ESME-- 2010

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    EntrepreneurshipandSmall Medium


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    Unit : I1.D efinition,2.Nature and Importance of an Entrepreneur,3.Ty pes of Entrepreneur

    4.Qualities & Characteristics of an Entrepreneur 5.Intrapreneurship6.Entrepreneurial Process .

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    An Entrepreneur is the person who isresponsible for -- setting up a business or enterprise .

    -- takes initiative-- innovative-- and looks for high achievements .

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    Definition of an Entrepreneur:The word derived from the French wordenterprendre means to undertake .

    According to J .A Schumpeter:Entrepreneur is an innovator who carries outnew combinations to initiate the process of economic development through introduction of new products, new markets, take over of newsource of raw materials and establishment of anew organization of industr y.

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    According to Webster: Entrepreneur is one who assumesthe responsibilit y of the risk and management of

    business .

    According to Peter Drucker:

    Entrepreneur is one who alwa ys searches for change,responds to it and exploits as an opportunit y. Innovationis a specific tool of entrepreneurs, the means b y whichthey exploit change as an opportunit y for different

    business or service .

    According to Dewing: The function of entrepreneur isone that promotes ideas into business .

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    Nature and Importance of an Entrepreneur:1.Contributes for the economic development .

    2.Speed up the process of activating the factors of production .

    3.Creation of emplo yment opportunities .

    4.Development of backward and Tribal areas .

    5.Improvement in the standard of living of the

    weaker sections of the societ y.

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    Ty pes of Entrepreneur:1. Trading Entrepreneurs

    a.R eal Estate, b.Mall Trading .

    2. Industrial Entrepreneurs:a. Large, b .Medium and c . Tiny Sector .

    3.Corporate Entrepreneurs .

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    4.Agricultural Entrepreneursa.Plantation

    b.Horticulturec.Poultr y [Poultr y feed, poultr y equipment, and

    poultr y processing sectors]

    5.Service Entrepreneursa.Engineering

    b.Beaut y Parlours .

    6.Health Entrepreneurs .

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    Classifications of Entrepreneurs1.Innovating Entrepreneurs

    2.Imitative Entrepreneurs

    3.Fabian Entrepreneurs [lack the will to adopt tonew methods of production]

    4.Drone Entrepreneurs [the y are not read y to makechanges in their existing production methods . They struggle to exist, not to grow ,continue tooperate in a traditional wa y and resist changes .

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    Qual ities a nd Ch arac te r isti cs of a nEnt r ep r ene ur.

    According to James J .Berne

    1.H e is an enterprising individual, energetic, hardworking, resourceful, aware of new opportunities,able to adjust himself with changing conditionswith ease and willing to assume risks involved in

    change .2.He is interested in advancing technolog y and in

    improving the qualit y of his product or service .

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    3.He is interested in expanding the scale of hisoperations b y reinvesting his earnings .

    4.He visualizes changes and adopt

    5.He is a firm believer in planning and s ystematicwork .

    6.He works for the societ y at large .

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    Characteristics of an Entrepreneur .Technical competence, initiative, good judgment,intelligence, leadership qualities, self-confidence, energ y, attitude, creativeness,fairness, honest y, tactfulness and emotionalstabilit y.

    1.Mental abilit y

    2.Clear Objectives

    3.Business Secrec y

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    4.Human relations abilit y

    5.Communication abilit y

    6.Technical knowledge

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    Entrepreneurial Behaviours

    1.G rasping opportunit y

    2. Solving problems creativel y

    3.Take responsibilit y

    4.Networking effectivel y to manageinterdependence .

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    Entrepreneurial Attributes:

    1.Achievement orientation and ambition

    2.Creativit y, determination

    3.Preference for learning b y doing

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    Entrepreneurial skillsEntrepreneurial skills

    1.Strategic thinking



    4.Creative problem solving

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    Intrapreneurship:Intrepreneurship or intrapreneuring or corporateentrepreneurship is the process b y which other new ventures are born with in an existingcorporation .

    It involves-- expansion b y exploring new opportunities

    -- through new combinations of existing resources .

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    Entrepreneur Intrapreneur

    Independent Semi- independent person

    R aises the necessar y Neither raises capital nor Capital b y himself and guarantees the investors .Guarantees the return to theinvestors .

    Takes full risks Does not full y bear therisks .

    Operates from outside operating with in the orgns .

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    Examples for Intrapreneurship:1) 3M: Minnesota Mining and Manufacturing

    a) Allows emplo yees to devote a percentage of their time to independent projects .

    2) HP: They failed to recognize the Steve Wozniaks proposal for the personal computer . But PC is the base for the Apple Computers .

    David Packard and Charles House[engineer invented the high qualit y video monitor . It wasused b y NASA also the heart transplants .

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    3.IBM-- separate organizations/ board of directors/autonomous decision making authorit y.

    -- products like Automatic Teller Machine for Banks, Industrial robots, and the I BM PersonalComputer .Intrapreneur Philip Estridge .

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    Intrapreneurial Environment:1.Organization operates on frontiers of technolog y2.New ideas encouraged3.Trail and error encouraged

    4.Failures allowed5.R esources available and accessible6.Multidiscipline teamwork approach

    7.Long time horizon8.Appropriate reward s ystem9.Sponsors and support of Top management

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    Entrepreneurial ProcessStage I : Change in the economic environment,

    creates needs for new goods and services .

    Stage II: By starting a new venture .

    Stage III: Intrapreneurship

    Stage IV: Co-ordinating the varied activities toachieve the entrepreneurial goal .

