Small scale industries are ones in which the manufacturing, production and servicing processes are carried out on a small scale. The expenditure in these industries is one-time and largely on plants and equipment; the overall investment in such industries does not exceed Rs 10 crore, and annual turnover does not exceed Rs 50 crore. Smaller machines and relatively limited labour are used to manufacture items and provide services in small scale businesses.
Small scale industries or SSIs are recognised as a country’s economic lifeline, critical for a nation like India. As a labour-intensive industry, it is extremely beneficial in terms of producing employment possibilities for the country’s population. They are also an important aspect of an economy from a financial viewpoint, as they help to stabilise the country’s per capita income.
Small Scale Industries: Characteristic
According to the definition of small scale business these industries have the following characteristics:
- Ownership – Such enterprises are typically sole proprietorships or, in rare situations, partnerships. In most circumstances, the business is owned by a single person.
- Management – One of the most important qualities of SSI is that the owners administer the enterprises. As a result, the owner is actively involved in the day-to-day operations of the business.
- Adjustable – As they run on a smaller level, these sectors are more vulnerable to rapid and unexpected business events. They are more equipped to respond to changes in the corporate environment.
- Workforce requirements – As capital investment in these kinds of sectors is lower than in large-scale ones, they rely heavily on labour to carry out manufacturing activities.
- Optimal resource utilisation – Small-scale industries use available resources efficiently and without waste, because they do not have surplus resources.
- Limitations on operation – Most small-scale firms have a limited range of operations. As a consequence, they only function on a local or regional scale. These are some of the features of a small business that aid in determining its operation, management, and scope.
Small Scale Industries: Classification
1. Industries involved in manufacturing/assembly/processing
These industries produce completed products for consumption or to be employed in further processing. Power looms, food processing units, and engineering units are some examples of small-scale industries.
2. Ancillary industries
Ancillary industries are those that produce elements for other manufacturers. The final product is then assembled or incorporated by these manufacturers. A tiny facility that manufactures various sizes of nuts and bolts is an excellent example. You could also think about industries that make electronic components or engines.
3. Service industries
Manufacturing is not involved in service-based sectors. They generally deal with the after-sales servicing, upkeep, and maintenance of products.
4. Export units
When an SSI exports over 50% of its output, it is classified as an export unit.
5. Cottage units
Cottage units are classified as SSIs if they do not require specialised infrastructure and are conducted within the owners’ living quarters or dwellings.
6. Village industries
Village industries are located in remote regions and are therefore not part of the formal sector. These industries typically rely primarily on human labour for output.
Aims of small scale industries
The small scale industries’ goals are as follows:
- To increase employment opportunities
- To assist in the economic development of rural and underdeveloped areas.
- To alleviate regional disparities.
- To ensure that the country’s untapped resources are used to their full potential.
- To raise people’s condition of living.
- To ensure that income and wealth are distributed equally.
- To address the issue of unemployment.
- To achieve self-sufficiency.
- Adopting cutting-edge technology in order to produce higher-quality items at a reduced cost.
Prerequisites for forming small scale industries
For the development of an SSI, an entrepreneur must go through the following stages:
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The ownership decision
An entrepreneur who wishes to create an SSI should first determine the SSI’s ownership structure. The SSI can be formed as a sole proprietorship, partnership, or corporation.
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Product choice
Next, entrepreneurs must select whether the SSI will produce or provide a service, the item range which must be produced, and the volume of product or service production.
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Location
The place where the unit will be established must be chosen. The plot size, location, enclosed and open area should all be determined. Once the location has been determined, the SSI unit must be constructed there, and operations can begin. The registered address/primary location of the SSI unit will be the site of the established unit.
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Registration
After establishing the unit at the chosen location, the SSI must get Shop and Establishment Act registration, business registration, or partnership firm registration, as required. The establishment can begin operations after the registration is secured.
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Registration of SSI
After obtaining Shop and Establishment Act registration, the unit can apply for SSI/MSME registration. If SSI registration is submitted prior to manufacturing, the turnover and investment figures must be 0 in the registration. If SSI registration is filed after the SSI units begin production, the revenue and expenditure details from the unit’s ITR will be immediately filled in the registration.
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Equipment and machinery
The machinery and equipment needed to manufacture the specified products or provide services must be determined. The latest technology machinery and equipment must be purchased and integrated into the SSI unit.
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Power and water supply
The property on which the business or SSI unit is located should have enough power and water supplies. If pollution board permits are required, the SSI unit must get all such permits from the appropriate authorities.
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Manpower recruitment
Once the machinery has been set on the unit and the necessary licences have been secured, there is a need for labour. The necessary workforce must be employed to start and run the business unit.
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Raw material acquisition
Raw materials are necessary for the operation of a business. Raw materials will be required by the labour force to work on the installed machinery in order to manufacture or offer services.
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Production
It can begin manufacture of the units’ products after obtaining the raw materials. After a large number of units are made, the products can be sold on the market.
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Marketing
When the items or services are ready, the entrepreneurs must promote them in order to get clients and grow their organisation.
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Quality control
Before promoting the products, the quality of product accreditation must be acquired from the relevant agencies such as BIS, AGMARK, HALLMARK, FSSAI, and so on.
Small scale industries: Online registration
The Ministry of Micro, Small, and Medium Enterprises (MSME) provides SSI registration through the State Government’s Directorate of Industries. The main reason for SSI registration is to establish new SSI enterprises in India. SSI registration allows the business to be eligible for various government benefits. The online process for registration is as follows:
- Visit the Udaym Registration portal and select “For New Entrepreneurs who are not yet registered as MSME or EM-II.”
- Fill in your “Aadhaar Number” and “Entrepreneur Name” and then click the “Validate and Generate OTP” button.
- You will be sent an OTP to your mobile phone. The PAN verification screen will open when you enter OPT. Enter your PAN and click the “PAN Validate” button.
- The Udyam Registration page will appear. Fill in all of your personal and industry information, such as business name, address, bank account details, and general information, and then click the “Submit and Get Final OTP” button.
- The MSME registration is now complete, and a notification indicating completed registration with a case number will appear.