SIDBI – Small Industries Development Bank of India & its Functions

SIDBI operates under the Department of Financial Services, Government of India. SIDBI is
one of the four All India Financial Institutions regulated and supervised by the Reserve Bank;
other three are EXIM Bank (Export–Import Bank of India ), NABARD (National Bank for
Agriculture and Rural Development) and NHB (National Housing Bank).
The SIDBI (Small Industries Development Bank of India) is a wholly owned subsidiary of IDBI
(Industrial Development Bank of India), established under the special Act of the Parliament 1988
which became operative from April 2, 1990.

SIDBI was made responsible for administering Small Industries Development Fund and National
Equity Fund that were administered by IDBI before. SIDBI is the Primary Financial Institution
for promoting, developing and financing MSME (Micro, Small and Medium Enterprise) sector.
Besides focussing on the development of the Micro, Small and Medium Enterprise sector, SIDBI
also promotes cleaner production and energy efficiency. SIDBI helps MSMEs in acquiring the
funds they require to grow, market, develop and commercialize their technologies and innovative
products. The bank provides several schemes and also offers financial services and products for
meeting the individual’s requirement of various businesses.

Finance Facilities Offered by SIDBI:

Small Industries Development Bank of India, offers the following facilities to its customers:

1. Direct Finance
SIDBI offers Working Capital Assistance, Term Loan Assistance, Foreign Currency Loan,
Support against Receivables, equity support, Energy Saving scheme for the MSME sector, etc.

2. Indirect Finance
SIDBI offers indirect assistance by providing Refinance to PLIs (Primary Lending Institutions),
comprising of banks, State Level Financial Institutions, etc. with an extensive branch network
across the country. The key objective of the refinancing scheme is to raise the resource position
of Primary Lending Institutions that would ultimately enable the flow of credit to the MSME
sector.

3. Micro Finance
Small Industries Development Bank of India offers microfinance to small businessmen and
entrepreneurs for establishing their business.

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

1. Small Industries Development Bank of India refinances loans that are extended by the PLIs to
the small-scale industrial units and also offers resources assistance to them
2. It discounts and rediscounts bills
3. It also helps in expanding marketing channels for the products of SSI (Small Scale Industries)
sector both in the domestic as well as international markets
5. It promotes employment oriented industries particularly in semi-urban areas for creating
employment opportunities and thus checking relocation of people to the urban areas
6. It also initiates steps for modernisation and technological up-gradation of current units
7. It also enables the timely flow of credit for working capital as well as term loans to Small
Scale Industries in cooperation with commercial banks
8. It also co-promotes state level venture funds

Benefits of SIDBI:

1. Custom-made
SIDBI policies loans as per the requirements of your businesses. If your requirement doesn’t fall
into the ordinary and usual category, Small Industries Development Bank of India would assist
funding you in the right way.

2. Dedicated Size
Credit and loans are modified as per the size of the business. So, MSMEs could avail different
types of loans custom-made for suiting their business requirement.

3. Attractive Interest Rates

It has a tie-up with several banks and financial institutions world over and could offer
concessional interest rates. The SIDBI has tie-ups with World Bank and the Japan International
Cooperation Agency.

4. Assistance
It not just give provides a loan, it also offers assistance and much-required advice. It’s
relationship managers assist entrepreneurs in making the right decisions and offering assistance
till loan process ends.

5. Security Free
Businesspersons could get up to INR 100 lakhs without providing security.

6. Capital Growth
Without tempering the ownership of a company, the entrepreneurs could acquire adequate capital
for meeting their growth requirements.

7. Equity and Venture Funding

It has a subsidiary known as SIDBI Venture Capital Limited which is wholly owned that offers
growth capital as equity through the venture capital funds which focusses on MSMEs.
8. Subsidies
SIDBI offers various schemes which have concessional interest rates and comfortable terms.
SIDBI has an in-depth knowledge and a wider understanding of schemes and loans available and
could help enterprises in making the best decision for their businesses.

9. Transparency
Its processes and the rate structure are transparent. There aren’t any hidden charges.

How to apply for loan through SIDBI:

Preparing BIM

Submitting BIM to SIDBI

Rating of Proposal

(After Approval)

Direct Financing (SIDBI) Indirect Financing (PLIs)

For processing a loan through Small Industries Development Bank of India, an entrepreneur
would have to go through the below-mentioned process:

Step 1: Recognized consultants empanelled with the SIDBI would prepare the documents
needed. Depending on the requirements and information specified by the MSMEs, the
consultants would prepare a BIM (Basic Information Memorandum). This document would
include all the information related to the rating agencies and banks.
Step 2: The Basic Information Memorandum is approved by MSME entrepreneur. The
accredited consultants would then submit the Basic Information Memorandum to Small
Industries Development Bank of India.
Step 3: In case required, the proposal would be rated by the rating agency which is approved by
the Reserve Bank of India.
Step 4: SIDBI would directly handle the below-mentioned cases:
i. SIDBI would offer equity or quasi-equity to the existing units that are growth-oriented
ii. The bank would finance units which are in the service sector
iii. It would offer credit to MSMEs for Cleaner Production Processes and Energy Efficient.
Step 5: For other cases, the application for the loan would be submitted to the Public-Sector
Banks. SIDBI (Small Industries Development Bank of India) has an MOU (memorandum of
understanding) with the public-sector banks for the issuing loans. Small Industries Development
Bank of India would help the entrepreneur at each stage until the loan is finally processed.
MSMEs stands a better chance of availing the loan in time and also could avoid needless delays.
Major Schemes by SIDBI:

A brief summary of the Schemes available with SIDBI. More details are available under the
Section Policies & Schemes,

National Equity Fund Scheme which provides equity support to small entrepreneurs setting up
projects in Tiny Sector.

National Equity Fund (NEF) under Small Industries Development Bank of India (SIDBI)
provides equity type assistance to SSI units, tiny units at one per cent service charges. The scope
of this scheme was widened in 1995-96 to cover all areas excepting Metropolitan areas, raising
the limit of loan from Rs. 1.5 lakhs to Rs. 2.5 lakhs and covering both existing as well as new
units:

The following are eligible for assistance under the scheme:

1. New projects in tiny and small scale sectors for manufacture, preservation or processing of
goods irrespective of the location (except for the units in Metropolitan areas).

2. Existing tiny and small scale industrial units and service enterprises as mentioned above
(including those which have availed of NEF assistance earlier), undertaking expansion,
modernisation, technology upgradation and diversification irrespective of location (except in
Metropolitan areas).

3. Sick units in the tiny and small scale sectors including service enterprises as mentioned above,
which are considered potentially viable, irrespective of the location of the units (except for the
units in Metropolitan areas).

4. All industrial activities and service activities (except Road Transport Operators).

Technology Development & Modernisation Fund Scheme for providing finance to existing
SSI units for technology upgradation/modernisation.
Single Window Scheme to provide both term loan for fixed assets and loan for working capital
capital through the same agency.
Composite Loan Scheme for equipment and/or working capital and also for worksheds to
artisans, village and cottage industries in Tiny Sector.
Mahila Udyam Nidhi (MUN) Scheme provides equity support to women entrepreneurs for
setting up projects in Tiny Sector.
Equipment Finance Scheme for acquisition of machinery/equipment including Diesel
Generator Sets which are not related to any specific project.
Venture Capital Scheme to encourage SSI ventures/sub- contracting units to acquire capital
equipment, as also requisite technology for building up of export capabilities/import substitution
including cost of total quality management and acquisition of ISO-9000 certification and for
expansion of capacity.
ISO 9000 Scheme to meet the expenses on consultancy, documentation, audit, certification fee,
equipment and calibrating instruments required for obtaining ISO 9000 certification.

Purpose of the schemes provided by SIDBI:

 Setting up of new projects
 Expansion, diversification, modernisation, technology upgradation, quality improvement,
rehabilitation of existing units
 Strengthening of marketing capabilities of SSI units.
 Development of infrastructure for SSIs and
 Export promotion.

Small Industries Service Institute (SISI)

• MSME - Development Institute, (MSME-DI) (Formerly Known as Small Industries Service
Institute) maintains a close liaison with the state industries department, Financial Institutions,
Voluntary Organizations and other agencies concerned with the entrepreneurial development.
• There are 28 SISI's and 30 branches of SISI's are set up all over the country.
• Set-up one in each state to provide consultancy.
• Training to small and prospective entrepreneurs.
• 28 SISI’s and 30 Branch SISI’s set up in state capitals and other places all over the country.
• Assist the utilization of assets.
• 40 percent share in total industrial output.
• 35 percent share in exports.

Functions of SISI
• Serve as an interface between central and state governments.
• Rendering technical support services.
• Conducting EDP's.
• Initiating Promotional Programs. It maintains an effective linkage is maintained with DIC’s for
providing the techno-economic and managerial consultancy
Assist existing and prospective entrepreneurs.
• Conduct EDPs all over the country.
• Testing of raw materials and products of SSIs.
• Financial assistance.
• Conduct economic and technical surveys.
• Market information.

Objectives of SISI
• Initiating steps for technological upgradation and modernization of existing units.
• Expanding the channels for marketing the products of the small scale sector.
• Promotion of employment-oriented industries.

