Institutional Assistance for MSMEs : Central Government Institutions

 

Institutional Assistance for MSMEs 

1. Introduction

The institutional support system for entrepreneurship development in India has been designed at four levels, viz., 

(i) Central Government, 

(ii) State Government, 

(iii) Non- Government Support System, and 

(iv) District Industries Centres. 

Following sections outline brief description of the role of institutions each level.

2.  Central Government Institutions

The Government of India formulated the Micro, Small and Medium Enterprises Development Act, 2006 and established the National Board for Micro, Small and Medium Enterprises (NBMSME) and made rules there under in 2006. This Board examines the factors affecting promotion and development of MSMEs and reviews policies and programs related to these enterprises from time to time and makes recommendations to the Government in formulating policies for the growth of MSMEs. The Government of India also constituted the National Commission for Enterprises in the Unorganized Sector (NCEUS) to examine the problems of the enterprises in the unorganized/ informal sector. The Commission has made recommendations to provide technical, marketing and credit support to these enterprises. The support system designed by government is described below.

2.1 Small Scale Industries Board (SSIB)

SSIB was established in 1954 to provide effective coordination and inter-institutional linkages for the benefit of small-scale sector. It consists of the union industry minister, state industry minister, selected members of parliament, secretaries of department concerned, and eminent experts in the field.

2.2 National Bank for Agriculture and Rural Development (NABARD)

NABARD is designated as an apex development bank in the country. It was established in 1982 by a Special Act of the Parliament with a mandate to uplift rural India by facilitating credit flow in agriculture, cottage and village industries, handicrafts, and small-scale industries. It is also required to support non-farm sector while promoting other allied economic activities in rural areas. NABARD functions to promote sustainable rural development for attaining prosperity of rural areas in India. It is basically concerned with matters concerning policy, as well as planning and operations in the field of credit for agriculture and other economic activities in rural areas in India. It is worth noting with reference to NABARD that RBI has sold its own stake to the Government of India. Therefore, Government of India holds 99 percent stake in NABARD.

2.2.1 Role of NABARD: 

NABARD is an apex institution having power to deal with all matters concerning policy, planning as well as operations in giving credit to agriculture and other economic activities in the rural areas. It is a refinancing agency for those institutions that provide investment and production credit for promoting several developmental types of SSIs, industrial estates, etc. SIDO maintains a close liaison with government, financial institutions and other agencies which are involved in the promotion and development of small-scale units.

SIDO provides a comprehensive range of consultancy services and technical, managerial, economic, and marketing assistance to SSI units. Its network includes: 28 Small Industries Service Institutes (SISIs), 30 Branch of SISIs, 37 Extension Centres, 4 Regional Testing Centres, 1 Product and Process Development Centre, 3 Footwear Training Centres, 5 Production Centres, and 10 Field Testing Centres. All small-scale industries except those falling within the specialized boards and agencies like Khadi and Village Industries (KVI), Coir Boards, Central Silk Board, etc., fall under the purview of the SIDO.

2.3.1 Functions of SIDO: 

Functions of SIDO are classified into three categories, viz., 

1. Coordination, 
2. Industrial development, and 
3. Extension.

Functions relating to coordination include: 

1. to evolve a national policy for the development of small-scale industries, 
2. to co-ordinate the policies and programs of various State Governments,
3. to maintain a proper liaison with the related Central Ministries, Planning Commission, State Governments, Financial Institutions etc., and 
4. to co-ordinate the programs for the development of industrial estates.

Functions relating to industrial development are: 

1. to reserve items for production by small-scale industries, 
2. to collect data on consumer items imported and then, encourage the setting of industrial units to produce these items by giving coordinated assistance, 
3. to render required support for the development of ancillary units, and 
4.  to encourage small-scale industries to actively participate in Government Stores Purchase Program by giving them necessary guidance, market advice, and assistance.

The extension function of SIDO include: 

1. to make provision to technical services for improving technical process, production planning, selecting appropriate machinery, and preparing factory lay-out and design, 
2. to provide consultancy and training services to strengthen the competitive ability of small-scale industries. 
3.  to render marketing assistance to small-scale industries to effectively sell their products, and 
4.  to provide assistance in economic investigation and information to small- scale industries.

