Entrepreneurship & Government

ENTREPRENEURSHIP & GOVERNMENT

Government plays a very important role in developing entrepreneurship. Government develop
industries in rural and backward areas by giving various facilities with the objective of balances
regional development. The government set programmes to help entrepreneurs in the field of
technique, finance, market and entrepreneurial development so that they help to accelerate and adopt
the changes in industrial development. Various institutions were set up by the central and state
governments in order to fulfill this objective.

A. Institutions set up by Central Government

1. Small industries development organization (SIDO)

SIDO was established in October 1973 now under Ministry of Trade, Industry and Marketing. SIDO
is an apex body at Central level for formulating policy for the development of Small Scale Industries
in the country, headed by the Additional Secretary & Development Commissioner(Small Scale
Industries)under Ministry of Small Scale Industries Govt. of India. SIDO is playing a very
constructive role for strengthening this vital sector, which has proved to be one of the strong pillars of
the economy of the country. SIDO also provides extended support through Comprehensive plan for
promotion of rural entrepreneurship.

2. Management development Institute (MDI)

MDI is located at Gurgaon (Haryana).It was established in 1973 and is sponsored by Industrial
Finance Corporation Of India, with objectives of improving managerial effectiveness in the industry.
It conducts management development programs in various fields. In also includes the programmes for
the officers of IAS,IES,BHEL,ONGC and many other leading PSU’s.

3. Entrepreneurship development institute of India (EDI)

Entrepreneurship Development Institute of India (EDI), an autonomous and not-for-profit institute, set
up in 1983, is sponsored by apex financial institutions – the IDBI Bank Ltd., IFCI Ltd., ICICI Bank
Ltd. and the State Bank of India (SBI). EDI has helped set up twelve state-level exclusive
entrepreneurship development centres and institutes. One of the satisfying achievements, however,
was taking entrepreneurship to a large number of schools, colleges, science and technology
institutions and management schools in several states by including entrepreneurship inputs in their
curricula. In the international arena, efforts to develop entrepreneurship by way of sharing resources
and organizing training programmes, have helped EDI earn accolades and support from the World
Bank, Commonwealth Secretariat, UNIDO, ILO, British Council, Ford Foundation, European Union,
ASEAN Secretariat and several other renowned agencies. EDI has also set up Entrepreneurship
Development Centre at Cambodia, Lao PDR, Myanmar and Vietnam and is in the process of setting
up such centres at Uzbekistan and five African countries.

4. All India Small Scale Industries Board (AISSIB)

The Small Scale Industries Board (SSI Board) is the apex advisory body constituted to render advise
to the Government on all issues pertaining to the small scale sector. It determines the policies and
programmes for the development of small industries with a Central Government Minister as its
president and the representatives of various organization i.e. Central Government, State Government,
National Small Industries Corporations, State Financial Corporation, Reserve Bank of India, State

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Bank of India, Indian Small Industries Board, Non government members such as Public Service
Commission, Trade and Industries Members.

5. National Institution of Entrepreneurship & Small Business Development(NIESBUD),New

Delhi

It was established in 1983 by the Government of India. It is an apex body to supervise the activities of
various agencies in the entrepreneurial development programmes. It is a society under Government of
India Society Act of 1860.The major activities of institute are:

i) To make effective strategies and methods

ii) To standardize model syllabus for training
iii) To develop training aids, tools and manuals
iv) To conduct workshops, seminars and conferences.
v) To evaluate the benefits of EDPs and promote the process of Entrepreneurial
Development.
vi) To help support government and other agencies in executing entrepreneur development
programmes.
vii) To undertake research and development in the field of EDPs.

6. National Institute of Small Industries Extension Training

It was established in 1960 with its headquarters at Hyderabad. The main objectives of national
Institute of Small Industries Extension Training are:

i) Directing and Coordinating syllabi for training of small entrepreneurs.

ii) Advising managerial and technical aspects.

iii) Organizing seminars for small entrepreneurs and managers.

iv) Providing services regarding research and documentation.

7. National Small Industries Corporation Ltd. (NSIC)

The NSIC was established in 1995 by the Central Government with the objective of assisting the
small industries in the Government purchase programmes. The corporation provides a vast-market for
the products of small industries through its marketing network. It also assists the small units in
exporting their products in foreign countries.