Activities of SISI
1. Assistance/Consultancy to prospective entrepreneurs
2. Assistance/Consultancy to existing units
3. Preparation of State Industrial Potential Survey
4. Preparation of District Industrial Potential Survey
5. Preparation of Detail Project Report
6. Entrepreneurship Development Programme Training
7. Industrial Motivation Campaign
8. Management Development Programme Training for SSI Units
9. Skill Development Programme Training
10.Preparation of Directory of Specific Industry
11.Production Index
12.Pollution Control
13.Export Promotion
14.Quality Control & Up gradation

State Financial Corporations (SFC)

The Industrial Finance Corporation of India was set up to offer financial assistance to only large
and medium – sized undertakings. Accordingly, the State Financial Corporation Act was passed
by parliament on September 28, 1951, as an enabling measure, under which State Financial
Corporation’s (SFCs) could be set up. The first SFC was set up in Punjab in 1953.
The State Finance Corporations (SFCs) are the integral part of institutional finance structure in
the country. SEC promotes small and medium industries of the states. Besides, SFCs are helpful
in ensuring balanced regional development, higher investment, more employment generation and
broad ownership of industries.
Organisation and Management: The State Finance Corporations management is vested in a
Board of ten directors. The State Government appoints the managing director generally in
consultation with the Reserve Bank and nominates three other directors.
The insurance companies, scheduled banks, investment trusts, co-operative banks and other
financial institutions elect three directors. Thus the majority of the directors are nominated by the
government and quasi-government institutions.

Function and Types of Assistance

The SFCs have been set up to extend long – term finance to small and medium – scale industrial
undertakings organized as public and private companies, cooperatives, partnerships or
proprietary concerns. The SFCs render assistance in the following forms:
1. Grant of loans and advances to industrial concerns for periods not exceeding 20 years;
2. Subscription to debentures repayable within a periods of 20 years;
3. Guarantee of loans raised in the market or from scheduled or cooperative banks by the
industrial concerns and repayable within 20 years;
4. Guarantee of deferred payments for purchases of plant, machinery, etc. within India;
5. Undertaking the issue of stocks, shares, bonds and debentures by industrial undertakings.
As far as SFC bonds and debentures are concerned, they are mostly subscribed by commercial
banks, the Life Insurance Corporation of India and other financial institutions. They are presently
an important source of the SFCs and account for about 30 percent of them.
The SFCs also borrow from the reserve bank, the state governments and the IDBI. The
borrowings of the SFCs including the bond issues at any time should not exceed 10 times of their
paid up capital and reserves. During recent year, refinance from IDBI has become the most
important source of funds for the SFCs.

Working of SFCs:

The government of India passed the State Financial Corporation Act in 1951 and made it
applicable to all the States. The authorised Capital of a State Financial Corporation is fixed by
the State government within the minimum and maximum limits of Rs. 50 lakh and Rs. 5 crore
and is divided into shares of equal value which were taken by the respective State Governments,
the Reserve Bank of India, scheduled banks, co-operative banks, other financial institutions such
as insurance companies, investment trusts and private parties.

The shares are guaranteed by the State Government. The SFCs can augment its fund through
issue and sale of bonds and debentures, which should not exceed five times the capital and
reserves at Rs. 10 Lakh.
District Industries Centres (DICS)

• Provides full assistance to the entrepreneurs who are going to start the business on their own
and in their regional places.
• These centers provide service and support to small entrepreneurs under a single roof at both pre
and post investments.
• Started on May 1st in the year of 1978 with a view to providing integrated administrative
framework at the district level for promotion of small scale industries in rural areas.
• implementing arm of the central and state governments of the various schemes and
programmes
• Registration of small industries is done at the district industries centre and PMRY (Pradhan
Mantri Rojgar Yojana) is also implemented by DIC.
• a total of 640 Districts as per the census of 2011.

OBJECTIVES OF DISTRICT INDUSTRIES CENTERS (DICS)

The following are the main objectives of DICs:
• To identify the new entrepreneurs and providing assistance to them regarding their own
startup’s.
• To provide financial and other facilities to smaller blocks.
• To rise the complete efforts for industrialization at district level.
• To enhance the rural industrialization and also the development of handicrafts.
• To reach economic equality in multiple areas of the district.
• To allow various government schemes to the new entrepreneurs.
• To desize the regional imbalance of development
. • To make all the necessary facilities to come under one roof.

Functions of DIC
• Identification of Entrepreneurs: DIC develops new entrepreneurs by conducting entrepreneurial
motivation programmes throughout the district especially in Panchayat Union Headquarters and
small towns.
• Selection of Projects: DIC offers technical advice to new entrepreneurs for the selection of
projects suitable to them.
• Provisional Registration under SSI: After the selection of projects, entrepreneurs are issued
with provisional SSI Registration which is essential for obtaining, assistance from the financial
institutions.
• Purchase of Fixed Assets: DIC sponsors the loan applications to TIIC. S1DCO and banks for
the purchase of land and buildings anti sanctions margin money under Rural industries Project
Loan Scheme payable to other financial agencies for the purchase of plant and machinery.
• Clearances from Various Departments: It takes the initiative to get clearances from various
departments and takes follow up measures to gel speedy power connection.
 • Assistance to Raw Material Supplies: It makes necessary recommendations to the concerned
raw materials suppliers and issues the required certificates for the import of raw materials and
machinery wherever necessary.
• Assistance to Village Artisans and Handicrafts: DIC arranges for the financial assistance with
the lead bank or nationalised banks of the respective areas.
• Interest-Free Sales Tax Loan: SSI units set up in rural areas can get IFST Loan up in a
maximum limit of 8% of the total fixed assets from S1DCO. But the sanction order from the
same is being issued by DIC. The DIC also recommends the SSI units to NSIC for registration
for Government Purchase Programme.
• Subsidy Schemes: DIC assists SSI units and rural artisans to get subsidies such as power
subsidy, interest subsidy for engineers, subsidy under IRDP, etc., from various institutions.
• Training Programmes: DIC gives training to rural entrepreneurs and also assists other units
giving training to small entrepreneurs. Self-employment for Unemployed Educated Youth: This
scheme was introduced in 1983-84 for youths between 18 years and 25 years with SSLC,
Technocrats and women are given preference.

Resources For District Industries Centers (DICs)

Funding assistance is provided by the Government of India for District Industries Centre in the
following manner:
1. A non-recurring grant up to Rs.2 lakh for the construction of an office building.
2. A non-recurring grant up to Rs.3 lakh to meet the expenditure on furniture and fixtures, office
equipment and vehicles.
3. Recurring establishment expenditure to the extent of 75% of the actual expenditure, bounded
up to Rs.3.75lakhs.

ACTIVITIES OF DISTRICT INDUSTRIES CENTRE (DICs)

The DIC’s performs the following activities primarily:
• Economic Investigation.
• Plant and Machinery.
• Research, education and training.
• Raw materials.
• Credit facilities.
• Marketing assistance.
• Cottage industries.
NATIONAL SMALL INDUSTRIES CORPORATION LIMITED (NSIC)

• The NSIC was set up in 1955 with the objective of supplying machinery and equipment to
small enterprises on a hirepurchase basis and assisting them in procuring Government orders for
various items of stores. NSIC provides a wide range of promotional services to small scale units
• The Corporation's Head Office is at Delhi and it has four regional offices at Delhi, Bombay,
Madras and Calcutta, and eleven Zonal offices. It has one central liaison office at Delhi and
depots and sub-centres.

Functions of NSIC are:

• To develop small scale units as ancillary units to large-scale industries:
• To provide SSIs with machines on hire-purchase basis;
• To assist small enterprises to participate in the stores purchase programme of the Central
Government:
• To assist small industries with marketing facilities:
• To distribute basic raw materials through their depots:
• To import and distribute components and parts to actual small scale users in specific industries:
and
 • To construct Industrial estates and establish and run prototype production-cum-training
centres.
• To develop small scale industries in other developing countries on turn key basis

NOTE: The NSIC has taken up the challenging task of promoting and developing small scale
industries almost from scratch and has adopted an 'integrated approach' to achieve the socio-
economic objectives.

NOTE: NSIC, in consultation with Rating Agencies and Indian Banks Association, has
formulated Performance & Credit Rating Scheme for Small Industries.
NSIC acts as a facilitator to promote marketing efforts and enhance the competency of the small
enterprises for capturing the new market opportunities by way of organizing participating in
various domestic & international exhibitions/trade fairs, buyers -seller meets, intensive
campaigns seminars and consortia formation.
Buyer Seller Meets are being organized to bring bulk buyers/government departments and micro
& small enterprises together at one platform. This enables micro & small enterprises to know the
requirements of bulk buyers on the one hand and help the bulk buyers to know the capabilities of
micro & small enterprises for their purchases.
Intensive campaigns and seminars are organized all over the country to disseminate/propagate
about the various schemes for the benefit of the small enterprises and to enrich the knowledge of
small enterprises regarding latest developments, quality standards etc.