Consequent to the increased globalization of the Indian economy, small industries are required to face new challenges. The SIDO has recognized the changed environment and is currently focusing on providing support in the fields of credit, marketing, technology, and infrastructure to SSIs. Global trends and national developments have accentuated SIDO’s role as a catalyst of growth of small enterprises in the country.

2.3.2 Institutions and Centres administered by SIDO: 

SIDO has promoted following institutes and centres and is responsible for their management.

1. Small Industries Service Institutes (SISI): The Small Industries Service Institutes (SISIs) are set-up in capital of all the 28 states. These Institutes through their wide network provide consultancy and training service to small and prospective entrepreneurs. SISIs function under the Ministry of SSI, Government of India and provide services such as preparation of project reports, conducting training programs in different areas, extending technical assistance, and offering guidance on industrial policy of the government. These are pioneer organization to develop small scale industries through counselling, consultancy, and training. SISIs assist the industries in marketing the products and acquiring quality standards. They also provide various types of extension and assistance services in setting up of units, promoting and developing product and services by the small- scale industries.

Functions of SISI: The wide spectrum of tasks performed by SISIs includes technological, managerial, and administrative functions. The detailed functions of SISIs are:

• To assist new entrepreneurs in preparing project proposals, obtaining financial assistance, and exploring possibilities of expansion and diversification.
• To assist existing/ prospective entrepreneurs through technical and managerial counseling in selecting appropriate machinery and equipment, adoption of recognized standards of testing, quality performance etc.
• To conduct economic and technical surveys; and prepare techno-economic feasible reports for selected areas and industries.
• To give exposure to Small Scale Industries (SSIs) on market survey, product identification and selection, technologies involved, management of small enterprises on matters relating to financial, marketing, packaging, and exports.
• To conduct EDPs for several target groups, e.g., educated unemployed youth, ex-service personnel, new entrepreneurs etc. on issues related with establishment of new enterprise, material handling, new technologies, management technique, facilities/ assistance available from State/ Central govt. agencies, banks, financial institutions and NSIC, energy conservation, pollution control, quality improvement, etc.
• To advise the Central and State governments on policy matters relating to small industry development,
• To assist in testing of raw materials and products of Small-Scale Industries (SSIs), their inspection and quality control,
• To provide market information to the SISIs,
• To recommend SSIs for financial assistance from banks/ financial institutions,
• To enlist entrepreneurs for participation in Govt. stores purchase program,
• To identify the potential for ancillary development through sub-contract exchanges,
• To organize small entrepreneurs meets and interaction program for sharing experience of successful entrepreneurs.
• To organize seminars, workshops, and industries clinics for benefit of entrepreneurs.

B. Product-cum-Process Development Centres (PPDC): These centres have been promoted to provide specific service to different types of small-scale units situated in different locations. These are responsible for serving as research and development institutions in areas of dense industry clusters, encouraging product design and innovation, developing new processes and upgrading the existing level of technology, providing technical and managerial support services, and act as centres of excellence in respective areas.

C. Regional Training Centres (RTC): These centres are located in major cities and are responsible for conducting quality awareness program and assisting field testing stations developed to provide testing services to SSI units. These centres are primarily engaged in systematic testing and technical consultancy services.

D. Training Institutes: SIDO also controls the affairs of NISIET (Hyderabad), NIESBUD (New Delhi) and integrated training centre (Industries) at Nilokheri which are responsible for arranging training facilities to entrepreneurial trainers.

2.4 National Small Industries Corporation Ltd. (NSIC)

NSIC, an ISO 9000 certified company established in 1955 is working to fulfill its mission of promoting, aiding, and fostering the growth of SSIs and other small-scale services/ businesses in the country and abroad. It is promoting modernization, technology up- gradation, quality strengthening, establishing linkages with large and medium enterprises and enhancing export projects and products from small-scale enterprises. At present, the NSIC operates through 6 Zonal Offices, 26 Branch Offices, 15 Sub-offices, 5 Technical Services Centers, 3 Extension Centers and 2 Software Technology Parks. These are supported by a team of over 5000 professionals spread across the country. The international operations in Gulf and African countries are managed through its offices in Dubai and Johannesburg.

