5.3.1 The Small Scale Industries Sector has acquired an important position in the economic structure of the country. As per the published Report of the Development Commissioner, Small Scale Industries (DCSSI), the sector encompasses about 32 lakh units, during 1998-99 which produce over 7500 different items for domestic as well as foreign markets, contributing to about 40per cent of the value added to the manufacturing sector and its share in national exports stands at over 34per cent. The Sector accounts for about 95per cent of industrial units in the country and provides a gainful employment to about 175 lakh persons. However, according to the Expert Committee on Small Enterprises constituted under the Chairmanship of Shri Abid Husain, Former Member, Planning Commission, a substantial share in terms of output of the total Small Scale Sector is covered by the Small Industry Development Organisation (SIDO) but it does not cover all industries of the sector. Further, the available data suffers from sampling problems and are highly aggregated. The Report also mentioned that SIDO figures of the high growth rate of Small Scale Industries under their purview seems to be grossly exaggerated.
5.3.2 The spectrum of industries extends from the organised large and medium industries to modern Small Scale Industries and unorganised traditional industries. The last two (i.e. modern Small Scale Industries and unorganised traditional industries) are commonly called as Village and Small Industries (VSI). The VSI sector is divided into seven sub-sectors namely, Handicrafts, Handlooms, Khadi and Village Industries, Coir, Sericulture, Power Looms and Small Scale Industries not falling in any of these categories, which are referred to as residuals. The first five sub-sectors are often referred to as “traditional sector” whereas the power looms and residual Small Scale Industries are known as the “modern” Small Scale Sector. For the purpose of administration and development of these sub-sectors, there are supervisory bodies or boards at the Central level. These bodies are Development Commissioner for Handicrafts, Development Commissioner for Handlooms, Khadi and Village Industries Commission, Coir Board, Central Silk Board, Textile Commissioner and the Development Commissioner for Small Scale Industries (DCSSI). The Office of DCSSI has the responsibility for the residual Small Scale Industries, which are identified on the basis of investment limits in plant and machinery. However, the definition of Small Scale Industries has undergone a change over the years in terms of investment limit as given in Annexe 5.18. In 1955, for example, the SSI was defined as an establishment with a fixed investment of less than Rs. 5 lakh and employing less than 50 workers using power or less than 100 workers without power. But the employment criterion was subsequently dropped in 1960, and the SSI was defined solely in terms of investment in plant and machinery at original value. The investment ceiling was again revised from time to time generally in the upward direction keeping in view mostly the pace of inflationary effect over time. The upward revisions in the ceiling on the investment in plant and machinery were continued till 1997 when the limit was increased to Rs. 300 lakh. The ceiling was then revised downward to Rs.100 lakh in 1999 and this limit is continued to hold good at the time of submitting the report in August 2001.
5.3.3 The First All-India Census of Small Scale Industrial Units was conducted in 1973-74 by Small Industry Development Organisation (SIDO), covering units registered with the State Directorate of Industries and falling in the purview of SIDO to collect detailed data on various parameters of importance namely, production, capacity, employment, investment, borrowings, raw material used, fuel consumed, exports, etc. The census covered 1.4 lakh registered SSI units up to December 1970.
5.3.4 A Plan Scheme known as “Collection of Statistics of SSI” with a 100 per cent central assistance was introduced during the Fifth Five-Year Plan and was implemented with the help of the Small Industries Service Institutes (SISIs), State Directorate of Industries (SDIs) and District Industries Centres (DICs). The scheme aimed at updating the data provided by the Census on an annual basis through registration records. The Plan Scheme was also meant for compilation of the Index of Industrial Production for the Small Scale Sector.
5.3.5 The Office of DCSSI conducted the Second All-India Census of Registered SSI units to collect complete data on the working of all registered SSI Units in 1990-91 with reference year as 1987-88. The data collected through this Census happens to be the latest available data on the SSI sector. Out of a total number of 9.87 lakh registered SSI units, the census revealed that about 37 per cent of the units were either closed or non-traceable.
