Small scale industries are defined as those with investment in plant and machinery up to Rs. 1 crore. They are characterized by small capital investment, local employment, and sole proprietorship. SSIs are important as they are labor intensive, ensure equal distribution of wealth and income, act as a link to large industries, and have export potential. Running an SSI has advantages like not requiring high technology, ability to use local resources, short gestation period, and generating local employment. A feasibility study assesses the viability of a business project by analyzing various factors such as market, resources, costs and benefits. Proper documentation and registration of a business is important for reducing liability, defining roles and objectives, and protecting intellectual property.

1. Small Scale Industries
Definition
Characteristics
Importance
Advantages of running an SSI
A few definitions..
• Small scale undertakings - Engaged in manufacturing,
processing or preservation of goods; investment in plant and
machinery up to Rs. 1 crore
• Tiny enterprises - Investment in plant and machinery up to
Rs. 25 Lakh
• Small scale service/business enterprise - Investment in fixed
assets up to Rs.25 Lakh (excluding plant and machinery)
• Women enterprises- Small scale units with financial holding
of minimum 51% by one or more women entrepreneurs
• Artisans, village and cottage industries – Artisans and small
industrial activities in villages/towns with population of max.
50,000; utilising locally available natural resources;
individual credit requirement up to Rs.50,000/-
Characteristics of a SSI
• Small capital investment
• Generates employment, generally around 10 employees
• Located in rural and semi urban areas
• Generally a sole proprietorship business
• Funding from the entrepreneur’s personal funds
• Exploitation of human resources (Women and child labour)
• Organising and management skills are often neglected
• Financial discipline is weak
• Encourages entrepreneurial growth
• Balanced regional development is ensured

2. Importance of SSI
• Labour intensive
• Ensure an equal distribution of income and wealth
• Act as a link to large scale
• Act as a training ground for entrepreneurs
• Mobilize resources and services
• Give rise to capital formation
• Has a huge export potential
• Are extremely innovative and productive
Advantages of running a SSI
• Most do not need high level of technology and are labour
intensive and hence do not need huge start up or working
capital
• SSI projects can be undertaken in a short time frame
• Use of abundant local natural resources is possible
• Small scale enterprises can be linked to large businesses
which help in their growth and progress
• Able to generate local and permanent employment
• Have a short gestation period
PROCEDURES FOR SMALL SCALE INDUSTRIAL LICENSING
License
 According to economics license means:-
A government-issued permission to engage in an activity or to operate
a business.
Criteria For SSI in India
 Industry employing less than 100 workers.
 Having fixed assets of less than Rs 10 lakhs need not obtain any
license.
(Subject to the condition that the unit is not owned, controlled or
subsidiary of any other industrial undertaking)
 Small scale units have to conform to the rules and regulations
prescribed by state or local authority under the Factories Act.

3. The Industries (Development and Regulation) Act, 1951
 Section ١٠ refers to the requirement of registration of existing
industrial units.
 Section ١١ refers to the requirement of licensing of new industrial
undertakings.
 Section ١١A deals with licences for the production of new articles.
 Section ١٣ refers, inter alia to the requirement of licensing for effecting
substantial expansion.
LIST OF ITEMS RESERVED FOR THE SMALL SECTOR

4. EXEMPTION FROM INDUSTRIAL LICENSING
 Licensing is exempted for industrial undertakings (including
MRTP/FERA companies)other than those in the small scale/ancillary
sector, if
 i) The proposed article(s) of manufacture is not included in Annex I, II
or is not reserved for small scale/ancillary sector.
ii) The proposed project is not located within 25 kms. from the
periphery of the standard urban area limits of a city having a
population of more than 1 mln. according to the 1991Census (list
enclosed).
 This condition, however, will not apply to electronics, computer
software, printing industry and other non-polluting industries that may
be notified from time to time.
 Those units who have received SIA or DTDG registrations for
manufacture of the reserved items.
SUBSTANTIAL EXPANSION
Substantial expansion of existing units will also be exempt from licensing
provided the item of manufacture is not covered by Annex I, Annex II or
reserved for the small scale/ancillary sector.

