Entrepreneurship development and Industrial Consultancy

Module 3. Government policies

Lesson 13
GOVERNMENT SCHEMES AND INCENTIVES FOR PROMOTION OF ENTREPRENEURSHIP

13.1 Introduction

Government provides many types of incentives to entrepreneurs. These incentives help to increase productivity. It acts as a motivating force for the entrepreneur. These incentives are categorized as concession, subsidies and bounties. Subsidies are a one time lump sum amount given to the entrepreneur by the government. It is a financial help to cover the cost. Bounty is a financial help provided to an industry so that it can compete with other units of the country as well as any foreign industry in the same business.

13.2 Aims and Objectives of Incentives

1. To eliminate Economic constraints: Entrepreneurs face many types of constraints. e.g. lack of adequate infrastructure, far flung locations of supporting offices for projects, lack of related knowledge by entrepreneurs viz., managerial know how, market intelligence, etc. Thus government incentives in the form of availability of power, concessional finance, capital investment subsidies, transport subsidies etc aims at eliminating such constraints and promote entrepreneurship.

2. To bring about regional parity in development: In our country there is imbalance in the development across different regions. Some are well established and some are underdeveloped. In order to see that there is equal development of all the regions, government provides special incentives for establishing entrepreneurs in the backward regions.

3. To enhance competitive capability: In this competitive world small scale enterprises established by entrepreneurs face stiff competition from big firms. If they are not provided appropriate support from the government then they can not survive and grow. Thus certain incentives are required. e.g. reservation policy, price preference, preferential purchase, etc., help to improve their competitive strength.

Entrepreneurs in the present globalized market economies are the engine of economic development. Due to their private ownership for majority of cases, entrepreneurial spirit, their flexibility and adaptability and also their capability to react to challenges and changing environments, enterprises lead to sustainable growth and employment generation in a significant manner. Enterprises, specially small and medium enterprises are considered to have strategic importance in national economy for many reasons. Therefore government helps enterprises including small and medium ones by supporting entrepreneurs. By doing so, it is possible to create new job positions, increase gross domestic product (GDP) and rising living standard of population. Government provides support to entrepreneurs in the following ways.

4. Training: Basic training varies from product to product but will necessarily emphasise on sharpening of entrepreneurial skills. In this regard central and state government’s technical institutions provide need based technical training. Entrepreneurship development programmes are conducted by many government organizations and non government institutions.

5. Marketing assistance: Government and non government agencies provide marketing assistance to entrepreneurs. Government promotes MSME products through exhibitions. NSIC directly markets the MSME product in the national and international market, NSIC manages single point registration scheme for manufacturers for government purchases. Enterprises registered under this scheme obtain the benefit of free tender documents and exemption from earnest money deposit and performance guarantee.

6. Promotional schemes: Government provides highest preference for development of MSME by formulating and implementing conducive policies and government schemes. Government provides development land and sheds on actual cost basis with appropriate infrastructure. The government has designed the special schemes for specific purposes such as quality upgradation, common facilities, entrepreneurship development and consultancy services at minimal charges. The government provides financial support to entrepreneurs to obtain ISO 9000 certificate by providing up to 75% of actual cost with maximum ceiling of Rs 75000/-.

7. Concession of Excise duty: Government provides exemption to MSME units for a particular level of annual turnover from paying excise duty. The limit of turnover is variable.

8. Credit facility: Credit to micro, medium and small scale sector is covered under priority sector lending by banks. Small industries development bank of India (SIDBI) is mainly responsible for implementing various schemes of providing financial support to small entrepreneurs. Loans are also provided to small entrepreneurs by scheduled banks without collateral security. This limit is variable.

13.3 Schemes of State Governments

All the state governments also provide technical and other support services to small enterprises through their directorate of industries and district industries centre. In general all the state governments extend support of following types.

a) Deferment/ suspension of sales tax.

b) Power subsidy

c) Capital investment subsidies to new enterprises established in some selected districts.

d) Margin money/seed capital assistance schemes.

e) Priority in providing power connection/water connection.

f) Technical and consultancy support.