Semester – VI (2016—2017)

Subject: Entrepreneurship Development and Small Business

Chapter 3:Role of support Institutions to Promote Small Scale Industries / Entrepreneurship:

Need for Institutional Support,
Pattern, objectives and types of Incentives (Support),
Institutional Support

1. Define Incentives & Subsidies & State the Advantage of incentives & subsidies…..
2. Discuss Need for incentives &subsidies
3. Stat the problems relating to subsidies & Discuss Any 3 of your choice….
4. Short Note on (SIDO) Small Industrial Development Org.
5. Short Note on (SISI) Small Industries Service Institutes
6. Short Note on (NSIC) National Small Industries Corporation
7. Khadi & Village Industry Commission
8. The National Institute For Entrepreneurship & Small Business Development (NIESBUD)
9. Small Industries Development Bank of India (SIDBI)
10. Discuss or Explain Role of Directorate of Industries (DI) & District Industries Center
11. Explain Role of State Financial Corporations (SFCs) in Entrepreneurship Development
12. Discuss Role of State Industrial Development Corporation (SIDC) ; State Industrial
Investment Corporation (SIIC) & State Small Development Corporations (SSIDC)
13. Give the brief idea about Institutional Support for the development of Entrepreneurship
14. Stat Types of Incentives for the Development of Entrepreneurship.
15. Prepare a chart showing Financial Assistance to Entrepreneurs.

Objective Questions :
1) EDI is located at
(a) Ahmedabad ( b) Baroda ( c) Ghandhinagar ( d) None of the above

( c) Ghandhinagar

2)Give full from of SIDC and SIICS

State Industrial Development Corporations, State Industrial Investment Corporations

3) SSIDCs were established under which Act

Companies Act 1956.

4) TCOs stands for

Technical Consultancy Organisations.

5) Give five names of state level agency that extend facilities for promotion of SSIs
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State Infrastructure Development Corporation,
State Co-operative Banks
Regional Rural Banks,
State Export Corporation,
Sate Agro Industries Corporation ,
State Handloom and Handicrafits Corporation

6) TCOs provide a total package of consultants services to small & medium scale enterprises –True or
False
True

7) SIDBI and IDBI Stands for

Small Industries Development Bank of India. Industrial Development bank of India

8 )SIDBI was set up in

a) May 1978 b) April 1990 c)June 1990 d)None of the above

b) April 1990

9 )SIDBI’s operations cover three areas of_______,______ and ______

indirect assistance, direct assistance & development & support services

10 ) Define subsidy

Subsidy denotes a single lump sum which is given by a government to an entrepreneur to cover the cost.

11) WASME Stands for

World Association for Small & Medium Enterprises

12) NABARD stands for

National Bank for Agriculture and Rural Development

13) Prime minister Rojgar Jojra is provided by district industry centre to provide self employment to
unemployed youth—Agree or Disagree

Agree

14) What is CMRY & PMRY ?..

CMRY & PMRY are self employment schemes.

Chief Minister Rojgar Yojna, Prime Minister Rojgjar Yojna

15 ) To provide financial assistance to entrepreneurs the government has set up a number

of___________ .
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A. financial advisors.
B. financial intermediaries
C. Industrial estates.
D. financial institutions.

ANSWER: D. financial institutions.

16) State Industrial corporations engage in the development of__________

A. industrial estates.
B. institutional estates.
C. individual investors.
D. agricultural entrepreneurs
ANSWER: A

17) IFCI was established in the year___________

A. 1985.
B. 1984.
C. 1980.
D. 1987.

ANSWER: B

18) IFCI provides____________

A. medium term credit.
B. short term credit.
C. medium and long term credit.
D. long term credit.

ANSWER: C

19) Assistance from IFCI is available for_________

A. setting up of new industrial projects
B. expansion of existing units.
C. renovation and modernization.
D. All of the above.

