Micro, Small and Medium Enterprises Department Policy Note 2014 - 2015 Demand No. 44 P. Mohan Minister for Rural Industries and Labour © Government of Tamil Nadu 2014 CONTENTS S.No. Description Page 1. Overview 1 2. Commissionerate of 18 Industries and Commerce 3. Tamil Nadu Small Industries 67 Development Corporation (SIDCO) 4. Tamil Nadu Small Industries 91 Corporation (TANSI) 5. Entrepreneurship 97 Development Institute (EDI) Micro, Small and Medium Enterprises 1.1 MSME Sector in the Global Economy Department Policy Note – 2014-15 The MSME sector is the backbone of the 1. Overview economy particularly in developing countries. The Organisation for Economic Co-operation and MSMEs are considered as engines of Development (OECD) reports that, more than 95% economic growth in both developed and developing of enterprises in the OECD area are MSMEs. These countries. The major advantage of the sector is its enterprises account for almost 60% of private sector employment potential at low capital cost. The labour employment, make a large contribution to intensity of the MSME sector is much higher than innovation, and support regional development and that of large enterprises. They further help to social cohesion. achieve fair and equitable distribution of wealth by regional dispersion of economic activities. MSMEs In developing countries, the MSME sector assist in fostering a self-help and entrepreneurial makes a vital contribution to GDP and employment. culture by bringing together skills and capital Higher growth rate of MSME’s has a direct effect on through various lending and skill enhancement GDP growth due to increased output, value addition schemes. These enterprises impart the resilience to and profits. MSME growth also impacts GDP withstand economic upheavals and maintain indirectly, through increased innovation and a reasonable growth rate since being indigenous is macro-economic resilience of the overall economy. the key to sustainability and self-sufficiency. 2 1.2 Role of MSMEs in a Developing Economy 1.3 Role of MSMEs in the Indian Economy Unemployment and underemployment are the prevailing economic ailment in most of the Asian The micro, small and medium enterprises countries and they are result of a fundamental constitute a very important segment of the Indian disproportionate relationship between population economy. Today, it accounts for nearly 45% of the the use of available resources. In many gross value of output in the Manufacturing Sector Asian countries, large-scale industrialization and over 40% of the total exports from the country. has been slow particularly attributed to the In terms of value added this sector accounts for shortage of supply of capital. Under the about 40% of the value addition in the circumstances, the problem of unemployment and Manufacturing Sector. The sector's contribution to under-employment can be tackled by the expansion employment is second highest next to agriculture. It and modernization of the existing small- has been estimated that every one lakh rupees of scale /cottage industry and by the introduction of investment in fixed assets in the MSMEs sector new industries capable of raising the level generates employment for about 0.21 persons as of production and improving the present depressed per IV All India Census of MSMEs. standard of living. The large scale industry has The capability of Indian MSME products to been slow to develop and has succeeded to a very compete in international markets is reflected in its limited extent in absorbing the surplus population of share of about 40% in national exports. In case of the countryside. MSMEs are still the most extensive items like readymade garments, leather goods, tools for controlling unemployment world over. processed foods, engineering items, the performance has been commendable both in terms 3 4 of value and their share within the MSME sector chemicals, plastics, steel, cement, paper, matches, while in some cases like sports goods etc., they textiles, hosiery, readymade garments etc. account for 100% share to the total exports of the The table given below indicates the trend in sector. growth of micro, small and medium enterprises The MSME sector has consistently during the last ten years and the level of registered a higher growth rate compared with investment, employment, etc, it has created:- overall industrial sector. With its agility and dynamism, the sector has shown admirable Trend in the Growth of MSMEs in Tamil Nadu innovativeness and adaptability to survive the Number of Investment Production Employment Year economic downturn and recession. units (Rs. In crore) (Rs. In crore) (in Numbers) 1.4 MSMEs in Tamil Nadu 2004-05 16253 1105.81 4556.97 60280 2005-06 20399 1705.20 4414.87 67800 The MSME sector has a major contribution to 2006-07 19201 714.41 2067.87 110026 the economy of Tamil Nadu. Tamil Nadu has 9.68 2007-08 27209 2547.14 8739.95 242855 Lakh registered MSMEs as on 31.3.2014. This 2008-09 32049 3557.89 13354.86 