand name;
- Technology information centres to be established to provide and imported raw materials to be ensured to the small-scale sector, particularly to the tiny sub-sector;
- Industry associations to be encouraged to set up sub-contracting exchanges, quality counseling services and common testing facilities;
- Package for handlooms, handicrafts, village industries covered by KVIC and for other village industries in the form of comprehensive integrated support services;
The small scale industrial sector has emerged as a dynamic and vibrant sector of the economy during the eighties. At the end of the Seventh Plan period, it accounted for nearly 35 percent of the gross value of output in the manufacturing sector and over 40 percent of the total exports from the country. It also provided employment opportunities to around 12 million people.
Service sub-sector was recognized as a fast growing area and Government felt the need to provide support to it in view of its recognized potential for generating employment. Hence, all industry-related service and business enterprises, irrespective of their location, were to be recognized as small scale industries and their investment ceilings would correspond to those of tiny enterprises.
While the small scale sector (other than “Tiny Enterprises”) would be mainly entitled to one-time benefits (like preference in land gradation), the tiny enterprises would also be eligible for additional support on a continuing basis, including easier access to institutional finance, priority in the Government Purchase Programme and relaxation from certain provisions of labour laws.
All the above measures are applicable equally to women enterprises as majority of them fall in the small enterprises category and especially in the tiny enterprise category, where extra benefits are applicable.