5.3.6 The Third Census of SSI units, scheduled to be conducted during 2001-02 with the reference year as 2000-01, is aimed to cover for the first time both registered and unregistered units in the SSI sector. The registered sector consists of units registered with State Directorates of Industries. However, traditional industries falling under the purview of Khadi and Village industries, Handlooms, Handicrafts, Sericulture, Coir sectors as well as Powerlooms sector will not be covered in the Third Census of SSI. The units that are registered as on 31 March 2001 will be covered on a complete enumeration basis. The unregistered sector consists of units, which are eligible for registration as per the definition of the SSI but are not registered, as the registration in SSI is voluntary. The unregistered SSI units, which are eligible for registration as on 31 March 2001, will also be covered in the Third Census through a sample survey. In this survey, a sample of about 2500 villages will be selected first and details of about 2.5 lakh sample units will be collected from the selected villages. The census will also cover the aspect of sickness and incipient sickness and their causes, which have not been covered in the earlier censuses. The fieldwork for the Third Census is expected to commence from August 2001 and is likely to continue till February 2002. Data processing and release of results are planned for completion by 31 March 2003.
Ad hoc Surveys and Studies
5.3.7 To analyse specific aspects of the Small Scale Sector like sickness, size of unregistered SSI sector, etc. ad hoc surveys and studies were conducted from time to time. So far, the Office of DCSSI has completed two diagnostic surveys on sickness during 1982-83 and 1994-95. One study for assessing the size and contribution of the unregistered units in the SSI sector was conducted through an independent agency namely, the Socio-economic Research Centre during 1994-95.
Index of Industrial Production – Small Scale Industries
5.3.8 For understanding the trend in production in the Small Scale Sector at the industry group level, a system of collection of production data was introduced in 1976. With these data, the Index of Industrial Production (Small Scale Sector) is being compiled by the Office of DC (SSI) with the object of estimating the growth of production in the Small Scale Sector on a regular basis. For this purpose a 2per cent sample was selected from the frame of working units available from the First All-India Census of Registered Small Scale Industrial Units (reference year 1970). The sample covered 2,400 units from which monthly production data on 356 important items is being collected on a quarterly basis. The quarterly Index of Industrial Production of the Small Scale Sector is being computed by the Office of DC (SSI) with base year 1970 for internal use only.
5.3.9 The Office of DCSSI has launched a revised scheme of data collection to improve the coverage of units in the Index of SSI Production. The scheme envisages the collection of data on about 500 items from 28,000 units capturing about 74per cent of the SSI production.
Representation of SSI in the Index of Industrial Production (IIP) Prepared by CSO
5.3.10 A scheme was introduced during the Sixth Five-Year Plan to give proper representation to the Small Scale Sector in the All-India Index of Industrial Production (IIP) compiled by the CSO. The Office of DCSSI regularly provides monthly production data to the CSO on 18 reserved items collected from about 4,800 SSI units selected from the frame of SSI units registered up to 1984-85 in order to provide representation of the Small Scale Sector in the IIP.
5.3.11 The Office of DCSSI could not supply the monthly production data for any of the additional items included in the 1993-94 series of IIP. Thus the representation of the Small Scale Sector in the All-India IIP remained inadequate. The Working Group on Commerce, Industry and the Corporate Sector under the Chairmanship of Dr. Arun Ghosh also examined this issue and recommended that the IIP should attempt to give a good estimate of the trends in the output of industries in the registered sector and a separate index for SSI Sector could be attempted on a quarterly basis.
5.3.12 The coverage of units in the unorganised manufacturing sector by the Office of DCSSI is not complete, since the units belonging to Handloom, Power Loom, Handicrafts, Coir, Sericulture, Khadi and Village Industries are under the purview of different All-India Boards and some of them under different ministries. However, an idea of the entire unorganised manufacturing sector could be obtained from the Economic Census conducted by the CSO. But the Economic Census does not capture all the relevant details of the working of these units and there are problems of differences in the definition of SSI as adopted by the Office of DCSSI and that adopted by the CSO for their censuses and surveys. The Economic Census provides information on broad parameters only like the number of units, employment, type of activity, location, etc. Detailed information on the unorganised manufacturing sector is collected through Follow-up Enterprise Surveys on unorganised manufacturing covering Directory Manufacturing Establishments (DME), Non-Directory Manufacturing Establishments (NDME) and Own Account Enterprises (OAE) in the Ministry of Statistics and Programme Implementation. The results of the Census and Follow up Enterprise Surveys could not provide information for the SSI sector separately. Some of the other deficiencies are as under:
The definition of Small Scale Industry, which is based on investment in plant and machinery (original value), has undergone frequent changes over time (see Annexe 5.18). The changes in the definition restrict the precise temporal comparison in growth of units or of the corresponding contribution.