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    U nit: II1.Concept of Entrepreneurship

    2. Phases of Entrepreneurship Development

    3. Factors Influencing Entrepreneurship .

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    I. Concept of Entrepreneurship:

    Acc to McClelland;-- Doing things in a new and better wa y.-- entrepreneurial role calls for decision making

    under uncertaint y.

    According to Casson,-- entrepreneurship consists of an eccentric(unusual )evaluation of economic events whichother people are unwilling to support .

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    Acc to Ke ynes:--abilit y to mobilize the resources and combinethem to initiate change in production .

    Adit ya Mittal:-- Entrepreneurship is a state of mind and can be

    applied to an y number of different fields .-- it is critical as it helps to prevent stagnation b y

    challenging traditional thinking and drives progress and development that can bring aboutlong term change .

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    -- ever yone has the potential to be entrepreneurialin their thinking and approach .

    Finall y,An entrepreneur ma y at best be defined as a person responsible for existence of new businessenterprises .

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    II. Phases of Entrepreneurship DevelopmentThree Phases:

    1. Initial Phase

    2.Development Phase

    3.Support Phase

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    1.Initial Phase:Creation of awareness about the entrepreneurialopportunities based on surve y.

    2.Development Phase: [E DP]Implementation of training programmes todevelop motivation and managerial skill .

    3.Support Phase: Infrastructure support of counselling and assisting to establish a newenterprise and to develop existing units .

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    EDP: Entrepreneurial Development Programme .EDP is primaril y meant for developing those first-generation entrepreneurs, who on their own cannot

    become successful entrepreneurs .

    EDP covers 3 areas .1.Location2.Target Group3.Enterprise [ Entrepreneurial activities]

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    Instit u tion al Su ppo r t to T ra ining a ndInstit u tion al Su ppo r t to T ra ining a ndEnt r ep r ene ur ship Deve lopment:Ent r ep r ene ur ship Deve lopment:

    National Level: [Promotion of MSMEs]1. NISIE T National Institute Small Industr y

    Extension Training, Hyderabad .

    2. IIE The Indian Institute of EntrepreneurshipGuwahati .

    3. NIES BU D National Institute Entrepreneurshipand Small Business Development

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    To promote entrepreneurship development in India,the Ministr y has two schemes:

    Promotion of;1.Entrepreneurship Development Institutions[ E DI]

    2. National Entrepreneurship Development Board[ NEDB ]

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    Objectives of these Programmes:

    1.Promoting entrepreneurship for creating self-emplo yment through enterprise creating .

    2.Facilitating creation of training infrastructure

    3.Supporting research of entrepreneurship relatedissues .

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    III . Factors Influencing Entrepreneurship .1.Technical knowledge

    2.Entrepreneurial Training

    3.Market contacts

    4.Famil y business

    5.Availabilit y of capital

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    6.Successful role models

    7.Local manpower

    8.Capable advisors& supporters

    9.Supplier assistance

    10.G overnmental & Institutional support .

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    U nit III .1.Entrepreneurial Motivation and the

    Motivating Factors2. Entrepreneurship Development in India3.R ural Entrepreneurship4.International Opportunities .

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    Entrepreneurial Motivation and theMotivating Factors

    Motivation:The term motivation has been derived from theword motive .

    Motive ma y be defined as an inner state of our mind that moves or activates or energizes anddirects our behaviour towards our goals .

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    Motivation ma y be defined as the process thatmotivates person into action and induces him to

    continue the course of action for the achievementof goals .It is an ongoing process because humanneeds/goals are never completel y satisfied .

    Entrepreneurial MotivationMotive

    Goal Behaviour

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    I. Maslows Need Hierarchy Theory:1.Physiological Needs.

    Entrepreneur also being a man needs to meethis/her ph ysiological needs for survival . Hence,he/she is motivated to work in the enterprise tohave economic rewards to meet the basic needs .

    2.Safet y Needs .Economic securit y and protection: Meeting theseneeds requires more mone y and hence, theentrepreneur is promoted to work more in his/her enterprise .

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    3.Social Needs: A n entrepreneur is motivated to interact with

    fellow intrapreneurs, his/her emplo yees andothers .

    4.Esteem Needs: In case of entrepreneurs, the ownership and self-control over the enterprise satisfies their esteem

    needs b y providing them status, respect,reputation and independence .

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    5. Self-ActualizingAn individual ma y self-actualize in being asuccessful entrepreneur .

    Based on this Maslows hierarch y of needs, for entrepreneurs, it is mainl y social, esteem and self-actualization needs that motivate them to work more and more for satisf ying them .

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    II. McClellands Acquired Needs Theor y:1. N eed for Affiliation2. Need for power 3. Need for Achievement:

    This refers to ones desire to accomplishsomething with own efforts .

    But in case of an entrepreneur, the high need for achievement is found as the dominating one .

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    Motivating Factors:Acc . To P .N.Sharma1.Educational background

    2.Occupational experience

    3.Desire to do work independentl y

    4.Famil y Background

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    5.Assistance from government

    6.Assistance from financial institutions

    7.Availabilit y of Technolog y/raw material

    8. Financial assistance from venture capital

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    Acc . M.Chandra Sekhor Facilitating Factors:1.Success stories of entrepreneurs

    2.Previous association

    3.Previous experience

    4.Inherited propert y

    5.Influence of others

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    Entrepreneurship Development in IndiaApproaches to E DEntrepreneurship development should integrate

    -- Entrepreneurial Training,

    -- Provision of Incentives,-- Consultanc y services-- Sectoral Development .

