entrepreneur development project

7/29/2019 Entrepreneur Development Project

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Over the years India has worked on beneficial strategies and incorporated technology resulting in

the emergence of efficient marketing organization and distribution centers, thus seeing a shift

from the inadequacy of these forms. In a developing country, its economy can be greatly

expanded improved and diversified by efficient marketing organizations, manned by expert

personnel. Small industries need them more. if their share in domestic governments and foreign

markets is to be secured and expanded, the small entrepreneur should develop a new attitude and

assist in the process of building up powerful and prosperous marketing organizations.

Internal marketing

In this field, the NSIC had undertaken the marketing of some products tapioca starch, hand-

made paper and hosiery items. By organizing and co-coordinating the productive efforts of a

consortium of hosiery manufacturers, the sale of ISI-marked hosiery products has been

encouraged. Under its future program, the NSIC intends:

(a)To cover domestic appliances, hand tools, malleable castings, light engineering products,soap;

(b)To provide marketing intelligence within the country and abroad for the benefit of thesmall-scale sector;

(c)To assist small scale units in their survey markets and marketing research;(d)To provide the necessary technological inputs in developing and standardizing products

in the small scale sector

(e)To establish raw material banks to meet the requirements of the small scale sector inferrous and non-ferrous raw materials.

Trade Centers

The government of India has established trade centers to cater the needs of units in the small

scale sector.

These trade centers provide an integrated market system for small industries; they collect

and disseminate information relating to all types of small-scale industries in the region, giving

full details of product, capacities and prices. They provide a focal point for buyers and sellers

who have the required supplementary service for trade centers and transactions, between small-

scale industries and the buyers of their products, including large-scale manufacturers, importersand merchant exporters , export houses, purchasing organizations and consumers in general. A

library function as an agency for contracts between small-scale units and prospective buyers in

the country and abroad. Moreover, they assist the small units in maintenance of quality control

and introduction of standardization. About 50% of the total recurring and non-recurring

expenditure on equipment, stores, library and documentation, etc, for these centers was met by


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the central government (excluding the cost of buildings and land), subject to a maximum amount

of Rs. 200,000 per year for a period of five years.

The need for setting up trade centers for small scale industries was keenly felt of their

phenomenal growth and because of the fact that they manufactured a wide variety of products

from simple consumer goods to capital goods to other sophisticated items, such as machine tools,television sets, scientific equipment, automobile ancillaries, drugs and pharmaceuticals, etc. But

if the small-scale sector is very important, it is also very vulnerable, so far as its marketing

capacity is concerned. It is essential, therefore, that the products of small units should become

competitive and should be able to contribute in a large measure to the industrial output.

Small scale industrialists cannot organize sales and market promotion activities on their own;

they cannot display their products; they cannot spend much on advertising and publicity market

research etc. because their resources are limited and they are handicapped in their exports know-

how and trade contacts. Buyers in India and abroad, on the other hands are not aware of the

quality, specifications and range of the products manufactured by the small scale industry. Thesetting of trade centers in the different parts of the country has therefore considerably filled up

the information and communication gap between small manufacturers, consumers and buyers.

Exports

Responding to the wide spread belief that the small industrial sector has not been marking a

proportional contribution to the overall export earning of the country, the NSIC has set up an

Export Department to encourage the export of small industry products, Because of their small

size and lack of resources and the effort the small industrialists do not have an easy access to

world markets, Very often, they are unable to infuse confidence in foreign buyers. The NSIC

aims in fulfilling this need by functioning as an export house. Following the latest in marketing

concepts, the corporation justifies demand abroad for labor intensive products. It collects

intelligence about specifications, prices etc. It locates small industries in the countries with the

required production facilities and helps such units to make dyes, tools, counter-samples, small

units and takes the entire responsibility for the execution of the contract. It helps small industry

products like hand tools, fasteners, casting etc., from some of the most sophisticated markets in

the worldfrom the USA, West Germany and Canada.

Export Incentives

The government has offered special initiatives to encourage export of the products of the small-

scale sector by minimum export performance limits for the grant of export house certificates

have been lowered for small scale manufacturers and their consortiums. The government has also


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made arrangements to educate the small-scale about the export prospects of different products

abroad, by collecting information from various sources and disseminate among them. Someof the

important sources of information are the reports prepared by the Trade Development Authority,

the IIFT, the Export Promotion Councils and Directorate General of Commercial Intelligence

Statistic. Periodical reports from Indian mission abroad are confused for the purpose of

indentifying export opportunities for small-scale industries or taking note of the development

affecting such opportunities in foreign countries.

Export Promotion Councils (EPCs)

There are at present eleven Export Promotion Councils in India. The EPCs perform both

advisory and excess functions.

Indian Institute of Foreign Trade (IIFT)

The IIFT was established in 1964 by the Government of India with the objective of strengthening

the countrys external trade sector through development of human resources; generating,

analyzing and disseminating data and conducting research and providing consultancy services.

The IIFT is engaged in the following activities:

(i) Training of personnel in modern techniques of international trade;(ii) Organization of research, area surveys, commodity surveys, market surveys; and(iii) Dissemination of information arising from its activities relating to research and

market studies

Commodity Boards

The five statuary commodity boards of Rubber, Coffee, Tea, Tobacco and Spices are responsible

for product development and export.

Export Inspection Council (EIC)

The EIC, a statutory body, is responsible for enforcement of quality control and Pre-shipment

inspecting various exportable commodities.

Indian Institute of Packaging (IIP)


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The main aims of Institute of Packaging are to undertake research into raw materials for the

packaging industry develops new types for export products, to organize programs on packaging

technology and to stimulate consciousness of the need for good packaging.

India Trade Promotion Organization (ITPO)

It has come into effect form Jan 1, 1992 with the main objective of promoting exports and

imports and upgradation of technology, through the medium of fairs to be held in India and

abroad, to undertake publicity through the print and electronic media, to assist Indian companies

in product development, to organize export development programs, buyer seller meets, contact

promotion programs and integrated marketing programs.

Export Credit Guarantee Corporation of India Ltd.

The prime objective of ECGC is to support the countrys export by providing a range of

insurance cover to the Indian Exporters against the risk of non-realization of export procedure to

political or commercial reasons and guarantees to financial institutions to facilitate grant of credit

facilities to exporters on a liberal basis.

