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 industrial undertakings]

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.

  1. 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.
    1. 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.
    2. 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.
    3. The cost of R&D equpiment and pollution control equipment will be excluded in computing the value of plant and machinery.
    4. 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.
    5. 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.
    6. 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.
    7. 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 undertaking.
    8. Cost of gas producer plant will be excluded.
  2. 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.
    1. 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.
    2. 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.
    3. 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

      4. 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.

    4. 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.
    5. 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.
    6. 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 (SSI)
    7. 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 sector.
    8. 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.
    9. Monitoring of the export obligation will be done by the office of the Chief Controller of Imports and Exports.

Sd/-
(C. K. Modi)
Addl. Secretary & Development Commissioner (SSI)