5. Manufacture of New Article
 Existing units will be permitted to manufacture any new article without
additional investment if the article is not otherwise subjected to
compulsory licensing
 This facility would be available notwithstanding any location
conditions.
FILING OF MEMORANDA
 In respect of new projects for manufacture of articles not covered by
compulsory licensing or their substantial expansions the only
requirement would be that the industrial undertaking shall file a
memorandum in prescribed form to the Secretariat for Industrial
Approvals (SIA) in the Ministry of Industry.
 Such a memorandum will also have to be filed by those industrial
undertakings to be engaged in non-scheduled industries i.e. those not
covered under the I(D&R) Act.
 The memorandum will be accompanied by a crossed demand draft of
Rs. 1000/- in favor of the Pay and Accounts Officer, Department of
Industrial Development, Ministry of Industry, Nirman Bhavan, New
Delhi - 110011.
 The receipt of the memorandum will be acknowledged by the SIA and
a reference number will be given. Industrial undertakings should quote
this reference number in all future correspondence, if any, with the
SIA
PROBLEMS IN SMALL SCALE INDUSTRIES
Classification of the problems
 The internal problems.
 The external problems.
Internal problems
 A) Planning:
 a) Technical feasibility:-
 - Lack of technical know-how.
 - Locational disadvantage.
 - Outdated production process.
 b) Economic Viability:-
 - High cost of inputs.
 - Uneconomic size of the projects.
 - Underestimation of financial requirements.
 - Over estimation of demand.
 B)Implementation.

6.  C) Production.
 a) Production Management:
 - Poor quality control.
 - Poor capacity utilization.
 - Poor inventory management.
 - Inadequate maintenance.
 - High wastage.
b) Labour management:-
 - Inefficient handling of labour problems.
 - Excessive manpower.
 - Lack of trained and skilled labour.
 c) Marketing management:-
 - Dependence on a single or small group of customers.
 - Defective pricing policy.
 - Lack of market research.
 d) Financial management:-
 - Liberal dividend policy.
 - Inadequate working capital.
 e) Administrative management:-
 - Over centralization.
 - Lack of professionalism.
 - Lack of feed-back to management.
 - Incompetent management.
External problems
 A) Infrastructural bottlenecks:-
 - Irregular supply of raw materials.
 - Transport bottlenecks.
 B) Financial bottlenecks:-
 C) Government controls and policies:-
 - Government price controls.
 - Change in government policies.
 D) Market constraints:-
 - Market saturation.
 - Technological advances rendering one’s product obsolete.
 E) Extraneous factors:-
 - Natural calamities.
 - Political situation.
 - War.
 - Strikes.
 - Multiplicity of labour unions.

7. Feasibility Study
Definition
• Activities / efforts / analysis to measure the cost and benefit of a
business project in order to define the efficiency and effectiveness of
the project's method and tools is know as feasibility study
• The results determine whether the solution should be implemented.
This activity takes place during the project initiation phase and is made
before significant expenses are engaged.
Types of Feasibility Studies:
 Market and Real Estate Feasibility
 Technology and System Feasibility
 Resource Feasibility
 Cultural Feasibility
 Legal Feasibility
 Schedule Feasibility
 Economic Feasibility
• At this stage the client’s business needs are analyzed, information
about project participants is collected, and the requirements for the
system are gathered and analyzed.
• The client’s expectations for system implementation are studied and
the proposed solution is offered.
During the Feasibility Study stage, the project’s goals, parameters and
restraints are agreed upon with the client including:
 Project budget and rules for its adjustment;
 Project time frame;
 Conceptual problem solution.
The following tasks are performed at this stage:
 The project feasibility is estimated and the project scope is defined
 Risks and benefits are identified
 Project structure is elaborated
 Project is roughly planned
 Next project stage is planned precisely
 Cost of the next phase is evaluated precisely and cost of the other
phases — approximately
 Functionality development priorities are defined
 System creation risks are estimated.

8. At the end of this phase the following documents are available:
 Feasibility Report — description of the proposed solution and list of
high-level functional requirements
 Project Structure — description of the project organization
 Project Plan — project schedule
 Risks List — list of potential project risks and possibilities of their
elimination.
Some norms of Feasibility study:
 The Feasibility Report must be agreed upon and signed by
the client.
 Signing this document means that the client and the project
team have a common understanding of the project goals and
tasks and have reached agreement on the process for
project implementation.
 Average duration of this phase is about 10% of the total
project duration.
Steps of Business Feasibility Study
 Determining
- general questions to answer
- specific questions to answer
 Constructing a framework to answer those questions
 Determining the data needed
 Implementing the Business Feasibility Study
Framework of Feasibility Study.
General description of the business
1. Legal aspects (to be in line with the law and regulation)
2. Social aspects (to be in line with the social environment)
3. Management aspects (capability of the owner and top
managers and general methods of managing the business
project)
4. Technical aspects (timing, location, capacity, tools,
production methods, technology, input, employees, etc.)