It provides (a) a range of insurance covers to the Indian exporters against the risk of non-

realization of export proceeds due to commercial or political causes and (b) different types of

guarantees to banks and other financial institutions to enable them to extend credit facilities to

exporters on liberal basis.

Export Processing Zones

The export processing zones set up as enclaves, sepearted from the Domestic Tariff area by fiscal

barriers, are extended to provide an internationally competitive duty free environment for export

production, at a low cost. This enables the products of EPZs to be competitive, both quality wise

and price-wise, in the international market. India has seven Export processing zones at Kandla

(Gujarat), Santa Cruz- Mumbai, Falta West Bengal, Noida- UP, Cochin- Kerala and Vizag

AP. The one at Vishakhapatnam has become operational only recently.

The Santa Cruz Electronics Export Processing Zone (SEEPZ) is meant exclusively for export of

electronics and jewellery items whereas the other zones are multiproduct zones.

Export Oriented Units

The EOU Scheme was introduced in early 1981, is complementary to the EPZ scheme. It adopts

the same production time but offers a wide option in locations wih reference to factors like

source of raw materials, ports of export, inter land facilities, availability of technological skills,

existence of an industrial base and the need for a larger area of land for the project. As on

31.12.2006, 2168 units were in operation under the EOU Scheme.


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Export Promotion Industrial Park Scheme (EPIPS)

A centrally sponsored Export Promotion Industrial Park (EPIP) Scheme has been introduced in

August 1994 with a view to involving the State Governments in the creation of infrastructuralfacilities for export-oriented production. The Scheme provides that 75% of the capital

expenditure incurred towards creation of such facilities, ordinarily limited to Rs. 10 crores in

each case, will be met from a central grant to the state governments. In addition a maintenance

grant equivalent to 2% of export turnover of each unit established therin will also be made

available State Government for a period of 5 years from the date of commercial production of

that unit.

The central Govt. have so far approved 18 proposals for establishments of EPIPs in the

states of Punjab, Himachal Pradesh, Rajasthan, Karnataka, Kerala, Maharashtra, Tamil Nadu,

Andhra Pradesh, Uttar Pradesh, Bihar, J&K, Assam, Madhya Pradesh, Orissa and Meghalaya.

Export Houses, Trading Houses and Star Trading Houses

The objective of the Scheme of Export houses, Trading Houses and Star Trading Houses is to

give recognition to the established exporters and large Export houses to build up the marketing

infrastructure and expertise requires export promotion. The registered exporters having a record

of export performance over a number of years are the status of Export/Trading Houses/star

trading houses/super star houses subject o the fulfillment of minimum annual average export

performance in terms of FOB value or net foreign exchange earnings on exports prescribed in theEXIM policy.

The Export houses, Trading Houses, Star trading Houses and Super Star Trading Houses

Scheme allot Registered Exporters certain additional benefits available to them under the policy.

Jute Corporation of India

The jute corporation was established on 2nd April, 1971 as a wholly owned limited company of

the Government of India. The main functions of the corporation are:

(i) Export and import of raw jute(ii) Internal marketing of jute(iii) Undertaking measures for the export promotion of jute goods

The objectives of JCI are to ensure the minimum prices of raw jute; to conduct commercial

operations in a just manner; to import and export jute fiber as authorized by the Government; to


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process raw jute and export jute goods, undertake export promotion measures for jute goods. It

also aims at maintaining stability of jute production and price.

State Trading Corporation of India (STC)

The STC was setup in May 1956 as an autonomous corporation to implement the Government

policies in regard to the promotion and diversification of FT. The principle objectives of the STC

are:

(i) To explore new markets for existing as well as new products;(ii) To diversify and consequently increase Indias export trade;(iii) To promote long term export operations and sale of difficult to sell items.

The corporations major export items are semi-processed leather, castor oil, art silk fabrics, rice,

jute goods. With the pace of canalization of Indias foreign trade gathering momentum, the share

of STS in Indias trade increased substantially in recent years.

The corporation deals in agricultural products, chemicals and fats, leather goods, textiles and

marketing.

The business activities turn over and profitability of STC have grown manifold in the recent

years as a result focused thrust on diversification and innovation.

In addition the STC has setup four subsidiaries

(a) The Projects And Equipment CorporationThe PEC was formed on 21st April, 1971, and has taken over the railway equipment and

engineering division from the STC

This corporation was formed to promote more intensively the export of non-traditional

sophisticated engineering and railway equipment. In addition to this, it specializes in large

scale joint ventures and turnkey project opportunities in most developing countries, the

corporation is expected to play a very important role in developing the exports of Indian

Engineering goods and technical knowhow on a continual basis.

The PEC plans to concentrate on undertaking turnkey projects and large-scale ventures. These

vary from the construction of new railway lines of the putting up of complete industrial plants

on an integrated basis, from the initial project report stage to that of final commissioning.

(b) Handicrafts and Handlooms Exports Corporation of India


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The HHEC came into existence in Oct 1962 as a subsidiary of the STC, with the merger of the

Indian Handicrafts Development Corporation and Handloom Export Organization, a

department of the STC with main objective to develop new markets and expand traditional

ones, thus supplementing and aiding the existing private sector trade in handicrafts and

handlooms.

With a view to projecting the image of Indian handicrafts and handlooms in International

markets, the corporation has opened showrooms known as Sona of India in New York,

Tokyo, Paris and Nairobi, and also at the Akbar Hotel in New Delhi. A carpet warehousing

depot was set up in Hamburg in July 1965.

The HHEC undertakes the export of handicrafts, handilooms, ready to wear garments and

canalized export of woolen knit wear. Product development is one of the main activities of

HHEC. In its attempts to increase overseas sales of its products, it has secured the help of many

popular designers in different countriesFrance, Japan, Italy and the UK.

The HHEC also conducts consumer preference surveys abroad and introduces new products

which products project the excellent craftsmanship of India, helps the trade by means of advice

and market exposure: participates in trade fairs and exhibitions abroad.

(c) The Cashew Corporations Of India LtdThe Government of India setup the Cashew Corporation of India CCT on 19th August 1970 as

a wholly-owned subsidiary of then STC to stabilize the import trade in raw cashew. The import

on raw cashew, handled under the Open General License, was canalized through the cashew

corporation with effect from 1st September 1970. The CCI has floated a joint stock company to

raise cashew plantations.