Entrepreneurship Development Institute of India (AHMEDABAD)

• Autonomous and not-for-profit institute

• Set up in 1983
• Sponsored by the IDBI Bank Ltd., IFCI Ltd., ICICI Bank Ltd. and State Bank of India (SBI).
• Set up twelve state-level exclusive entrepreneurship development centres and institutes.
• Runs a range of educational programs including 2 year Post Graduate
• Diploma in Management program for first generation entrepreneurs, agribusiness, family
business inheritors.

Functions
• Promoting micro enterprises at rural areas.
• Participating in institutional building efforts.
• Inculcating spirit of ‘Entrepreneurship’ in youth.
• Developing new knowledge and insights on entrepreneurship theory.
• Improving managerial capabilities.
• Creating a multiplier effect on opportunities for selfemployment,
• Augmenting the supply of competent entrepreneurs through training,
• Augmenting the supply of entrepreneur trainermotivators,
• Facilitating corporate excellence through creating intrapreneurs,
• Sensitizing the support system to facilitate entrepreneurs establish and manage their enterprises,
• Collaborating with organizations to accomplish the above objectives.

NRDC

National Research Development Corporation (NRDC) was established in 1953 by the

Government of India, with the primary objective to promote, develop and commercialise the
technologies / know-how / inventions / patents / processes emanating from various national R&D
institutions / Universities and is presently working under the administrative control of the Dept.
of Scientific & Industrial Research, Ministry of Science & Technology. During the past six
decade of its existence and in pursuance of its corporate goals, NRDC has forged strong links
with the scientific and industrial community in India and abroad and developed a wide network
of research institutions, academia and industry and made formal arrangements with them for the
commercialisation of know-how developed in their laboratories and is now recognised as a large
repository of wide range of technologies spread over almost all areas of industries, viz.
Agriculture and Agro-processing, Chemicals including Pesticides, Drugs and Pharmaceuticals,
Bio Technology, Metallurgy, Electronics and Instrumentation, Building Materials, Mechanical,
Electrical and Electronics etc. It has licensed the indigenous technology to more then 4800
entrepreneurs and helped to establish a large number of small and medium scale industries.

Besides being the torch bearer in the field of technology transfer, NRDC also undertakes number
of activities under its structured promotional programme for encouragement and advancement of
research, promotion of inventions and innovations such as meritorious inventions awards,
Techno-Commercial support, Technical and financial assistance for IPR Protection, Value
addition services and support for further development of technologies and much more.

NRDC has also successfully exported technologies and services to both developed as well as the
developing countries. NRDC is recognised, particularly in the developing countries, as the
source of reliable appropriate technology, machines and services, which are typically suitable for
these countries.

EDP under NRDC

Socio-economic empowerment has now become an integrated concept of growth and poverty
elimination and has been of paramount concern for the overall development of the Country.
NRDC has been working for quite some time for the development of rural and backward areas of
the country and has undertaken several initiatives for improvement of the economy of these areas
in various states. The activities undertaken include the projects in post Harvest technologies,
food & agro processing, entrepreneurship development, etc.
The programme aims to reduce the drudgery of people in their daily lives belonging to rural and
backward areas of the country, facilitate new avenues of employment generation and income
generating activities through S & T intervention.

The programme envisages skill upgradation of unemployed youth, capacity building of NGOs
and Women Self Help Groups(SHG) and other developmental agencies engaged in
developmental activities through the application of S&T Tools with a view to passing the
benefits of Science and Technology to Rural India with an emphasis on:

 Improving the living conditions of our people

 Increasing the employment potential through the application of appropriate technologies
utilizing local resources
 Upgrading the traditional skills
 Improving rural sanitation and health care

National Institute for Entrepreneurship and Small Business Development (NIESBUD)

The National Institute for Entrepreneurship and Small Business Development is a society
under the Ministry of Micro, Small and Medium Enterprises engaged in Training,
Consultancy, Research and Publication, in order to promote entrepreneurship. The institute
has been financially self sufficient since 2007-08.
• Established in 1983 by the then Ministry of Industry [now Ministry of Micro, Small &
Medium Enterprises (MSMEs)], Government of India
• An apex body for coordinating and overseeing the activities of various institutions/agencies
engaged in Entrepreneurship Development
• In the area of small industry and small business. This Institute is registered as a Society
under Societies Registration Act, 1860 (XXI of 1860), 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 MSME.
• The Executive Committee consisting of Secretary (Micro, Small & Medium Enterprises) as
its Chairman and Director General of the Institute as its Member-Secretary executes the
policies and decisions of the Governing Council through its wholetime Director General.

Objectives of NIESBUD
• To evolve standardized materials and processes for selection, training, support and sustenance
of entrepreneurs, potential and existing.
• To help/support and affiliate institutions/organizations in carrying out training and other
entrepreneurship development related activities.
 • To serve as an apex national level resource institute for accelerating the process of
entrepreneurship development ensuring its impact across the country and among all strata of the
society.
• To provide vital information and support to trainers, promoters and entrepreneurs by
organizing research and documentation relevant to entrepreneurship development
• To provide national/international forums for interaction and exchange of experiences helpful
for policy formulation and modification at various levels.

NOTE: NIESBUD also serves as the secretariat for National Entrepreneurship development
Board(NEDB), the apex body which determines policy for entrepreneurship development in the
country. The institute, therefore, performs the task of processing the recommendations made by
the Board.

Activities of NIESBUD

 Training: The different kind of training programmes being organized by the Institute inter-alia
include Trainers’ Training Programmes (TTPs); Management Development Programmes
(MDPs); Orientation Programmes for Head of Departments (HoDs) and Senior Executives;
Entrepreneurship Development Programmes (EDPs); Entrepreneurship-cum-Skill Development
Programmes (ESDPs) and specially designed sponsored activities for different target groups.
 Research/Evaluation Studies: Besides the primary/basic research, the Institute has been
undertaking review/evaluation of different government schemes/programmes, training need
assessment- Skill Gap studies, industrial potential survey etc. The broad objective of these
activities is the promotion of the MSME Sector.
 Development of Course Curriculum/Syllabi: The Institute has developed Model Syllabi for
organizing Entrepreneurship Development Programmes. It also assists in Standardization of
Common Training programmes.
 Publications and Training Aids: The Institute has been bringing out different Publications on
entrepreneurship and allied subjects. The Institute has also assembled an Entrepreneurship
Motivation Training brings out a quarterly Newsletter.
 Cluster Interventions: The Institute has been actively involved in undertaking developmental
programmes (Soft and Hard Interventions) in Clusters in different capacities. The Institute has so
far handled a total of 24 Industrial Clusters.
 Incubation Centres: The Incubator sponsored by the Ministry of MSME and functioning at the
Campus of the Institute, has been instrumental in providing hands-on training and familiarizing
the beneficiaries with the real factory/market conditions/ situations in the area of stitching,
Mobile Repairing, Home Décor products, Beautician and Art Incubation. Following activities are
organized for the same:
(a) Self Employment Fair
(b) Functioned as Udyami Mitra under Rajiv Gandhi Udyami Mitra Yojana
 (c) Business plan preparation
(d) Institutional arrangements with Financial Institutes/ support organization(s)
(e) Linkage with Prime Minister’s Employment Generation Programme (PMEGP)
(f) Post training follow up with the participants
 Intellectual Property Facilitation Centre: The Intellectual Property Facilitation Centre,
operational at the Campus of the Institute under the auspices of the O/o DC (MSME) provides
facilitation/assistance under one roof to the units located in its vicinity for identification,
registration, protection and management of Intellectual Property Rights, as a business tool.
 The E-Module: EDP: The Institute has developed an E-learning Module (Hindi and
English) for Entrepreneurship Development Programmes. The course material of the Module has
been incorporated in a C.D. which is moderately priced. The Module has been launched in
different States.
 E-learning Modules on Different Subjects: Eight e-learning Modules have been created on
Cyber Security, Communication Skills, Java Personality Development, Mathematical Modeling,
Web Designing & Cloud Computing.
 Hand-holding for Enterprise Creation and Employment Assistance to the Trainees: The
Institute provides hand-holding services to candidates interested in self-employment and assists
to find suitable wage employment if they do not opt for self-employment. For the same, an
interaction platform called Rojgar Mela(s) is organized for prospective employees and trained
persons.
 Consultancy Services (National and International): Offering consultancy services in the area
of entrepreneurship especially for MSMEs. It Offers advice and consultancy to other Institutions
engaged in entrepreneurial training either in the Government or in the Private Sector. Advising
Governments (both Central & State) and foreign Governments as well in the area of
entrepreneurship and MSMEs.

Punjab Small Industries and Export Corporation (PSIEC)

In 2018, PSIEC allowed its industrial plot holders in focal points to utilize their premises for
warehousing purpose and development of skill development centers, treating it as an industrial
activity.

Representatives of various industrial bodies were seeking liberalization of the policies to treat
warehousing and skill development as an industrial activity in the industrial plots developed by
PSIEC across the state.

This move will facilitate industrial plot holders to undertake a wide variety of activities which
they will be allowed to treat at par with service sector enterprise.

These activities would cover industrial or technical test lab, industrial photography, bulk courier
services, blue printing, drawing, or computer designing facilities, research and development in
any field, tool room for facilitation of industry, media houses, printing, publishing services,
industrial kitchens or catering services, engineering and design services.