294255 sector provides employment to about 63.18 Lakh 2009-10 41799 3214.22 10880.01 151743 persons and accounts for a total investment of 2010-11 57902 5872.37 12500.86 405233 Rs.67,130 crore. MSMEs in Tamil Nadu produce 2011-12 70758 7429.59 15496.00 502381 over 6000 varieties of products including 2012-13 83348 8751.54 17503.08 583436 engineering products, electrical, electronics, 2013-14 116393 18939.87 16832.25 494990 5 6 such as cluster development will be adopted in implementing focused initiatives to make SMEs There has been a phenomenal growth in the competitive. number of MSMEs in Tamil Nadu from 3,87,597 in 2000 to 9,67,636 registered MSMEs as on 1.6 Special Package of Incentives announced by the Hon’ble Chief Minister 31.03.2014. The Hon’ble Chief Minister announced a 1.5 Vision Tamil Nadu 2023 Special Package to encourage the Micro, Small and Medium Enterprises sector on the floor of the The Vision Tamil Nadu 2023 released by Legislative Assembly under Rule 110 on 7.5.2013. Hon’ble Chief Minister has listed the following major This package contains the following 10 issues as confronting the SME sector. Announcements: Access to finance Conducive regulatory and policy (i) The subsidy granted on the total cost of the environment machineries and equipments to Micro, Access to technology Small and Medium Enterprises set up in the Industrial Backward Areas Micro Enterprises Market access set up in all parts of the State and for the Infrastructure availability agro based Micro, Small & Medium production Enterprises will be enhanced from 15% to 25%. The subsidy for this will The Vision document has also suggested a be a maximum limit of Rs.30 Lakh. strategy for effectively addressing the above issues through a combination of policy measures, skill (ii) To further encourage the development of Micro, Small and Medium Enterprises, in development and infrastructure facilities. Measures order to form new Industrial Estates a land 7 8 bank of about 2000 acres will be formed in a urban areas, the Government would provide phased manner through Small Industries 75 % grant of the total project cost and a Development Corporation in various places maximum of Rs.15 crores for getting in the State. electricity and water connections and other (iii) To facilitate the growth of Micro, Small and infrastructure facilities like conference halls, Medium Enterprises by having close common facility centres etc. Similarly, locational proximity with the large industries entrepreneurs associations coming forward so that comprehensive benefits are to set up new clusters in the outskirts of extended to them, minimum 20% of the total towns/ cities will be provided 50% grant upto area of land lying contiguous in all the a maximum limit of Rs.10 crores. Industrial Estates developed / to be developed by SIPCOT will be set apart for (v) As no consistent, uniform policy of land MSMEs and to be handed over to SIDCO on pricing for Micro, Small and Medium outright sale basis. SIDCO in turn will Entrepreneurs is suitably available in develop the land obtained from SIPCOT and SIDCO, and revising the policy of SIDCO in allot to Micro, Small and Medium allotting industrial plots / sheds to Micro, Enterprises, unlike in the past where the Small and Medium Entrepreneurs on allotment of plots / sheds morethan 5000 outright sale basis or on hire purchase basis, sq.ft requires government sanction, a suitable land pricing policy for the hereafter SIDCO would be conferred with allotment of industrial plots through SIDCO power to allot plots / sheds up to the extent will be formulated to make it consistent and of 50 cents. entrepreneurs friendly. The Industrial Plots/Industrial sheds in the Industrial Estates will also be considered for allotment (iv) The industrial units functioning in proximity to on 30 years lease basis. An option will be human habitations / residential areas, are given to the entrepreneurs to buy the plot on causing pollution and lack of space had full cost basis at the end of 30 years lease made their expansion impossible. The period. Government would offer all assistance and other facilities to entrepreneurs prepared to shift their units outside town areas. If these (vi) Creation of new industrial estate involves scattered units willing to shift outside the various stages i.e. from getting suitable land 9 10 (both private and Government) for the Complex will be established in Tirumazhisai formation of the estate till approval of the near Chennai as a first step at a cost of layout of the new industrial estate. The Rs.20 crores and small entrepreneurs will be entire process involves clearances and allotted modules on long term basis. approvals from various Government agencies / departments. In order to avoid delay, a state level Single Window (viii) The multi-storeyed industrial complexes Clearance Committee under the would be set up since the land cost around Chairmanship of Chief Secretary will be Chennai had gone up manifold and there are constituted.