2.4.1 Functions of NSIC: 

NSIC provides wide range of services, predominantly promotional in nature to SSIs. Its main functions are to: 

1. Provide machinery on hire- purchase basis to SSIs, 
2. Provide equipment leasing facility, 
3. Help in export marketing of the products of SSIs, 
4. Participate in bulk purchase program of the Government, 
5. Develop prototype of machines & equipments to pass on to SSIs for commercial production, 
6. Distribute basic raw material among SSIs through raw material depots, 
7. Help in development and up-gradation of technology and implementation of modernization program of SSIs, 
8.  Impart training in various industrial trades, 
9. Set up SSIs in other developing countries on turn-key basis, and 
10. Undertake the construction of industrial estates.

2.4.2 Support Services: 

NSIC provides various support services related to marketing, credit, technology, and others.

1. Marketing Support: 

NSIC acts as a facilitator to promote small industries products and has devised several schemes to support SSIs. in their marketing efforts, both in and outside the country. These include:

• Consortia and Tender Marketing: NSIC forms consortia of units manufacturing the same products; thereby easing out marketing problems of SSIs. NSIC explores the market and

secures orders for bulk quantities. These orders are then distributed to small units in tune with their production capacity.

• Single Point Registration for Government Purchase: 

NSIC operates a Single Point Registration Scheme under the Government Purchase Program, wherein the registered SSI units get purchase preference in Government Purchase Program, exemption from payment of Earnest Money Deposit etc. The units registered under this scheme get several facilities, such as 

1. Issue of tender sets free of cost 
2. Advance intimation of tenders issued by DGS&D
3. Exemption from payment of earnest money
4. Waiver of security deposit up to the monetary limit for which the unit registered, and
5. Issue of competency certificate in case the value of an order exceeds the monetary limit, after due verification.

• Exhibitions and Technology Fairs: To showcase the competencies of Indian SSIs and to capture market opportunities, NSIC participates in select International and National Exhibitions and Trade Fairs every year. NSIC facilitates the participation of the small enterprises by providing concessions in rental, etc. Participation in these events exposes SSI units to international practices and enhances their business skills.

• Buyer-Seller Meets: Bulk and departmental buyers such as the Railways, Defence, Communication departments and large companies are invited to participate in buyer- seller meets to enrich SSI units’ knowledge regarding terms and conditions, quality standards, etc. required by the buyer.

• Export of Products and Projects: NSIC is a recognized export house and exporting products and projects of small industries of India to other countries. The major areas of operation are 

1. Exports of products such as handicrafts, leather items, hand tools, pipes/ fittings, builders’ hardware etc. 
2. Supply of small industry products on turnkey basis.

(b) Credit Support: 

NSIC provides credit support to SSIs through strategic alliance with Commercial Banks or Syndicate of Banks.

• Assistance in Equipment Financing: Help in getting loan for equipment and machinery.

• Tie-up with Commercial Banks: It arranges term loans and working capital finance to SSIs. The SSIs accredited under Performance and Credit Rating Scheme of NSIC have
  better chance of getting credit from banks at liberal rates.
• Short-Term Financing for Procurement of Raw Material: NSIC helps SSIs in arranging and financing Raw Material (indigenous and imported). The scheme envisages 

1. Financial assistance for procurement of raw materials up to 90 days 
2. Arrangement of Bulk purchase of raw materials at competitive rates 
3. Help in import of scarce raw materials, and 
4. Assistance in import documentation and letter of credit.

• Financing of Marketing Activities: Both Internal Marketing and Exports through 

1. Bill discounting 
2. Factoring, and 
3. Pre/ Post Shipment finance. 

(c) Technology Support: 

Advise on application of new techniques.

• Material testing facilities through accredited laboratories.
• Product design including CAD.
• Support facility in machining, EDM, CNC, DNC etc.
• Energy and environment services.
• Classroom and practical training for skill up-gradation.

