Circular 4/91-SSI Bd. Dated 7.5.91
[Enclosure to D.O.
letter No. 4/91-SSI Bd. Dated 7.5.91 from addl. Secretary & Development
Commissioner (Small Scale Industries) to Secretary (Industries) of States/Uts
regarding enhancement of investment limits in the small scale/ancillary
Subject : - Enhancement
of investment limits in the Small Scale and Ancillary Industrial Undertakings.
The Government has
issued a Press Note on 19th March, 1985, raising the investment limits
in small scale industrial undertakings from Rs. 20 lakhs to Rs. 35 lakhs
and for ancillary industrial undertakings from Rs. 25 lakhs to Rs. 45 lakhs
in plant and machinery. Keeping in view the escalation in the cost of plant
and machinery since then, Government has been considering the question
of upward revision of these investment limits. Accordingly, Government
has placed a statement in (both housese) Parliament on 31st May, 1990 outlining
certain policy measures to be adopted including enhancement of investment
ceiling of small scale/ ancillary industrial undertaking. In pursuance
of this, a draft notification for changing the definition (enhancing the
limits) of small scale/ancillary industrial undertakings was placed before
the parliament on 7th August, 1990, as per the provisions of Section 11B
(3) of the Industries (Development & Regulation) Act, 1951. Parliament
did not disapprove or modify the draft notification in any way within thw
period stipulated in Section 11B (3) of I (D&R) Act, 1951. Accordingly,
Gazette Notification No. S.O. 232 (E) dated 2nd April, 1991 has been issued
(copy enclosed) under sub-section (1) od Section 11B and sub-section (1)
of Section 29B of the Industries (Development & Regulation) Act, 1951
enhancing investment limits in fixed assets in plant and machinery, whether
held on ownership term or by lease or by hire purchase, for small scale
and ancillary industrial undertakings as per details below: -
Tabular matter available on request
Besides the criterion
of investment ceiling an ancillary industrial undertaking is one which
is engaged or is proposed to be engaged in the manufacture or production
of parts, components, sub-assemblies, tooling or intermediates or the rendering
of services, and the undertaking supplies or renders or proposes to supply
or render not less than 50 percent of the production or services, as the
case may be, to one or more industrial undertakings.
An undertaking within
the investment limits in plant and machinery under different categories
and other requirements mentioned above would now be exempt from the licensing
provisions of the Industries (Development and Regulation) Act, 1951. The
various conditions and stipulations regarding industrial licensing mentioned
in notification No. S.O. 629 E dated 30th June, 1988 would, however continue
to operate except for investment ceiling for SSI which have now been revised.
This will, be subject to the condition that such an undertaking shall not
be a subsidiary of or owned controlled by any other undertaking.
- Certain clarifications
and explanations have been issued from time to time by the Government regarding
computation of investment in fixed assets in plant and machinery of small
scale/ ancillary industrial undertaking. These would continue to hold good
and are reproduced below for the sake of convenience.
- In calculating
the value of plant and machinery, the original price paid by the owner,
irrespective of whether the plant and machinery are new or second hand,
will be taken into account.
- The cost of
equipment such as tools, jigs, dies, moulds and spare parts for maintenance
and the cost of consumable stores will be excluded in computing the value
of plant and machinery. Similarly, the cost of installation of plant and
machinery will also be excluded.
- The cost of
R&D equpiment and pollution control equipment will be excluded in computing
the value of plant and machinery.
- In the case
of imported machinery, import duty will be included, but not the miscellaneous
expanses like transprtation from the port to the siteof the factory, demurrage
if any paid at the port and premium if any paid for import entilement or
import of machinery. However, shipping charges, customs clearence charges
and sales tax should be included in computing the cost of plant and cahinery.
- The cost of generation
sets, if any, installed will be excluded. Similarly, the cost of extra
transformer, etc which have to be installed by a unit as per the regulations
of State Electricity Board would also be excluded.
- The bank charges
and services charges paid to the National Small industries Corporation
or to the State Small Industries Corporation will be excluded in computing
the cost of plant and machinery.
- The cost involved
in procurement/installation of cables wiring bus-bars, electrical control
panels (not those mounted on individual machines), OCBs/MCBs etc., ehich
are necessarily to be used for imparting electrical power to the plant
& machinery / safety measures is not to be taken into account for computing
the cost of plant and machinery for determining the status of an industrial
- Cost of gas
producer plant will be excluded.
- Consequent upon
upward revision of investment ceiling in fixed assets in plant and machinery
of small scale/ ancillary industrial undertaking, procedural formalities
in certain specific situations envisaged are also clarified as under.
