Udyog Aadhar

 

Udyog Aadhar is a governmental scheme-enabling registration that is provided to the Micro Small Medium Enterprises. Being the backbone of an economic sector, Udyog Aadhar act as an engine that helps in the growth of the economy and promoting equitable development. The government of India provides various subsidies, schemes incentives to MSMEs/SSIs to promote it through MSME Act.

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advantages

Reservation
Policy

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The reservation policy is one of the most vital benefits given to enterprises in the form of a policy under this sector. To ensure that the MSME sector is not affected by the stiff competition in the market, the central government has given exclusive rights to manufacture certain products only to this sector. Under the Government Stores Purchase Program, the central government has reserved the purchase of more than 300 products exclusively from this sector. For example, wooden furniture and fixtures, pickles, bangles, ground nut oil, mustard oil, bread, jute, brakes, and clutches for automobile corporations, among others.

Entrepreneurial
Policy

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Filing of Entrepreneurial Memorandum is mandatory for enterprises engaged in the manufacturing process where as it is optional for enterprises engaged in rendering services. The banks are directed by the Reserve bank of India to allocate certain percentage of their lending to priority sectors like agriculture, Micro, small and medium sized enterprises, loans to poor students for their education, etc. However, medium sized enterprises do not fall under priority sector as they are financially sound. So, filing of entrepreneurial memorandum ensures the MSME enterprises get the benefit lending from banks.

Credit
Guarantee

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Micro and Small Sized enterprises can avail of a loan of up to 50 lakh collateral-free loan under this scheme. Since the micro and small companies are run by the poor, and the deprived, the RBI has directed banks to sanction collateral-free loans to such enterprises.

Capital
Aid

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Some MSMEs may not be able to use their resources to full potential due to the lack of the sophisticated technology required. The government, under the Capital Aid for technological up-gradation scheme, helps these enterprises upgrade their equipment through the latest technology by helping them get a low-interest loans from banks.

Market
Development

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Apart from the reserved products that government has promised to buy from theses MSMEs, they are given marketing assistance even to those products, manufactured by them, which do not fall under the purview of Reservation Policy.

limitations

Low
Wages

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Though SSI’s are labor intensive, the wages paid in SSI’s are low when compared to those paid in large scale industries. In many SSI’s because of lack of safety measures and proper training to workers, accidents and injuries are common occurrences.

Inefficiency
in Bussiness

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Due to lack of scale economies, low skilled and poorly trained workers and usage of outdated technology, small scale industry suffers from inefficiency of operations. Their productivity is low when compared to large scale industries.

Less Innovation
Capacity

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SSI’s have limited financial resources, therefore they are not able to invest adequately in research and development (R&D) or acquire technology. As a result, their technological up-gradation is less and they continue with outdated processes and techniques. This hinders their competitiveness and capacity to come out with new products, processes, etc.

Low Capacity
Utilization

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In many SSI’s, capacity utilization is low and productive capacity remains idle. Small firms are unable to utilize their full capacity due to problems related to finance, marketing, technology, skills etc.

Economies
of Scale

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SSI’s produce in small quantities. Therefore they do not enjoy economies of scale in purchases, production and marketing. Their costs are consequently higher and they are not able to compete with large scale units. They were able to survive when many of the items were reserved for production by SSI’s. But after the economic liberalization policy followed by the government, many of the items have been De-reserved. Therefore large scale units can also produce products which were earlier produced only by small scale units. Many of the SSI’s have closed down unable to compete with large scale producers and cheap imports from other countries, especially China.

FAQ's

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What kind of business comes under Udyog Aadhar?
Every Micro, small and medium business are counted under Udyog Aadhar.
Why should I apply before commencing options?
It is advisable to get a Provisional SSI Registration Certificate (PRC) before starting your operation in your enterprise. The PRC will work smoothly for you and will help you out with particular NOCs and clearances from regulatory bodies.
How is the value of Plant and machinery?
The original value of Plant and Machinery is to be taken in to account. The components, to be excluded while computing the value of Plant and Machinery, are detailed in the said notification.
Are MSME startups successful?
Yes, there are various MSMEs which are successful enough.
What is the impact of GST on MSME sectors?
The positive impact of GST on MSME is as it gives ease to start a business, reduces the tax burden, faster delivery, elimination of goods and services.
For how long is an MSME Provisional Registration Certificate Valid?
The validation of a PRC is for 5 years and if the unit is still not under operational then you may still re-apply for it. As soon as you start with your operations, you can easily apply for the Permanent License.

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