ANSWER: D

20) SIDBI was set up as a subsidiary of_________

A. IDBI.
B. IFCI.
C. ICICI.
D. . SFC.

ANSWER: A

21) Which of the following is a function of SIDBI

A. Extension of seed capital.
B. Discounting of bills.
C. Providing factoring services.
D. All of the above.

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ANSWER: D

22) Financial resources of SFCs consist of__________

A. paid up capital.
B. reserve funds.
C. borrowings from RBI.
D. All the above.

ANSWER: D

23) A concessional rate of interest is charged by SFC in case of__________

A. small scale industries.
B. . units in backward areas.
C. units set up by technical entrepreneurs
D. All the above.

ANSWER: D

24) SIDC stands for __________

A. State industrial development corporation.
B. Small industries development corporation
C. State institutional development corporation.
D. Small institutional development corporation.

ANSWER: A

25) In backward areas, term loans for expansion or setting up a new unit are available at __________
A. concessional terms
B. differential terms.
C. standard terms.
D. specific terms.

ANSWER: A

26) Term financing is mainly availed by entrepreneurs for the establishment of _______
A. a. new industrial units
B. b. acquisition of fixed assets.
C. b. expansion in plant capacity
D. c. all the above.

ANSWER: D

27) The first step in starting a new business venture is _________

A. . Idea generation.
B. Scanning of ideas.
C. Preparing a business plan.
D. Project implementation

ANSWER: A

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28) EDPs course contents contains ___________
A. a. General introduction to entrepreneurs
B. b. Motivation training.
C. b. Managerial skills.
D. b. All the above.

ANSWER: D

29) The main functions of DIC is __________

A. a. To collect data on consumer items.
B. a. Identification of entrepreneurs.
C. a. To prepare model schemes.
D. a. To secure reservation of certain products for the SSIS.

ANSWER: B

30) SIDO stands for____________

A. State Travel Industries Development Organization.
B. Service Industries Development Organization.
C. Small Industries Development Organization.
D. Small Institution Development Organization.

ANSWER: C

31) The main function of SIDO is _________

A. a. To provide SSI with machines on hire purchase basis.
B. a. To assist small industries with marketing facilities.
C. a. To distribute basic raw materials through their depots.
D. a. To secure reservation of certain products for the SSIS.

ANSWER: D

32) National Alliance of Young Entrepreneurs (NAYE) Sponsored an Entrepreneurial Development

scheme
with Bank of India in______________
A. January 1920.
B. August 1920.
C. January 1972.
D. August 1972.

ANSWER: D

33) Large investment is made in fixed assets, the project will be termed as __________
A. Capital Intensive.
B. Labour Intensive.
C. Product Intensive.
D. Market Intensive.

ANSWER: A

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34) Projects involving large number of human resources will be termed as __________
A. Capital Intensive.
B. Labour Intensive.
C. Product Intensive.
D. Market Intensive.

ANSWER: B

35)

ANSWER: B

36) The term ___________ denotes bonus or financial aid which is given by a government to an
industry
to help it compete with other units
A. Incentive.
B. Subsidy.
C. Bounty.
D. Concession.

ANSWER: C

37) The granting of cash subsidy on the capital investment is called __________
A. Concessional finance
B. Quantum of Subsidy.
C. Interest Subsidy.
D. Central Investment Subsidy.

ANSWER: D

38) DGTD stands for __________

A. Directorate General of Technical Development
B. District General of Technical Development.
C. District General of Taxation Deduction.
D. Directorate General of Taxation Deduction.

ANSWER: A

39) _____________ involves estimates about project costs and revenues and the funds required for the
project
A. Techno-economic analysis.
B. . Feasibility analysis.
C. Input analysis.
D. Financial analysis

ANSWER: D

40) Decisions taken by an entrepreneur on behalf of his enterprise are known as _________
A. Organizational decisions.
B. Personal decisions.
C. Routine decisions.
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D. Strategic decisions

ANSWER: A

INCENTIVES AND SUBSIDIES In India Entrepreneurs are offered a number of incentives because they
fulfill two main objectives of economic development. Firstly, they facilitate decentralization of industries.
They assist in the dispersal of industries over the entire geographical area of the country. Secondly, they
facilitate the transformation of a traditional technique into modern technique characterized by improved
skills, high production and higher standard of living.

INCENTIVES It is the financial and promotional assistance provided by the government to the industries
for boosting up industrial development in all regions particularly in backward areas. Incentives include
concession, subsidies and bounties. ‘Subsidy’ denotes a single lump-sum which is given by a government to
an entrepreneur to cover the cost. It is granted to an industry which is considered essential in the national
interest. The term Bounty denotes bonus or financial aid which is given by a government to an industry to
help it compete with other units in home market or in a foreign market. Bounty offers benefits on a
particular industry; while a subsidy is given in the interest of the nation. The object of incentives is to
motivate an entrepreneur to start new ventures in the larger interest of the nation and the society.