(d) Other Support Services: 

NSIC offers some support services through its Technical Services Centers and Extension Centers. These include: 

1. Info-mediary Services, 
2. Software Technology Parks, 
3. Science and Technology Park/ Technology Business Incubators, and 
4. International Cooperation

• Info-mediary Services: NSIC provides Info-mediary services to SSI s, broadly through its website, www.nsic.co.in and also through its sector specific portals for disseminating focused information. This information consists of 

(i) Supplier database, 

(ii) Market intelligence, 

(iii) Technology providers, 

(iv) Information providers, 

(v) Linkages with relevant institutions, 

(vi) E to E services, and 

(vii) E to B services.

• Software Technology Parks: NSIC Software Technology Parks (STPs) facilitate small industries in setting up 100% export-oriented units for software exports. They also act as nodal point to activate software exports directly through NSIC. These STPs extend support in terms of the requisite infrastructure to the SSIs to start business operations with a minimum lead time.

• The scheme is governed by regulations of the Ministry of Information Technology, Government of India. NSIC established the first STP in Okhla, New Delhi in 1995 and second in Chennai in 2001.

• Science & Technology Park/Technology Business Incubators: The fostering and developing emerging technological and knowledge-based entrepreneurial ideas in a supportive environment before they become attractive for commercial investments requires incubation centers.

• To fulfill the need, NSIC has set-up a Science and Technology Entrepreneur’s Park for general engineering and also the IT incubator at Rajkot in association with Department of Science and Technology (DST), Government of India.

• International Cooperation: NSIC facilitates enterprise to enterprise/ regional cooperation, sharing best practices and experiences with other developing countries and sustainable international partnerships. This facilitates: (i) exchange of business/technology mission with various countries, (ii) exploration of new markets and areas of cooperation, (iii) identification of new markets for boosting export by participating in sector-specific exhibitions all over the world, (iv) experience Indian experiences with other developing countries.

2.4.3 Technical Service Centres (TSCs): 

NSIC has established TSCs which operate in different parts of the country and provide diverse technical support to the small-scale sector. Some of these centres are as follows.

1. Entrepreneurship Development Institute of India (EDII): Entrepreneurship development and training is one of the key elements for the promotion of micro, small and medium enterprises, especially for creation of new enterprises. To inculcate the entrepreneurial culture amongst the first generation of entrepreneurs on a regular basis, the Ministry has set up three national entrepreneurship development institutes namely: 

1. National Institute for Micro, Small and Medium Enterprises (NI-MSME) at Hyderabad, 
2. National Institute for Entrepreneurship and Small Business Development (NIESBUD) at Noida (Uttar Pradesh), and 
3. Indian Institute of Entrepreneurship (IIE) at Guwahati, as autonomous societies. These institutes are engaged in developing training modules; undertaking research & training; and providing consultancy services for entrepreneurship development and promotion of MSMEs, including enhancement of their competitiveness.

• National Institute for Micro, Small and Medium Enterprises (NI-MSME): 

The National Institute of Micro, Small and Medium Enterprises was established with the mission of promoting the growth and development of MSMEs through services in the areas of policy, entrepreneurship, technology, information, education, management, and extension. NI-MSME has designed specialized and need-based programs, workshops, and seminars in tune with the current developments in policy and the economy. NI- MSME has been providing unstinted support, in terms of offering services like research, consultancy, information, training and extension not only to enterprises but also to concerned developmental agencies.

• National Institute for Entrepreneurship and Small Business Development (NIESBUD): 

NIESBUD is an apex body established by Ministry of Micro, Small & Medium Enterprises, Government of India for coordinating, training and overseeing the activities of various institutions/ agencies engaged in entrepreneurship development particularly in the area of small industry and small business. Its main activities are to evolve effective training strategies and methodology, standardizing model syllabi for training various target groups, formulating scientific selection procedure, developing training aids, manuals, and tools, facilitating, and supporting Central/ State/ Other agencies in organizing entrepreneurship development programs, conducting training programs for promoters, trainers and entrepreneurs, and undertaking research and exchange experiences globally.