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    Entrepreneurship Development Programme:Objectives of E DP programmes .1.To give substance to the governments policies of

    simulation of economic growth .

    2.Dispersing( Separate ) industries to rural areas .

    3.Promoting the processing of local raw materials .

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    Entrepreneurial Development:1.Entrepreneurial education2.Publicit y for entrepreneurial opportunities3.Identification of potential entrepreneurs4. Guidance in selecting products and preparing

    project reports .5.Availabilit y of local agencies with trained

    personnel for entrepreneurial counselling and promotions .

    6.R ecognition of entrepreneurial skills .

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    Issues of E DPs:1.Structure and Composition of E DPs.

    2. Areas of Operation

    3.Fixing Priorities

    4.Lack of specialists support .

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    3. R ural Entrepreneurship:R ural Entrepreneurs:The entrepreneur who brings in overall change

    through innovation, new ideas for the maximumsocial good in rural areas is a rural entrepreneur .

    -- R ural entrepreneur is one of the segments of ruralgrowth .

    -- he is responsible for effecting change, add valueto art and crafts .

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    R ural Industr y:-- rural industr y includes village and small

    industries .

    -- cottage industr y is an important aspect of ruralindustr y.

    -- rural industr y appropriate for the rural areas .

    -- rural industr y serves the requirements of rural people as well as other markets .

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    Classification of R ural Entrepreneurs :

    1.Agriculture Entrepreneurs .

    2.Micro Entrepreneurs .

    3.Small Business Entrepreneurs

    4.R ural Artisans[skilled craftsman] .

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    Ty pes of Industries:1.H andicrafts:[ R aw materials can be wood, metal

    clay, cloth etc to produce consumer articles .

    -- All India handicrafts Board .

    -- Handlooms and Handicrafts Export PromotionCorporation promotes exports from this sector .

    -- The products are,carpets, printed textiles, art,metal wares, Zari goods, embroidered goodsetc .gems and jeweller y.

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    2.Handloom Industries .

    3.Sericulture .[Product from silk]

    4.Coir Industries .

    5.Khadi and Village Industries .

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    Problems of Entrepreneurship:1. Inadequate flow of credit, obsolete technolog y,

    machiner y and equipment .

    2. Poor qualit y standards .

    3. Inadequate infrastructural facilities .

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    Inte r na tion al Ent r ep r ene ur ship Oppo r tu nitiesInte r na tion al Ent r ep r ene ur ship Oppo r tu nities

    International Business

    Exporting Non equit y Direct foreigna) Direct arrangement investment

    b) Indirect

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    a) Indirect exporting :-- foreign purchaser in the local market or through-- export management firm

    they will take care of * selling, marketing, deliver y and an y technical

    problems involved in the export process .

    b) Direct exporting:-- compan ys overseas sales office will be there .-- independent foreign distributors also will be

    there .

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    N on Eq u ity A rra ngements1.Licensing

    2.Turn ke y projects3.Management contracts .

    1.Licensing:-- right to use a patent, trademark, technolog y, production process etc .-- this involves low risks and generate incremental

    income .

    Wolverine world wide Inc opened a Hush Puppies store inSofia, Bulgaria through licensing agree . With Pikin .

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    2.Turn ke y projectsHaving a foreign entrepreneur build a factor y or

    other facilit y, train the workers, train themanagement and then turn it over to local ownersonce the operation is going .

    -- finance is provided b y the local compan y or theGovt with periodic pa yments being made over the

    life of the project .

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    3.Management Contracts:-- entrepreneurs have successfull y entered

    international business b y contracting their management techniques and skills .

    Direct Foreign Investment:1.Joint ventures

    2.Minorit y and Majorit y equit y positions are alsomethods for making direct foreign investments .

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    U nit : IVProjects Management1.Concept of projects and classification2.Project Identification3.Formulation4.Project Design5.R eport and Project Appraisal .

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    Project ManagementEntrepreneurial ventures use project management to

    accomplish outcomes under conditions of limitedresources with critical time constraints .

    PM is one of the basic approaches followed b y entrepreneurs to accomplish things the y undertake .

    PMI defines PM as the application of knowledge,skills, tools, and techniques to project activities tomeet project requirements .

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    There is a huge variet y of projects that anentrepreneur is likel y to undertake starting with

    researching and writing the business plan tosetting up the plant to executing orders fromclients .

    In the broadest sense, a project can be defined as a finite task to be completed.

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    Purpose: The project has a well defined end goal . The goal itself might be made up of several sub

    goals . A project can be subdivided into severalsubtasks, which must be completed in order toachieve the project goals .

    Classification of Projects:1.Q uantifiable and Non quantifiable Projects

    2.Sectoral Projects3.Techno Economic Projects4.Services Projects

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    1.Q uantifiable and Non quantifiable ProjectsQuantifiable : Projects concerned with

    -- Industrial development-- Power generation-- Mineral development

    Non quantifiable Projects: Projects involving-- Health-- Education-- Defence

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    2. Sectoral Projectsa) Agricultural & Allied sector

    b) Irrigation & Power sector c) Industr y & Mining sector d) Transport& Communication sector

    e) Social Service sector

    3.Techno Economic Projects

    a) Agricultural, Forestr y & Fishing b) Mining & Quarr yingc) Manufacturing

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    d) Constructione) Electricit y, gas, water and sanitar y servicesf ) Transport, storage and communications .

