11287.handbook For MSME Entrepreneur

Page
Content
Foreword
Introduction to the MSME Sector
Knowledge on Bank Loans
Preparation on Bank Loans
Preparation of a Project Report
19
NEIIPP
26
Central Subsidy Schemes
Central Transport Subsidy Scheme,2007
31
Central Capital Investment Subsidy Scheme,2007
40
Central Interest Subsidy Scheme, 2007
44
Central Comprehensive Insurance Scheme
49
Operational Guidelines of NEIIPP,2007
Back Page
30
50
Foreword
A dynamic MSME sector is the backbone of a growing economy as it not only creates employment
opportunities, income and assets but also constitutes the entrepreneurial hub in the country. In India
this sector , constituting over 90% of total enterprises of the country has been considered as the
engine of growth . The liberalization process have thrown open many new opportunities for the
sector , which is witnessing a steady growth with significant investments and accounting for highest
rates of employment growth and major share of industrial production and exports.
However, this sector in the Northeast is still in a nascent stage and is plagued with a wide array of
issues. Access to Finance, Market linkages, Quality , Productivity and cost management are the
some of the critical areas which needs to be addressed to make the sector competitive and ready to
take advantage of the opportunities emerging for this sector Confederation of Indian Industry
accords high priority to the development of micro, small and medium enterprises and provides :
Effective and integrated assistance to enable them to grow and contribute significantly to the
nations economy.
Institutional linkages to ensure sustainable competitive advantage.
This handbook has been developed by CII on how they can take advantage of the various schemes ,
policies and loan facilities provided by Banks and Financial Institutions. I hope this handbook will
be of immense help for the entrepreneurs while developing proposal for project finance from bank
and institutional credit.
Mr Dipak Chakravarty
Chairman,CII Assam State Council&
Managing Director, Numaligarh Refinery Limited
Handbook for MSME Entrepreneur

Introduction to the MSME Sector
Before we go into the in-depth analysis of the growth of the MSME Sector in the north east, let us
first get a clear idea on what is MSME.The following chart will give us an insight into the sector
wise categorisation of this sector:
Sector
Manufacturing(Original Investment In) Service( Original InvestmentIn)
Micro
Plant and machinery Up to Rs 25 lacs
Equipment up to Rs 10 lacs
Small
Plant and machinery Rs 25 lac-5 Cr
Equipment Rs 10 lacs- 2 Cr
Medium
Plant and machinery Rs 5-10 Cr
Equipment Rs 2-5 Cr
Priority Sector Lending:
Priority sector lending includes only those sectors as part of the priority sector, that impact
large sections of the population, the weaker sections and the sectors which are employmentintensive such as agriculture, and tiny and small enterprises.
Bank's lending to the Micro and Small Enterprises is reckoned for priority sector advances. Lending to
Medium enterprises is not eligible to be included for the purpose of computation of priority sector
lending.
In order to ensure that sufficient credit is available to micro enterprises within the MSE sector,
banks should ensure the following:
(a) 40 per cent of the total advances to MSE sector should go to micro (manufacturing) enterprises
having investment in plant and machinery up to Rs. 5 lakh and micro (service) enterprises having
investment in equipment up to Rs. 2 lakh ;
(b) 20 per cent of the total advances to MSE sector should go to micro (manufacturing) enterprises
with investment in plant and machinery above Rs. 5 lakh and up to Rs. 25 lakh, and micro (service)
enterprises with investment in equipment above Rs. 2 lakh and up to Rs. 10 lakh. Thus, 60 per cent
of MSE advances should go to the micro enterprises.

(c) While banks are advised to achieve the 60% target as above, the allocation of 60% of the MSE
advances to the micro enterprises is to be achieved in stages viz. 50% in the year 2010-11, 55% in
the year 2011-12 and 60% in the year 2012-13.
Special Bank branches for MSME
Public sector banks have been advised to open at least one specialized branch in each district.
The banks have been permitted to categorize their MSME general banking branches having 60%
or more of their advances to MSME sector, as specialized MSME branches for providing better
service to this sector as a whole.
MARKET LINKAGE
Government will actively encourage trade with neighboring countries and countries in South
East Asia such as :
a)
Reimbursement of 50% of the rent/fee paid by the unit for participation in Trade fair/
exhibition sponsored or recognized by Government within India Subject to a ceiling of
Rs.10, 000.
b)
Reimbursement of 50% of the transport cost incurred on exhibits for participation in

Government sponsored/ recognized trade fair/ exhibition in South East Asia subject to a
ceiling of Rs.50, 000.00 per exhibition.
c)
A unit can avail this benefit for a maximum three times.The Industries Department will
make adequate provisions forimplementing the incentive.

Guidelines for delayed payment of dues to the MSE borrowers
(i) The buyer to make payment on or before the date agreed on between him and the supplier in
writing or, in case of no agreement before the appointed day. The agreement between seller and
buyer shall not exceed more than 45 days.
(ii) The buyer fails to make payment of the amount to the supplier, he shall be liable to pay
compound interest with monthly rests to the supplier on the amount from the appointed day or, on
the date agreed on, at three times of the Bank Rate notified by Reserve Bank.
(iii) For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the
interest as advised at (ii) above.
(iv) In case of dispute with regard to any amount due, a reference shall be made to the Micro and
Small Enterprises Facilitation Council, constituted by the respective State Government.
TIME FRAME FOR DISPOSAL OF LOAN APPLICATIONS MADE BY THE MICRO SMALL
ENTERPRISES
up to a credit limit of Rs. 25,000/-, within 2 weeks
and those up to Rs.5 lakh within 4 weeks
(provided the loan applications are complete in all respects and accompanied by a 'check
list')
UNIQUE FEATURE OF MSME LENDING
Perception of high credit risk
Lack of transparent credit information
Lack of Collaterals
Reluctance to submit stock statement
Diversion of fund
High propensity of loan impairment
Credit Rating in evolution stage
Poor Management

INTERNAL REASONS
Lack of skilled / technical staff for appraisal of Hi-tech projects
Lack of co-ordination with Govt. Depts. / FI

Inadequate support from Controlling Office / Legal / Technical cell
Inadequate organizational arrangements
CGT SCHEME

TO SUM UP
MSMEs while starting up aim to break barriers and graduate to large business conglomerates
Hundreds of success stories could be quoted where MSMEs with a start turnover of Rs.1 crore to
Rs.10 crores have become large corporates with turnover of over Rs.1000 crores within a decade
apart from diversifying and expanding.
But business enterprise is a passion and it should be looked at with maturity and tinkered at every
stage of growth with appropriate rebalancing in terms of financial strength, human capital and
product strength.

Knowledge on bank loans
Approaching a bank successfully for getting a loan is one of the major concerns of Small and
Medium entrepreneurs in North East India. The main expectations of the borrowers are easy
and quick accessibility to loan funds, which are available in the form of several bank schemes.
Purchase of capital assets such as machines and equipments, and meeting working capital
requirements, are the main reasons for approaching a bank for a loan.
The banks on the other hand have a number of schemes to provide credit services to small
entrepreneurs but their outreach is often restricted, as they do not consider the entrepreneurs
creditworthy. Entrepreneurs are often disqualified for not being able to prepare a project correctly;
failure to convince about repayment capacity, either from the project or from other sources; lack of
proper marketing arrangement; and also due to the absence of a proper business plan. In addition,
there is a prevailing notion that the people in the NER of India are by and large not bankable!
This view is largely held by bankers, perhaps due to higher proportion of NPA shown in bank
statistics as well as banking experience shared by colleagues who have served in the north eastern
region of India. This notion is gradually fading with the successes of micro credit programmes in
the region, which have been reported by various organizations from the grass roots: and also as a
result of the emergence of successful small entrepreneurs in the region over the last few years,
most of whom have grown with the help of commercial bank finance.
The future looks bright with the growing entrepreneurial confidence shown by a section of small
entrepreneurs; their integrity and competence have been observed by financial and
developmental organizations all over the country.
It is generally agreed that it is not possible to do business by entrepreneurs without financial
services support from banks. Banks being professionally run organizations have developed various
schemes and services and are prepared to serve the potential entrepreneurs. The big questions
here are: whether the small entrepreneurs, community organizations and non-government
organizations have the correct approach for accessing finance purely for commercial purpose
from the banks? Are they prepared to approach the bank for a second loan?
In the NER, there are several issues which arise while sanctioning loans to small and medium
6