ADVANTAGES OF INCENTIVES AND SUBSIDIES They offer following advantages:

1) They act as a motivational force which makes the potential entrepreneur to enter into business
activities.
2) They encourage the entrepreneur to start industries in the backward areas.
3) They help the government to get a balanced regional development.
4) They help to develop new enterprises which lead to economic development.
5) They make the entrepreneur to face competition successfully.
6) They help to reduce the overall problems of small scale entrepreneurs.

NEED FOR INCENTIVES AND SUBSIDIES The need for incentives and subsidies arises for the
following reasons:

1) To Remove Regional Disparities in Development: Industries may be concentrated and overcrowded in

some regions, in order to correct this regional balance, incentives are provided to entrepreneurs. They will
start new ventures in such backward areas. Thus the backward areas become developed and regional
imbalances are corrected.

2) To Provide Competitive Strength, Survival and Growth: several other incentives are provided for the
survival and growth of industries. For example, reservation of products, price preference etc. will improve
the competitive strength. Other concessions like concessional finance, tax relief etc., contribute their
survival and growth.

3) To Generate More Employment and Remove Unemployment: Market adjustments and external
economies play a significant role in the economic development of a country. Subsidies cause movement of
entrepreneurs from developed areas to developing or backward areas. In short, incentives and subsidies
serve as a catalyst to start a dynamic process of development.

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4) To Promote Entrepreneurship: Industrial estates, availability of power, concessional finance, capital
investment subsidy, transport subsidy etc, are few examples of subsidies which are aimed at encouraging
entrepreneurs to take up new ventures.

PROBLEMS RELATING TO SUBSIDIES Some problems may arise in devising and implementing a
subsidy system. They are as follows.

1) A subsidy may remain unutilized.

2) If the administration is inefficient or corrupt, subsidy will not produce the desired results.
3) It is very difficult to measure the impact of subsidies.
4) Subsidies may lead to inefficiency in the long run.
5) Subsidies once introduced are difficult to withdraw.
6) The administrative procedure must be effective.
7) The cost of administering a subsidy should be considered.
8) The subsidy scheme should be communicated to prospective beneficiaries.
9) The quantum of subsidy should be adequate to produce the desired results.
10) The target groups to whom the subsidy is to benefit should be clearly determined.

List of important institutions that are helping Indian entrepreneurs by

providing financial and other supports
A) Financial Institutions:

1) Industrial Development Bank of India (IDBI)

2) Industrial Finance Corporation of India (IFCI)
3) Small Industries Development Bank of India (SIDBI)
4) National Small Industries Corporation Ltd (NSIC)
5) State Small Industries Corporation (SSIC)
6) Regional Rural Banks (RRBs)
7) State Financial Corporations (SFCs)
8) State Industrial Development Corporations (SIDCs)
9) Cooperative Banks and Gramin Banks

B) Institutions for technical guidance:

1) Small Industries Development Organisation (SIDO)

2) District Industries Centres (DICs)
3) Technical Consultancy Organisations (TCOs)
4) Small Industries Service Institutes (SISIs)
5) State Small Industries Development Corporations (SSIDCs)
6) Industrial Development Corporation (IDCo)

C) Training Institutions:

1) Small Industries Service Institute (SISI)

2) National Bank for Agriculture and Rural Development (NABARD)

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 3) Council for Advancement of Peoples Action and Rural Technology (CAPART)
4) District Industries Centre (DIC)

1)SMALL INDUSTRIAL DEVELOPMENT ORGANISATION (SIDO) The SIDO was formed under
the Ministry of Industry. It is a policy making, co-coordinating and monitoring agency for the development
of small scale industries. It maintains a close liaison with the government, financial institutions and other
agencies which are involved in the promotion and development of small scale units. It provides a
comprehensive range of consultancy services and technical, managerial, economic and marketing assistance
to the small scale units. It has launched various technology support programmes for the benefit of small
scale industries in the country through a number of steps.