The decision will help small industries economize on their operations and manage their affairs
more effectively and efficiently by precluding the need for making separate arrangements for
warehousing purpose, outside industrial focal points, thereby incurring additional investment.

Notably, the service sector enterprises are providing support to the manufacturing activities in
the industrial estates or focal points.

Allowing service sector enterprises in industrial plots would help in providing integrated support
services to the entrepreneurs, who would not have to run to other places for procuring secondary
facilities.

This would naturally accelerate growth of MSMEs, start-ups, facilitate availability of skilled
man-power, and bring synergy between manufacturing and service sector operations.

TECHNICAL CONSULTACY ORGANISATIONS (TCOs)

All India financial institutions and state governments have set up net work of technical
consultancy oraganizations in the country. The funtions of the TCOs include, conducting surveys
on industrial potential surveys, preparing project profiles, undertaking techno-economic
appraisal of projects, carrying out market research, providing technical and managerial assistance
to entrepreneurs, assistance in modernisation, technology upgradations and rehabilitation
programmes and organising information cell and Data Bank concerning industrial and economic
activities and provide these to entrepreneurs. In Tamil Nadu, the Industrial Technical
Consultancy Organization of Tamil Nadu offers a wide variety of consultancy services.

SSIEC (Sino-Swedish Innovation & Entrepreneurship Centre)

SSIEC provides a landing platform with a physical space for the development of sustainable and
lucrative business solutions. Located in the heart of the Chinese Capital and with direct access to
several landing services, SSIEC serves as an ecosystem for project development, match-making
and networking opportunities. Through cooperation with a wide spectrum of Nordic and Chinese
organizations, SSIEC becomes more than a business accelerator: it facilitates business growth
between the Nordic countries and China.
SECTION – B : INTRODUCTION TO MARKETING MANAGEMENT

Product strategies:

Product strategy is defined as the road map of a product.This road map outlines the end-to-
end vision of the product, particulars on achieving the product strategy and the big picture
context in terms of what the product will become. Companies utilise the product strategy
in strategic planning and marketing to identify the direction of the company's activities.The
product strategy is composed of a variety of sequential process in order for the vision to be
effectively achieved. The company must be clear in terms of the target market of the product in
order for them to plan the activities needed in order to reach the destination and to achieve its
goals.
Different types of product strategies:

1. Differentiation strategy
Under a differentiation strategy, the company tries to be different and unique from its
competitors. It may offer better quality, quantity, pricing, appearance, and after sales-service,
when compared to its competitors. It may offer more features and facilities in its product. It may
be more flexible while dealing with its customers. It may also offer quick and better delivery of
its products. So, there are many ways, in which a company can remain different from its
competitors. If it maintains this uniqueness and difference in its product quality and customer
service, then it can charge higher prices.
2. Cost leadership strategy
Under a cost leadership strategy, the company tries to reduce its cost of production. This is done
by producing goods on a very huge scale. By doing so, the company will get the benefits of
economies of large scale. Higher the scale of production, lower will be the cost of production.
This is because per unit cost of raw materials, labour, advertising, sales promotion, R & D, etc.
will decrease.

3. Market segmentation strategy

In market segmentation strategy, the company divides the market according to the type of
customers it has to focus and target. It sells different products and services to different types of
customers. To achieve this goal, it produces and sells goods and services as per the needs of the
customers. Therefore, market segmentation strategy is also called Focus Strategy.

4. Price or cost strategy

Under price or cost strategy, the company sells its product at a very low price. This strategy is
used when the products are homogeneous (same) in nature. That is, when the customers cannot
distinguish the company's product from the competitors' products. In this case, the company will
fix a low price. So, the customers will purchase the company's product and not the competitors'
products.
5. Quality strategy
Under quality strategy, the company produces and sells high-quality goods and services. The
prices of such goods and services are naturally very high. However, this strategy attracts those
customers who prefer top quality products and are ready to pay necessary appropriate prices. The
company must pay special attention to the design of its products. It must upgrade product design
and add new product features to satisfy the current needs and demands of its customers. Products
which are designed badly will naturally fail in the market. To gain success in the market, the
company must smartly invest to make quality innovative products that are free from any defects.

6. Delivery strategy
Here under delivery strategy, the company delivers its product and services to their customers as
early as possible that too within a fixed time period. The company gives top priority to fast
delivery of products and providing quickest accessibility of services. Speed delivery of products
and fastest accessibility of services removes the problem of scarcity and unnecessary delays in
the market. Delivery strategy is used as a selling tactic to fight cut-throat competition.

7. Product mix or flexibility strategy

Under this strategy, the company produces and sells a product mix. A product mix is a group of
products, which are sold by the same company. Here, the company does not depend only on one
product for its survival and growth. It uses a product mix because it offers many advantages to
the company. However, only large companies with huge production capacity can use this
strategy.
8. Service strategy
Under this strategy, the company uses a service to attract the customers. It gives quicker and
better after-sales service. It gives around the clock, i.e. 24-hour customer service. It may render
this service directly via the company or through the network of call centres. Service is required
for both consumer goods as well as industrial goods.
9. Eco-friendly products
Under eco-friendly strategy, the company produces and sells environment-friendly products also
called as Green Products. For e.g. producing and selling lead-free petrol to reduce pollution,
manufacturing mercury-free television panels, etc., are some good steps to preserve nature. This
is a new type of production strategy. It is used to reduce pollution and protect the biosphere.
Companies may also recycle certain materials like plastic, metals and papers. The properly
recycled products are later used for manufacturing new products and in packaging. Companies
use biodegradable packing material to reduce the problem of waste disposal. Recycling reduces
continuous demand cycle of natural resources and hence somewhat minimize the exploitation of
environment. The company informs the public about their environment-friendly manufacturing
approach through advertisements.
10. Flexible response strategy
Flexible response strategy is said to be used when a company makes necessary changes in its
production plans that too in accordance with the emerging changes in the market. Here,
importance is given to speed and reliability. That is, the company must make quick changes as
per the arising changes in the market demand. It must also be reliable. That is, it must give a
regular supply of goods to its customers. There must not be any shortage of goods in the market.
To achieve this, the company must follow a strict production schedule.
11. Low cost strategy
Under low cost strategy, the company fights massive market competition by selling its products
at very lower prices. Simultaneously, it must also maintain the quality of its products. A
company can only sell its goods at minimum prices if it maintains a low cost of production and
distribution. This can be done by producing and distributing goods on a large scale. That is,
company must take advantage of economies of large-scale production.

Pricing Strategies:
Definition: Price is the value that is put to a product or service and is the result of a complex set
of calculations, research and understanding and risk taking ability. A pricing strategy takes into
account segments, ability to pay, market conditions, competitor actions, trade margins and input
costs, amongst others. It is targeted at the defined customers and against competitors.
As we know the marketing mix (made up of product, price, place and promotion) is the perfect
combination of elements you need to get right for effective marketing. Pricing is one of the most
important elements of the marketing mix, as it is the only element of the marketing mix, which
generates a turnover for the organisation.
Types of Pricing Strategies

(Total 11 pricing strategies have been discussed below)

Value based pricing

Pricing Strategy Definition Example

Penetration Pricing Here the organisation sets a A television satellite company
low price to increase sales and sets a low price to get
market share. Once market subscribers then increases the
share has been captured the price as their customer base
firm may well then increase increases.
their price.
Skimming Pricing The organisation sets an initial A games console company
high price and then slowly reduces the price of their
lowers the price to make the console over 5 years, charging
product available to a wider a premium at launch and lowest
market. The objective is to price near the end of its life
skim profits of the market layer cycle.
by layer.
Competition Pricing Setting a price in comparison Some firms offer a price
with competitors. In reality a matching service to match what
firm has three options and these their competitors are offering.
are to price lower, price the Others will go further and
same or price higher than refund back to the customer
competitors. more money than the
difference between their price
Pricing Strategy Definition Example
and the competitor's price.

Product Line Pricing Pricing different products An example would be a DVD

within the same product range manufacturer offering different
at different price points. DVD recorders with different
features at different prices e.g.
A HD and non HD version..
The greater the features and the
benefit obtained the greater the
consumer will pay. This form
of price discrimination assists
the company in maximising
turnover and profits.
Bundle Pricing The organisation bundles a This strategy is very popular
group of products at a reduced with supermarkets who often
price. Common methods are offer BOGOF strategies.
buy one and get one free
promotions or BOGOFs as they
are now known. Within the UK
some firms are now moving
into the realms of buy one get
two free can we call this
BOGTF I wonder?

Psychological Pricing The seller here will consider The seller will charge 99p
the psychology of price and the instead £1 or $199 instead of
positioning of price within the $200. The reason why this
market place. methods work, is because
buyers will still say they
purchased their product under
£200 pounds or dollars, even
thought it was a pound or
dollar away.
Premium Pricing The price is set high to indicate Examples of products and
that the product is "exclusive" services using this strategy
include Harrods, first class
airline services, and Porsche.
Optional Pricing The organisation sells optional This strategy is used commonly
Pricing Strategy Definition Example
extras along with the product to within the car industry as I
maximise its turnover. found out when purchasing my
car.