sector entrepreneurs. Most of the bankers are from outside the region and therefore knowledge
about the region is definitely scanty in the beginning. Then when they come to the region, the
feedback they get would veer around the problem of bad recovery history in the region. Their
tenures here are also short say, for 2/3 years, and by the time they understand theregion, they
are transferred back.
Overview of the Credit Market in North East India
The North Eastern region (NER) of India comprise of 8 states with a population of 39.93 million as
per 2001 census, which accounts for 3.8 per cent of the total population of the country. A large
portion of this population live in the Brahmaputra and Barak valley and the rest are spread
across the upland areas of the region. Banking infrastructure in the region has been established
to meet the credit and savings needs of this population.
During the period 1994 to 1999 the growth of bank branches in the entire country was 4.35 per
cent while the North Eastern region witnessed a growth rate of 2.31 per cent. By contrast, the
percentage of rural branches, are much higher in the region (61.9 per cent) as compared to the
rest of the country (50.9 per cent). As of March 2002, the number of rural branches in the entire
NER stood at 1,254, in semi-urban area at 373 and in area urban 258 with a total of 1,885
branches. However, viability of rural branches is a matter of concern in the NER with a low
recovery rate at 17 per cent.
Bank clients on the other hand need to improve their approach to strengthen their access to
credit and maintain sound relationship with banks.

Preparations for a Bank Loan
Preparation for a Bank Loan is an important responsibility of the Borrower, which is often
overlooked while approaching a bank for a loan. Generally a person looking for bank loan to
finance a new project or even for working capital finance overlook a number of things that they
should be responsible for producing before a bank officer.
The following usually happens:
The borrower meets the banker often without an appointment. Very rarely, one wouldfind
someone meeting a bank manager with an appointment. On meeting the banker for the
first time, the entrepreneur spends substantial time introducing one-self and talking
casually about their proposal without much preparation.
Thereafter, several meetings are arranged and, in each meeting the banker would raise a
new query. The reason being, at the very first meeting the borrower did not provide
complete information about the project, nor gave relevant information required to make a
decision for giving a loan. As a result, the entrepreneur becomes frustrated; and often, first
generation entrepreneurs give up their initiative for starting a business with a bank loan.
If at all the banker decides to give the loan after several meetings, considerable amount of
valuable time will have already been spent.
In general, the entrepreneur ends up not receiving the loan from the bank due to lack of
proper information regarding the project as well as about his credibility or his ability to
repay the loan. In fact, the borrower has failed to convince the banker the feasibility and
viability of the project. For example, he has failed to explain how the loan is going to be
utilised, what the expected returns from the project are and whether the returns will be
sufficient to repay the loan.
The broad framework for fulfilling such borrower responsibilities are given below:
a) General approach: What do you need to take along when you first meet the banker?
You may take time to get the documents below, but having them before the first meeting is
desirable. This shows that the borrower is serious. The banker is a very busy man and

therefore, things, which can be submitted at the first meeting itself for him to read later
helps the process.
b) Preparation for the First Visit
Things to carry
-
A concrete project report. Bankers want to see something in black and

white.
Training, exposure visits, contracts with machinery providers should

be documented and placed.
Market survey needs to be shown.
The banker would like to see somebody who has the money, perhaps
to make a fixed deposit. Therefore proof of assets of the
company/person should be there. Only the people who are moneyed
get the loan. Even the dress matters! If the customer is going with a
friend or the consultant, they need an introduction, and this should be
kept in mind too.
Land documents must be there. Miyadi patta/ original sales deed in

the borrower's name is needed along with Jamabandi papers. If this is
not available, then a lease deed for at least ten years should be there
to show that land is no problem.
If there are any insurance (life) papers then the surrendered value
paper from the concerned organizations (These papers are required
for mortgage only) should be brought along. If available, fixed deposit
account papers could be also submitted.
A 'no objection certificate' from the existing commercial banks of the

area.
Land valuation papers from approved quantity surveyor.
Registration of the unit, either with SSI/ DICC/Sales Tax

Department(VAT Registration)
Issues to discuss regarding the project needs to be listed and thought through. So that
the issues could be discussed precisely and clearly.
Entrepreneurs need to keep and maintain financial books and records such as:
personal expenditure account, labour wage record, tax account, insurance premium

record, savings and investment record, record of subsidies received if any, etc. In
addition, if one has already started the business, then one needs to maintain and
furnish yearly profit and loss accounts, cash flow statement and balance sheet of the
business. A book of accounts reflects the business character of the borrower, which is
more important for banks for a check on his or her personal character than a guarantor's
recommendation.
Next, the borrower must be ready to patiently wait for the decision of the banker.
It is important to take note finally, that an entrepreneur should take at least a year to
conceptualise and think through the project or the business venture for which he
proposes to borrow money from the bank. This will also help him to remain focused on
his business goals.
c) Guidelines for preparation of a Project Report

Presentation of a project report to the banker shows the borrowers character as a true
professional. A neatly presented project report for a commercial loan reflects the character
of the borrower as one who has discipline. It leads the banker to believe that he is perhaps
likely to apply the same discipline in his business and in the utilization of the bank loan.
The project report therefore needs to be prepared by appraising the project and then
incorporating the appraisal in the business plan. The different types of appraisal that
are used in formulating a project are outlined below:
q Technical appraisal This consists of a number of aspects regarding the entire
business operation. For example, it will deal with environmental or health hazards
related to the raw materials used in the production process or the residues and
production wastes. It ascertains that there is no change in the manufacturing process;
estimates the production capacity of the plant; whether any future expansion of the
plant be required; the extent to which the product mix-requirement change; examines
the optimum level of production, plant lay out, water supply, power supply, raw material
specification, input requirement for running the plant such as fuel and lubricants; and
whether the plant is suitably located. Furthermore, it also examines the extent of quality
standard norms the unit might need to maintain as per industry requirement.
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q Commercial appraisal This is usually done with respect to number of product range
that is feasible to produce; sales volume for the market; identifying various segments
of the market that the product will possibly cover; marketing network; dealer and
retailer coverage; and price margins at various level of the market chain or the supply
chain. It also assesses the number of competitors and the extent of competition in the
various markets and different market segments. Therefore, the focus of this section
will be the commercial feasibility and viability of the enterprise project in question
within the commercial environment. It also takes into account pricing policy,
packaging, transportation, distribution channels and sales promotion strategies. Profit
margins are examined as per the product mix and the possible change is sometimes
recommended in the product mix to maximize profits.
q Financial Appraisal- This appraisal determines the financial position of the unit after
examining the value of the assets and current liabilities of the entrepreneur. It
examines the financial requirement of the unit as per the technical and commercial
appraisal. Estimated working capital requirements are also worked out for expected
level of capacity utilization. Application for a loan from a bank or from any other formal
financial institution, especially to set up a new enterprise needs to have the following
analysis done in the project report:
Break-Even Analysis- The break-even analysis is done to find the break-even
point i.e., the point, at which the enterprise makes neither profit nor loss, and can
just recover the cost of production. To calculate the break-even point, two types of
costs are to be taken into account: Fixed Cost and Variable Cost.
Fixed Costs are the following: salaries and wages; repairs and maintenance
costs; administrative expenses; fixed selling expenses; fixed royalty and
know-how payments; interest on debt (i.e., interest on bank loans or other
forms of credit); and depreciation (in the experts' language it is the 'straight line
depreciation').
Variable Costs are those that are incurred in the following: Raw materials;
outside purchase; purchase of goods for resale; consumable stores and
spares; packing material; power, fuel and water; royalty payments linked to
sales; variable selling expenses; interest on working capital; and variable
proportions varying in addition to outputs.
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The Break - even point =
Fixed Cost or Marginal Cost