    4. Service Projectsa) Welfare projects

    b) Service projectsc) R esearch & Development projectsd) Educational projects

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    Phases of Project Management

    Start Identification Formulation Appraisal

    Selection Implementation Management

    d f

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    Project Identification:An entrepreneur has an infinitel y wide choice with

    respect to this project . The important dimensionsof choice are-- Product / Service

    -- Market, scale of production-- Technolog y, location, Incentives-- Equipment etc .

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    Project Identification is concerned with-- collection,

    -- compilation and anal ysis of economic data-- for the eventual purpose of locating possible

    opportunities for investment and

    -- with the development of such opportunities .

    Criteria for selecting a particular project:

    1.Investment size2.Location3.Technolog y

    4 E i t

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    4. Equipment5. Marketing .

    Importance of Project Identification:1.They become the catal ytic agents of economic

    development2.Projects usuall y involve substantial financial

    outla ys3.Projetcs commitments cannot be easil y reversed4.PI brings the necessar y changes in societ y in

    course of time5.Project accelerate the process of socio cultural

    development .

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    St a ges of P r oje ct Fo r m ula tion

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    g jFeasibilit y anal ysis

    Techno- Economic Anal ysis

    Project Design & Network Anal ysis

    Input Anal ysis

    Financial Anal ysis

    Social- Cost Benefit Anal ysis

    Pre - Investment Anal ysis .

    N t k A l i It i t hi h l b th

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    Network Anal ysis: It is a s ystem which plans bothlarge and small projects b y anal yzing the project

    activities . Projects are broken down into simpleactivities, which are then arranged in a logicalsequence . It is also decided to which task will be

    performed simultaneousl y and which otherssequentiall y.

    Project Anal ysis of Scheduling Time co-ordinating

    Design Pro . Activities Pro .Act costs the activities .worked out


    P j t R t

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    Project R eport :A project report is prepared for anal yzing the extent

    of opportunities in the contemplated project .

    It gives a complete anal ysis of the inputs and outputs

    of the project .

    It enables the entrepreneur to understand at the

    initial stage, whether the project is sound ontechnical, commercial, financial and economic

    parameters .

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    Main stages of the s ystem of project appraisal are

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    Main stages of the s ystem of project appraisal areStep 1 :Economic Indicates priorit y use

    Step 2 : Technical Involves scale of the projectand the process adopted

    Step 3:Organizational Suitabilit y is examined

    Step 4: Managerial Adequac y & competence arecriticall y scrutinised

    Step 5: Operational Capabilit y of the projectStep 6: Financial Determines the financial

    viabilit y.

    i S i hi S i h

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    Unit IV: St ar ting the Vent ur e.Unit IV: St ar ting the Vent ur e.

    1.B usiness Plan2.Marketing Plan3.Financial Plan

    4.Organizational Plan5.Financing the venture

    a) Source of Capital b) Venture Capital .

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    (b) Se r vice Ente r p r ises : The enterprises engaged

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    (b) Se r vice Ente r p r ises : The enterprises engagedin providing or rendering of services and are

    defined in te r ms of investment in eq u ipment .

    The limit for investment in plant and machiner y /

    equipment for manufacturing / service enterprises,as notified, vide S .O. 1642 (e ) dtd .29- 09-2006 areas under:

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    Service Sector

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    Service Sector Ente r p r ises Investment in eq u ipments

    Micro Enterprises : Does not exceed ten lakhrupees

    Small Enterprises : More than ten lakh rupees but

    does not exceed two crorerupees

    Medium Enterprises: More than two crore rupees but does not exceed five corerupees

    The P r od uc t G r ou p Ma tr ix

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    There are about twent y-one major industr y groups inthe small scale sector . These are listed below :

    - Food Products

    - Chemical & Chemical Products- Basic Metal Industries- Metal Products- Electrical Machiner y & Parts

    - R ubber & Plastic Products- Machiner y & Parts Except Electrical goods- Hosier y & Garments - Wood Products- Non-metallic Mineral Products

    Paper Products & Printing

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    - Paper Products & Printing- Transport Equipments & Parts

    - Leather & Leather Products- Miscellaneous Manufacturing Industries- Other Services & Products- Beverages, Tobacco & Tobacco Products- R epair Services- Cotton Textiles- Wool, Silk, S ynthetic Fibre Textiles

    - Jute, Hemp and Mesta Textiles- Other Services

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    1 Small Scale Industries:

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    1.Small Scale Industries:SMEs existed in India for a long time in various

    sectors and contributed significantl y in bringingdown;

    -- regional imbalance;

    -- generating emplo yment opportunities,output, and exports;

    -- fostering entrepreneurship;

    --accelerating economic development .

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    -- or the rendering of services and the

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    -- or the rendering of services and theundertaking supplies or renders or proposes

    to suppl y or render not less than 5 0 per centof its production or services

    -- The amount not exceed R s 10 million

    3.Tiny Enterprises

    Investment limit in plant and machiner y inrespect of tin y enterprises is R s 2 .5 millionirrespective of location of the unit .

    Scope and Ty pes of Small Business

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    Scope and Ty pes of Small BusinessScope of Small Scale Enterprises

    Manufacturing Trading Services1Village & Cot Ind Whole sale Professional serv .

    2 Handlooms& Handicrafts R etail Commercial serv .3 Modern SSI Franchise Personal ser i SSI Financial ser .

    ii Ancillar y U

    nits I T serv .iii Tiny U nits4 Artisans

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    2 Industrial Polic y for Small Scale Industries

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    2. Industrial Polic y for Small Scale Industries .