Cost Plus Pricing The price of the product is For example a product may
production costs plus a set cost £100 to produce and as
amount ("mark up") based on the firm has decided that their
how much profit (return) that profit will be twenty percent
the company wants to make. they decide to sell the product
Although this method ensures for £120 i.e. £100 plus
the price covers production 100/100 x 20
costs it does not take consumer
demand or competitive pricing
into account which could place
the company at a competitive
disadvantage.

Cost Based Pricing This is similar to cost plus Cost based pricing can be
pricing in that it takes costs useful for firms that operate in
into account but it will consider an industry where prices
other factors such as market change regularly but still want
conditions when setting prices. to base their price on costs.

Value Based Pricing This pricing strategy considers Firms that produce technology,
the value of the product to medicines, and beauty products
consumers rather than the how are likely to use this pricing
much it cost to produce it. strategy.
Value is based on the benefits
it provides to the consumer e.g.
convenience, well being,
reputation or joy.

Channel Strategies:

A channel strategy is a plan for reaching customers with products and services. Considers factors
such as customer habits, competitive environment and constraints such as costs.
Types of Channel Strategies:

Retail
Opening physical locations to reach customers.
Camping
Locating sales offices or retail shops close to your customers.
Ecommerce
Selling through your website and other digital channels such as a mobile app.
Bricks and Clicks
Combining your ecommerce and retail operations such that they compliment each other.
Personal Selling
Using a sales force who sell to a network of social connections. Example: Amway, Tupperware.
Direct Selling
Selling directly to customers through mediums such as social media.
Value Added Reseller
Partners that incorporate your products or services along with their own products.
Franchising
Retail locations that you don't own but exercise significant control over through contractual
agreements
Wholesale
Selling to intermediaries in the supply chain such as wholesalers.
Licensing
Granting other firms the right to use your brand and/or intellectual property.
Agent/Broker
Selling through representatives such as agents and brokers.
Marketing Partners
Partners such as advertising platforms that help you to reach customers.
Distribution Partners
Partners that help you with distribution including sales and delivery of products, services and
customer many cases, distribution partners can help to expand sales to new regions or customer
segments.
Channel Integration
Integrating the strategies above. For example, using a mobile app to drive sales at retail
locations.

Promotion Strategies:

Promotion is an attempt by marketers to inform, persuade, or remind consumers and B2B users
to buy their products and services, and to influence their opinion.. The goal is to stimulate action
from the people or organizations of a target market
 A promotion strategy is defined by the plan and tactics you implement in your marketing plan,
in order to increase the demand for your product or service. Promotion strategies play a vital role
in the mix of marketing (product, price, place & promotion), and they revolve around:

 Target audience – who are you selling for and what are their interests
 Budget – how much are you willing to invest
 Plan of action – what strategy are you adopting in order to reach your purpose and make a
profit.

The Promotional Mix

The combination of traditional advertising, personal selling, sales promotion, public relations,
social media, and e-commerce used to promote a product is called the promotional mix. Each
firm creates a unique promotional mix for each product. But the goal is always to deliver the
firm’s message efficiently and effectively to the target audience.

Types of Promotional Strategies

1) Social Media :
There are various platforms online where you can promote your products and can reach a huge
number of audiences. There is hardly any person who is not using either Facebook or Instagram.
By using this platform, you can make people aware of your product. You can talk about its uses
and how it is essential for them. In addition to this, you can show people how your product is
better than other similar product. Unlike other promotional strategies which are blindly pushing
their product on everyone. You can make sure that your product has reachability to your
potential customers who have high chances to get converted. if you don’t believe me. Just go and
open your Facebook app. You will understand what I am trying to say. There are 90% chances
that you will find the advertisement for “Zomato” offering you a 50% discount on your first
order. If you are either feeling hungry or it is 12 pm (lunchtime).
2) Mail Order Marketing :
Just think that your company is still breathing just because of your customers. once customers
have used your product and liked it, there are chances that they are going to be connected with
you for a long time. Therefore, don’t make a mistake to overlook these customers. you can ask
them to share their personal details in exchange for free gifts or services. You can use that
information to promote your product in a new market where people are totally unaware of the
existence of your product.
3) Free Product and sample Giveaways :
This promotional strategy is used by both small as well as powerful companies. By using this
strategy, you can boost the sale of your product instantly. This strategy is mostly adopted by food
or cosmetic companies. They provide a sample of their products free of cost and make people try
new products. You must have noticed a small counter of some brand in a shopping mall which
gives away samples of products to every passer-by or sometimes they ask for personal details
like an email address from people whom they are giving free samples. Later you can use this
information to promote your product.
4) Customer Incentive Referral Program :
This promotional strategy will use your current customers and encourage them to refer your
products or services to their families and friends. You can offer them gifts or discounts on their
next purchase in exchange for their referral. For example, many e-commerce companies run
“Customer Incentive Referral Program” to increase their customer-base using their existing
customers. this strategy is far less expensive than the traditional style of advertising.
5) Point of Sale Promotion and End Marketing :
In stores, products are displayed strategically so that they come first in the eyes of customers as
soon as they enter the store. Stores do this for two reasons convenience and impulse. Many
times, you have noticed a rack displaying attractively offers on a certain product or many
products are displayed near the aisle of the store. There are reasons why stores do this. They do
this either to boost the sale of the product or when they want their stock moving. This strategy
makes people buy certain products impulsive while they wait for their turn to check out.
6) Branded Promotional Gifts :
This is an effective strategy used by many companies to promote their brand. In this strategy,
rather than handing out the business card they print the business name, logo and contact
information on a functional gift. For example, companies in Japan distribute millions of napkins
with their brand’s name printed on its envelope. The logic behind doing this is that people
usually discard business card without even looking at them, however, a napkin is a useful thing
people don’t throw it away and there are high chances that it will stay with the person it is
handed to, for a longer period of time. This is also the best way to keep your customers happy
because people love getting free gifts and a happy customer will definitely bring you more
business.
7) Causes and Charity :
People want to connect with those companies which are giving back to society along with
providing excellent services. Therefore, many small, as well as powerful companies, use this
strategy to strengthen their customer base. To do this, you need to tie-up with some charity
organization or an NGO and then you can advertise about your initiative on your social media
handles, website, and in your stores so that people become aware of it and will buy your products
to do their bit for the society. A classic example of this promotional strategy used by a stationery
company “Classmate”. Classmate tells their buyers that they will pay “one rupee” for the
education of unprivileged children for every product bought by you. This strategy makes the use
of emotions of human beings to boost sales. There is no harm to give a try to this strategy.
8) After-Sale Customer Survey :
Reaching your customers through telephonic calls or emails or text messages to know about their
experience shopping with you does three jobs: 1. It makes your customers believe that you care
for them. 2. It open the doors for promotional activities. 3. Your customer’s feedbacks can help
you to improve your business.
During the conversation, you can also educate your customers about the on-going or upcoming
offers on your products and if they are happy with your services then you can politely ask them
to give a positive review online. It will improve the image of your business.
9) Customer’s Appreciation Events :
This type of strategy involves throwing a small party for your customers. this small gesture will
not cost you as much as fancy advertisements will cost you, but it will definitely improve the
loyalty of customers towards your brand. You can also organize small competitions where you
can provide gift hampers to the winner or you can also give them a discount on their next
purchase. To make this kind of event more attractive you can also offer food items like pizza,
soft drinks or some other snacks. This will attract customers to your store. Make sure to display
products that you want to promote strategically so that it comes in the eyes of people.
10) Throwing contests for promotion :
This type of promotional strategy is quite frequently used by companies to make a place for their
newly launched product in the market. you must have noticed many bloggers and YouTubers
posting about their partnership with various brands and asking their customers to go do various
tasks to get a chance to win the contest. In addition to this, companies also offer a certain
discount if a customer enters the code provided by a specific YouTuber or Blogger. Or you can
also organize contests in a traditional way such as organizing a contest in the store and asking
customers to participate to stand a chance to win.
11) Work With Brand Ambassadors To Increase Brand Awareness
By associating your brand with a person of interest that is relevant to your audience, your
customers (together with the potential ones), will be able to put a face to the name. Usually,
brand ambassadorship makes the brand look more personal and human. Even though it is
known that these ambassadors are getting paid by brands to promote their brand, the natural
human response to another human’s experience with the product is more likely to be a better one,
in comparison to a simple branding approach.
12) Adopt Refunds & Rebates Strategies To Guarantee Quality
Refunds and rebates are some of the classics in product promotion strategies. The concept behind
them is pretty similar, however, they are different in essence and practice.
Refunds represent a way of guaranteeing your customers about the quality of your product.
Does “money back guarantee” sound familiar to you? This promotion marketing tactic works
like reverse psychology. Knowing that if you are not satisfied with the product, you can get your
money back will make you want to try the product. Of course, brands who adopt this type of
promotion strategy are mostly the ones who actually know, you won’t ask for your money back,
because you will fall in love with your brand. Before you embrace this kind of strategy, make
sure you offer a good quality product.
Rebates, on the other hand, are counting on a different thing – the comeback of the customer.
How does it work? In the case of this particular marketing strategy, the partial discount aka
rebate, is offered only when the purchased quantity reaches a specific limit. The targeted public
here is not potential customers, but rather existing customers, in the hopes of securing customer
loyalty.
122 // Management and Entrepreneurship

● Wherever high technology involved the parent company executives will help.
Alternatively, consultants can be hired to sort out technology related problems.
● It is one of the best forms of self-employment as well as giving employment
opportunities to own kith and kin, friends and relatives etc.
● In case of rural sector the SSI units will be able to have cheaper labour
especially in off seasons.
● In developing countries the SSI units are a necessity to assist bigger industries
and new projects. Thus they not only contribute to the economy of the nation
but also create employment opportunities to people around the project sites.
● In case of SSI units started by experienced and talented executives, there is
abundant scope to develop high technology components for MNCs and also
to organize exports.
● Due to increase in population there has been increase in production of
consumer goods and Fast Moving Consumer Goods (FMCG). In view of this
there is a bigger role for small industries to take up components production
and even manufacture the product itself.
● The small units are exempted from excise duty up to 75 lakhs per annum
turnover. In case of industries in the backward districts, waiver or concession
is given for various statutory taxes. Thus lot of paper work and formalities
are avoided.
● Since employees are recruited based on contacts or relations there will be
loyalty to the owner and hence there will be no trade union activity.