8. Risk Capital and Technology Finance Corporation Ltd.(RCTFC)

RCTFC was established in 1988 with an authorized capital of 15 crores rupees. The main objectives
of RCTFC are provision of risk capital for the extension and expansion of entrepreneurial
development and venture capital for the projects with high techniques for technology development
and transfer.

9. Natioanl Research and development corporation (NRDC)

NRDC was established in 1953 under Department of Science and Industrial Research under
Government of India. Its main objectives are:

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i) Providing assistance in technology transfer

ii) Transfer of technology
iii) Establishing relations with various technology institutions and collecting various indigenous
techniques developed by them.

10. Indian Investment Centre

This is an autonomous organization established by Central Government. Its main objective is to assist
in promoting foreign cooperation with Indian entrepreneurs and providing necessary information to
foreign entrepreneurs.

11. Khadi and village industries Commission(KVIC)

Khadi and Village Industries Commission established by an Act of Parliament in 1956.It is a service
organization engaged in promotion and development of Khadi and Village Industries in rural areas. Its
main objectives are:

i) Providing employment in rural areas.

ii) Improvement of skills
iii) Rural Industrialization
iv) Transfer of Technology
v) Building strong rural community base and self reliance among rural people.

12. Indian Institute of Entrepreneurship (IIE)

It was established by the Department of Small Scale Industries and Agro and Rural Industries in
1953.It is autonomous organization with its headquarters at Guwahati. Its main objective is to
undertake research, training and consultancy activities in the field of small industry and
entrepreneurship.

13. National Alliance of Young Entrepreneurs(NAYE)

It has sponsored number of entrepreneurial development scheme in collaboration with various public
sector banks. The main objective of the scheme is to encourage young entrepreneurs to explore
investment and self –employment opportunities .It arranges for their training and assists them in
procuring necessary finance. In 1975 NAYE also set up a Women’s Wing to make women self-relaint
and to raise their status.

14. Centre for Entrepreneurial Development(CED) Ahmedabad

It was sponsored by the Government of Gujarat and public financial institutions operating in the State.
It conducts entrepreneurial development programmes at various centers. The important features of
training programme are:

i) Training programmes were conducted after survey for opportunities was made.
ii) Appropriate linkage was established with supporting agencies supplying finance, factory
sheds, raw materials, etc.
iii) Behavioural tests were conducted to select the entrepreneurs.
iv) Training programmes covered theoretical and practical aspects.
v) Full time project leader took follow up action after the training was over.

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15. Technical Consultancy Organisation (TCOs)

A network of TCOs has been established by All India Financial Institutions and State Government
throughout the country. These organizations have been set up to provide comprehensive package of
services to entrepreneurs in general and to small business entrepreneurs in particular. Their main
functions include the following:

i) Identifying potential industrial project.

ii) Preparing project reports, feasibility reports and pre-investment status.
i) iii. Identifying potential entrepreneurs.
ii) iv. Providing technical and administrative support.
iii) v. Conducting techno-economic studies of the projects.
iv) vi. Conducting market research and surveys.
v) vi. Rendering advice to set up laboratories and design centre.

18. Public Sector Banks.

Public sector banks in association with NAYE have been conducting entrepreneurial development
programmes. The main thrust of these banks has been to identify potential entrepreneurs in rural and
backward areas. For example Punjab National Bank started entrepreneurial assistance programme in
March 1977 in the States of West Bengal and Bihar. Similarly, Bank of India started entrepreneurial
assistance programme since August 1972 in the States of Punjab, Rajasthan , Himachal Pradesh, J& k
and the Union Territories of Chandigarh and Delhi.

The important Forms of entrepreneurial assistance are:

i) Identifying potential entrepreneurs

ii) Identifying viable projects.
iii) Assisting in preparation of project profiles
iv) Helping in project evaluation.
v) Arranging practical training.
vi) Financing the projects.

B. Institutions set up by State Government

1) Small Industries Service Institute (SISI):

Small Industries Service Institute is a national level organisation founded by Central government. At
the state level, SISI functions under the Director assisted by Deputy Directors. Total 28 SISIs and 30
divisions in State capitals and other towns in India. The small industries service institutes (SISI’s) are
established in every State to provide consultation and training to potential entrepreneurs. SISI
conducts EDP aiming educated jobless youth, ex-service staffs etc. for period of weeks.