The subsidiaries assist the parent Corporation in furthering the main objectives of export

promotion.

The Minerals and Metals Trading Corporations of India (MMTC)

The MMTC was established on 1st October to broaden and enlarge the scope of exports of Indian

minerals and ores and to arrange for the import of essential raw materials for distribution ofindustrial units in the country. Iron ore, fifth largest Foreign exchange earner in the country, is

the principal item of the export handled by the MTC. The other items of export handled by it are

manganese ore , ferro manganese, coal, silimanite, ferro silicon and ferro chrome.


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Beside Japan, which still counts for more than 65% of MMTCs exports, several other markets

have been cultivated. It is sought to secure continuous export by entering into long term contracts

with importing countries.

Tea Trading Corporation of India (TTCI)

TTCI was established in 1971 to create a stable export market for India partnership in value

added forms, which include packet tea, tea bag, instant tea etc. Other activities of this

corporation is marketing of Tea for domestic consumption, management of tea establishment. It

has been a subsidiary of STC since Jan 1986.

The spices trading corporation limited (STCL)

STCL formerly known as cardamom trading corporation limited was established in October 1982

and commenced its trading activities in September 1983. The corporation was set up to cary on

domestic and international trade in spices and their products .

PROMOTIONAL ACTIVITES :

The Small Industries Development Organisation (SIDO), through its network of Small

Industries Service Institutes and Extension Centres, provides techno-managerial assistance

and extension services for promotion of the export of the products of these industries.The SIDO intensified its activities relating to the dissemination of information on foreign

markets to export-worthy small scale units; provided on consultancy services in all

matters of export procedure to facilities the disposal of replenishment, claims, drawbacks

and other incentives; on export prices; on the identification of small scale units already

possessing the necessary equipment and skills to undertake the production of items

having an export potential; on the organization of training programmes on export

marketing; and on maintaining of liaison with the concerned agencies. Training

programmes on export packaging too, were organized by some of the Small Industries

Services Institutes in collaboration with the Indian Institutes of packaging.

A quarterly Small Industry Export Bulletin which covers the important areas of

interest to exporters, continued to be brought out by the SIDO.. It contains useful

information in export marketing, government policy announcements and the procedures

relating to small industry exports, abstracts of market / commodity report prepared by such

professional agencies as the Indian Institutes of Foreign Trade and Trade Development

Authority etc., The Export Promotion Division has started another features in the form of


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Trade Enquiry Service Bulletin, in which the names and address of overseas buyers,

importer and importing organization are provided.

SIDO also dealt with the special problems of small scale exporting units, especially

in regards to import entitlement, cash assistance, duty drawbacks etc., and took them with

up authorities concerned.

In order to encourage the formation of export consortia of small scale units, a scheme

for financial assistance to them in the initial years of their formation was formulated and

submitted to the Ministry of Industry. under the scheme, the export consortia of small

scale units would be provided financial assistance during 3 to 4 years till they are are

able to develop themselves into full fledged export houses.

CO-OPERATION WITH OTHER ORGANISATION :

The SIDO actively collaboration with other Central and State institution in their export

promotion efforts, especially for small scale industries. The SISIs prepared techno-

managerial reports on export worthy small scale units, and collaboration with State Small

Industries Corporations, Export Promotion councils, National

Productivity Council and association of small industries in organizing seminars training

programmes etc.,

Under the scheme of Export Awards of the Ministry of Commerce, the Development

commissioner has been designated as a sponsoring authority for small scale units. The

SIDO through its network of SISIs, therefore invited applications from various small scale

units and recommended suitable exporting units for the Awards.

STATE SMALL INDUSTRIES CORPORATIONS :

Some of the State Small Industries Corporation have in recent years, shown interest in

export promotion activities. These corporations were actively associated with the various

programme of export promotion organized by the SISIs.

Export House and Turn key projects : The NSIC, a recognized export house has been

pushing up export of such small industry products as hardware, locks and machine tools

etc., Goods worth more than Rs 2 cores have been exported to such countries as the

UK, USA and countries in Middle East. The NSIC has supplied complete plant andmachinery for 32 turn key projects for 62 small scale units in Tanzania against the IDBI

credit line of Rs 20 million. This has evoked interest for similar projects from other

countries, viz., Nigeria, Maurities, Uganda and Yemen. The corporation also considered

proposals to assist Tanzania and Indonesia in setting up industrial estates for small scale

units.


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RESPONSIBILITIES OF MANAGEMENT :

The general responsibilities of the general management are to established marketing

objectives, to make policy decisions and communicates these decision to the manager of

the operating or implementing division of the company to establish standards for

measuring and guiding the overall performance of the company. The responsibilities ofoperational or line management are to plan programmes, methods and procedures and

implement the decision necessary to achieve the stated objective; to organize and co

ordinates the activites and resources necessary to carry out the programmes and to see

that operating result conforms as nearly as possible to agreed plans and standards of

performance.

GLOBAL AND REGIONAL TRADE ARRANGEMENTS

WORLD TRADE ORGANIZATION :

The WTO, established in 1 January 1995, as the successor to the General Agreements on

Tariffs and Trade (GATT) serves as the legal and institutional foundation of the

multilateral trading system.

The Uruguay Round Trade Agreement that created the WTO also eliminated tariffs for

some manufactured goods and reduced other tariffs reduced barriers to trade inagricultures; expanded protection for copy rights, patents and other intellectual property;

and provided some reduction in barriers to services and foreign investment. It also

reformed the multilateral trade process itself, including the introduction of a stronger

dispute settlement mechanism.

The WTO has 123 members and 31 governments have applied to join.

NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)

NAFTA which built on the 1989 U.S.Canada Free Trade Agreement, went into force 1

January 1994, phasing out tariffs on trade between United States, Canada and Mexico

over 15 years side agreements required each country to enforce its own labour and

environmental laws.


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U.S trade with Canada and Mexico increased 29% in the first two years of NAFTA.

Failing for three years to get abroad fast track authority from congress to negotiate any

trade agreements, the Clinton Administration is grappling with a strategic decision

whether to request fast track authority solely for negotiating accession to NAFTA by

Chile.

ASIA PACIFIC ECONOMIC COOPERATION (APEC)

Formed in 1989 as an informal dialogue group with limited participation, APEC has

become a forum for negotiations to achieve the goal of freer trade and investment in the

Asia Pacific Regionby 2010 for industrialized economies and by 2020 for developing

economies.