Fixed Cost
=
Sales Price Variable Cost Contribution
Contribution = Sales Realistion Variable Cost
Break-even points can be of three types:

Volume of production to calculate this figure, the break-even point is multiplied by the projected
volume of production, for example:
The Break - even point =
Fixed Cost
estimated production volume
Contribution
Percentage of installed capacity - To calculate the break-even point as the percentage of

installed capacity it is multiplied with the average installed capacity. For example - To calculate the
break-even point as the percentage of installed capacity it is multiplied with the average installed
capacity. For example :
Break - even as % of installed capacity =
Fixed Cost
average installed capacity (%)
Contribution
1000
90% = 30%
3000
Amount of sales - Similarly, the break-even as the amount of sales is calculated by multiplying
the break-even point by estimated/ or budgeted sales.
Debt service Coverage Ratio (DSCR): This ratio is one, which indicates the capacity of the unit
to repay term loan and interest on the loan thereafter. It can be calculated during the entire
repayment period separately for each year and also as an average for the entire repayment
period.
DSCR =
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Profit after Tax + Depritiation + Interest on term loan + Lease Rentals

Repayment of term + Intetest on term loan + Lease rentals

Fixed Assets Coverage Ratio: Term loans are normally given against the security of fixed assets.
When there is excess of fixed assets over term loans provide margin on security then this ratio is
worked out to find the available security cover.
Debt-Equity Ratio- This ratio indicates the relationship between term liabilities and owned funds
and helps in assessing the capital gearing. Debt is cheaper to finance a project as compared to
equity owing to taxation policy. But certain amount of equity is required to cushion for debt. The
higher the debt equity ratio, lower will be the margin available to the banker for its term loans. The
instalment of term loan (debt) repayable within one year and preference capital redeemable within
one year is treated as current liability and excluded in the long-term debt equity ratio calculation.
There are four methods for understanding the profitability of the project of which the last two
methods are usually used reliably by most financial institutions for project finance to assess the risk
as it takes into account the time value of money.
Payback Method-This method is estimated for recovering the entire investment made in the
project. Although the calculation of the payback period method is simple, it ignores the time
value of money.
Average Rate of Return Method- In this method the entire life of the project is taken into
account, unlike the payback period. The annual operating profit (after depreciation) for the
entire life of the project is taken and the rate of return on original investment and average
investment is calculated. The average profit is divided by original investment as well as
average investment to get the rate of return on them.
Net Present Value (NPV) - This is calculated by discounting the cash flow for all the years
during the expected life of the project and is discounted at a pre-determined cut off rate and
the present value is obtained. This rate should equate with the cost of fund that the
entrepreneur will have to pay as interest on loans. When the NPV is positive at this rate or at
the rate of cost of capital the project proposal is accepted. On the other hand, if the NPV is
zero, it indicates that the total earning from the project is equal to the cost of funds that the
entrepreneur will have to pay. If the NPV is negative, the bank will not accept the project
proposal. The several discount rates are used to discount the projected cash flow from the
project until a rate is found when the NPV is zero. This discount rate is the Internal Rate of
Return.
Internal Rate of Return- This return is calculated to assess the return from the project in
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relation to the interest rate charged by the financial institution. If the Internal Rate of Return is
higher than the Bank's interest rate, the project is considered to be viable.
Organisational Appraisal- This appraisal is done to assess the organizational strength and
weakness of the organization in relation to the vision and mission statement, strategic objectives
and operational goals of the organization.
a) Working Capital Requirement
Financial feasibility with regards to linkage with other plants is also examined in much detail. In
addition, finally keeping in view the future cash flow the repayment schedule is drawn of existing
loans and additional term loans. Further the following information may be submitted along with the
application for working capital requirements:
Turnover Ratios: This indicates the extent to which gross working capital is turned around in a
year. It further indicates the level of holdings of various inventories and receivables. The ratios
given below are very useful for banks providing working capital finance to judge the efficiency
of the management in utilization of inventories and recovery of receivables:
Raw material stock + Finished goods + Work in progress +

Spares, packing materials + receivables
Current ratio holding ratio (months) =
Gross sales/12
Raw materials holding ratio (months) =

Stores Holding ratio (months) =
Stock of raw materials

Raw material consumed during the year/12
Stock of shares
Consumable stores used during the year /12
Work - in - process ratio (months) =
Stock of work - in - process

Cost of production /12
Finished Goods Holding ratio (months) =
Stock of the finished goods

Cost of goods sold/12
Receivables (including contingent

liability for bills discounted)
Collection ratio (months) =
Gross sales/12
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Raw material stock + Finished goods + Work in progress
+ Spares, packing materials + receivables
Currrent Assets Holding ratio (months) =
Gross sales/12
Furthermore, the efficiency with which capital assets have been used and comparison with similar
enterprises in the same industry as well as the relationship between total value of goods sold and
funds deployed can be understood with the help of the following ratios:
Total Income to Fixed assets ratio (times) =
Net sales + other income (Operational)

Net fixed asset + Future lease rentals payable
Net sales + Other income (operational) +

Other income (non - operational)
Capital turn around ratio (times) =
Net Fixed Assets + Future lease rentals payable + Investment +
Current Assets - Provisions - Creditors
Working capital management of the business would also consider the following financial indicators:
production growth rate, growth in sales, quick ratio, current ratio, net profit to sales, gross profit to
sales, and return on investment, which needs to be also worked out particularly when the business
is in operation for several years. These ratios could be calculated in the following way:
Quick Ratio =
Quick Assets
Current Liabilities
Current Ratio =
Current Assets
Current Liabilities
Net Profit to Sales =
Net proft
100
Sales
a) Business Plan for a New Venture

A business plan is important to convince a banker about the probable success of the
enterprise or venture for which financial assistance is sought from the institution. In order to
improve upon your business plan, it is always helpful to discuss your business plan with
your consultant and also take the help from local businesspersons in your district town or
15

