Davanagere University

Department of Commerce, Shivagangotri, Davangere.

EL 3.4- Promotion and Management of Small Business Enterprises.

Present by: Mr. A.P. SUBRAMANYAN

M.A.F., (M Phil).,

Faculty Member and Research Scholar, Department of commerce, Davanagere University.

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Module 4: Incentives and Subsidies

4.1 Policies initiatives for entrepreneurial growth. 4.2 Schemes of incentives in operation. 4.3 Incentives under the licensing regulations. 4.4 Incentives for development of backward areas.

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4.1 Policies initiatives for entrepreneurial growth.

1. Identification of backward areas and announcement of a number of concessions and incentives for the entrepreneurs to start their ventures in such areas; 2. Changes in the attitudes of both Central and State Governments towards private enterprises in general and promotion of small scale industries in particular. 3. Liberalization of Industrial Licensing Policy and announcement of special incentives for NRI investments and exporting industrial units. 4. Promoting coordinated development of large and small industries by2/14/2013 Mr. SUBRAMANYA A.P. 3

Continues.

Reserving further expansion either exclusively or

partly for the small sector in certain industries. Developing small industries more vigorously as ancillaries to large industries. Encouraging the participation of small industries in the export drive.

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Small Scale Industrial Policy

Separate small scale industries policy in August 1991. - For small scale industries the investment limit (investment in plant and machinery) is raised to Rs. 75 lakhs for both ancillary and export oriented units and Rs. 60 lakhs to SSI units. - The investment limit for the tiny sector was raised to Rs. 5 lakhs from Rs. 2 lakhs. - Irrespective of their location would be recognized as small scale industries. - The Small Industries Development Organization (SIDO) has been recognized as the nodal agency to support the small scale industries export promotion
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Continues.
- An export development centre would be set up in SIDO to serve the small scale units through its network of field officers to further augment export activities of the sector. - A technology development cell will be set up in SIDO which could provide technology inputs to improve quality and competitiveness of production of small scale sector. - The National Small Industries Corporation (NSIC) would concentrated on marketing of mass consumption items under common brand name and organization links between NSIC and SSIDCs would be established.
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Continues.
- The scope of the national equity fund scheme will be widened to cover projects up to Rs. 10 lakhs for Equity Support (up to 15%). - The single window loan scheme has also been enlarged to cover projects up to Rs. 20 lakhs with working capital margin up to Rs. 10 lakhs. - Small Scale Units can have equity support to the extent of 24% of the total investment from the medium and large scale industries, public undertakings and NRIs or foreign investment.

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Meaning of Incentives and Subsidies

incentive means concessions, subsidies and bounties. subsidies denotes a single lump sum which is given by a government to an industry.

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Advantages and Disadvantages

Advantages: They act as a motivational force which makes the prospective entrepreneurs to enter into manufacturing line. They encourage the entrepreneurs to start industries in backward areas. By providing subsidies and incentives the Government can Bring industries development uniformly in all regions
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Continues.
Develop more new entrepreneurs which leads to entrepreneurial development Increase the ability of entrepreneurs to face competition successfully Reduce the overall problems of small scale entrepreneurs. Disadvantages: 1.The antagonists argue that the incentive schemes may deteriorate into useless tax-give away schemes if they are not implemented properly.
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Continues.
2. Empirical studies reveals that the incentive schemes are being highly misused rather than properly used. Some of the units are located in backward areas with a view to mainly avail the subsidies and concessions. The real objective of providing incentives is hardly achieved. 3. Favoritism and corruption have crept into the administrative machinery which has caused much financial strain on the exchequer.
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4.2 Schemes of incentives in operation.

Export/Import subsidies and bounties Interest free loans Subsidy for R&D works Capital investment subsidy Transport subsidy Interest subsidy Subsidy for power generation Exemption from property tax Subsidies to artisans and traditional industries including handlooms
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Continues.
Incentives to non-resident Indians Special incentives to women entrepreneurs Exemption from income tax Interest free sales tax loans Sales tax exemptions Subsidy for buying test equipment Subsidy for industrial housing Land and building at concessional rates Price preference to SSI units Subsidy/assistance for technical consultancy Exemption from stamp duty
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Continues.
Concessional water Provisions for seed capital Allotment of developed/constructed sheds Allotment of controlled or subsidized raw material Subsidizing the cost of market studies/feasibility studies or reports
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4.4 Incentives for development of backward areas.

1. Concessional finance 2. Central investment subsidy 3. Tax holiday to new industrial undertakings set up in backward states and union territory Tax holiday for the power sector

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15

Thank you
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