2) District Industrial Centers (DIC):

Governments- both Central and State, attempted for entrepreneurship development in past, but actual
success have been far below the expectations. Also centre of attention of industrial development was
primarily on large cities and state capitals consequently ignored the district areas. In addition, variety
of institutions involved in small industries development and complex systems and procedures made
job of encouraging industrial units an uphill task for small entrepreneurs. Hence, it was felt essential
to establish a development agency, which could cater all services and facilities to village and small

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industries under one roof. Accordingly, the DICs were established in May 1978 in order to satisfy the
needs of small units. Each district has a DIC at its headquarters. The main function of DIC is to act as
a chief co-ordinator or multifunctional agency in respect of different government departments and
other agencies. The potential entrepreneur would get all help from DIC for setting up and running a
business unit in rural areas. DIC was not established in metropolitan cities like Delhi, Mumbai,
Calcutta and Chennai.

3) Maharashtra Small Scale Industries Development Corporation (MSSIDC):

The Maharashtra Small Scale Industries Development Corporation Ltd., generally known as
MSSIDC, was founded on October 19, 1962 with a vision to give strength to progress of Small Scale
Industries in Maharashtra State. The objective of MSSIDC is to help, guidance, and support, funding,
encourage the interests of Small Industries. The Corporation renders help to near about 30000 SSI
units in the Maharashtra. MSSIDC is top most Corporation in India concerning to small scale
industries. MSSIDC offers comprehensive backing right from how to establish a SSI unit to selling
goods at marketplace.

Incentives Subsidies and Grants by Government to promote entrepreneurship

Incentives, Subsidies and Grants are the financial assist provided by various institutions either
governmental or non-governmental. It is an efficient tool to the entrepreneurship promotion. They
execute functions of supporter for a developing entrepreneur.

1) Incentives: The term incentive means encouraging productivity. It is a motivational force which
makes an entrepreneur takes a correct decision and proceeds upon it. Broadly, incentives include
concessions, subsidies and bounties. Economic incentives both financial and nonfinancial move
forwards an entrepreneur towards important decision and action.

2) Subsidy: Subsidy indicates a single lump-sum which is given by a government to an entrepreneur

to cover up the cost. The term ‘bounty’ signifies a bonus or financial aid given to an industry to help it
to compete with other units in country or in a foreign market. The purpose of subsidies is to motivate
an entrepreneur to set up a new venture in well-built interest of nation and society.

3) Grants: Grants are a financial help by the government to prospective entrepreneurs without
expecting that money will be refunded. In cost-effectively challenged periods, the government is main
sources of grants.

4) Assistance: The progress of entrepreneurship development in recent times is wonderful. State and
Central governments and different organizations encouraging entrepreneurship are taking substantial
struggles to simplify the method of coming out of entrepreneurs for establishing enterprises.

i) Financial Assistance: Finance is a blood of any organization. Any Entrepreneurs requires relative
amount of finance to commence enterprise. Government solves this problem through providing
financial assistance to entrepreneurs. It is a long-term credit supplied by specialised financial
institutions to industry and business.

ii) Technical Assistance: Technical training improves productivity and it is imparted by the central as
well as state government technical foundations viz. NIESBUD, NSIC, NISIET.

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iii) Promotional Activities: Government is utmost careful for MSME by formulating and put into
practice appropriate policies and schemes. In addition to offering plots to entrepreneurs, distinct
schemes have been planned for purposes like quality up-gradation, shared amenities at minimal rates.

iv) Marketing Assistance: It is provided by governmental and other institutions. For promoting
Indian goods to abroad, the government has generated a marketing development fund which gives
grants; export promotion schemes with 60% of funding, etc.

Government’s various schemes launched for entrepreneurs are discussed below.

Prime Minister's Employment Generation Programme (PMEGP):

1) Ministry of Micro, Small and Medium Enterprises (MoMSME) has initiated a new credit related
subsidy scheme called Prime Minister’s Employment Generation Programme (PMEGP) by
combination of two schemes namely Prime Minister’s Rojgar Yojana (PMRY) and Rural
Employment Generation Programme (REGP) for creation of employment by launching of micro
enterprises in countryside as well as city areas.