your city. For example, you could discuss your business plan with a member of your local
business community, particularly issues related to: supply chain, procurement, marketing,
pricing, etc.
One the other hand, for machines used in your manufacturing plant you could, apart from
consulting a technical consultant (who would usually be a company representative or an
independent consulting firm), discuss with local fabrication and electrical businesses.
There could be persons in your locality who are familiar with machines in your proposed
unit. So these people are invaluable community assets for you as a beginner.
We would like to present to you the salient features of a business plan that is recommended
for small and medium scale industrial projects. If you prepare a project report in this
manner, you are likely to ful-fill a major responsibility for producing a comprehensive project
proposal for acquiring finance from the bank. The following steps are explained in a logical
sequence.
Business Concept: This the first section of the business plan that explains the type of
business; the industry and the nature of the market in which the business is going to be
established; the product range to begin with; the objective of the business and the
business strategy that the entrepreneur is going to follow to establish the business in
the market.
Industry Setting: This section describes the industry setting in terms of the size of the
market, number of markets, suppliers for the business, the long-term focus and trend
on the future of the market in which the products are going to be sold. The market
situation in terms of the legal and institutional matters related to the industry.
Marketing Strategy:The marketing strategy is one of the most important features of
the business plan. This is one of the sections that the banker is keen to look at before
disbursing a loan. The section should describe the target market of the products,
distribution structure, sales network, promoters and promotion.
Operating Strategy:In this section the discussion should revolve around the basic
elements of operation of the business, such as: the use of specific technology; use of
different facilities; procurement system; and general operation management policies.
Investment plan: In this section the investment plan should be a 'logical extension' of
the production and marketing plan, the choice of technology and the location of
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technology in which the investments are going to be made. This section should also
give the timing of investment during the course of project implementation.
Resource Mobilization:The section of the project would discuss the existing capital
requirement, and a brief outline of the financial plan. It is useful to take the help of a
financial consultant to work out the financial plan. In projects dealing in sectors with a
large number of sub-sectors such as agriculture or entertainment, it is useful to take
the support of a technical consultant along with the financial consultant for preparing
the financial plan.
Resource Allocation:There are mainly three types of resources in a business
enterprise: financial, human and raw material for production. This section discusses
the allocation of human resources, raw materials and financial resources as per the
business strategy and internal business decisions of the enterprise.
Performance: This section discusses how the performance of the business would be
monitored as per the business targets set by the enterprises. For example, the
performance monitoring in terms of sales and profitability targets.
We would like to present to you the salient features of a business plan that is
recommended for small and medium scale industrial projects. If you prepare a project
report in this manner, you are likely to ful-fill a major responsibility for producing a
comprehensive project proposal for acquiring finance from the bank. The following steps
are explained in a logical sequence.
Business Concept: This the first section of the business plan that explains the
type of business; the industry and the nature of the market in which the business is
going to be established; the product range to begin with; the objective of the business
and the business strategy that the entrepreneur is going to follow to establish the
business in the market.
Industry Setting: This section describes the industry setting in terms of the size
of the market, number of markets, suppliers for the business, the long-term focus and
trend on the future of the market in which the products are going to be sold. The
market situation in terms of the legal and institutional matters related to the industry.
Marketing Strategy:The marketing strategy is one of the most important
features of the business plan. This is one of the sections that the banker is keen to look
at before disbursing a loan. The section should describe the target market of the
products, distribution structure, sales network, promoters and promotion.
17
18
Operating Strategy:In this section the discussion should revolve around the
basic elements of operation of the business, such as: the use of specific technology;
use of different facilities; procurement system; and general operation management
policies.
Investment plan: In this section the investment plan should be a 'logical
extension' of the production and marketing plan, the choice of technology and the
location of technology in which the investments are going to be made. This section
should also give the timing of investment during the course of project
implementation.
Resource Mobilization:The section of the project would discuss the existing
capital requirement, and a brief outline of the financial plan. It is useful to take the
help of a financial consultant to work out the financial plan. In projects dealing in
sectors with a large number of sub-sectors such as agriculture or entertainment, it is
useful to take the support of a technical consultant along with the financial consultant
for preparing the financial plan.
Resource Allocation:There are mainly three types of resources in a business
enterprise: financial, human and raw material for production. This section discusses
the allocation of human resources, raw materials and financial resources as per the
business strategy and internal business decisions of the enterprise.
Performance: This section discusses how the performance of the business would
be monitored as per the business targets set by the enterprises. For example, the
performance monitoring in terms of sales and profitability targets.

PREPARATION OF A PROJECT REPORT
While preparing detailed project report (DPR), some of the necessary information and documents
required are given as below :
a) Indicative Information Required In Detailed Project Report (DPR)
b) Indicative Checklist of Documents to be submitted with the Detailed Project Report (DPR)
These are the indicative and guideline to the entrepreneurs / consultants to help in preparing
detailed project report which can be submitted to the banks or financial institutions.
INDICATIVE INFORMATION REQUIRED IN DETAILED PROJECT REPORT
COMPANY/FIRM
1. Memorandum and Articles of Association with certificate of incorporation.
2. IEM/DIC registration
PROPOSAL
1.
What is the project proposal, cost of the project, Equity or promoter/self contribution and
Term Loan.
2.
What is the proposed capacity of the project?
3.
What is the proposed capacity utilization?
BACKGROUND OF PROMOTERS/DIRECTORS AND THEIR EXPERIENCE

1.
Detailed bio-data of each inter-alia name, Father's / Husband's name, age, qualifications
and experience in the proposed line of activity and other fields.
2.
Promoters' place of residence, permanent and temporary and address for communication,
telephone numbers and e-mail id.
3.
Detail experience of the Promoter, particularly in business management of present activity.
4.
Proposed shareholding pattern and definite source of meeting the commitment of

promoters' contribution.
5.
Details of Associated business along with the balance sheet and profit & loss account for
the last three years.
6.
Income tax return for the last three years.
7.
Details of networth
19

BACKGROUND OF THE PROJECT
1.
For existing unit, describe in detail, the experience, background and operational
details of the unit.
2.
For existing organization getting into new business, write details of the reason getting
in to the new business.
3.
What are the reasons for your going into the project?
4.
Audited Balance Sheet, Profit & Loss account for the last three years, in case of
existing unit.
ORGANIZATIONAL STRUCTURE AND MANAGEMENT

1.
Existing and proposed organizational Chart.
2.
Number of Managers, Supervisors, Workers - Skilled, Unskilled etc.
3.
Availability of adequate manpower. What arrangement is done to ensure qualified and

adequate manpower.
TECHNOLOGY/COLLABORATION
1.
Describe type of technology being proposed.
2.
Is the level of technology high or low?
3.
A note on the performance of various units based on the same/similar technology in

the region/country.
4.
Technical competency you command over the proposed technology.
5.
Name of the Machinery suppliers, their reputation, their past business in the same
state/area.
6.
Latest Price Quotation of the machinery, equipment.
7.
Any technical arrangement/tie-up? If yes, Name & Address of the collaborator.
8.
A detailed note on important terms and conditions of the collaboration agreement

relating to performance guarantee of the plant with regard to quality and output, buyback arrangement, assistance to marketing etc.
9.
Note on the background of the collaborators.
1.
PRODUCT, MARKETING AND SELLING ARRANGEMENT
20
1.
Uses of the product.
2.
Industry analysis and major competitors.

3.
Demand and supply position indicating the demand supply gap. The published
data on these aspects should be submitted.
4.
In case, exports are envisaged, furnish the comparative advantages of the

product in the export market.
5.
Details of marketing & selling arrangements.
LOCATION AND LAND

1.
Proposed location of the project and advantage.
2.
Details of land such as area, nature of possession viz. ownership, leasehold. Nonencumbrance certificate etc.
3.
Description on the proposed location and site of the project. Distance from the main
market, and reasons/advantages thereof i.e. distance from the raw material source,
distance from the market from finish goods, availability of labour, power, water,
infrastructure, communication/transport and other factors related to the proposal.
4.
Status of the land allotted , whether it is industrial or agricultural land. Status of

necessary clearances for conversion of land use.
5.
Whether location/site is prone to natural calamities such as Earthquake, Flood, Cyclone,

flood, landslide etc.
6.
NOC from concerned Authorities such Local/Village authorities with non- encumbrances
certificate.
PROCESS
1.
Detailed description of the process involved in manufacture of the product.
2.
Process flow-chart/Block diagram of the process.
3.
Salient features of the process with justification.
4.
Quality control measures.
5.
Arrangement made for effluent treatment.
RAW MATERIAL & CONSUMABLES

1.
Raw materials/consumables required for manufacture of the product.
2.
Present price of various inputs along with three quotations of each raw material.
3.
Demand supply of critical raw materials and consumables.
4.
Industry report/analysis
5.
Arrangement for procurement of raw materials.
21