APEC has 18 members : Australia, Brunei, Canada, Chile, Hong Kong, Indonesia, Japan,

South Korea, Malaysia, Mexico, New Zealand, Papua, New Guinea, Philipines, Singapore,

Taiwan, Thailand, and the United States.

NEW TRANSATLANTIC AGENDA :

Part of the New Transatlantic Agenda agreed to at the U.S. European Union (EU) summit

in December 1995 in Madrid was an initiative to expand trade between the two sides

called the New Transatlantic place, assisted by meeting of businessmen called

collectively the Transatlantic Business Dialogue.

Among a number of agreed goals were tariff cuts, including elimination of tariff on

information technology products and negotiation of mutual recognition agreements to

harmonize products standards and testing . Progress has been slow

Meanwhile, U.S. EU relations have been disturbed in 1996 by a number of irritants

especially U.S imposition of sanction against third country investments in Cuba, Iran and

Libya.


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Enterpreneurs in India are offered a number of incentives with their strategic

contributions to economic development. Firstly, they facilitates the decentralization of

economic power by encouraging prospective to take up industrial ventures and assist in

the dispersal of industries over Indias geographically area. Secondly, they facilities the

transformation of a traditionally technology which is characterized by low skill, low

productivity and low wages into a modern technology, subsequently characterized by

improved skills, high productivity rising wages and a higher standard of living.

INCENTIVES :

The term incentive means encouraging productivity. It is a motivational force which

make an entrepreneur take a right decision and act upon it. Broadly incentives include

concessions, subsidies and bounties. Economic incentives both financial and non financial

push an entrepreneur towards decisive decision and action.

THE POWER OF INCENTIVES :

There is evidence that people respond significantly to incentives even in situation where

we do not usually imagine their behavior to be rational. Apparently psychologist have

discovered by experiment that when you hand a person an unexpectedly hot cup of

coffee, he typically drops the cup if he perceives it to be inexpensive but manages to

hang on if he believes the cup is valuable. Indeed, the response to incentives may be as

innate as any other instinctive behavior.

SUBSIDY :

Subsidy denote a single lump-sum which is given by a government to an entrepreneurto cover the cost. The term bounty denotes a bonus or financial aid given to an

industry to help it to complete with other units in country or in a foreign market. The

objective of incentives is to motivate an entrepreneur to set up a new venture in a lager

interest of the nation and the society.

NEED FOR INCENTIVES :

The need for incentives and subsidies arise for the following reasons :

1. To Correct Regional imbalances in Development : The usual package o incentivesand concessions has been available in backward as well as developed district. It has

been however the experience of industrial administration, department o industries,

development corporation etc., that what is lacking in the backward district is overall

existing environmental growth. Industrial policy uses incentives both to correct market

imperfections and to accelerate the process o industrialization so as to drive the

force of supply and demand reaches equilibrium level. such a policy then aims at


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inducing some entrepreneur or sections of the community to locate their industrial

units in areas selected by the government rather than that of their own choice.

Regional Balances can also lead to effective utilization o regional resources, removal

of disparities in income and level of living and contribute to more integrated society.

2. TO PROMOTE ENTREPRENEURSHIP BY REMOVING ECONOMICCONSTRAINTS : As for economic constraints, the new entrants in the field face

many impediments on account of inadequate infrastructures. The new entrepreneur

suffers because of distances separating central administration organs from

entrepreneurs and their projects, deficiency of various supporting services such as

market intelligence, lack of institutional mechanism to provide full time management

personnel completementary to that of new entrepreneurs and finally from insufficient

orientation of the promotional institutions barring a few exceptions at the state level

to needs of new entrepreneurs.

3. TO PROVIDE COMPETITIVE STRENGTH SURVIVAL AND GROWTH : some ofthe incentives are concerned with the establishment of industries while others are

concerned with the survival and growth of industries. Several incentives are confined to

the first few years of the establishment of the units while a few of them are available

over a long period.For a new comer, the reservation is an incentives to enter the

industry itself. A price preference improves its competitive strength.

TYPES OF INCENTIVES :

Incentives provided to small scale enterprise are in the nature of :

1. FISCAL INCENTIVES : Tax concession exemption, rebates, refund or postponement of direct or

indirect taxes Incentives for exports including duty drawbacks Exemption and preferential treatment from Excise duties Exemption from Sales Tax Other incentives

I. Capital investment subsidyII. Transport subsidy


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III. Creation of tax free zones.2. FINANCIAL INCENTIVES:

Seed capital Credit on priority Technology Upgradation Fund Scheme for Textile Industry Venture capital funds for software and IT industry Credit guarantee Scheme Micro Finance

3. PROMOTIONAL SCHEMES : Reservation of items for exclusive manufacture in the SSI Enhancement of investment limit for export oriented / high tech items

reserved for manufacturer in SSI Sector to Rs 5 crores from Rs 1 crore.

Price and purchase preference scheme Foreign Direct Investment Infrastructural Facilities Industries Growth centre Export Processing Zones Industrial Packs National Programme for Rural Industrialisation

4. MARKETING SUPPORTThe marketing infrastructure as available for SSI consist of a combination of

agencies and incentives schemes

a. Agencies National Small Industries corporation (NSIC)P SIDO Export Promotional Councils SIDBI

b. Incentive Schemes Sub- contracting Exchanges Quality certification Marketing Development Scheme Exhibitions and trade fairs Vendor development programmes


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5. ORGANISATIONAL SUPPORT Consultancy Training Testing and Toolroom facilties Workshops and Seminars Research and Development (R&D) Design Industrial motivation campaigns National Award for Small Scale Entrepreneurs Technology business incubators.

THE ASSISTANCE PROGRAMME

Some of the important measures of assistance now available for the entrepreneurs in theindustrial sector are:

1. Technical assistance through industrial extension service ;2. Assistance for obtaining raw materials ;3. Cash assistance ;4. Supply of machinery on hire-purchase basis ;5.

Marketing assistance ;

6. Assistance to small entrepreneurs ;7. Rural industries projects ;8. Seed capital assistance ;9. Concessional finance assistance ;10.Technology assistance ;11.Pollution control.In order to promote industrialization of the country as a whole and to remove disparities in

levels of development between different regions, the central government is operating three

major sections, viz., central investment subsidy scheme, transport subsidy scheme and central

assistance scheme for infrastructural development in no-industry districts.