The steps include establishment of

(a) process-cum-product development centers,
(b) tool rooms and training centers. (c) specialized institutes and
(d) regional testing centers with its field testing stations.

FUNCTIONS OF SIDO The main functions are co-ordination, industrial development and industrial
extension service, other functions are summarized as follows:
1) To estimate the requirements of raw material for the small scale sector and to arrange their supply.
2) To collect data on consumer items which are imported and encourage the setting up of new units by
giving them co-ordinate assistance.
3) To prepare project reports and other technical literature for prospective entrepreneurs.
4) To secure reservation of certain products for the SSIs.

2)NATIONAL SMALL INDUSTRIES CORPORATION (NSIC) It was set up in 1995 to provide

machinery to small scale units on hire purchase basis and to assist these units in obtaining orders from
government departments and officies. Its head office is at Delhi. It has four regional offices at Delhi,
Mumbai, Chennai and Calcutta. It has eleven branch offices also.

FUNCTIONS OF NATIONAL SMALL INDUSTRIES CORPORATION Its functions are as follows:

1) To develop small scale units as ancillary units to large scale industries
2) To impart training to industrial workers.
3) To market the product of SSIs at home and abroad.
4) To help the small scale industries in procurement of scarce and imported raw material.
5) To obtain orders for SSI units from government department and offices.
6) To provide machinery to SSI units on hire purchase basis.
7) To construct Industrial Estate and establish and run proto-type production-cum-training centres.

3) SMALL INDUSTRIES SERVICE INSTITUTES (SISIs) Small Industries Service Institutes have been
established in each state in 1956 as agencies of SIDO. The objective is to develop small scale industries. The
functions performed may be summarized as follows:
1) It promotes entrepreneurship and development of SSIs in rural and other underdeveloped areas.
2) It supplies market information in selected cases and undertakes market distribution surveys for industrial
enterprises.
3) It conducts various programmes for workers in other organizations as well as in small industry in certain
trades.
4) It assesses the capacities of small units for imported/controlled materials.
5) It provides technical guidance on the efficient use of wastages and scraps.
6) It prepares designs and drawing for production equipment and accessories.

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7) It ensures that small industry development in India is being done in right lines.
8) It provides workshop common facilities to industrialists at reasonable charges.
9) It conducts detailed plant studies to locate production and other problems. It initiates and coordinates
modernization of selected industries.
10) The institute assists in rehabilitation of sick units.
11) It helps to develop ancillary industries. It registers SSI units with NSIC to supply their products to
government.
12) The institute conducts modernization studies for technology upgradation.
13) It undertakes quality control, energy conservation and pollution control, specialized training
programmes on export marketing.
14) The institutes also conduct surveys and studies for identification of industries having scope of
promotion and development.

15) It advises the Govt. of India and state government on policy matters relating to small industry
development.

4) KHADI AND VILLAGE INDUSTRIES COMMISSION KVIC makes finance available to the
implementing agencies in the form of capital expenditure loans. It also extends assistance for setting up of
retail sales outlets and also for strengthening of the capital base of the registered institutions and
cooperatives. It also assists individual artisans besides formulating liberal pattern of assistance for identified
hill, border and weaker sections. The loans for Khadi are interest free, while those for village industries have
an interest at the rate of 4% per annum.

FUNCTIONS OF KVIC
(1) To train the artisans.
(2) To assist village industries in procuring raw materials.
(3) To assist and support through marketing of finished products of village industries.
(4) To provide equipment and machinery to producers on concessional terms.
(5) To undertake R and D programmes for improved implements for silk reeling, more efficient extraction of
oil in power ghanis, manufacture of panel boards from banana stems and improved ‘charka’ and looms. The
main thrust of KVIC is to alleviate rural poverty and to make the village artisan more productive through
improved technology and market support.

5) THE NATIONAL INSTITUTE FOR ENTREPRENEURSHIP AND SMALL BUSINESS

DEVELOPMENT (NIESBUD) It is an apex body established in 1983 by the ministry of Industries,
Government of India, for coordinating, training and overseeing the activities of various institutions/agencies
engaged in entrepreneurship development, particularly in the area of small industry and small business. The
Institute which is registered as a society under Government of India Societies Act started functioning from
6th July, 1983.The policy, direction and guidance to the institute is provided by its governing council whose
chairman is the minister of SSI. It has an executive committee.