6.
Detail analysis of the raw material requirement.
UTILITIES
1.
Different type of utilities existing/proposed to be installed.
2.
Consumption and cost per unit output.
3.
A note on:1.
Power: Estimation of connected power requirement, sanctioned load & tariff

rate. Status of sanction of requisite power load from SEB. Is the power
regular?
2.
1.
DG Set: Capacity required
Water: Quantity of water required, storage capacity, arrangement proposed for

obtaining the requisite amount of water.
2.
Fuel: Quantity required, storage capacity and arrangements proposed for

procurement.
3.
Compressed air and Steam: Quantity required existing/proposed arrangement
4.
Natural Gas: Quantity required existing/proposed arrangement
DETAILS OF ENGINEERING CONSULTANTS, TECHNICAL CONSULTANTS AND

ARCHITECHTS
1.
Their experience in the same field or on similar projects/plants. A list of various jobs
handled in the past, scope of work handled earlier and job presently handling.
2.
Scope of work of the consultant/architects.
COST OF THE PROJECT

1.
Land: Break-up of the cost of land and site development.
2.
Building & Civil Works: Approved civil drawings of the building showing plan/elevation
and cost estimates.
3.
Plant & Machinery: The details of plant & machinery with price quotation. The details
of delivery schedule, performance guarantee, lay out etc.
4.
Details of Misc. Fixed Assets includes furniture & fixtures and equipment other than
the main machines.
5.
Preliminary & Pre-operative expenses including interest during construction period.
6.
Details of working capital and its arrangement.
22

OTHERS
1.
Implementation Schedule.
2.
Status of various Govt. approvals required for implementation of the project.
3.
Copies of applications made for working capital to a bank.
4.
Copies of applications/letter sent to other financial institutions involved, if any, in case of

joint financing with these institutions.
Financial Analysis
1.
Project cost and Means of Financing
2.
Detailed profitability estimates along with the assumptions of profitability,
3.
Cash Flow Statement,
4.
Projected Balance Sheet,
5.
Financial Ratios
6.
Repayment Schedule
LAND DOCUMENTS
1.
2.
If on lease 1.
Registered lease deed
2.
NOC from lessor to create mortgage
3.
Title Investigation Report
If owned 1.
Pattas/Registered sale deeds
2.
Certified to be true copy of Jamabandi
3.
Certified to be true copy of Chitha
4.
Non Encumbrance Certificate
5.
Land revenue payment receipt
6.
Trace map
7.
Search reports
8.
Valuation report
9.
Title Investigation Report
23

INDICATIVE CHECKLIST OF DOCUMENTS TO BE SUBMITTED WITH THE DETAILED
PROJECT REPORT
PROPOSAL
1.
Brief write up on existing experience i.e. background and conceptualization of the proposal.
2.
A write up of the present proposal
3.
Justification of the proposal
COMPANY/ FIRM/ASSOCIATED COMPANIES

1.
Memorandum and Articles of Association with Certificate of Incorporation/Registered

Partnership Deed.
2.
Registered office and Operating office address with telephone, fax, email-id etc
3.
Annual Report of the Company, in case of existing (containing Audited Balance Sheet,
Profit & Loss account) for last three years.
4.
Existing Bankers, credit sanction letter, present outstanding and latest bank loan
statement.
5.
ITR of the Company for the last three years.
6.
Annual Report of Associated Company/s (containing Audited Balance Sheet, Profit & Loss
account) of the Company for the last three years.
7.
ITR of the Associated Company/s for the last three years.
8.
Detailed Address for communication.
9.
Credit Rating from external Agency, if any, and a copy.
10.
PAN card of the Company.
11.
IEM Number and Registration copy.
12.
DIC Registration Copy.
13.
NEIIPP 2007 registration copy.
14.
Certificate of Excellence/ISO Certificates.
15.
Application for Sanction of Power to the State Electricity Board and sanction letter, if
sanctioned.
16.
24
Land allotment Letter/ Patta or lease deed.

17.
Environmental Clearance from Ministry of Environment & Forest, if applicable.
18.
Consent to Establish / NOC from Pollution Control Board.
19.
Mining plan approval from Indian Bureau of Mines/Ministry of coals.
20.
Clearance from the Chief controller of explosive.
21.
A write up on availability of water
22.
Approved building plan and Construction Permission from concerned authority.
23.
Other related Govt. approvals / Registration required for the project
24.
Clearance / Permission from Local Bodies
25.
Any other statutory clearances
26.
Proposed shareholding pattern and source of meeting the commitment.
27.
Quotations from 3 suppliers for each plant/ machinery item
28.
Machinery layout plan
29.
Details of existing and proposed manpower such as Number of Managers, Supervisors,

Workers (Skilled, Unskilled etc.)
30.
Details of key personnel with details of experience
31.
Profile of the Machinery suppliers
PROMOTERS/DIRECTORS
1.
Detailed bio-data of each inter-alia age, qualifications and past experience
2.
Proof of Address, Phone Number, e-mail id etc.
3.
Balance sheet for the last three years
4.
Income Tax Returns for the last three years.
5.
Banking details if Loan, sanction, outstanding, credit report.
6.
Net-worth Statement
7.
PAN CARD
8.
Balance Sheet /P & L Statement of Associate Companies/Firms
9.
Banker details of Associated Companies
10.
Certificates of qualifications & excellence
25

NORTH EAST INDUSTRIAL AND INVESTMENT PROMOTION POLICY
(NEIIPP)
The Government has approved a package of fiscal incentives and other concessions for the North
East Region namely the 'North East Industrial and Investment PromotionPolicy (NEIIPP),
2007', effective from 1.4.2007, which, inter-alia, envisages the following:
(i) Coverage:
The North East Industrial Policy (NEIP), 1997 announced on 24.12.1997 covered the States of
Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura. Under NEIIPP,
2007, Sikkim will also be included. Consequently, the 'New Industrial Policy and other concessions
for the State of Sikkim' announced vide O.M. No.14(2)/2002-SPS dated 23.12.2002 and the
Schemes thereunder i.e. Central Capital Investment Subsidy Scheme, 2002, Central Interest
Subsidy Scheme, 2002 and Central Comprehensive Insurance Scheme, 2002, notified vide
Notifications No. F.No.14(2)/2002-SPS dated the 24.12.2002 will be discontinued from 1.4.2007.
(ii) Duration:
All new units as well as existing units which go in for substantial expansion, unless otherwise
specified and which commence commercial production within the 10 year period from the date of
notification of NEIIPP, 2007 will be eligible for incentives for a period of ten years from the date of
commencement of commercial production.
(iii) Neutrality of location:
Incentives will be available to all industrial units, new as well as existing units on their substantial
expansion, located anywhere in the North Eastern Region. Consequently, the distinction between
'thrust' and 'non-thrust' industries made in NEIP, 1997 will be discontinued from 1.4.2007.
(iv) Substantial Expansion:
Incentives on substantial expansion will be given to units effecting 'an increase by not less than
25% in the value of fixed capital investment in plant and machinery for the purpose of expansion of
capacity/modernization and diversification', as against an increase by 33 % which was
prescribed in NEIP, 1997.
26