    Objectives of Industrial Polic y:

    1.To maintain a sustained growth in productivit y.

    2. To enhance emplo yment opportunities .

    3. To attain international competitiveness

    1 .L icensing po licy:

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    e s g po y:

    -- List of Industries reserved for Small scale

    industries are exempted from obtaining fromlicense .

    -- Drugs and pharmaceuticals have been removedfor the compulsor y license .

    -- onl y five industries are under compulsor y licensing due to environmental, safet y andstrategic considerations .

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    3.Liberalization of Location Polic y:

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    3.Liberalization of Location Polic y:-- Entrepreneurs are free to select an y place for the

    location of their business .

    - But approval is required if it is located with in 25

    KM where the population is more than onmillion .

    -- This polic y may not applicable to the electronic,computer based industr y, printing industries etc .

    4.Polic y for small scale Industries for reservation of

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    4.Polic y for small scale Industries for reservation of products .

    -- 11 4 items are reserved for SSI .

    -- If an y non SSI wants to manufacture the items

    reserved for the SSI then the y need to obtain anindustrial license and undertake export obligationof 5 0% of their annual production .

    -- this condition will not applicable to an y undertakings operating under 100% EO U .

    5.Exim polic y for small scale sector .

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    p ySchemes of Government of India for SSI:

    1.Organization of specialized training programmeson packaging for exports in collaboration with theIndian Institute of Packaging, Bomba y.

    2.Assistance to SSI units for participation in theInternational and Internal Trade fairs .

    3.Dissemination of export information to SSIthrough Technological Information PromotionsSystems [ TIPS] .

    4. Incentives for qualit y production in the SSI

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    4. Incentives for qualit y production in the SSIsectors .

    EXIM Polic y:-- Status like export/trading/ start trading/super star

    trading are given to the small, medium exporters

    based on the prescribed export performance level .

    -- if the status is claimed in terms of FO B value of

    exports, double weightage is given to the exportof products manufactured b y SSI .

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    Infrastructural Set U p:

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    p1.18 Export Promotion Council for the promotion of

    specific commodities .2.Chamber of Commerce and Industr y and Asso .of

    Trade and Industr y.

    3.Federations of Indian Export Organizations[FIEO]4.Trade Fair Authorit y of India[ TFAI] .5.Agricultural and Processed Food Products Export

    Development Authorit y.6.Spices Trading Corporation of India Ltd .7.Tea Trading Corporation of India ltd .

    Special Import License (SIL )

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    Special Import License (SIL )-- Exporters recognized as Export Houses, Star

    Trading House, Trading Houses, etc . Are eligiblefor grant of special Import License (SIL ) @certain percentage of their FO B value of exports

    -- However, 2 percent additional SIL is grantedfor exports of Products manufactured b y units

    registered as SSI, provided the exports of these products is more than 5 0% of the exports duringthe period

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    Export Processing Zones:

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    p g-- To encourage the exporters who manufacturing

    the products are getting incentives from GOI b y establishing EPZs .

    -- EPZS and EO U s are under the purview of

    Ministr y of Commerce .-- EPZs provided with basic infrastructural facilities

    at reduced rates and

    -- Developed land sites, standard designed factor y buildings, roads, power, water and drainage also banking, post office facilities etc .

    Packaging for export

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    g g p-- With a view to acquaint SSI Exporters of the

    latest Packaging standards, techniques etc . training programmes on packaging for exports areorganized in various parts of the countr y.

    -- These programmes are organised in associationwith Indian Institute of Packaging which has

    requisite expertise on the subject .

    Technical & managerial consultanc y services

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    g yTechnical & Managerial Consultanc y Services to

    the SSI manufacturers/exporters is providedthrough a network of field offices to ensurehigher level of production and generation of higher exports .

    Marketing development assistance

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    Marketing Development Assistance (M DA) is

    being operated b y Ministr y of Commerce under which M DA is given to exporters through FIEOand Export Promotion Councils/ Commodit y Boards to plan their marketing strateg y for export

    growth .

    Eligible exporters: -

    -- Status Holder exporters namel y Export Houses,Trading Houses etc . They would be eligible to getMDA through FIEO .

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    A new scheme for technolog y up gradation for

    industrial clusters has been started recentl y.

    The scheme aims at diagnostic stud y of the

    clusters, identification of technological needs,technological intervention and wider dissemination of information and technolog y within the clusters .

    U nit: VI

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    : V1.Process of Setting up a Small-Scale

    Industr y.2.Enterprise Location .

    3.Financing small business .4.Legal Framework for Small Business .

    1.Process of Setting up a Small-Scale Industr y.

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    g p y1.Selection of Industr y.

    2.Arrangement for Technical Know-howi) Prepare Project R eport

    [ Project report includes Marketing, Pricingstrategies, Financing, Staffing etc .]

    3.Appl y to Financial Institutions

    4. Selection of Location and Acquisition of Premises .

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    5.Appl y to D.I for R egistration and NOC, Power allotment .

    6.Appl y to Local bod y/ Pancha yat / Municipalit y for NOC and Permission .

    7. Appl y for Power connectionPlace for Machiner y Appl y for Quota for R aw materials . R ecruit Staff .

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    For installing power looms, the y have get

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    permission from the Textile Commissioner, GOI.

    2 .Registration of SSI:--All the SSI has to registered with the Director of

    Industries in their state .

    --Cop y of this application for registration has to be

    sent to the Director of Small Service Institute inthe concerned state .