• Indian Institute of Entrepreneurship (IIE): 

The Indian Institute of Entrepreneurship (IIE) was established in the year 1993 in Guwahati by the erstwhile Ministry of Industry (now the Ministry of Micro, Small and Medium Enterprises), Government of India as an autonomous national institute with an aim to undertake training, research and consultancy activities in small and micro enterprises focusing on entrepreneurship development. The main objectives of the institute are: 

1. to organize and conduct training for entrepreneurship development, 
2. to evolve strategies & methodologies for different target groups and locations, and conduct field testing, and 
3. to identify training needs and offer training programs to government and non-government organizations engaged in promoting and supporting entrepreneurship.

B.Credit Rating Scheme for Small Industries: 

NSIC, by providing performance and credit rating scheme enables small enterprises to ascertain the strengths and weaknesses of their existing operations and take corrective measures to enhance their organizational strength. The scheme is operated through empaneled agencies like CARE, CRISIL, ICRA ONICRA and SMERA. SSIs have the liberty to choose among any of the rating agencies empaneled with NSIC. Rating agencies charge the credit rating fee from SSIs according to their policies. 75 percent of the credit rating fee, subject to a maximum of Rs. 25,000, Rs. 30,000 and Rs. 40,000 is reimbursed by way of grant to SSIs having a turnover up to Rs. 50 lakh, Rs. 50 lakh to Rs. 200 lakh and above Rs. 200 lakh respectively. The key benefits of the scheme are 

1. It improves the market image of SSIs in domestic and international markets, 
2. It provides Independent and trusted third party opinion on capabilities and credit worthiness of SSIs facilitate prompt credit decisions from banks on loan proposals of SSIs, 
3. The accredited SSIs get benefit from commercial banks.

2.5 Small Industries Development Bank of India (SIDBI)

SIDBI, a Subsidiary of IDBI and was setup as an act of parliament for ensuring larger flow of financial and non-financial assistance to the small-scale sector. It has taken over the outstanding portfolio of the IDBI relating to the small-scale sector for promotion, financing, and development of the SSI sector and for coordinating the activities of other institutions. It is the principal financial institution for the promotion, financing, and development of industries in the small, tiny and cottage sectors and for coordinating the functions of the institutions engaged in similar activities.

SIDBI has devised tailor-made schemes for direct lending to small scale sector so as to supplement the efforts of Primary Lending Institutions, which includes: 

1. State Financial Corporation’s (SFCs), 
2. State Industrial Development Corporations (SIDCs), 
3. Scheduled Commercial Banks (SCBs) both in the public and the private sector, 
4. State Cooperative Banks, 
5. Scheduled Urban Cooperative Banks, 
6. Regional Rural Banks, and 
7. SIDBI – Venture Capital Ltd. 

It has encouraged the growth of the venture capital industry for hi-tech SME units in India by promoting 13 state/ regional level funds and setting up an all-India Venture Fund. It provides assistance for 

(i) setting up of new SSI units, small hotels, hospitals and so on, 

(ii) technological up gradation and modernization, expansion and diversification, 

(iii) quality up gradation, 

(iv) development of markets, 

(v) development of infrastructure, and 

(vi) discounting of bills of manufacturer-seller in selling either equipments, or components.

Over the years SIDBI has striven to fulfill the role enshrined in its charter by formulating and reorienting its policies, gearing up operations and enlarging the profile of its promotional and developmental activities aimed at facilitating entrepreneurial entry and strengthening the small-scale sector to enable them to meet the emerging challenges. From being a mere traditional refinancing institution, it has emerged stronger in meeting the varied requirements of the SSI sector by exploring new areas and seeding option for the future growth, like launching new financial products and instruments and support service programs.

2.6 Indian Investment Centre (IIC)

IIC, a government organization enjoys nearly more than three decades of rich understanding in investment promotion. It is the body which is to be contacted first for investment and is a single window agency for bona fide information or any assistance that may be required for investments, technical collaborations, and joint ventures. All the services provided by the Indian Investment Centre are free of charge. IIC is a body known to generate wider knowledge about conditions, laws, policies, procedures and incentives pertaining to investment and the infrastructural facilities available, and of investment opportunities in India. It functions as a single reference point for foreign investment projects and aids Indian and foreign entrepreneurs in meeting the procedural requirements of project approvals. It also aids them in overcoming bottlenecks, if any, in the process for implementation of the project.