(v) Excise Duty Exemption:
100% Excise Duty exemption will be continued, on finished products made in the North Eastern
Region, as was available under NEIP, 1997. However, in cases, where the CENVAT paid on the
raw materials and intermediate products going into the production of finished products (other
than the products which are otherwise exempt or subject to nil rate of duty) is higher than the
excise duties payable on the finished products, ways and means to refund such overflow of
CENVAT credit will be separately notified by the Ministry of Finance.
(vi) Income Tax Exemption:
100% Income Tax exemption will continue under NEIIPP, 2007 as was available under NEIP,
1997.
(vii) Capital Investment Subsidy:
Capital Investment Subsidy will be enhanced from 15% of the investment in plant and machinery
to 30% and the limit for automatic approval of subsidy at this rate will be Rs.1.5 crores per unit, as
against Rs.30 lakhs as was available under NEIP, 1997. Such subsidy will be applicable to units
in the private sector, joint sector, cooperative sector as well as the units set up by the State
Governments of the North Eastern Region. For grant of Capital Investment Subsidy higher than
Rs.1.5 crore but upto a maximum of Rs.30 crores, there will be an Empowered Committee
Chaired by Secretary, Department of Industrial Policy & Promotion with Secretaries of
Department of Development of North Eastern Region (DONER), Expenditure, Representative of
Planning Commission and Secretary of the concerned Ministries of the Government of India
dealing with the subject matter of that industry as its members as also the concerned Chief
Secretary/Secretary (Industry) of the North Eastern State where the claiming unit is to be
located.
Proposals which are eligible for a subsidy higher than Rs.30 crores, will be placed by Department
of Industrial Policy and Promotion before the Union Cabinet for its consideration and approval.
(viii) Interest Subsidy:
Interest Subsidy will be made available @ 3% on working capital loan under NEIIPP, 2007 as was
available under NEIP, 1997.
(ix) Comprehensive Insurance:
New industrial units as well as the existing units on their substantial expansion will be eligible for
reimbursement of 100% insurance premium.
27

(x) Negative List:
The following industries will not be eligible for benefits under NEIIPP, 2007:(i) All goods falling under Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985
(5 of 1986) which pertains to tobacco and manufactured tobacco substitutes.
(ii) Pan Masala as covered under Chapter 21 of the First Schedule to the Central Excise Tariff
Act, 1985 (5 of 1986).
(iii) Plastic carry bags of less than 20 microns as specified by Ministry of Environment and
Forests Notification No.S.O. 705(E) dated 02.09.1999 and S.O.698 (E) dated 17.6.2003.
(iv) Goods falling under Chapter 27 of the First Schedule to the Central Excise tariff Act, 1985 (5
of 1986) produced by petroleum oil or gas refineries.
(xi) Incentives for Service/other Sector Industries Incentives under NEIIPP, 2007 will be
applicable to the following service sector activities/industries:I. Service Sector:
(i) Hotels (not below Two Star category), adventure and leisure sports including ropeways ;
(ii) Medical and health services in the nature of nursing homes with a minimum capacity of 25
beds and old-age homes ;
(iii) Vocational training institutes such as institutes for hotel management, catering and food
crafts, entrepreneurship development, nursing and para-medical, civil aviation related
training, fashion, design and industrial training.
A number of tax concessions under the existing provisions of Section 10A and 10AA of the
Income Tax Act are already available to the IT sector. However, one of the important
impediments to the development of Software Technology Parks or IT related SEZs in the North
Eastern Region is the non-availability of trained human resources in the North Eastern Region.
Accordingly, tax benefits as is availed under Section 80 IC of the Income Tax Act would be
extended to IT related training centers and IT hardware units.
II. Incentives for Bio-technology industry:
The biotechnology industry will be eligible for benefits under NEIIPP, 2007 as applicable to
other industries
III. Incentives for Power Generating Industries:
Power Generating plants will continue to get incentives as governed by the provisions of
28

Section 81A of the Income tax Act. In addition, power generating plants upto 10 MW based on
both conventional and non-conventional sources will also be eligible for capital investment
subsidy, interest subsidy and comprehensive insurance as applicable under NEIIPP, 2007.
(xii) Establishment of a monitoring mechanism for implementation of the NEIIPP, 2007:
In order to establish a monitoring mechanism for implementation of NEIIPP, 2007, a 'High Level
Committee' / an 'Advisory Committee' under the Chairmanship of Secretary, Department of
Industrial Policy and Promotion and comprising Secretaries of the Ministries/Departments of
Revenue, Department of Development of North Eastern Region (DONER), Banking and
Insurance, Representative of Planning Commission, CMD, NEDFi as well as major stakeholders
including the industry associations of the North Eastern region would be constituted. In addition,
an 'Oversight Committee' will be constituted under the Chairmanship of the Union Commerce and
Industry Minister with Industry Ministers of NE States as its members.
(xiii) Value Addition
In order to ensure genuine industrial activities in the North Eastern Region, benefits under
NEIIPP, 2007 will not be admissible to goods in respect of which only peripheral activities like
preservation during storage, cleaning operations, packing, re-packing, labelling or re-labelling,
sorting, alteration of retail sale price etc. take place.
(xiv) Transport Subsidy Scheme
The Transport Subsidy Scheme would continue beyond 31.3.2007, on the same terms and
conditions. However, an early evaluation of the scheme will be carried out with a view to
introducing necessary safeguards to prevent possible leakages and misuse.
(xv) Nodal agency
The North East Industrial Development Finance Corporation (NEDFi) will continue to act as the
nodal agency for disbursal of subsidies under NEIIPP, 2007.
2. The 'New Industrial Policy and other concession in the North Eastern Region' announced on
24.12.1997 (NEIP, 1997) will cease to operate with effect from 1.4.2007. Industrial Units which
have commenced commercial production on or before 31.3.2007 will continue to get
benefits/incentives under NEIP, 1997.
3. Government reserves the right to modify any part of the Policy in public interest.
4. All concerned Ministries/Departments of the Government of India are requested to amend their
respective Acts/rules/notifications etc. and issue necessary instructions for giving effect to these
decisions.
29

CENTRAL SUBSIDY SCHEMES
Government of India has entrusted NEDFi, in the budget 1998-99, to act as the nodal agency
for disbursement of Central Subsidies for the North Eastern States.
At present subsidies under the following schemes are disbursed:
CENTRAL TRANSPORT SUBSIDY

a) Transport Subsidy Scheme 1971
b) Transport Additional Notification
CENTRAL CAPITAL INVESTMENT SUBSIDY

a) Central Capital Investment Subsidy Scheme,2007
CENTRAL INTEREST SUBSIDY
a)
CENTRAL COMPREHENSIVE INSURANCE SCHEME

a)
30
Central Capital Investment Subsidy Scheme, 2007

CENTRAL TRANSPORT SUBSIDY
Transport Subsidy Scheme 1971
The Transport Subsidy Scheme was announced on 23.7.1971. The Scheme was introduced to
develop industrialization in the remote, hilly and inaccessible areas by providing for subsidy in the
transportation cost incurred by the industrial units so that they could stand competition with other
similar industries, which are geographically located in better areas.
2. Planning Commission, Ministry of Railways, Ministry of Finance (Department of Expenditure),
State Governments and Industrialists in NER, were associated at the time of finalization of initial
scheme.
3. The salient features of the Scheme are as under:
Introduced on: 23.7.1971
Applicability:The Scheme is applicable to all industrial units (barring plantations, refineries and
power generating units both in public and private sectors irrespective of their size)
Coverage:- 8 States of the North East
H.P.
Uttarakhand
J&K
Darjeeling District of West Bengal
Andaman & Nicobar Administration
Lakshadweep Administration
Validity of Scheme:The scheme has been extended from time to time, the last being on
26.02.2009 when the Cabinet Committee on Economic Affairs (CCEA) approved its extension
beyond 31.03.2008 till completion of the process of evaluation of the Scheme being done with a
view to introducing necessary safeguards to prevent possible leakages and misuse, if any, under
the Scheme.
On the basis of Performance Audit Report of the Comptroller & Auditor General of India and
Evaluation Report submitted by M/s. Deloitte Touche Tohmatsu India Ltd. and in consultation
with stakeholders, a draft CCEA Note on Transport Subsidy Scheme has been circulated to the
31

concerned Ministries/Departments for comments. On receipt of comments from the concerned
Ministries/Departments, a suitable proposal will be incorporated in the Note and submitted for
approval of CCEA.
Quantum of Subsidy: Subsidy ranging between 50% and 90% of the transport cost for
transportation of raw material and finished goods to and from the location of the unit and the
designated railhead. (For North East States, J&K and UTs, the subsidy is 90%. For H.P. and
Uttarkhand and Darjeeling District of West Bengal, the subsidy is 75%. However, for movement of
goods within NER, the subsidy is 50 %.)
Period of eligibility:The subsidy is eligible to a unit for a maximum period of five years from the
date of commencement of commercial production.
Nodal Agency:The disbursement of subsidy to the eligible industrial units in the States is made
through the nodal agencies appointed for the purpose. These are:
(i) North East Development Financial Corporation (NEDFi), Guwahati for North Eastern Region.
(ii) JKDFC for Jammu & Kashmir
(iii) HPSIDC for Himachal Pradesh
(iv) SIDCUL for Uttarakhand
The disbursement of subsidy to the industrial units in the Union Territories is made through the
UTs Administrations.
Releases under the scheme : Since inception of the Scheme, an amount of Rs.2438.99 crore
(approx) has been released to the States/UTs.
32