Many SSI units do not get registered with State Directorate of Industries firstly, because registration is voluntary, and secondly as in metro areas, there are restrictions on registration under municipal rules. Further, no benchmark data is available for an estimation of the economic parameters of the entire SSI sector. However, the data on the registered SSI sector can be culled out by cross tabulation of data collected in the Follow-up Enterprise Surveys of the Economic Census and ASI.
The data collected by the Office of DCSSI are confined to registered SSI units only. There does not exist a system of removing closed units from the frame of registered units as the information regarding such units is not regularly available. The nature of SSI registration is voluntary as there is no legal backing for collection of data from this sector.
The SSI sector overlaps with units covered by the ASI and the unorganised sector on account of varying definition being adopted by the two organisations namely, DCSSI and Ministry of Statistics and Programme Implementation. Since the Ministry of Statistics and Programme Implementation is not collecting the information required to identify the SSI sector uniquely, this poses difficulties in properly estimating the extent of the overlap
The contribution of the unregistered manufacturing sector in the weighting diagram, estimated on the basis of Gross Value Added in 1993-94, is about 29 per cent in the overall IIP. On account of the non-availability of regular monthly production data, the unregistered manufacturing sector is represented by only 18 reserved items from the SSI sector, which constitutes less than one per cent in the all-India IIP. Further, the production data for these 18 reserved items is based on an outdated sample of about 4800 units selected from the frame of SSI units registered up to 1984-85.
The revised scheme launched by the Office of DCSSI to enhance the coverage of SSI sector in IIP and to improve the timeliness in supplying the data to CSO within 4 to 5 weeks as required under Special Data Dissemination Standards (SDDS), envisages the collection of data in respect of about 500 items from 28,000 units capturing about 74per cent of the SSI production. However, the production data for all the 500 items are not available on a continuous basis since 1993-94. Even the base year data for 1993-94 is not available. In the absence of the availability of base year data, the representation of the SSI sector in IIP was restricted to only 18 items and thus remained inadequate.
The Office of the DCSSI does not cover the entire Village and Small Scale Industries (VSI), as the units in Handicraft, Handloom, Khadi and Village Industries, Coir, Sericulture and Powerlooms are not within its purview.
5.3.12 In view of the above mentioned deficiencies, the Commission recommends the following:-
The representation of the SSI sector in the all-India IIP should be improved by extending the coverage of items for which DCSSI is collecting regular monthly production data.
Since the frames maintained by the source agencies do not make a distinction between the registered and unregistered units, a mechanism should be devised to avoid overlapping of units belonging to SSI and other source agencies, in respect of common items for which the production data is reported by two agencies.
The Office of DCSSI should make efforts to compile monthly IIP as against the present practice of compiling quarterly IIP, for monitoring the trend of the Small Scale Industries. Efforts should be made to enlarge the coverage of items in order to make the index more representative of the SSI sector. The base year of the two indices namely, all-India IIP and DCSSI index should be in close proximity if not the same.
The Office of DCSSI should publish the index for use by the Government, private agencies and researchers.
The Economic Census and the Follow-up Enterprise Surveys should collect the information on “investment in plant and machinery (original value)” and “whether registered as SSI unit or not”. The Economic Census would help in providing the number of registered and unregistered SSI units while the Follow-up Surveys would enable estimation of various parameters of these sectors. Similar information in ASI should also be collected to estimate the different characteristics of registered and unregistered SSI units in the total organised sector.
With the availability of information on the SSI sector from the Economic Census and Follow-up Enterprise Surveys, as mentioned above, the utility of conducting a future census of small-scale units should be examined. The detailed information, if any, required for the sector could be collected through sample surveys.
To facilitate evaluation over time, the Office of DCSSI should present data to enable time series comparison keeping in view the changes in the definition of the SSI sector.
The NSSO as a part of their tabulation programme should generate data on the principal characteristics relating to the SSI sector to enable cross comparison with DCSSI data.
Though administratively, the Small Scale Sector is divided into seven sub-sectors, which are under the control of different ministries and departments, the Office of DCSSI that is controlling the major segment of this Sector, should coordinate with the remaining six departments and generate a database for the sector. Thereafter, efforts should be made to compile an index of the overall Small Scale Sector.