OBJECTIVES OF NIESBUD The objectives of the institute include the following:

To evolve standardized materials and processes for selection, training, support and sustenance of
entrepreneurs, potential and existing.
To share internationally, its experience and expertise in entrepreneurship development.
To train the trainers, promoters and consultants in various areas of entrepreneurship development.
To provide national/international forums for the interaction and exchange of experiences helpful for policy
formulation and modification at various levels.
To provide vital information and support to trainers, promoters and entrepreneurs by organizing research
and documentation relevant to entrepreneurship development.
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FUNCTIONS OF NIESBUD
(a) Evolving effective training strategies and methodology.
(b) Standardizing model syllabi for training various target groups.
(c) Formulating scientific selection procedures.
(d) Developing training aids, manuals and tools.
(e) Facilitating and supporting central/state/other agencies in organizing entrepreneurship development
programmes.
(f) Conducting training programmes for promoters, trainers and entrepreneurs.

6)Small Industries Development Bank of India (SIDBI):

SIDBI was set up in April 1990 as a wholly owned subsidiary of IDBI (Industrial Development Bank of
India) t provide financial assistance to the entrepreneurs under an Act of the Parliament, namely Small
Industries Development Bank of India Act 1989.

The Bank has been delinked from IDBI with effect from March 27, 2002. The Bank caters all SSIs –tiny,
village and cottage—through its Head Official at Lucknow.

Channels of SIDBI’s Assistance:

1. Indirect Finance:
By way of refinance and bills discounting through more than 901 primary lending institutions having over
65000 outlets across the country.

2. Direct Finance:
Direct finance is given through SIDBI’s own 38 offices by means of several tailor-made schemes to reach
assistance to specific target groups.

3. Promotional and Development Activities:

Involving accredited Non-Government organizations voluntary organizations, Scientific and Research
Institutions, Technology Institutions, Management Institutions, etc.

Thus SIDBI is the principle financial institution for promotion, financing and development of small scale
industries in India. It co-ordinates functions of existing institutions engaged in similar activities.

Accordingly, SIDBI has taken over the responsibility of administering Small industries Development Fund
and nation Equity fund which were earlier administered by IDBI

Functions of SIDBI:

The important functions of SIDBI are:

(1) To initiate steps for technological up-gradation and modernization of existing units.
(2) To expand the cannels for marketing the products of SSI sector in domestic and international markets.
(3) To promote employment oriented industries especially in semi-urban areas to create employment
opportunities and thereby checking migration of people to urban areas.
(4) To refinance loans and advances extended by the primary lending institutions to SSI units and also
provides resources to them.
(5) To discount and rediscount bills arising from sale of machinery to or manufactured by industrial units in
the SSI sector.

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(6) To provide services like leasing, factoring etc. to industrial concerns in the SSI sector.
(7) To expand financial support to State Small Industries Development Corporation for providing scare raw-
materials to industrial units in SSI sector.
(8)To grant loan and advances to any person engaged in exporting or executing any turnkey project abroad.
(9) To subscribe to or purchasing stocks and shares, bonds and debentures of any state /financial
Corporations.

Scope of SIDBI:

The SIDBI covers all industrial undertakings like any concern engaged in business activities and which is
regarded as a small scale undertaking under Section 11-B of the Industrial Development and Regulation Act,
1951.

The following business activities undertaken by small scale sector are covered under the scope of SIDBI:

(i) The manufacturing preservation or processing of goods;

(ii) Shipping industry;
(iii) Mining industry;
(iv) Hotel industry
(v) Transport of passengers or goods by road/water/air;
(vi) Generation or distribution of electricity or any other form of power;
(vii) Maintenance, repair, testing or servicing of machinery of any description or vehicle or vessels or motor
boats or trailers or tractors;
(viii) Assembling, repairing or packing any article with the aid of machinery or power;
(ix) The development of any contiguous area of land as an Industrial Estate;
(x) Fishing or providing stores facilities for fishing or maintenance thereof;
(xi) Providing special or technical knowledge or other services for the promotion of industrial growth; or
(xii) The research and development of any process or product in relation to any of the matters aforesaid.