TRANSPORT SUBSIDY SCHEME
NOTIFICATION
New Delhi, the 23rd July, 1971.
No. F.6(26)/71-IC The Government of India are pleased to make the following scheme for grant of
subsidy on the transport of raw materials and finished goods to and from certain selected areas with
a view to promoting growth of industries there:1. Short title - This Scheme may be called the Transport Subsidy Scheme, 1971.
2. Commencement and duration: It comes into effect from 15-7-1971, for selected areas (A), with
effect from 24-8-1973 for selected areas (B), with effect from 1-12-1976 for selected areas (C) and
with effect from 5-12-1977 for selected areas (D) and will remain in operation till 31-3-2007. [The
Scheme was extended till 31.3.2007 vide Notification No.11(1)/2000-DBA.II dated 25.5.2000; till
31.3.2008 vide notification No. 10(3)/2007-DBA.II/NER, dated 3rd April, 2007 & 5th November
2008. Vide Notification No.10(3)/2007- DBA-II/NER dated 4th March, 2009, the Scheme was
further extended beyond 31.3.2008 on the same terms and conditions till completion of the
evaluation process after which suitable proposals are to be placed before the CCEA for decision.
Amended vide Notification Nos 6(26)/71-IC, dated 28.2.74; 6(3)/75-RD, dated 19.7.78 (Areas A, B,
C & D were defined); 11(1)/85-DBA.II, dated 1.12.86
3. It is applicable to all industrial units (barring plantations, refineries and power generating units)
both in the public and the private sectors, irrespective of their size in the selected areas (A), (B), (C)
and (D) for a period of 5 years from the date of commencement of commercial production. The date
of effect of this amendment shall be 1st April, 1995.
Amended vide Notification Nos. 6(3)/75-RD, dated 19.7.78; 11(1)/95-DBA-II dated 28-7-93 & dated
29-9-1995.
4. Definitions
(a) 'Industrial Unit' means an industrial unit where a manufacturing programme is carried on.
(b) 'New Industrial Unit' means an industrial unit which has set up manufacturing capacity and come
into production on or after the date of commencement of the Scheme.
(c) 'Existing Industrial Unit' means an industrial unit which has set up manufacturing capacity and
came into production before the date of commencement of the Scheme.
(d) 'Substantial Expansion' means increase in production of an industrial unit by 25 per cent or more
of the licenced or approved capacity.
(e) 'Diversification' means manufacture of new article or articles by an industrial unit by 25 per cent
or more (by value) of the approved or licensed capacity of the article or articles already
33

manufactured by it during the preceding year.
(f) The Selected Areas (A) means the State of Jammu & Kashmir, Union Territories of Andaman &
Nicobar Islands, Lakshadweep, the State of Sikkim and the North-Eastern Region comprising
the States of Assam, Meghalaya, Manipur Nagaland and Tripura and the Union territories of
Arunachal Pradesh and Mizoram, the Selected Areas (B) means the State of Himachal Pradesh
and hilly areas of the State of Uttarakhand comprising the districts of
Dehradun, Nainital, Almora, Pauri Garhwal, Tehri Garhwal, Pithoragarh, Uttar Kashi and
Chamoli and the State of West Bengal comprising Darjeeling District.
Amended vide Notification No. 11/1/85-DBA-II dated 1-12-1986
(Initially amended vide Notification No.6/3/75-RD, dated 19.7.78 to provide definition of areas A,
B, C & D)
(g) Deleted vide Notification No. 6(26)/71-IC dated 28.2.1974
(h) 'Raw Material' means any raw material actually required and used by an industrial unit in its
manufacturing programme as approved by the Government of India and/or by the Government
of State/Union Territory in which the industrial unit is located.
(i) 'Finished Goods' means the goods actually produced by an industrial unit in accordance with
the manufacturing programme approved by the Government of India and/or the Government of
the State/Union Territory in which the industrial unit is located.
5. Deleted vide Notification No. 6(26)/74-IC dated 28.2.1974
6. Details of the Scheme
(i) A transport subsidy will be given to the industrial units located in the selected areas in respect
of raw materials which are brought into and finished goods which are taken out of such areas.
(ii) Industrial units will not be eligible for the transport subsidy for internal movement of raw
materials and finished goods within the State of Jammu & Kashmir, the State of Himachal
Pradesh, the hilly areas of Uttar Pradesh, the Union Territory of Andaman & Nichobar Islands and
Lakshadweep and the State of Sikkim.
(iii) In the case of Jammu & Kashmir, transport subsidy will be given on transport costs between
the location of the industrial unit and rail-head of Jammu or Pathankot, whichever is nearer.
Transport Subsidy would also cover 75% of the air freight on movement of electronic
components/products by air to and from Delhi to Srinagar and vice-versa. In case of movement of
goods moving partly by air and partly by rail/road, the transport subsidy would be admissible
34

@75% on the air freight from Delhi to Srinagar and @90% for movement by rail/road upto the
location of the industrial unit and vice-versa. (Transport subsidy on air freight allowed vide
Notification No.11/2/89-DBA-II, dated 18.8.89)
In the case of Himachal Pradesh the transport subsidy will be given on transport costs between the
location of the industrial unit in the State and the nearest rail-head viz. (i) Pathankot, (ii) Kiratpur
Sahib, (iii) Nangal, (iv) Kalka, (v) Ghanauli, (vi) Yamuna Nagar, (vii) Barara and (viii) Hoshiarpur.
Transport Subsidy would also cover 75% of the air freight on movement of electronic
components/products by air to and from Delhi to Shimla and vice-versa. In case of movement of
goods moving partly by air and partly by rail/road, the transport subsidy would be admissible
@75% on the air freight from Delhi to Srinagar and @75% for movement by rail/road upto the
location of the industrial unit and vice-versa. (Transport subsidy on air freight allowed vide
Notification No.11/2/89-DBA-II, dated 18.8.89)
In the case of hilly areas of Uttar Pradesh State, the transport subsidy will be given on the transport
costs between the location of the industrial unit and the nearest rail-head viz., (i)Dehradun, (ii)
Rishikesh, (iii) Moradabad, (iv) Bareilly, (v) Kotdwara, (vi) Shahajahanpur and (vii) Rampur.
**Amended vide Notification No. 11/1/85-DBA-II dated 1-12-1986
(Initially amended vide Notification No.6/3/75-RD, dated 19.7.78 to provide definition of areas A,
B, C & D)
(iv)* In the case of North-Eastern region comprising the States of Assam, Meghalaya, Nagaland,
Manipur, Tripura and the Union Territories of Arunachal Pradesh and Mizoram the transport
subsidy will be given on the transport costs between Siliguri and the location of the industrial unit in
these states/Union territories. While calculating the transport costs of raw materials the cost of
movement by rail from Siliguri to the railway station nearest to the location of the industrial unit and
thereafter the cost of movement by road to the location of industrial unit will be taken into account.
Similarly, while calculating the transport costs of finished goods the costs of movement by road
from the location of industrial unit to the nearest railway station and thereafter the cost of
movement by rail to Siliguri will be taken into account. In the case of North Eastern region, for
materials moving entirely by road or other mode of transport the transport costs will be limited to
the amount which the industrial unit might have paid had the raw materials moved from Siliguri by
rail upto the railway station nearest to the location of the industrial unit and thereafter by road.
Similarly in the case of movement of finished goods moving entirely by road or other mode of
transport in the North Eastern region, the transport costs will be limited to the amount which the
35