2) PMEGP formulated in such a way that attractiveness of PMRY and REGP is not weakened while
consolidating supervising and implementation.

3) The subsidy levels under PMEGP are as under:

4) The higher limit of the project cost for manufacturing sector is Rs.25 lakh and for service sector is
Rs.10 lakh. There are no restrictions of annual income of beneficiaries but he/she must pass minimum
VIII standard. The beneficiaries would be identified from Panchayat, Special Awareness Camps and
will be provided with a compulsory Entrepreneurship Development Programme (EDP). The scheme is

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executed by Khadi and Village Industries Commission (KVIC) in rural area and in urban areas it is
executed through the State Governments {District Industries Centres (DICs)}.

5) The assessed total spending for subsidy under PMEGP is Rs.4485 crore plus Rs.250 crore
apportioned for offering Backward and Forward linkages for EDP training, 103 advertising,
marketing, e-tracking of applications, physical verification of projects for enterprises. The scheme is
getting independently re-evaluated after every two years. The guidelines of scheme available on
website: www.pmegp.in

Entrepreneurship Development Programme:

The aim of EDP is to give direction and awareness to several managerial and operational functions of
enterprise like finance, production, marketing, banking formalities, bookkeeping, etc. It takes account
of interface with successful rural entrepreneur, banks as well as orientation through field visits. The
EDP is conducted through KVIC, KVIB training centers as well as NSIC, the three national level
entrepreneurship development institutes (EDIs) i.e. NIESBUD, NIMSME and IIE, EDII, MITCON,
MCED and state governments, Banks, rural development and self-employment training institutes
(RUDSETI) reputed NGOs. But EDP is compulsory for all the PMEGP beneficiaries.

Awareness Camps:

KVIC and State DICs are organising awareness camps with help of KVIBs across nation to promote
PMEGP for prospective beneficiaries in rural and urban areas. The awareness camps comprises
participation from unemployed youths with especially reserved categories i.e., SC, ST, Physically
challenged, Ex-servicemen, Minorities, Women, etc.

Schemes of Ministry of Micro, Small and Medium Enterprises

(MSME) MSE-Cluster Development Programme (MSE-CDP): The government has implemented

cluster development method for improving efficiency and effectiveness of MSEs. The programme is
being executed for all-inclusive growth of micro and small enterprises in clusters through soft
intervention (such as diagnostic study, capacity building, marketing development, export promotion,
skill development, technology upgradation, organizing workshops, seminars, training, study visits,
exposure visits, etc.), infrastructure development in industrial areas. The guiding principles have been
cautiously improved in February 2010 to deliver advanced support to MSEs. Central government is
granting financial help for various activities as stated above. More than 460 clusters have been
identified and 126 proposals have been selected for infrastructure development.

1. Classification of Enterprises Previous conception of ‘Industries’ have been reformed to

‘Enterprises’. Enterprises have been categorized into:

i) Enterprises involved in the manufacture/production of products.

ii) Enterprises involved in of service sector.

1) Manufacturing enterprises have been explored in terms of investment in plant and machinery
(without plot and buildings) and further categorised into: -

 Micro Enterprises – investment up to Rs. 25 lakh.

 Small Enterprises – investment above Rs. 25 lakh and up to Rs. 5 crore
 Medium Enterprises – investment above Rs. 5 crore and up to Rs. 10 crore.

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2) Service enterprises have been explored in terms of investment in equipment (without plot and
buildings) and further categorised into: -

 Micro Enterprises – investment up to Rs. 10 lakh.

 Small Enterprises – investment above Rs. 10 lakh and up to Rs. 2 crore.
 Medium Enterprises – investment above Rs. 2 crore and up to Rs. 5 crore.

Credit Guarantee Scheme:

The Government has started a Credit Guarantee Fund for micro and small entrepreneurs who are
incompetent to assure deposit security so as to get loans for enterprises.