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ADVANTAGES OF INCENTIVES AND SUBSIDIES

1. They act as a motivational force which makes the prospective entrepreneurs to enter intomanufacturing line.

2.

They encourage the entrepreneurs to start industries in backward arrears.

3. By providing subsidies and incentives the government cani. Bring industrial development uniformly in all regions.

ii. Develop more new entrepreneurs which lead to entrepreneurial development.iii. Increase the ability of entrepreneurs to face competition successfully.iv. Reduce the overall problems of small-scale entrepreneurs.

PROBLEMS OF INCENTIVES AND SUBSIDIES

Empirical studies reveal that the incentives and subsidies are being highly misused. Incentives and subsidies turned out to be grounds for dishonesty. They have given scope for favoritism and rampant corruption. They have become the seeds of unethical business practices. Resulted in financial drain on the exchequer. The real objective of providing incentives, subsidies and assistance is hardly achieved.

CENTRAL INVESTMENT SUBSIDY SCHEME

This was introduced in 1971, and has been modified from time to time. The scheme is for

encouraging setting up of industries in centrally notified backward areas. For setting up

industries in category A backward areas, subsidy is allowed at the rate of 25% subject to a

maximum of rs. 25 lakh (enhanced to RS.50 lakh for setting up electronics industry in hilly

districts). It is 15% and 10% subject to a maximum of Rs. 15 lakh and Rs. 10 lakh for

categoryB and C districts respectively. MRTP/FERA companies are not eligible for subsidy

in category C areas. Entrepreneurs who set up nucleus plants in category B AND CDISRICTS/AREAS are legible for 20% and 15% subsidy, subject to a maximum of Rs. 20 lakh

and Rs. 15 lakh respectively. Since the inception of the scheme and up to December, 1989, a

total sum of Rs. 855.46 crore reimbursed to states/union territories excluding Delhi and

Chandigarh.


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TRANSPORT SUBSIDY SCHEME

The scheme was introduced in 1971 and is applicable to remote and inaccessible areas. It covers

the entire north eastern region including Sikkim, Jammu Kashmir, himachal Pradesh, hill

districts of Uttar Pradesh, Lakshadweep and Andaman & nicobar islands and Darjeeling

district of west Bengal. Identified promotional institutions which transact business on behalf ofsmall, village and cottage industries are also eligible for transport subsidy. It is paid on the

transport costs of the industrial raw materials which are brought into and finished goods which

are taken out of these areas to identified rail heads/ports. In the north eastern region subsidy is

available at the rate of 90% and for himachal Pradesh, hill districts of Uttar Pradesh and

Darjeeling district of west Bengal, it is 75%. It is also available at the rate of 90% for movement

of raw materials within the N.E region and at the rate of 50% for movement of finished goods in

this region from one state to another state. For airlifting of electronic components/products from

Kolkata airport to the airport nearest to the locations of the industrial units in this region subsidy

is allowed at the rate of 75% and vice versa

CENTRAL ASSISTANCE FOR INFRASTRUCTURAL DEVELOPMENT IN NO-

INDUSTRY DISTRICTS UNDER THE OLD SCHEME

To assist state governments in taking up infrastructural development in one or two identified

growth centers in each no-industry district, the Centre gives financial assistance which is limited

to one-third of the total cost of infrastructural development, subject to a maximum of Rs. 2 crore

per district. Two types of patterns have been laid down for the purpose of:

PATTERN 1

Rs. 2 crore as subsidy from the central government

Rs. 2 crore as loan from IDBI on concessional terms

Rs. 2 crore as share of the state government.

PATTERN 2

Rs. 2 crore as subsidy from the central government

Rs. 4 crore as share of the state government

Rs. 5 crore as loan from IDBI on concessional terms after the shares of state and Centre arespent.

For states in the N.E. region, the scheme has been further liberalized. In a total project of Rs. 4

crore, the Centres shares would be 50%, i.e.; Rs. 2 crore per district and the state governments


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have the option to fund the balance of Rs. 2 crore either from their own funds or by raising a loan

from IDBI. Construction of sheds, subject to a ceiling of 25% of the total cost, has been allowed

in the case of this region only.

So far 51 growth centers in 44 districts of the states of Rajasthan, Orissa, and Karnataka, UP,

Bihar, Maharashtra, west Bengal, Tripura, Nagaland, AP and Mizoram have been approved bythe government for development of infrastructural facilities. A sum of Rs. 15.42 crore has been

released for creating infrastructural facilities in the states till December 1988.

NEW SCHEME FOR GROWTH CENTRES

The government has announced on June 3, 1988, the decision to set up 100 growth centres

throught the country over the next five years or so. These growth centres, would be endowed

with infrastructural facilities on par with the best available in the country, particularly in respect

of power, water, telecommunication and banking. Each would be provided with funds of order of

Rs. 25-30 crore in order to create infrastructural facilities of a high order.

The states/union territories have been asked to identify double the number of growth centres

allocated to them but the final selection of these will be done by the centre. The state

governments are also free to include any of the growth centres already approved under the

erstwhile scheme for developing such centres in the no-industry disricts.

The growth centres shall not be located within 50 kms of the boundary of 7 cities with a

population of above 25 lakh, 30 kms from the boundary of 2 cities with a population of above 15

lakh but below 25 lakh and 15 kms from the boundary of 12 cities with a population of 7.5 lakhbut below 15 lakh.The growth centres shall be located close to district sub-

divisional/block/taluk/headquarters or developing urban centres.

The broad financial pattern for development of infrastructure in the selected growth centres will

be as follows:

1. Central government(equity) Rs. 10 crore2. State government (equity) Rs. 5 crore3. All India financial institutions (2 crores-equity) Rs. 4 crore4. Nationalized banks Rs. 1 crore

Rs. 20 crore

5. Market borrowings Rs 10 croreTotal Rs 30 crore


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The growth centres selected under this scheme will be included in category B (unless it is already in category A) of the list of backward areas and will be entitled to all incentives

available from time to time for category B areas. The state governments have been requestedto make suitable provisions in their states/union territories plan for the development of thesegrowth centres.

