An Overview of Small Scale Industries

The Micro, Small and Medium Enterprises Act, 2006 as defined by RBI is:
a) Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:
I. A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;
II. A small enterprise is an enterprise where the investment in plant and machinery is more than Rs.
25 lakh but does not exceed Rs. 5 crore; and
III. A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.
To begin with an overview of small scale industries, investment in plant and machinery is the original cost excluding land and building and the items specified by the Ministry of Small Scale Industries (SSI).
b) Enterprises engaged in providing or rendering of services and whose investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006 are specified below.
I. A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh;
II. A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore; and
III. A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore.
Objectives behind the formation of Small Scale Industries:

• Establishing a high level Board and advisory committee consisting of various stakeholders for the development of Small Scale Industries.
• Facilitation of procurement of goods and services.
• Concentrating on the related matters of Small Scale Industries.
• Enhancement of the competitiveness of Small Scale Industries by formulation of plans, policies, programmes, guidelines etc.
• Facilitation of the promotion and development of Small Scale Industries.
• Ensuring timely payment to these industries.
• Defining and classifying small, medium and micro enterprises.
• Prevention of corporate sickness in these industries by ensuring proper and timely flow of funds.
• Provision of simplified winding-up scheme (exit) scheme.

Classification of MSMEs:
For Manufacturing Enterprises (upper limit on investment in plant & machinery):

• Micro - Rs. 25 Lakh
• Medium – Rs. 10 Lakh
• Small – Rs. 5 Lakh

For Service Enterprises (upper limit on investment in equipments)

• Micro - Rs. 10 Lakh
• Medium – Rs. 5 Lakh
• Small – Rs. 2 Lakh

Items to be excluded while calculating investment in plant & machinery:

• Expenditure for installation of plant & machinery
• Equipment for pollution control and research & development
• Equipments such as spare parts for maintenance servicing and cost of other consumable stores
• Fire- fighting equipments
• Gas producer plants
• Hauling charges (excluding sales-tax or VAT and excise duty) for local machines from place of manufacture to the site of the enterprise
• Raw material storage tanks and finished products not linked with manufacturing process.
• Bank charges and service charges paid to national small industries corporation and state small industries corporation

Extra transformer and power generation set installed.
Registration Procedure:
There is no statutory basis for the registration of an existing or proposed small scale enterprise, rather is beneficial for the enterprise, it being eligible to avail various Government benefits for the promotion of Small Scale Industries like priority sector lending, cheap customs duty, various tax exemptions, credit guarantee scheme to name a few. Such scheme of voluntary registration was made eligible for different types of assistance by the Governmental agencies
The appropriate authorities for the registration of such Small Scale Industries are the State Directorate or Commissioner of Industries and District Industries Centers (DIC’s) and such registration are done under two stages namely:

• Provisional and
• Permanent registration

Provisional Registration: Provisional registration is granted to a unit at its pre- investment period to enable it to take necessary steps to apply for financial credit, land or an industrial set, water, power or telephone connections, etc.
Permanent/Final Registration: A provisionally registered industrial unit when it is about to go into production is to apply for grant of Permanent / Final Registration. An existing and functioning industrial unit is eligible to apply for Permanent / Final Registration without going into provisional registration processes.