State Level Institutions –

1) Directorate of Industries (DIs) – At the State level, the Commissioner/ Director of Industries
implements policies for the promotion and development of small-scale, cottage, medium and large scale
industries. The Central policies for the SSI sector serve as guidelines but each State evolves its own policy
and package of incentives. The Commissioner/ Director of Industries in all the States/UTs, oversee the
activities of field offices, that is, the District Industries Centers (DICs) at the district level

2)District Industries Centers (DICs) – In order to extend promotion of small-scale and cottage industries
beyond big cities and state capitals to district headquarters, DIC program was initiated in May, 1978, as a
centrally sponsored scheme. DIC was established with the aim of generating greater employment
opportunities especially in rural and backward areas in the country. At present DICs operate under
respective Sate budgetary provisions. DICs extend services of the following nature – (i) economic
investigation of local resources (ii) supply of machinery and equipment (iii) provision of raw materials (iv)
arrangement of credit facilities (v) marketing (vi) quality inputs (vii) consultancy

Role of DIC

1. Technical support for preparation of Project Report.

2. Information on sources of machinery & Equipment.
3. Priority in Power supply/ Telephone connection.
4. Promotion of new Industrial Estates/ Growth Centres.
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5. Land/ Shed in Industrial Estate.
6. Approval of Project Reports of special types.
7. Promotion of Electronic Industries.
8. Govt. Margin Money Loan under Additional Employment Programme.
9. Training through Entrepreneurship Development Programme.
10. Assistance under State Incentives Scheme.
11. Allotment of Raw Materials.
12. Financial Assistance under Self Employment Schemes.
13. Financial assistance through Bank/ WBFC/ WBSIC/NSIC.
14. Assistance under Equipment Leasing Scheme through NSIC.
15. Marketing linkage with Central Govt./ State Govt. organisations/ undertakings.
16. Marketing assistance through WBSIC/NSIC/CEO.
17. Ancillary Industry tie-up with Govt. undertakings.
18. Marketing information.
19. Marketing assistance through participation in Exhibitions/ Trade Fairs/ Buyers-Sellers Meet etc.
20. Marketing assistance to Handicrafts Artisans through participation in Handicrafts Expo and Exhibition
inside/ outside of the state.
21. Linkage with organisations like WBHDC/ WB State Handicrafts Co-operative Society
Ltd./Development Commissioners ( Handicrafts ).
22. Attending problems related to SSI Registration/ Bank loan/ Marketing of production etc.

3)State Financial Corporations (SFCs) – Main objectives are to finance and promote small and medium
enterprises in their respective states for achieving balanced regional growth, catalyze investment, generate
employment and widen ownership base of industry. Financial assistance is provided by way of term loans,
direct subscription to equity/debentures, guarantees, discounting of bills of exchange and seed capital
assistance. SFCs operate a number of schemes of refinance of IDBI and SIDBI and also extend equity type
assistance. SFCs have tailor-made schemes for artisans and special target groups such as SC/ST, women, ex-
servicemen, physically challenged and also provide financial assistance for small road transport operators,
hotels, tourism-related activities, hospitals and so on. Under Single Window Scheme of SIDBI, SFCs have
also been extending working capital along with term loans to mitigate the difficulties faced by SSIs in
obtaining working capital limits on time

4)State Industrial Development / Investment Corporation (SIDC/SIIC) – Set up under the Companies
Act, 1956, as wholly owned undertakings of the State governments, act as catalysts in respective states.
SIDC helps in developing land providing developed plots together with facilities like roads, power, water
supply, drainage and other amenities. They also extend assistance to small-scale sector by way of term
loans, subscription to equity and promotional services. 11 out of 28 SIDCs in the country also function as
SFCs and are termed as Twin-function IDCs

5)State Small Industrial Development Corporations (SSIDC) – Established under Companies Act, 1956,
as State government undertaking, caters to small, tiny and village industries in respective states. Being
operationally flexible undertakes the activities like (i) procure and distribution of scarce raw materials, (ii)
supply of machinery to SSI units on hire-purchase basis, (iii) product marketing assistance, (iv) construction
of industrial estates, allied infrastructure facilities and their maintenance (v) extending seed capital
assistance on behalf of State government and (vi) providing management assistance to production units.

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