6.8 STEPS TO START AN SSIS

Starting an SSI is a complex job. The potential entrepreneur has to pass through a
number of steps in a step-by-step approach to achieve his goal of setting up an SSI. In
fact, deciding and motivating the self is the first bedrock upon which the establishment
concept of an enterprise is entirely posited. Similarly, the identification of a viable
project ensures the proposition that “well begun is half done”. Hence the various steps
involved in establishment of an enterprise through which the entrepreneur may pass
are the following:
1. Decision to be self-employed: This is the most crucial decision a youth has
to take, shunning wage employment and opting for self-employment or
entrepreneurship.
2. Analyzing strengths, weaknesses, opportunities and threats (SWOT
analysis): The potential entrepreneur has to analyze his strengths, weak-
nesses, opportunities and threats, while deciding to go for entrepreneur career.
This analysis enables him to know what type and size of business would be
the most suitable. This will vary from person to person.
 Small Scale Industry // 123

3. Scanning of business environment: It is always essential on the part of the

entrepreneur to study and understand the prevailing business environment.
In order to ensure success of his enterprise, entrepreneur should scan the
business opportunities and threats in the environment. He should study the
administrative framework, procedures, policies, rules and regulations and other
formalities implemented by the government.
4. Training: Before going to start the enterprise, the potential entrepreneur must
assess his own deficiencies which he can compensate through training. He can
avail the facilities of various training institutes like EDI, NIESBUD, IEDs
existing in our country. These institutes are providing tailor-made
Entrepreneurship Development Programmes (EDPs) and skill up gradation
training programmes for the benefit of the new entrepreneurs, existing
entrepreneurs and for the employees of the small scale industries.
5. Product selection: The most important step is to decide what business to
venture into, the product or range of products that shall be selected for
manufacture and in what quantity. The level of activity will help in determining
the size of business and thus form of ownership. One could generate as many
project ideas as one can through environment scanning and short list a few
of them as discussed in the last chapter. Closely examine with the help of
opportunity analysis each one of them and zero on the final product or
products.
6. Market survey: It is always convenient to manufacture an item but difficult
to sell. So it is rational on the part of the entrepreneur to survey the market
thoroughly before embarking upon production. Market survey implies
systematic collection of data by the entrepreneur about the product for
manufacture, demand-supply lag, extent of competition, frequency of demand,
pattern and design of demand, its potential share in the market pricing,
distribution policy, etc. The principle is to produce what actually people
demand. The entrepreneur can contact the concerned authorities for this, and
will be discussed later.
7. Form of organization: A firm can be constituted as proprietorship, partner-
ship, limited company (public/private), cooperative society, etc. This will
depend upon the type, purpose and size of entrepreneur’s business. One may
also decide on the form of ownership on the basis of resources at hand or
from the point of view of investment.
8. Location: The next step will be to decide the location where the unit is to be
established. Will it be hired or owned? The size of plot, covered and open
area and the exact site will have to be decided.
9. Technology: To manufacture any item, technology is used. Information on all
available technologies should be collected by the entrepreneur and the most
124 // Management and Entrepreneurship

suitable one to be identified. This will also be useful to determine the type of
machinery and equipment to be installed. The entrepreneur can contact DIC,
TCO etc.
10. Machinery and equipment: Having chosen the technology, the machinery and
equipment required for manufacturing the chosen products have to be decided,
suppliers have to be identified and their costs have to be estimated. One may
have to plan well in advance for machinery and equipment especially if it has
to be procured from outside the town, state or country.
11. Project report preparation: After deciding the form of the ownership,
location, technology, machinery and equipment, the entrepreneur should be
ready to prepare his project report or the feasibility study. The economic
viability and the technical feasibility of the product selected have to be
established through a project report. A project report that may now be
prepared will be helpful in formulating the production, marketing, financial
and management plans. It will also be useful in obtaining finance, shed, power
connection, water connection, raw material quotas, etc. The entrepreneur has
to consider the guidelines given by the Planning Commission in preparing the
report (see chapter 8).
12. Project appraisal: Ordinarily, project appraisal implies the assessment of a
project. It is a technique for ex-ante analysis of a scheme or project. While
preparing to set up an enterprise, the entrepreneur has to carefully appraise
the project from the standpoint of economic, financial, technical, market,
managerial and social aspects to arrive at the most socially-feasible enterprise.
To avail the finance from the financial institutions and banks, a comprehensive
appraisal of projects carrying techno-economic feasibility aspects should be
undertaken by the entrepreneur. Thus, a project which is selected should be
technically feasible and economically viable, and then only it will be bankable.
For this, the following appraisals can be performed at the preliminary level:
(a) Economical appraisal
(b) Financial appraisal
(c) Technical appraisal
(d) Management appraisal
(e) Organizational appraisal
(f) Operational appraisal
(g) Market appraisal
13. Finance: Finance is the lifeblood of the enterprise. Entrepreneur has to take
certain steps and follow specified norms of the financial institutions and banks
to obtain it. A number of financial agencies provide capital assistance and
venture capital for starting an enterprise. There are some agencies which
 Small Scale Industry // 125

provide financial assistance on concession rates. Under PMRY and REGP

schemes financial assistance and subsidies are being provided to the persons
who want to set up their own enterprise. Details of it are discussed in chapter 7.
14. Provisional registration: It is always worthwhile to get the unit registered
with the government. The entrepreneur has to obtain the prescribed application
form for provisional registration from DIC or Directorate of Industries. After
having duly filled in the application form, he has to submit the application
with all relevant documents in the local DIC or Directorate of Industries. This
will enable the entrepreneur to avail various government facilities, incentives
and assistances schemes including financial assistance from NSIC/SFCs/KVIC.
The table 6.2 and table 6.3 gives the details.
15. Technical know-how: In some cases, technical know-how may be arranged for
setting up enterprise. This can be arranged through TCOs, NSIC, SSIDC, DIC,
private consultants, SISI, ED-institutes, foreign collaborators, India Investment
Centre, and Industry, etc. Facilities are also available to SSI for making technical
know-how arrangements including turn-key jobs.
16. Power and water connection: The sites, where the enterprise will be located,
should either have adequate power connections or this should be arranged.
Entrepreneur can calculate the total power requirement and determine the
nearest pole from which power will be given to the enterprise as it can
materially affect the installation cost. Similarly, the water connection will have
to be obtained or provision should be made for adequate water supply to the
firm.
17. Installation of machinery: Having completed the above formalities, the next
step is to procure the machinery for installation. Machinery should preferably
be installed as per the plan layout.
18. Recruitment of manpower: Once machines are installed, the need for man-
power arises to run them. So the quantum and type of manpower is to be
decided. This presupposes the skilled, unskilled and semiskilled labour,
administrative staff etc. Further, sources of getting desired labour and staff
members be indented and recruited. Possibly, the labour force has to be trained
either at the entrepreneur’s premises or in a training establishment.
19. Procurement of raw materials: Raw materials are the important ingredients
for running an enterprise. The labour will require raw materials to work upon
the installed machinery. These materials may be procured indigenously or may
have to be imported by the entrepreneur. Entrepreneur has to identify the
cheap an assured sources of supply of raw materials for running his own
enterprise. Government agencies. (See table 6.2) can assist in case the raw
materials are scarce or imported.
126 // Management and Entrepreneurship