Objective: Credit facility by Bank deprived of botheration of securities is most important support to
entrepreneurs of Micro and Small Enterprise (MSE). Taking this in account, Central government
launched this scheme to available credit to MSE zone. For execution of this scheme, Central
government and SIDBI started Credit Guarantee Fund Trust for Micro and Small Enterprises
(CGTMSE). The aim is entrepreneur should get credit facility only on primary security of the
properties financed. Important aspect of Credit Guarantee scheme (CGS) is if lender fails to release
his/her liabilities, Guarantee Trust is incurring loss up to 75 / 80/ 85 per cent of total credit. For
Service Enterprises, maximum credit capacity Rs.100 lakh can be covered.

Schemes of Maharashtra Government:

Industrial Promotion Subsidy Scheme:

Government of Maharashtra launched Incentives Schemes for decentralization of industries. Scheme

is recognised as efficient for development of entrepreneurship. Government has categorised total
Maharashtra in six classes like A, B, C, D, D+ and no industry district according to industrial
development until now attained.

Jalgaon district is categorized as D zone and entitled up to 50% and 30% subsidy for fixed capital
investment, done through Micro/Small and Medium/Large scale businesses respectively. In addition,
other incentives like Stamp duty/Electricity duty discharge. Special incentives for quality
enhancement are also permissible.

Revised Seed Money Scheme:

To promote self-employment among jobless youths, Government of Maharashtra has launched this
scheme. For project cost ranges from Rs.10 lakhs to 25 lakhs, a cheaper rate of interest on seed
capital from 10% to 6% is applied.

Eligibility:

i) Age limit - 18 to 50 years.

ii) Minimum 7th Std. pass.
iii) Domicile of Maharashtra State.

D.I.C Loan Scheme:

1. Any rural service and cottage industry is eligible to get benefit under this scheme.

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2. Loan from D.I.C for general categories 20% upto Rs.40, 000/- and 30% for the SC/ST category upto
Rs.60,000/- against the project cost sanctioned by the Bank.

NABARD Margin Money Scheme:

i) Any rural small scale industry.

ii) Maximum Project cost upto 25 lakhs.
iii) 20% Interest free loan from NABARD with service charges.

Eligibility:

i) Special high-tech projects are eligible only.

ii) All nationalized and schedule commercial banks are eligible for finance.

Zilla Udyog Mitra:

This group of members is directed by the District Collector to resolve different complications of
business units. Team comprises of officers concerning to improvement of entrepreneurship and
Businesses Associations.

Export Oriented Units:

The Export Oriented Units (EOU) scheme was introduced to boost exports, increase foreign earnings
and created employment in India. The EOU scheme is complementary to the scheme for Free Trade
Zone, Export Processing Zone. Units that are undertaking to export their entire production of goods
are allowed to setup as a EOU. In this article, we look at the Export Oriented Units scheme in detail.

Export oriented units are units undertaking to export their entire production of goods. EOUs can be
engaged in manufacturing, services, development of software, repair, remaking, reconditioning, re-
engineering including making of gold / silver / platinum jewellery and articles. Further, units involved
in agriculture, agro-processing, aquaculture, animal husbandry, bio-technology, floriculture,
horticulture, pisciculture, viticulture, poultry, sericulture and granites can also obtain the status of
EOU.

The following are the benefits enjoyed by Export Oriented Units:

 EOUs are allowed to procure raw material or capital good duty free, either through import or
through domestic sources;
 EOUs are eligible for reimbursement of GST;
 EOUs are eligible for reimbursement of duty paid on fuels procured from domestic oil companies;
 EOUs are eligible for claiming input tax credit on the goods and services and refund thereof;
 Fast track clearance facilities;
 Exemption from industrial licensing for manufacture of items reserved for SSI sector.

For being accorded the status of EOU, the project must have a minimum investment of Rs.1 crore in
plant and machinery. This condition does not apply for software technology parts, electronics
hardware technology parks and bio-technology parks. Further, EOU involved in handicrafts,
agriculture, animal husbandry, information technology, services, brass hardware and handmade
jewellery do not have any minimum investment criteria.

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To obtain EOU status, application for setting up of unit under EOU scheme must be made to the
Board of Approval. If approved, a validity of Letter of Permission for setting up EOU is provided.
The Letter of Permission will have a initial validity of 2 years to enable the unit to construct the plant
and install the machinery. Further extension can be obtained for a period of upto one year. On starting
operation, in a period of 5 years, the EOU will have to achieve positive net foreign exchange earning
cumulatively.

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