    -- This will help the SSI in obtaining financial

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    assistance from the government and for obtaining

    machiner y on hire- purchase from the NSIC .

    -- Assistance in the suppl y of

    i) controlled raw materialsii) specific certificate for imported raw materialsiii) facilities for export promotion

    Will be easil y available if the y registered with theState Director of Industries .

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    4 .Machinery:NSIC d hi h h

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    -- NSIC: under hire- purchase scheme .

    -- NSIC has acquired the necessar y experience in the procurement of machines from the right sources .

    -- it takes care of the problems up to the stage of deliver y of machines to the entrepreneurs .

    --Small entrepreneur should enlist with the NSIC .

    -- This application form should be accompanied withR egistration Certificate and report of the DI.

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    Directors of Industries : Allot quotas of raw

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    materials .

    Chief Controller of Imports : They issue licensesAnd Exports and its Port for import of raw

    Offices materials .

    6 .Marketing : Internal

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    1.Small Industries Service Institutes . [SISI]

    -- They enlist the units for participation under Central Govt stores purchase programme .

    -- Issue competenc y certificates to the unitsreceiving Govt orders .

    2.National Small Industries Corporation . [ NSIC]

    -- Secure contracts from the Director- General of Supplies and Disposals, R ailwa ys and Defence .

    3.State Small Industries Corporations: SSIC

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    -- secure orders from the state governments .

    4. Small Industries Service Institute: Export .-- render technical counselling for satisfactor y execution of export orders .

    -- disseminate information about the items havingexport markets .

    5.Chief Controller of Imports and Exports:-- issue license s for export of products to foreigncountries .

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    7. Incentives for SSI:

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    SIDO : Co-ordinates policies and programmes at the

    national level and provides extension services .

    State level: State Directories of Industries,

    SIDC, FC cater to the needs of Smallindustries, the needs include :land,shed, credit,power and raw materials etc .

    NSIC : Provides machines and equipments on hire- purchase .assist units to participate in the Trg. Progs .

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    IDEMI: Institute for the Design of ElectricalM i I M b i

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    Measuring Instruments, Mumbai .

    -- provides technical know how & Testing,-- calibration, training facilities for manufacturersof electrical measuring instruments .

    R ural Industries Projects [ R IP]Artisans Development Programme is covered b y

    this Projects .

    Enterprise Location .Enterprise Location .

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    Location Polic y:

    Other than cities of more than 1 million population there is no requirement for theapproval from the central govt, except the

    industries under compulsor y licensing .

    Any polluting industries should be located outside

    25 Kms .

    Factors Influencing Location of an Enterprise:

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    1.Selection of R egion

    2.Selection of Communit y

    3.Selection of Site

    4.Optimum selection of site .

    1.Selection of R egion

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    a) Availabilit y of raw materials

    b) Nearness to marketc) Availabilit y of power and fueld) Transporte) Suitabilit y of climatef ) Government polic yg) Competition among statesh) Metrological & Topograph y [Atmospheric

    phenomena, especiall y weather and weather conditions & landscape /geograph y]

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    4.Optimum selection of sitef

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    Optimum selection of industr y is based on the

    comparative economic surve y of the alternativesites in question .

    Financing small business .1 SIDB I

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    1.SIDB I

    Banks1.Commercial Banks2.RRB s [R egional R ural Banks]

    3.Co- operative banks

    State Level Others:1.SFC 1.N ABARD2.SIDCs 2 .NSIC3.SIICs[ State Industrial Investment Cor]4.SSI DCs

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    2.Medium Term Finance [ Period of 1 to 5 years]

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    Sources of financea) Issue of Debentures

    b)Loans from banks & other financial institutions

    c)Public deposits [ for existing concerns]d) Ploughing back of profits [for existing concerns]

    3.Long Term finance [5 years and above]S f fi

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    Sources of finance

    a)Issue of shares b)Issue of debenturesc)Loans from financial institutions

    d)Ploughing back of profits [for existing concerns] .

    Guidelines followed b y the banks:1 Th d b i i

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    1.The debt equit y ratio

    2.Turnover to net worth3.R eturn on capital emplo yed4.Net profit as a percentage of net worth

    5.Dividend paid to shareholders6.R atio of current assets to current liabilities .

    Assistance b y SFCs, SI DC & Commercial Banks .Fi i

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    -- of new projects in the S&M size categor y-- for modernization of S&M industries-- for rehabilitation of S&M industries

    -- of import of capital equipment .

    SIDB I: Services of SI DB I are,

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    2.Financing3.Development of Industries in the small- scale


    4.Co-ordinating the functions of institutions engagedin similar activities .

    5.R efinance

    6.Bills financing7.Project & equit y finance .

    Direct finance: through 38 offices providingschemes to specific target groups

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    schemes to specific target groups .

    Indirect finance: b y refinance and billsrediscounting through 894 primar y lendinginstitutions having 65, 000 outlets across thecountr y.

    Financial Assistance to Small- scale U nits:1 R l t th SS it g t d t

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    1. R upee loans to the SS units are granted at

    concessional rates of interest .

    2. Non commitment charge is levied on loans up

    to R s.5 lakhs to units in the small scale sector .

    3. Commitment charge at the rate of 1%is levied on

    all other loans after an initial grace period of 12months from the date of sanction .

    4.But, units located in categor y A backwardareas are totall y exempted from commitment

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    y pcharges on rupee loans .

    5. And units located in categor y B&C areas areeligible for 5 0% concession on the commitment

    charges .