20. Production: The unit established should have an organizational set-up. To

operate optimally, the organization should employ its manpower, machinery
and methods effectively. There should not be any wastage of manpower,
machinery and materials. If items are exported, then the product and its
packaging must be attractive. Production of the proposed item should be taken
up in two stages:
(i) Trial production
(ii) Commercial production
Trial production will help tackling problems confronted in production and test
marketing of the product. This will reduce the chances of loss is the eventuality of
mistakes in project conception. Commercial production should be commenced after the
test-marketing of the product.
21. Marketing: Marketing is the most important activity as far as the entrepre-
neurial development is concerned. Various aspects like how to reach the
customer, distribution channels, commission structure, pricing, advertising,
publicity, etc. have to be decided by the entrepreneur. Like production,
marketing should also be attempted cautiously, that is, in two stages namely:
(i) Test stage
(ii) Commercial marketing stage
Test marketing is necessary to save the enterprise from going into disrepute in
case the product launched is not well accepted by the customers. It will also assist
the entrepreneur in carrying out modifications or additions in designs and features
of the product. Having successfully test marketed the product, commercial marketing
can be undertaken. The entrepreneur can contact the Small industries marketing
corporation.
22. Quality assurance: Before marketing, the product quality certification from
BIS (Bureau of Indian Standards)/AGMARK/HALLMARK, etc., should be
obtained depending upon the product. If there is no quality standards specified
for the products, the entrepreneur should evolve his own quality control
parameters. Quality, after all, ensures long term success.
23. Permanent registration: After the small scale unit goes into production and
marketing, it becomes eligible to get permanent registration based on its
provisional registration from DIC or Directorate of Industries.
24. Market research: Once the product or service is introduced in the market,
there is strong need for continuous market research to assess needs and areas
for modification, upgradation and growth. Market becomes waterloos for most
SSI entrepreneurs as they ignore the vital day-to-day operation. Initial success
should not lure the entrepreneur into a sense of complacency.
172 // Management and Entrepreneurship

(iii) Technical Feasibility: The appraisal of the technical aspects involves

scrutiny of such aspects of the project as
● Technology selected
● Technical collaboration arrangements made
● Capacity/Size of the project
● Selection of plant, machinery and equipment
● Plant layout and factory building
● Technical and engineering services
(5) Organizational analysis: As a lender and development institution, the banks
and other financial institutions place particular stress on the need and efficient
organization and responsible management for the execution of the project.
During project appraisal, these two aspects of a project are examined. If both
aspects are not carried out properly, short term remedial steps are recommended
to the entrepreneur. The objective of this aspect of appraisal is to make sure
that the project is adequately carried out. The various organizational aspects
are organization, structure, recruitment, training and development and so on.
(6) Managerial aspects: If the management is incompetent, even a good project
may fail. It is rightly pointed out that if the project is week, it can be improved
upon but if the promoters are week and lack in business acumen, it is difficult
to reverse the situation. To safeguard from this problem, the financial
institutions can exercise control over the assisted units. There is a provision
for appointment by the financial institutions of nominee directors on the boards
of all MRTP companies assisted by them. The companies act, the industries
act (Development and Regulation), empower government to exercise powers
of control over the management, including the take over of management of
industrial undertakings. All these indicate the importance given to proper
managerial strategies to prevent mismanagement. If the proper appraisal of the
managerial aspects is made in the beginning itself, future problems in this area
can be avoided to a very large extent.

8.11 IDENTIFICATION OF OPPORTUNITY

The reason for anyone to think of establishing an SSI unit can be summarized in single
word—opportunity. The opportunity to be your own boss, to implement your own
ideas, to earn for himself or herself is reason to think of starting an SSI unit. Starting
an SSI needs a lot of courage. To be successful, to stay in the business an entrepreneur
needs combination of hard work, skill and perseverance.
Entrepreneur who starts their own business can be grouped into two broad
categories. The first category consists of people who know exactly what they want to
do and are merely looking for the opportunity or resources to do it. These people may
 Preparation of Project // 173

already developed many of skills necessary to succeed in their chosen field and are also
likely to be familiar with industry customs and practices, which can help during the
start-up phase of a new business.
The second group consists of people who want to start their own business, but do
not have definite ideas about what may would like to do. They may have developed
skills during their education or in the course of their previous employment, but many
have not be interested in opening a business in the same field of endeavor.
Project identification is concerned with the collection complication and analysis of
data for the eventual purpose of locating possible opportunities for investment and with
the development of the characteristics of such opportunities. Opportunities, according
to Drucker, are of three kinds: additive, complimentary and break-through.
Adiptive opportunities are those opportunities which enable the decision maker to
better utilize the existing resources without in any way involving a change in the
character of business. Complementary opportunities involve the introduction of new
ideas and as such do lead to certain amount of change in the existing structure. Break-
through opportunities on the other hand, involve fundamental changes in both the
structure and character of business. Additive opportunities involve the least amount of
disturbance to the existing state of affairs and hence the least amount of risk. The
element of risk is more in other two opportunities.
Project identification cannot be complete without identifying the characteristics of
the project. Every project has three elements—inputs, outputs and social costs and
benefits. The input characteristics define what the project will consume in terms of
raw material, energy, manpower, finance and organizational setup. The native and
magnitude of these input must be determined in order to make the input characteris-
tics explicit. The output characteristics of a project define what the project will
generate in the form of goods and services, employment revenue etc. The quantity and
quality of all these output should be clearly specified. In addition every project will
have impact on society. It inevitably affects the current equilibriums of demand and
supply in the economy. It is necessary to evaluate carefully the sacrifice which the
society will be required to make and the benefits will not accrue to the society from
a given project.

8.12 PROJECT FEASIBILITY STUDY

Project feasibility analysis is carried out to ensure viability of project. The important
project feasibility study is
1. Market feasibility
2. Technical feasibility
3. Financial feasibility
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4. Economic feasibility
5. Ecological feasibility
Market feasibility
Market feasibility is concerned with two aspects the aggregate demand for the proposed
product/service, the market share of the project under consideration. For this market
analysis requires variety of information and appropriate forecasting methods. The kind
of information required is
● Consumption trends in the past and the present consumption level
● Past and present supply position
● Production possibilities and constraints
● Imports and exports
● Structure of competition
● Cost structure
● Elasticity of demand
● Consumer behavior, intentions, motivations, attitudes, preferences and
requirements
● Distribution channels
● Administrative, technical and legal constraints

Technical Analysis
Technical analysis seeks to determine whether prerequisites for successful commissioning
of the project have been considered and reasonably good choices have been made with
respect to location, size, and so on. The important questions raised in technical analysis
are:
● Has the availability if raw material, power, and other inputs been
established?
● Is the selected scale of operation optimal?
● Is the production process chosen suitable?
● Are the equipment and machines chosen appropriate?
● Have the auxiliary equipment and supplementary engineering works been
provided for?
● Has provision been made for treatment of effluents?
● Is the proposed layout of the site, buildings and plant sound?
● Have work schedules been drawn up realistically?
● Is the technology proposed to be employed appropriate from the social
point of view?
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Financial Analysis
Financial analysis is necessary as ascertain whether the propose project is financially
viable in the sense of being able to meet the burden of servicing dept and whether the
propose project will satisfy the return expectations of those who provide the capital.
The aspects to be looked into while conducting financial appraisal are as follows.
● Investment outlay and cost of project
● Means of financing.
● Project profitability
● Break-even point
● Cash shows of the project
● Investment worthiness judged in terms of various criteria of merit
● Project financial position
● Level of risk

Economic/Social Cost-benefit Analysis

This is concerned with judging a project from the larger social point of view, where in
the focus if on social costs and benefits of a project, which may often be different from
its monitory costs and benefits. The questions to be answered in social cost-benefit
analysis are as follows.
● What are the direct economic benefits and costs of the project measured
in terms of shadow (efficiency) prices and not in terms of market prices?
● What would be the impact of the project on the distribution of income
in the society?
● What would be the impact of the project on the level of savings and
investment in the society?
● What would be the contribution of the project towards the fulfillment
of certain like self-sufficiency, employment and social order?

Ecological Analysis
Today, environmental concerns assured a great deal of significance and hence ecological
analysis should be done, particulars for project which have significant ecological
implications like power plants and irrigation schemes and for environmental polluting
industries like chemicals, leather processing etc. The key questions to be answered in
ecological analysis are as follows.
● What is the likely damage caused by the project to the environment?
● What is the cost of restoration measures required to ensure that the
damage to the environment is contained within acceptable?
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PROJECT SELECTION
Project selection starts once the entrepreneur has generated few ideas of project. After
having some ideas, these project ideas are analyzed in the light of existing economic
conditions, market conditions, and the government policy and so on. For this purpose
a tool is generated used what is called SWOT analysis. The intending entrepreneur
analyses his strengths and weaknesses as well as opportunities/competitive advantages
and threats/challenges offered by each of the project ideas. In addition the entrepreneur
needs to analyze other related aspects also like raw material, potential market, labor,
capital, location and forms of ownerships etc. Each of these aspects has to be evaluated
independently and in relation to each of these aspects. This forms a continuous and
back and forth process as shown in fig 8.1.
On the basis of this analysis, the most suitable idea is finally selected to convert it
into an enterprise. The process involved in selecting a project out of few projects is
also termed as “Zeroing in Process”.

Product

Ownership Raw Material

Location Market

Working Capital Labour

Total Investment

Fig. 8.1: Interdependent aspects of projects

Readers are advised to note that there is a time interval involved in between project
identification and project selection. In some cases it may be few months and in others
it may be few minutes.