9. 5. Market aspects (market structure, competitors, market target,
market share, advertisement, projected sales)
6. Financial aspects (funding, fund allocation, projected balance
sheet + income statement + cash flow, Net Present Value, IRR,
BCR, etc)
7 General Conclusion
Feasibility report
Feasibility Report is “studying a situation and a plan to do
something about it, and then determines whether the plan is
"feasible" or it is practical.
 It answers the question of whether a plan should be
implemented by stating "yes", "no", and sometimes
"maybe".
 Not only recommendation, it should also provide the data
and the reasoning behind that recommendation

10. Feasibility factors
LOCATION
• An industrial feasibility study refers to the appropriate location
selection ,that is where the project should be located, because the site
may significantly influence the cost of production and distribution
,distribution efficiency ,the operating environment ,etc
Factors
Factory Design
• Factory design refers to plan for a particular type of building ,
arrangement of machinery and equipment, provision of service
facilities, lighting , heating , ventilation etc in the building.
• It influences the operational costs of the enterprise.
Factory layout
• It is a floor plan for determining and arranging the desired machinery
and equipment of a plant.
• Factors like nature of product, volume of production, material handling
,type of equipment, factory building , system of manufacture, service
facilities, etc ., should be taken into consideration while choosing a
layout.

11. Importance
• Factory design and layout should be flexible so that it may be adapted
easily to technological change, modernization , diversification and
expansion with minimum cost and time.
Optimum size
• The size and the scale of operations of the unit determines its
efficiency and profitability
• This is determined by the laws of returns to achieve equi-marginal
returns from all resources or factors of production.
• It indicates a rational allocation of resources and a combination of
inputs to secure maximum outputs under existing economic conditions
and maximum profit due to the lowest average cost.
Measure of size

12. DOCUMENTATION & REGISTRATION
WHAT IS DOCUMENTATION
 Something transposed from a thought to a document; the written
account of an idea.
 It is usually paper books or computer readable files (such as HTML
pages) that describe the structure and components, or on the other
hand, operation, of a system/product.
Subfield of Documentation include:
 Scientific documentation
 Technical documentation
 Legal documentation
 Administrative documentation
 Historical documentation
IMPORTANCE OF DOCUMENTATION
 Documentation will
 Reduce liability,
 Mitigate risk from lawsuits and unforeseen events,
 Resolve disputes,
 Outline the details of wealth distribution
 Clearly define the specific roles of the partners, employees,
advisors, Board of Directors and other company stakeholders;
 Raise capital; and
 Define the business objectives and execution strategy.
 Clearly define the specific roles of the partners, employees,
advisors, Board of Directors and other company stakeholders

13. A good but far from comprehensive documentation list...
 Standard Operating Procedures
 A document that outlines the relevant corporate policies,
decision making procedures, business processes, accountability
controls, etc.
Incorporation Documents
 The incorporation documents should also serve to limit liability by
serving as a shield to protect the personal assets of investors,
managers, etc.
Shareholder's Agreement
 A shareholder's agreement will help facilitate a smooth transition for
the remaining partners to enable the business to continue as an
ongoing concern.
Intellectual Property Rights Protection Agreements
 Trademarks, copyrights and patents fall into this category.
 These agreements are intended to provide legal safeguards to protect
the competitive advantage that is gained by the ideas and proprietary
information, processes, products, logos, etc. of the company.
Insurance Agreements
 Insurance is intended to mitigate the risk of unforeseen, unfortunate
and potentially catastrophic events that could substantially cripple or
kill the business.
 Insurance is also used protect the employees of the business and
their beneficiaries from possible temporary or permanent life-altering
and/or financially paralyzing events, such as catastrophic injury or
disability, substantial property damage or destruction, death, serious
health concerns, etc.
Licensing Agreements
 Licensing agreements that are required to operate the business from
local, state, federal and international regulatory authorities.
 A lack of compliance by not obtaining the appropriate licenses can
spell disaster and potentially shut down a business and/or cause
substantial liability to be incurred by the partners.

14. Employment Agreements
 Defines the working relationship between employee and employer.
 In addition, through a non-compete clause, they will typically provide
protection for a number of years to the company from the threat of
employee departure by preventing direct competition by the (former)
employee.
Confidentiality Agreements
 Prevent parties from sharing information with outside parties that
could have potentially damaging competitive, financial and/or business
implications (e.g., violation of the confidentiality in a merger
transaction).
Written Contracts
 All business arrangements and agreements between parties should be
documented.
 Though verbal agreements are enforceable, a written agreement
limits the potential for misunderstanding and can provide protection in
litigious situations.