    6.The SSI are allowed a debt- equit y ratioextending up to 2 .5. The promoters contributionnorm varies between 12.5% to 22 .50%,depending on the location of the project andstatus of the entrepreneurs .

    Credit Facilities to SSI:1 B anking s ystem provides mainl y working capital

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    1.B anking s ystem provides mainl y working capitaland SFCs provides investment capital .

    2. The credit provided b y banks to this sector wastreated as credit to Priorit y Sector .

    3. The commercial banks are required to lend 4 0% of their total loans of which 15 to 16% is

    required to be in the form of direct agriculturaladvances and the rest can be to the SSI andindirect agricultural loans etc .

    4.Assistance is provided to new units b y way of interest free loans to fill the shortfall inequit y

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    interest free loans to fill the shortfall inequit y.

    The loans are repa yable over a period of 5 to 7years after an initial moratorium period of 5 to 7


    Financial Assistance to Medium- Scale U nits:1 For medium scale units located in

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    1.For medium scale units located in

    backward areas 12.50% Non- backward areas 14% of interest .

    2.Commitment charges:A backward areas -- No commitment charges .B&C backward areas commitment charge at the rate of

    .5% per annum shall be levied after allowing the normal

    period of a grace of six months from the date of sanction .

    3.Non backward areas - 1% as commitment charges .

    Legal Framework for Small Business .f l

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    Ty pes of controls:1.Formal




    SSIs are regulated b y the following Acts .1.The Workmens compensation Act 1923

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    1.The Workmens compensation Act 1923

    2.The Trade U nions Act 1926

    3.The Pa yment of Wages Act 1936

    4.The Industrial Disputes Act 1947

    5.The Factories Act 1948

    6.The Shops and Commercial Estab . Act 1948

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    Others:1 The Industrial Development Regulations Act

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    1.The Industrial Development R egulations Act

    2. Indian Boiler Act3.Income Tax Act4.The central and State Sales Tax Act

    5. Drugs controls Act6.The companies Act .

    U nit : VII

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    1.Institutional assistance to Small ScaleIndustries .

    2.Women Entrepreneurship .

    3.Incentives and Facilities for Exporters of

    Small Scale Sector .

    Institutional Assistance to Small ScaleIndustries .

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    Institutional assistance to SSI b y way of;1.Promotional2.Financial

    3.Technical4.Marketing5.Training6. Others7.Associations .


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    a. DISG g.EC b. SIDO h .SDCc. SSIC i .NSIC

    d. SIIC j .NPCe. IDC k .IBSf . COI R BOA RD l. DIC

    2. Financial

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    LIC/ U TI SCIC[ shipping credit and Inv .com]SIDB I world bank HU DCO

    3.Technicala ITCO

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    e. Pollution control boardsf .The Technolog y Dev.and Information Compan y

    of India

    g.The Products and Process Development Centres .

    4. Marketinga.The Investment centres

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    b.EPCc.CB/ EH/ EICd.IIP

    e.STC of Indiad.Jute Corporation of Indiaf .Minerals and Metals Trading Corporation of India

    g.EXIM Bank of Indiah.The Indian Institute of Foreign Tradei.Export Credit Guarantee Corporation of India Ltd .

    5.Traininga.The Centre for Entrepreneurship Development

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    b.The Entrepreneurship Development Institute of India

    c.The Management Development Institute

    d.The Institute of Management

    e.Institute of Entrepreneurship Development

    f .The National Institute for Entrep &Small BusinessDev

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    g.Training of R ural Youth for Self- Emplo yment

    h.The Indian Institute of Entrepreneurship

    i.EDPs of SI DB I

    j.The National Institute of Fashion Technolog y.

    6.Associations:a.The National Alliance of Young Entrepreneur .

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    b.The Association of Women Entrepreneurs of Karnataka .

    c.The Coimbatore District Small IndustriesAssociation

    d.Industrial Associations

    e.Associated chambers of Commerce and Industr y of India .

    f .Federation of Associations of Small Industries of India

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    g.Federation of Tiny and Small Industries of India

    h.Federation of Micro and Small and Medium

    Enterprises .

    i.National Association of Software and Service

    Companies . j.Association of Lad y Entrepreneurs of AndhraPradesh .

    7.R esearch Institutions .a.The Central Manufacturing Technolog y Institute

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    g g y

    b.Automotive R esearch Association of India

    c.The Central Leather R esearch Institute

    d.The Council of Scientific and Industrial R esearch

    e.Process and Product Development Centre .

    Women Entrepreneurship:-- IDB I has provided under a special scheme,

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    p p ,

    refinancing at a concessional rate of 9 % a year, theceiling on the rate of interest on the loan being12.5%.

    -- IDB I extends 100% refinancing to SFCs in respectof proposals covered under the automaticrefinancing scheme and 85 % if the proposals comeunder the normal refinancing scheme .

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    Gove r nment s chemes fo r women empowe r ment [WomenEntrepreneurship in Small Scale Industries]

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    The government programme for women development beganas earl y as 1954 in India but the actual participation beganonly in 1974 . At present, the Government of India hasover 27 schemes for women operated b y differentdepartments and ministries . Some of these are:

    Integrated R ural Development Programme (I RD P)

    Training of R ural Youth for Self-Emplo yment ( TR YSEM )

    Prime Ministers R ojgar Yojana (PM R Y)

    Womens Development Corporation Scheme (W DCS )Working Womens Forum

    d h l

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    Indira Mahila YojanaIndira Mahila KendraMahila Samiti YojanaR ashtri ya Mahila Kosh

    Khadi and Village Industries CommissionIndira Pri yadarshini YojanaSIDB Is Mahila U dyam Nidhi Mahila Vikas NidhiSBIs Sree Shaki Scheme

    NGOs Credit Schemes National Banks for Agriculture and R ural Developments


    The experience in conducting E DPs for womenindicate that,

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    1.More time required to complete all legal and procedural formalities in view of the variousrestriction on their mobilit y.

