For long, the term ‘small enterprises’ means an industrial unit which employed less than 50 workers producing with electricity and than 100 workers without using electricity and had assets not exceeding Rs 5 lakhs.
In 1960, and even now the definition delimits the size of industries in terms of capital investment alone. Later on in 1966, some modification was made but that reduced the items to be included in evaluating the capital investment.
In 1966, the small scale enterprises were defined as undertakings with a fixed capital investment of less than Rs. 7.5 lakh and ancillaries with a fixed capital investment of Rs 10 lakh.
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Investment will imply investment in fixed assets in plant and machinery, whether held in ownership term or by lease or by hire purchase. In 1973, this limit was revised to Rs. 10 lakh for small scale enterprises and Rs. 20 lakh in case of ancillaries. One more category of small units known as tiny sector whose investment was fixed at less than 1 lakh.
Under the Industrial Policy statement of 1980, the limit was further raised to 20 lakhs in case of small- scale units and Rs. 25 lakhs in case of ancillary units. In the case of tiny units, the limit of investment had been raised from Rs. 1 lakh to Rs. 2 lakh. In March 1985, the government has again revised the investment limit of small-scale to Rs. 35 lakhs and for ancillary units to Rs. 45 lakh
Again, the Industrial Policy Statement of May 1991, increased the investment ceiling for small scale industries from Rs. 35 lakhs to Rs. 60 lakhs ; ancillary units from Rs. 45 lakhs to Rs. 75 lakhs and for tiny units from Rs. 2 lakhs to Rs. 5 lakhs.
On the recommendation of Abid Hussain Committee, during 1997, the investment limit was again raised for small units and ancillaries from Rs. 60/75 lakhs to Rs. 3 crores and that for tiny units from Rs. 5 lakhs to Rs. 25 lakhs.
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Ancillary Unit- According to the modified definition, an ancillary unit is one which sells not less than 50 percent of its manufactures to one or more industrial units.
Classification of SSI:
SSI are commonly classified under two heads:
1. Traditional small industries and
2. Modern small industries
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a. Examples of traditional small industries are khadi and handloom, village industries, handicrafts, sericulture, etc.
b. Modern small scale industries produce a wide range of goods from comparatively simple items to sophisticated products such as television sets; electronics control system, various engineering products, particularly as ancillaries to large industries.
a. The traditional small industries are highly labour intensive, while the modern small scale units make use of highly sophisticated machinery and equipment.
b. The share of traditional small industries in the total output of this sector is less than the modern small industries.
c. Unlike modern small industries, traditional village industries cannot provide full time employment to workers, but instead can provide only subsidiary or part-time employment to agricultural labourers and artisans.
d. Traditional small industries are largely carried on by labourers and artisans living below the poverty line, while modern small industries can provide good source of livelihood.