INCENTIVES AND FACILITIES TO EXPORTERS

1. Duty drawbackFor a product exported from India, the manufacturer would have paid duties as under:

i. Import duties on raw materials and components imported andii. Excise duty on the items manufactured in India.

The customs and central excise duty drawback rules, 1971 provide for refund of such duties to

the exporter on the export being completed.

Duty drawback is allowed only in respect of all the items wherein such raw materials and

components have been used on which duty either of customs or excise has been paid. There are

two types of rates of drawback:

I. All-industry rate andII. Brand rate

All-industry rate is applier to exporters alike. The brand rate is applicable only to particular

manufacturers. The brand rate is fixed on application and furnishing of information to the

authorities by the exporter. Brand rate can be so fixed where the all-industry rate does not exist,

or where the existing rate of drawback is less than 80%of the duty paid.

For claiming the drawback, the exporter should file with the customs the triplicate copy of the

shipping bill within 60 days after the customs officer at the port has given LET EXPORT

ORDER. On a fortnightly basis, the drawback entitled to the exporter will be remitted to his

account with his bank. If the rate of drawback is yet to be fixed, the exporter can make a

provisional claim. The final disbursement will be made on fixation of the rates.

To help the exporter tide over the financial difficulty faced due to the delay in disbursement of

the duty drawback, the government has formulated it, 1976. Under this scheme the exporter, can

get interest-free finance from his bank an export eligible goods and producing a provisional

certificate as to his entitlement of drawback.


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2 .DUTY EXEMPTION SCHEME

The scheme enables the exporter to import materials without payment of customs duty. The

license issued under this scheme is known as ADVANCE LICENCE. The items allowed to be

imported under these licenses are such as are to be used in the manufacture of goods to be

exported from India.

These licenses are issued to manufacture-exporters subject to actual user condition. Generally,

the scheme is applicable only to those export products in which there is a minimum value

addition of 33%. The licence will bear a suitable export obligation.

The licencing authority issuing a licence under this scheme will also simultaneously issue a

connected duty exemption entitlement certificate. Exempt materials imported against a licence

under this scheme should be utilized for the manufacture of the resultant products specified in

the duty exemption entitlement certificate. The licence holder should execute a bond with bank

guarantee and lodge it with the licencing authority.

No duty drawback will be allowed on the products exported/supplied under this scheme.

FISCAL INCENTIVES FOR SEZ UNITS

Duty free import/domestic procurement of goods for development, operation and maintenance ofSEZ units.

100%income tax exemption on export income for SEZ units under section 10AA of the incometax act for first five years, 505 for the next 5 years thereafter and 50% of the ploughed backexport profit for next 5 years.

Exemption from minimum alternate tax under section 115JB of the income tax act. External commercial borrowing by SEZ units up to US $500 million a year without any maturity

restriction through recognized banking channels.

Exemption from central sales tax, service tax, state sales tax and other levies as extended by therespective state governments.

TAX EXEMPTIONS TO SEZ DEVELOPERS

Exemption from customs/excise duties for development of SEZ units for authorized operationsapproved by the board of approval.

Income tax exemption on export income for a block of 10 years in 15 years under section 80-IAB of the Income tax act.


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Exemption from minimum alternate tax under section 115JB of the Income tax act. Exemption from dividend distribution tax under section 115O of the Income tax act. Exemption from central sales tax (CST) and service tax (section 7,26 and second schedule of the

SEZ act).

3. EXCISE REBATE

Finished goods which are subject to excise duty for home consumption are exempt from the duty

when they are exported. The scheme is also applicable where exported goods contain excisable

goods in their manufacture.

The exporter can avail of this facility in either of the following methods, where finished goods

are excisable:

I. EXPORT UNDER BOND: Under this method, the exporter has to execute a bond in favour ofCentral Excise Authorities. The amount of the bond will be equal to the duty on the estimated

maximum outstanding of goods leaving the factory without paying the duty and pending

acceptance of their proof of export by excise authorities. No excise need to be paid by the

exporter.

II. REFUND OF DUTY: If the duty is already paid, after export is made, the exporter should makea claim with the Central Excise Authorities. After verification of the claim, the excise authorities

will arrange for the refund of the central excise.

Where the excisable materials have been used in the manufacture, the exporter can avail of the

facility of manufacturing under bond or he can claim refund after the duty is paid.

4. MARKETING DEVELOPMENT ASSISTANCE

The Government of India has instituted a Marketing Development Fund for providing grants-in-

aid for the development of markets for Indian products abroad, for compensatory support for

export commodities and for other export promotion efforts. The fund gets its resources from the

allocation of General Budget.

The fund is administered by a committee consisting of the secretaries of the Departments of

Economic Affairs and Expenditure and Commerce. Various schemes falling under the grants-in-

aid are processed by different sub-committees.


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Assistance under MDF is available to organizations like Export Promotional Councils,

commodity boards, India trade promotion organization ,etc.; and individual exporters approved

by such organizations.

The extent of assistance differs depending upon the scheme. Generally, it ranges between 50%

and 60%. Some of the schemes eligible for assistance under the fund are:

a) Commodity survey/study within the country or abroad;b) Market survey abroad;c) Publications for issue within the country or abroad;d) Participation in exhibitions abroad;e) Setting up showrooms, warehouses, after sales service establishments;f) Research and development;g) Consultancy services;h) Setting up foreign offices.

The application for assistance should be sent to the marketing department assistance committee

at the ministry of commerce through the approved organization like Export Promotional Council

and Commodity Board.

5.

SUPPLY OF RAW MATERIALS

Units engaged in exports are given priority in the allotment of scare raw materials such as steel.

In certain cases, the raw materials are arranged to be supplied at international prices, much below

the internal prices.

IPRS: the international Price Reimbursement Scheme for steel and pig iron provides for

reimbursement to the exporter of the difference in international and domestic price of specified

categories of iron and steel used in export of engineering goods. The reimbursement is made

through the engineering Exports Promotion Council.

6. EXPORT ORIENTED UNITS/EXPORT PROCESSING ZONEUnits undertaking to export their entire production of goods may be set up under the Export

Oriented Units Scheme. Such units may be engaged in manufacture, production of software,

horticulture, agriculture, aquaculture, animal husbandry or similar activity. Units engaged in

service activities may also be considered on merits.