- Industrial undertakings
which have crossed the limit of Rs. 35 lakhs in the case of small scale
industrial undertakings and Rs. 45 lakhs in the case of ancillary industrial
undertakings, but fall within the revised investment limit and are holding
industrial licence or have got themselves registered with DGTD or other
technical authorities on or before the date of the notification raising
the investment limits, will be treated as small scale undertakings and
ancillary undertakings, as the case may be. Such undertakings will have
an option to be transferred to the State Directorate of Industries or to
continue with DGTD. This option will have to be exercised within six months
fronm the date of the notification **1**. However, in the meanwhile(i.e.
upto a period of six months) these undertakings will continue to receive
their raw material assistance through the DGTD. However an industrial undertaking
exercising the option to continue with the DGTD or the concerned technical
authority, will not be entitled for the incentives and concessions which
are extended to small scale undertakings.
- Small scale and
ancillary undertakings which were granted carrying-on-business licences
on crossing of the investment limits prescribed prior to the date of the
notification, would now be eligible to be treated as small scale undertakings
and ancillary undertakings, in accordance with the revised definition,
if they fall within the revised investment limits. The COB licences in
their cases, will be treated as dormant.
- In the case of
undertakings which had crossed the previous investment limits prior to
the date of notification and applied for COB licence, they will no longer
be required to obtain COB licence provided their case falls within the
enhanced limits, now fixed for small scale and ancillary undertakings.
No further action
1 Amendment issued
vide circular No. 4/91 - SSI Bd. & Policy, dated 10.9.1993
It is clarified that
any unit in the small scale in possession of a COB licence or formerly
registered with the DGTD can, at ant time, apply for registration as a
small scale industrial undertaking. Such unit should be registered as such,
provided they satisfy the definition criteria, irrespective of the fact
that they may have applied after the period of six months from the date
of notification No. S.O. 232 (E) dated 2.4.1991.
would be taken on
their COB applications. They will continue to be treated as small scale
/ ancillary undertakings.
- The undertakings
which has crossed the previous investment limits (of Rs. 35 lakhs/45 lakhs)
prior to the date of notification raising the present limit, and which
had neither obtained nor applied for COB licence, as was required under
the existing law, would have breached the provisions of the Industries
(Development & regulation)Act 1951. In view of the fact that they now
qualify for treatment as small scale and ancillary undertakings eligible
for exemption under the licencing provisions. Government have decided to
treat such breach as a technical breach only and to condone their non-compliance
with the provisions of the industries (Development & Regulation) Act,
1951 during the period for which they might have crossed the previously
laid down investment limits and under which they would require COB licence
provided their cases fall within the enhanced limits now fixed for small
scale / small scale with at least 30 percent exports/ ancillary undertakings.
- In industrial
undertaking which has crossed the limit of Rs. 60 lakhs prior to the date
of the notification, but has exported at least 30 percent of its production
in the previous year and falls within the revised investment limit of Rs.
75 lakhs for exporting units and has got itself registered with DGTD or
other technical authorities, on or before the date of notification raising
the investment limit to treated as small scale industrial undertaking.
Such undertaking will have an option to be transferred to the State Directorate
of Industries or continue with DGTD. This option will have to be exercised
within six months from the date of notification. However, in the meanwhile
(i.e. upto a period of six months) these undertakings will continue to
receive their raw material assistance through the DGTD. However, an industrial
undertaking exercising the option to continue with the DGTD or the concerned
technical authority will not be entitled for the incentives and concessions
which are extended to small scale undertakings.
- In case of industrial
undertakings which graduate to medium scale units by process of natural
growth will get raw material assitance from DGTD, for a period of six months
from the date of registration /grant of industrial licence / COB licence
at the same level as earlier approved by the Director of Industries / DC
- All units which
cross the limit of investment as now prescribed in the definition of small
scale / ancillary industrial undertakings by process of natural groath
will need registration with DGTD or other technical authorities. The units
engaged in the manufacture of such items which are not eligible for exemptions
from the licencing provisions in terms of any earlier notification issued
by the Department of Industrial development ( e.g. units engaged in the
manufacture of items exclusively reserved for small scale scetor, units
requiring foreign exchange for import of components and raw materials in
excess of the prescribed limits and industries requiring regulation) will
need a 'carrying-on-business' licence before crossing this limit. Such
units will have to submit their applications in the prescribed manner to
the secretariat for industrial approvals. In granting the registration
with DGTD/ technical authorities or the COB licence, the export obligation
on such units consistent with the policy or protection to the small scale
- Directors of
industries will keep a special watch over the units which are about to
cross the upper limits of the definition as as to enable a smooth transfer
of units from the Directorate of Industries to DGTD/ Technical authorities
and that the units take timely action to obtain the COB licences, whereever
necessary. However, if a small scale unit wishes to have some more time
for the transfer to the DGTD list, a grace period of two years will be
allowed during which period it will continue to enjoy all the facilities
under the small industries programme. A special report on such units will
be made by the Directors of Industries to the Development Commissioner,
Small scale industries.
- Monitoring of
the export obligation will be done by the office of the Chief Controller
of Imports and Exports.
(C. K. Modi)
Addl. Secretary & Development Commissioner (SSI)