IIC advises foreign investors on setting up industrial projects in India; it provides them information regarding investment environment and opportunities. It also apprises the investors about Government, industrial and foreign investment policies, facilities and incentives, and taxation laws, and assists them in identifying collaborators in India. It undertakes promotional work and guides entrepreneurs abroad via diplomatic officers in the external affairs office and other relevant organizations. Overseas the government body of IIC assists Indian companies in discovering source of capital and technology, hence facilitating foreign collaborations.

IIC is the main organization responsible for promoting investment in India by Non- Resident Indians (NRIs) and Overseas Corporate Bodies with NRI holdings, providing them lead services. It acts as a sole agency for projects with NRI investment and provides all the necessary services for setting up such projects. IIC apprises government policies, procedures, services, and inducements available to foreign investors. It provides necessary data for selection of projects to NRIs and Overseas Corporate bodies and helps them in obtaining the approval of the Government authorities. It stands on the State Level Review Committees, which monitors the execution of the projects and thus helps them in removing complicatedness, if any, in the process of implementation.

2.7 National Board for Micro, Small and Medium Enterprises (NBMSME)

In pursuance of the MSME Development Act 2006, the National Board for Micro, Small & Medium Enterprises consisting of a total of 47 members was constituted. The 20 non- official members on the Board represent industry associations of MSMEs from all over the country while the other 27 members comprise Members of Parliament, Ministers of six State Governments, representatives of RBI, Banks etc. The main purpose of the board is 

(i) to solve various issues relating to development of MSMEs, and 

(ii) to come out with remedial measures which are undertaken in consultation with the concerned departments/ agencies.

2.8 Khadi and Village Industries Commission (KVIC)

KVIC, established under the Khadi and Village Industries Commission Act, 1956, is a statutory organization engaged in promotion and development of khadi and village industries for providing employment opportunities in rural areas, thereby strengthening the rural economy. Main objectives of its formation are: 

(i) The KVIC has been identified as one of the major organizations in the decentralized sector for generating sustainable rural non-farm employment opportunities at low per capita investment, 

(ii) It helps in checking migration of rural population to urban areas in search of employment opportunities, 

(iii) New reform programs are undertaken which aim at revitalizing the khadi sector for enhanced sustainability of khadi; increasing incomes for spinners and weavers; increasing employment; enhancing artisan’s welfare and gradually enabling khadi institutions to stand on their own feet.

2.9 Mahatma Gandhi Institute for Rural Industrialization (MGIRI)

To strengthen the R&D activities in khadi and village industry sectors, a national level institute namely MGIRI was established at Wardha, Maharashtra in association with IIT, Delhi by revamping the erstwhile Jamna Lal Bajaj Central Research Institute. The objective of MGIRI is to strengthen the R&D activities in khadi and village industry sectors. The main functions of the Institute are to improve the R&D activities under rural industrial sector through encouraging research, extension of R&D, quality control, training and dissemination of technology related information.

2.10 Coir Board

The Coir Board is a statutory body established under the Coir Industry Act, 1953 for promoting overall development of the coir industry and improving the living conditions of the workers engaged in this traditional industry. The activities of the board for development of coir industries include: 

1. undertaking scientific, technological and economic research and development activities, 
2. developing new products & designs and marketing of coir and coir products in India and abroad, 
3. promoting cooperative organizations among producers of husks, coir fibre, coir yarn and manufacturers of coir products; ensuring remunerative returns to producers and manufacturers, and
4. promoting two research institutes namely, Central Coir Research Institute (CCRI), Kalavoor, Alleppey, and the Central Institute of Coir Technology (CICT), Bengaluru for undertaking research activities on different aspects of coir industry, which is one of the major agro-based rural industries in the country.

2.11 National Institute for Small Industry Extension Training (NISIET)

NISIET is an autonomous body of the Ministry of Small-Scale Industries (SSI). Since inception in 1960, it has taken gigantic strides to become the premier institution for promotion, development, and modernization of the SME sector. The Institute strives to achieve its objectives through a gamut of operations ranging from training, consultancy, research and education to extension and information services.