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Free Trade Zone or Export Processing Zone is an individual estate, cordoned off from domestic

tariff area, where trade barriers applicable to the rest of the economy do not apply and where

EOUS can operate free of import duties or quantitative restrictions and are given other

advantages including tax exemption. Seven free trade zones have been set up in India at Santa

Cruz (Mumbai), kandla, Chennai, Cochin, Noida, falta (Kolkata), and Visakhapatnam.

Units in the free trade zone and export oriented units (outside the zone) are similarly placed with

regard to conditions and benefits bestowed on them.

FACILITIES FOR UNITS IN THE EXPORT PROCESSING ZONE

Developed plots/ready-buildings to suit project requirements Single-point clearance of new projects within 40-65 days. Automatic approvals of proposals by the Development Commissioner on certain conditions No license required for import of capital goods, raw materials, consumables, spares etc. Duty free import of capital goods and equipment from preferred sources. Second-hand capital goods allowed being imported. Sourcing of capital goods from domestic manufacturing/leasing companies allowed. Exemption from Central Excise Duty and other levies on products manufactured within the zone. Complete exemption from Income Tax on profits for a period of five years. Foreign equity participation up to 100% permissible. Remittance of profits and dividends by foreign investors/NRIs allowed fully after payment of

taxes.

Up to 25% production and 5% rejects can be sold in domestic market on payment of appropriateduties.

Re-export of unused imported goods allowed, subject to certain conditions. Sub-contracting part of job work to units in the domestic market may be allowed. Concessional finance available for investment and working capital. Assured power supply, preferential power connection. Supplies from domestic market to the units in the zone, treated as deemed export. Export finance banks or special concessional rate of interest.


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Green card to units for getting facilities like telephone, telex, cement, steel, etc. on priority basis Containers loaded by units in SEPZ not to be inspected or other points, so long the seals are

intact.

OTHER FACILITIES/PROVISIONS BEING MADE AVAILABLE IN SEPZ

Security as per norms laid down by the customs for SEPZ. Paved internal roads, street lights, water supply, etc. Container space on rental basis. Customs clearance centre within the Diamond Industrial Park. Railway Station within I Km. Surat Airport, Magdalla Sea Port & Highway within IS

Km.

Office premises available in the International Trade Centre of the park. Health centre, school, recreation club, theatre coming soon. Hotel by an international Chain of Hotels soon to come up. Excellent green and clean environment. Administrative support by the Promoters to users in preparing their application for units in

the zone.

7. EXPORT HOUSES, TRADING HOUSES AND STAR TRADING HOUSESA registered exporter is a person holding valid registration certificate issued by an Export

Promotion Council, Commodity Board or other registering authority designated by Government

for the purpose of export promotion.

The exporter may be registered as anExport House or a Trading House or a Star Trading House

if the average FOB value of physical exports during the preceding three licensing years is not

less than Rs. 10 crores, Rs. 50 crores and Rs. 250 crores respectively. The registration may also

be granted if the FOB value of exports during the preceding licensing year was not less than Rs.

15 crores (export house), Rs 75 crores (trading house) and Rs. 300 crores (star trading house).

These houses are entitled for special import licences for import of such items included in the

Negative List of Imports, under a scheme notified in this behalf. They are also eligible for

opening of foreign currency accounts in India and abroad, Marketing Development Assistance

and to execute legal undertaking in lieu of bank guarantee to cover the export obligation.

8. EXPORT PROMOTION CAPITAL GOODS SCHEME

Under the EPCG scheme capital goods may be imported at a concessional rate of customs

duty of 25% of CIF value with an export obligation of 3 times CIF value to be achieved within 4

years. The duty will be further reduced to 15% of CIF value where the export obligation

undertaken is 4 times the CIF value within a period of 5 years.


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A manufacturer-exporter for a period not less than 3 years is eligible for this scheme. Other

exporters may also be considered on merits.

9. FOREIGN CURRENCY ACCOUNTS FOR EXPORTERS

Exporters with a net foreign earnings of Rs. 4 crores and over during the preceding year may

be permitted by Reserve Bank to maintain foreign currency accounts in US dollar or sterlingpound, with SBI, public sector banks and foreign banks operating in India.

Only one account shall be maintained which will have no cheque facility. No overdraft can

be granted in the account. The exporter availing this facility should route all export documents

through the designated branch of the bank. Credit to the foreign currency account will be

approved method of liquidation of postshipmen(,advances. RBI will fix ceiling on balance to be

maintained in the account. Excess over that shall be converted into rupees promptly.

If exports arrange foreign currency overdraft/revolving lines of credit from banks abroad for

financing their imports RBI may consider their keeping foreign currency accounts abroad.

Mirror account shall be maintained by a bank in India. They cannot availpreshipment/postshipment finance except to the extent of rupee expenditure.

10. OTHER BENEFITS

Some of the other benefits available to exporters can now be listed.

a) Exemption from sales tax.b) Exemption from income tax.c) Training facilities in India and abroad.d) Availlability of concessional finance from banks and Exim Bank.e) Credit insurance cover from ECGC.f) Preshipment inspection facilities.g) Foreign exchange for business visits abroad and for participation in trade fairs and

exhibitions abroad

h) Special import licences for items in negative list.Thus, it may be seen that no efforts have been spared in providing all possible facilities and

incentives to exports.

STATE INCENTIVES

All states in India recognised that small and medium industries continue to playa vital role in

their socio-economic development. There is a major interest in state developing programmes lO

stimulate and encourage indusrial development in their state. With a view to attract

entrepreneurs to set up industries/business in their states, states offer varied incentives, subsidies

ard assistance. Major incentives and concessions offered by the selected states is presented here,


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MAJOR INCENTIVES AND CONCESSIONS TO SSI UNITS IN SELECTED

STATES

Note: Talukas in the State have been classified as A, B, C, D & D+ in the order of most to

least developed areas.