8.4 MEANING AND SIGNIFICANCE OF PROJECT REPORT

As is discussed in the previous section, Webster new 20th century dictionary defines as
a scheme, design a proposal something intended or devised. A project report or a business
plan is a written statement of what an entrepreneur proposes to take up. It is a kind
of guide frost or course at action what the entrepreneur hopes to achieve in his business
 Preparation of Project // 159

and how is he going to achieve it. A project report serves like a kind of big road map
to reach the destination determined by entrepreneur. Hence a project report can be
defined as a well evolved course of action devised to achieve the specified objectives
within a specified period of time. It is like an operating document.
The preparation of project report is of great significance for an entrepreneur. The
project report serves two essential purposes. The first is the project report is like a road
map it describes the direction the enterprise is going in, what its goals are, where it
wants to be, and how it is going to get there. In addition it enables the entrepreneur to
know that he is proceeding in the right direction. Dan Steinhoff and John F. Burgess
hold the view that without well spelled out goals and operational methods, most
businesses flounder on the rocks of hard times.
The second purpose of the project report is to attract lenders and investors. The
preparation of project report is beneficial for those small scale enterprises which apply
for financial assistance from the financial institutions and commercial banks. On the
basis of this project report the financial institutes make appraisal and decide whether
financial assistance should be given or not. If yes how much. Other organizations which
provide various assistance like work shed /land, raw material etc, also make decision
on the basis of this project report.

8.5 CONTENTS OF A PROJECT REPORT

The significance of project report as discussed above makes it clear that there is no
substitution for business plan or project report and there are no shortcuts to prepare
it. The more concrete and complete project report not only serves as road map but
also earns the respect of outsiders who support in making and running an enterprise.
Hence project report should be prepared with great care and consideration. A good
project report should contain the following.
(1) General information: Information on product profile and product details.
(2) Promoter: His/her educational qualification, work experience, project related
experience.
(3) Location: exact location of the project, lease or freehold, location advantages.
(4) Land and building: land area, construction area, type of construction, cost
of construction, detailed plan and estimate along with plant layout.
(5) Plant and machinery: Details of machinery required, capacity, suppliers, cost,
various alternatives available, cost of miscellaneous assets.
(6) Production process: Description of production process, process chart, technical
know how, technology alternatives available, production programme.
(7) Utilities: Water, power, steam, compressed air requirements, cost estimates
sources of utilities.
(8) Transport and communication: Mode, possibility of getting costs.
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(9) Raw material: List of raw material required by quality and quantity, sources
of procurement, cost of raw material, tie-up arrangements, if any for procure-
ment of raw material, alternative raw material, if any.
(10) Man power: Man power requirement by skilled and semi-skilled, sources of
manpower supply, cost of procurement, requirement for training and its cost.
(11) Products: Product mix, estimated sales distribution channels, competitions and
their capacities, product standard, input -output ratio, product substitute.
(12) Market: End-users of product, distribution of market as local, national,
international, trade practices, sales promotion devices, proposed market
research.
(13) Requirement of working capital: Working capital required, sources of working
capital, need for collateral security, nature and extent of credit facilities offered
and available.
(14) Requirement of funds: Break-up project cost in terms of costs of land, building
machinery, miscellaneous assets, preliminary expenses, contingencies and margin
money for working capital, arrangements for meeting the cost of setting up of
the project.
(15) Cost of production and profitability of first ten years.
(16) Break-even analysis.
(17) Schedule of implementation.

8.6 FORMULATION OF PROJECT REPORT

A project report is like a road map. It is an operating document. What information and
how much information it contain depends upon the size of the enterprise, as well as
nature of production. For example small-scale enterprises do not include technology
which is used for preparing project reports of large-scale enterprises. Within small-scale
enterprises too, all information may not be homogeneous for all units. Vinod Gupta
has given a general set of information in his study “Formation of a project report.”
According to Gupta, project formulation divides the process of project development into
eight distinct and sequential stages as below:
(1) General information
(2) Project description
(3) Market potential
(4) Capital costs and sources of finance
(5) Assessment of working capital requirements
(6) Other financial aspects
(7) Economical and social variables
(8) Project implementation
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The nature of formation to be collected and furnished under each of these stages
has been given below.

(1) General Information

The information of general nature given in the project report includes the following:
Bio-data of promoter: Name and address, qualifications, experience and other
capabilities of the entrepreneur. Similar information of each partner if any.
Industry profile: A reference analysis of industry to which the project belongs,
e.g., past performance; present status, its organization, its problems etc.
Constitution and organization: The constitution and organization structure of the
enterprise; in case of partnership firm its registration with registrar of firms, certification
from the directorate of industries /district industry centre.
Product details: Product utility, product range, product design, advantage to be
offered by the product over its substitutes if any.

(2) Project Description

A brief description of the project covering the following aspects should be made in the
project report.
Site: Location of the unit; owned, rented or leasehold land; industrial area; no
objection certificate from municipal authorities if the enterprise location falls in the
residential area.
Physical Infrastructure: Availability of the following items of infrastructure should
be mentioned in the project report.
(a) Raw material: Requirement of raw material, whether inland or imported,
sources of raw material supply.
(b) Skilled labour: Availability of skilled labour in the area i.e., arrangements for
training labourers in various skills.
(c) Utilities: These include:
(i) Power: Requirement of power, load sanctioned, availability of power
(ii) Fuel: Requirement of fuel items such as coal, coke, oil or gas, state of
their availability and supply position.
(iii) Water: The sources of water, quality and quantity available.
(d) Pollution control: The aspects like scope of dumps, sewage system, sewage
treatment plant, infiltration facility etc., should be mentioned.
(e) Communication and transportation facility: The availability of communi-
cation facilities, e.g., telephone, fax, telex, internet etc., should be indicated.
Requirements for transport, mode of transport, potential means of transport,
approximate distance to be covered, bottlenecks etc., should be stated in the
business plan.
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(f) Production process: A mention should be made for process involved in

production and period of conversion from raw material into finished goods.
(g) Machinery and equipment: A complete list of machines and equipments
required indicating their size, type, cost and sources of their supply should be
enclosed with the project report.
(h) Capacity of the plant: The installed licensed capacity of the plant along with
the shifts should also be mentioned in the project report.
(i) Technology selected: The selection of technology, arrangements made for
acquiring it should be mentioned in the business plan.
(j) Other common facilities: Availability of common facilities like machine shops,
welding shops and electrical repair shops etc should be stated in the project
report.
(k) Research and development: A mention should be made in the project report
regarding proposed research and development activities to be undertaken in
future.

(3) Market Potential

While preparing a project report, the following aspects relating to market potential of
the product of the product should be stated in the report.
(a) Demand and supply position: State the total expected demand for the product
and present supply position, what is the gap between demand and supply and
how much gap will fill up by the proposed unit.
(b) Expected price: Expected price of the product to be realized should also be
mentioned.
(c) Marketing strategy: Arrangements made for selling the product should be
clearly stated in the project report.
(d) After sales service: Depending upon the nature of the product, provisions
made for after-sales should normally be stated in the project report.

(4) Capital Costs and Sources of Finance

An estimate of the various components of capital items like land and buildings, plant
and machinery, installation costs, preliminary expenses, margin of working capital should
be given in the project report. The sources should indicate the owners funds together
with funds raised from financial institutions and banks.

(5) Assessment of Working Capital

The requirement for working capital and its sources of supply should clearly be
mentioned. It is preferred to prepare working capital requirements in the prescribed
formats designed by limits of requirement. It will reduce the objections from banker’s
side.
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(6) Other Financial Aspects

To adjudge the profitability of the project to be set up, a projected profit and loss account
indicating likely sales revenue, cost of production, allied cost and profit should be
prepared. A projected balance sheet and cash flow statement should also be prepared
to indicate the financial position and requirements at various stages of the project. In
addition to this, the break even analysis should also be presented. Break even point is
the level of production at which the enterprise shall earn neither profit nor incur loss.
Breakdown level indicates the gestation period and the likely moratorium required for
repayment of the loans. Break-even point is calculated as
Break-Even Point (BEP) = F/S–V
Where F = Fixed Cost
S = Selling Price/Unit
V = Variable Cost / Unit
The break-even point indicates at what level of output the enterprise will break even.

(7) Economical and Social Variables

Every enterprise has social responsibility. In view of the social responsibility of business,
the abatement costs, i.e., the costs for controlling the environmental damage should be
stated in the project. Arrangements made for treating the effluents and emissions should
also be mentioned in the report. In addition the following socio-economic benefits should
also be stated in the report.
(i) Employment Generation
(ii) Import Substitution
(iii) Ancillaration
(iv) Exports
(v) Local Resource Utilization
(vi) Development of the Area

(8) Project Implimentation

Every entrepreneur should draw an implementation scheme or a time-table for his project
to the timely completion of all activities involved in setting up an enterprise. If there is
delay in implementation project cost overrun. Delay in project implementation jeopardizes
the financial viability of the project, on one hand, and props up the entrepreneur to
drop the idea to set up an enterprise, on the other. Hence there is need to draw up an
implementation schedule for the project and then to adhere to it.
PERT and CPM discussed later in this chapter can be used to get better insight
into all activities related to implementation of the project.