    2.Discrimination was evident during theimplementation stage but less once the unitswere established .

    3.Women entrepreneurs had to face thediscouraging attitude of tradition bound traders .

    4.Women coming from families in industrial and business activities could achieve success faster

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    than most others .

    5.More married women in the age 3 0-45 were foundto be more reliable as their responsibilities towardstheir famil y were clearl y defined .

    6. All successful women entrepreneurs had strongfamil y support in the form of finance and businessknow-how .

    Incentives and Facilities to Exporters .1.D uty Drawback

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    2.Duty Exemption scheme

    3.Excise R ebate

    4.Marketing Development Assistance

    5.Suppl y of R aw Materials

    6.Export oriented U nits/ Export Processing Zone

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    7.Export Houses, Trading Houses and Star TradingHouses

    8. Export Promotion Capital Goods Scheme .

    9. Foreign Currenc y Accounts for Exporters .

    10.Other Benefits .

    1.D uty Drawback For a product exported from India, the manufacturer

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    would have paid duties as under,1. Import duties on raw materials and components

    imported and2. Excise dut y on the items manufactured in India

    The customs and Central Excise Duty Drawback R ules, 1971 provide for refund of such duties tothe exporter on the export being completed .

    For claiming the drawback, the exporter should filewith the customs the cop y of the shipping bill

    i hi 6 d f h ffi h

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    within 6o da ys after the customs officer at the port has given Let Export Order .

    2.Duty Exemption Scheme .The scheme enables the exporter to importmaterials without pa yment of customs dut y. The

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    materials without pa yment of customs dut y. The

    licence issued under this scheme is known asAdvanced Licence .

    The items allowed to be imported under these licenseare such as are to be used in the manufacturer of goods to be exported from India .

    After exports, the Duty Exemption EntitlementCertificate dul y completed b y the customs willhave to be surrendered to the licensing authorit y infulfillment of the export obligation imposed .

    3.Excise R ebate .Finished goods which are subject to excise dut y for

    home consumption are exempt from the dut y whe

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    home consumption are exempt from the dut y whethey are exported .

    1. Export under bond . U nder this method, theexporter has to execute a bond in favour of central

    Excise Authorities . 2. R efund of dut y. If the dut y is alread y paid, after

    export is made the exporter should make a claim

    with the central Excise authorities . Then the excisauthorities will arrange for the refund of the centraexcise .

    4.Marketing Development Assistance .The government OF India has instituted Marketing

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    Development Fund for providing grants in aidfor the development of markets for Indian products abroad .

    Schemes eligible for assiastance under the Fund are,a.Market surve y abroad

    b.Publications for issue within the countr y or abroad .

    c.Participation in exhibitions abroad .d.Setting up showrooms, warehouses .

    e. R esearch and Developmentf . Setting up of foreign offices .

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    5.Suppl y of R aw materials .U nits engaged in exports are given priorit y in the

    allotment of scarce raw materials such as steel . Incertain cases, the raw materials are arranged to besupplied at international process, much below theinternal prices .

    6. Export Oriented U nits/ Export Processing Zone .U nits undertaking to export their entire production

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    of goods ma y be set up under the Export OrientedU nits scheme . These units in engaged in service activities ma y be

    considered on merits .EPZ are free from domestic tariff area, where trade

    barriers applicable to the rest of the econom y donot appl y and where export oriented units canoperate free of import duties including Taxexemptions .

    Facilities for EPZ:1.Automatic approvals of proposals b y the

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    Development Commissioner on certainconditions .2.No licence required for import of capital goods,

    raw materials, spares etc .3.Duty free import of capital goods and equipments

    from preferred sources .4.Second hand capital goods allowed to be

    imported .

    5.Exemption from Central Excise Duty and other levies on products manufactured within the zone .

    l f f

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    6.Complete exemption from Income Tax on profitsfor a period of 5 years .

    7.Sub contacting part of job work to units in thedomestic market ma y be allowed .

    8. Assured power suppl y.9.Green card to units for getting facilities like

    Telephone, telex, cement, steel etx on priorit y basis .

    7. Export Houses, Trading Houses and Star TradingHouses .

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    -- a registered exporter is a person holding validregistration certificate issued b y an ExportPromotion Council, Commodit y Board for the

    purpose of export promotion .EH - 15 Cr TH - 75Cr STH - 300 Cr .-- SIL-- Foreign Currenc y A/cs

    8.Export Promotion Capital Goods Scheme .U nder the EPC G scheme, capital goods ma y be

    i d i l f d f

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    imported at a concessional rate of customs dut y of 25% of CIF value with an export obligation of 3times CIF value to be achieved within 4 years .

    9.Foreign Currenc y Accounts for Exporters .Exporters with a net foreign earnings pf R s.4 Cr and

    over during the preceding year ma y be permitted by RB to maintain foreign currenc y accounts in U Sdollars or pound with S BI,Public sector banks andforeign banks operating in India .

    10.Other Benefits .1.Exemption from sales Tax/ Income Tax

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    2. Training facilities in India and Abroad . 3.Availabilit y of concessional finance from banks

    and Exim bank .

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