Gujarat -Category I

Areas

Category II

Areas

1.Capital InvestmentSubsidy

Tiny Industries

Small Scale

Industries

2.Sales Tax IncentivesTiny Industries

Small Scale

Industries

3.Additional SalesTax Benefits

4.Sales Tax Benefits for100% EODs

5.Other Incentives: to100% EODs

35% of eligible fixed capital

investment 30% of eligible

fixed capital investment with

a maximum of Rs. 30 lakh


investment for 9 years

Available to employment

oriented units 100% of fixed

capital investment for 10

years Priority allotment of

land and raw materials.


investment


investment with a maximum

of Rs. 20 lakh



75% of fixed capital



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Maharashtra

1. Sales Tax incentive to new SSI units as Exemption/ B. 100% of Fixed Capital Investmentfor 6 years

Deferral/Interest free unsecured loan C. 110% of Fixed Capital Investment

for 8 years

2. Special capital incentive for SSI units only D. 120% of Fixed Capital Investmentfor 10 years

3. Refund of Octroi/Entry Tax in the form of a D+ 130% of Fixed CapitalInvestment for 12 years

Grant up to 100% of the admissible. B 15% of Fixed Capital Investment

with a maximum of Rs. 7 lakhs

Fixed Capital Investment to New SSI units C 20% of Fixed Capital Investment

with a maximum of Rs. 10 lakh4. (a) Refund of electricity duty to new SSI units D 25% of Fixed Capital Investment

with a maximum of Rs. 15 lakh

(b) Refund of electricity duty to new units in D+ 30% of Fixed Capital Investment

with a maximum of Rs. 20 lakh

Electronic Hardware Technology Parks (EHTPs) B for a period of 5 years

And to 100% EOUs C for a period of 7 years

D for a period of 9 years

D+ for a period of 12 years

D Grant for a period of 7 yearsD+ Grant for a period of 10 years

(A)Grant for a(B)Period of(C)5 years(D)Grant for a period of(D+) 7 years

Kerala

1.Investment subsidy for thrust industries (electronics, rubber 15% of Fixed CapitalInvestment subject to a maximum of Rs. 20

processing, food processing, light engineering, drugs & available to

existing units undertaking expansion,


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pharmaceuticals, leather, clay & silica based industries diversification and

modernization.

and garment manufacturing industries).

2.(a) Sales Tax exemption/deferment to all new industrial units Exemption for 7years/deferment for 10 years upto a ceiling of

and existing u,.'its undertaking expansion diversification 100% of Fixed

Capital Investment.

& modernisation

(b) Additional option of SSIs only

3.Concessions to ensure a market for products manufactured To deposit theSales Tax with the Government in the Tax for

by SSI units in the State. Growth Fund A price

preference of 15% for all departmental

Purchases, purchases made by State

public sector enterprises andstatutory corporations.

4. Exemption from electricity duty and enhancement in power tariff. To all new

units for the first five years.

Tamil Nadu

1. State Capital Subsidy in most backward talukas 20% of fixed assets with a ceilingof Rs. 20 lakh

Other specified areas

2. Special Subsidy for select category of industry 15% of fixed assets with a ceiling

of Rs. 15 lakh

(a) To encourage priority and sunrise industries A sum not exceeding Rs. 15 lakh

based on 10% of cost of fixed

Assets Rs 20 lakh and

(b) For leader and electronic units Rs. 35 lakh respectively

3. Concessions in power tariff for three years 1st year 40% of energy charges

located in metropolitan areas) 2nd year 30%

3rd year 20%

4.Generator subsidy for certain industries 15% of the cost of generator subject

to a maximum


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5. Liberalised Sales Tax waiver/deferral scheme of Rs. 5 lakh

up to a ceiling of total investment in fixed assets

(a) Full waver for five years New and existing units located in

most backward talukas

(b) Deferral for 9 years New units located in 82 backward

talukas and in government

Developed industrial areas

(c) Deferral for 5 years up to a maximum of 60% New industries in other areas

6. Subsidies and concessions to women entrepreneurs

(a) For units where women constitute more than

30% of the workforce 5% additional capital subsidy upto a

maximum

of Rs. 5 lakh

(b) Reservation in the allotment of industrial 30% reservation in all new Industrial

Estates andsheds and developed

Industrial plots Complexes developed by

Government organizations.

west bengal

One time subsidy on Investment in Plant & Machinery 40% for industries in B,C and D

category and for specified industries in

(a) Valued up to Rs. 21akh A category districts15% for industries in A& B category

districts, 20% in C and

(b) Valued above Rs. 21akh 30% in D category districts

2. One time subsidy on cost of drawing power line and installation 20% in B,C &

D category districts only.

of transformer 25% irrespective of the

location provided such cost is not borne by the

3.One time subsidy on cost of purchase & installation of Gen. Sets Power Supply

Agency.

4.Waiver of Electricity duty w.e.f. the date of commencement of 100% for a

period of 5 years in B,C & D category districts only.

activities 100% for a period of 3 years in B,C

& D category districts only

5.Exemption from payment of Octroi/Entry Tax w.e.f. the date 100% for 5 years for


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A, B & C category and 9 years for D category

of commencement of activities districts.

6.Exemption of Sales Tax on purchase of Raw Material

(a) for new SSI units 100% for 4 years in A

(specific industries only) and B category districts and

(b) for expansion/modernisation 6 & 8 years for C & D

category districts respectively.

Notes: The incentives are available for new SSI units as well as for units

undertaking expansion/modernisation. ') Districts in the State have been

classified as A, B, C & D in the order of most to least developed areas.


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CONCLUSION

Besides incentives and subsidies given by the Centre, the State Governments too offer fiscal and

monetary incentives and subsidies help entrepreneurs setting up their industries in the States to

overcome certain disadvantages. The entrepreneurs are attracted to some State for their package

of incentives and subsidies. The foremost incentive is a stable government with excellent law and

order situation followed by availability of disciplined, dedicated and skilled labour force.

However, states do attract industries by giving incentives in regard to sales tax, octroi, and

subsidised loan. These incentives have helped in large measure in attracting entrepreneurs to set

up industries - and accelerate the process of industrialisation. State incentives and subsidies have

helped entrepreneurs to locate their projects and industrialise the State on a firm foundation. The

innovations of these incentives and subsidies indicate their adaptivity and the vital role they have

been playing in the process of industrial development, spanning rural and urban, backward and

non-backward and organized and unorganized large, medium and small sectors of the economy-

each sector needing different approaches, strategies, skills and techniques.


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I

N

C

E

N

T

I

V

E

S

ENTREPRENEURSHIP DEVELOPMENT

REGIONAL DEVELOPMENT

PROVIDE COMPETITIVE STRENGTH

MOTIVATE PEOPLE FOR NEW VENTURE

GIVE STIMULUTS TO INDUSTRY AND

BUSINESS

INCENTIVES

entrepreneur development project

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