industrial unit might have paid had the finished goods moved from the location of the industrial
units to the nearest railway station by road and thereafter by rail to Siliguri.
[* Amended vide Notification No. 6(26)/71-IC dated 28.2.1974]
Transport subsidy would also cover movement of 'raw materials' from one State to another within
the North Eastern Region. Transport subsidy would also cover inter-State movement of 'finished
goods' within the region but the subsidy available would be 50% of the transport cost on the
movement of the goods from the location of the industrial units to the nearest Railway Station by
road and thereafter by rail and vice-versa. Transport subsidy would also cover 75% of the air
freight on movement of electronic component/products by air to and from Calcutta upto the
location of the industrial unit & vice-versa. In case of movement of goods moving partly by air and
partly by rail/road, the transport subsidy would be admissible @ 75% on air freight from Calcutta
upto the airport nearest to the location of the industrial unit and thereafter, @90% for movement
by rail/road upto the location of the industrial unit and vice versa.
[ Inserted vide 11/1/85-DBA-II dated 17.3.1987 and 24.5.1988]
(v)& In the case of Andaman & Nichobar Islands, the transport subsidy will be given on transport
costs by sea and road between Madras Port and the location of the industrial unit in the Union
Territory. In the case of Lakshadweep, the transport subsidy will be given on transport costs by
sea and road between Cochin Port and the location of the industrial unit in the Union Territory. If
any other port on the mainland is used for the purpose of transport subsidy, the transport costs will
be taken as what the industrial unit would have incurred had Madras or Cochin Port, as the case
may be, been used, or the actual transport costs, whichever are less.
[& Inserted vide Notification No. 6/3/75-RD dated 19-7-1978]
(vi)& In the case of Sikkim, the transport subsidy will be given on transport costs between the
location of the industrial unit in the State and the rail head of Siliguri.
[& Inserted vide Notification No. 6/3/75-RD dated 19-7-1978]
(vii)$ Freight charges for movement by road/sea will be determined on the basis of
transport/transshipment rates fixed by the Central Government/State Government/Union
Territory Administration concerned from time to time or the actual freight paid, whichever is less.
[Renumbered & amended vide Notification No. 6/3/75-RD dated 19.7.1978]
(viii) Cost of loading or unloading and other handlings charges from railway station to the site of
the industrial unit will not be taken into account for the purpose of determining transport costs.
36

(ix)All New industrial units located in the selected areas will be eligible for transport subsidy
equivalent to 90 percent in the selected areas (A) and 75 per cent in the selected areas (B) of the
transport costs of both raw materials as well as finished goods.
(x) Existing industrial units in the selected areas are also eligible for transport subsidy in respect of
the additional transport costs of raw materials and finished goods arising as a result of substantial
expansion or diversification effect by them after the commencement of the Scheme. Transport
Subsidy in such cases will be restricted to 90 percent in the selected areas (A) and 75 per cent in
the selected areas (B) of the transport costs of the additional raw materials required and finished
goods produced as a result of the substantial expansion or diversification.
(xi) Transport subsidy will also cover 90 percent in the selected areas (A) and 75 per cent in the
selected areas (B) of the transport charges for movement of steel from Gauhati Stockyard of M/s.
Hindustan Steel Limited to the site of the industrial units in the North Eastern region and for
movement of industrial raw materials from the State Corporation's depots situated in the hill
districts of Uttar Pradesh and Himachal Pradesh to the sites of the industrial units located in the hill
districts of the State. Transport Subsidy will also cover the transport charges for movement of
Steel from the SAIL's Stockyard at Parwanoo upto the location of the industrial units in the State of
Himachal Pradesh (SAIL Stockyard added vide Notification No.11/3/81-BAD/DBA-II dated
28.7.86)
[Amended vide Notification No. 11/1/85-DBA-II dated 25.9.1986- Definition of areas A & B
provided and rate of subsidy revised from 75% to 90% for area A]
(xii) (a) The State Government/Union Territory Administration will set up a committee consisting of
the Director of Industries, a representative each of the State Industries Department and the State
Finance Department etc. on which a representative of the Ministry of Industrial Development will
also be nominated. The Committee will operate at the State/Union Territory Level and scrutinize
and settle all claims of transport subsidy arising in the State/Union Territory. The claimants should
be asked to provide proof of raw materials, 'imported' into and finished goods 'exported' out of the
selected States/Union Territory/areas where the unit is situated from the registered chartered
accountants. The committee may also lay down the production of any other documents which in
their opinion is necessary to decide the eligibility of claimant for the transport subsidy. However, in
the case of small units with a capital investment of Rs. 1 lakh or less the requirement of production
of certificate from Chartered Accountant may be waived subject to the condition that such claims
are properly verified by the State Government authorities before the subsidy is
37

sanctioned/disbursed. After having scrutinized and settled the claims, the amount disbursed to
industrial unit should first be adjusted against the outstanding ways and means of advance made
to the State Government/Union Territory Administration for Centrally Sponsored Scheme in
accordance with the procedure outlined in the Ministry of Finance letter No.2(17)PII/58 dated
12/5/1958 and the balance, if any, shall be paid in cash to the State Governments/Union Territories
Administration.
Provided that in the case of small units with a capital investment of Rs.1,00,000 and less, the
requirement of production of proof of import of raw material and export of finished products from
registered Chartered Accountant will be substituted by a appropriate verification by the State
Government authorities.
[* Amended vide Notification No. 6(26)/71-IC dated 28.2.1974]
(b) The North East Development Finance Corporation (NEDFi) shall act as a nodal agency for
release of transport subsidy on the basis of the recommendations of the State Level Committee,
for the North East Region, as per existing terms & conditions of the Scheme.
[ Inserted vide Notification No.11 (1)/98-DBA-II dated 29.1.1998]
(c) In the case of Himachal Pradesh, Uttaranchal and Sikkim, after scrutiny and approval of the
transport subsidy claims by the State Level Committee (SLC)/District Level Committee (DLC), the
claims shall be referred by the respective Directorate of Industries to the designated nodal
agencies of these States namely Himachal Pradesh State Industrial Development Corporation
(HPSIDC), State Industrial Development Corporation of Uttaranchal (SIDCUL) and North Eastern
Development Finance Corporation Limited (NEDFi) respectively. Thereafter, HPSIDC, SIDCUL
and NEDFi shall, after careful scrutiny of the transport subsidy claims in accordance with the
provisions of the scheme and the guidelines issued to them separately, disburse transport subsidy
to the eligible units out of the funds which will be released by the Department of Industrial Policy
and Promotion to them and which will be maintained by these nodal agencies as revolving fund to
be supplemented by the Department from time to time based on the requirements received from
such nodal agencies.
[ Amended vide Notification No.10 (4)/2004-DBA-II dated 25.1.2005]
Explanation: However, in the State of Mizoram, if it is not possible for the existing industrial units
to furnish a certificate from a registered Chartered Accountant for non-availability of a registered
Chartered Accountant, the unit(s) may be asked to provide a certification from the sale tax
authorities and counter signed by Commissioner/Director Industries of the State for transportation
38

of raw material/finished goods in lieu of Chartered Accountant certificate. The position regarding
availability of registered Chartered Accountant may be reviewed regularly by the State
Government of Mizoram and the alternate course of providing certificate may be suspended as
and when a registered Chartered Accountant becomes available and thereafter the units may be
asked to provide the required certificate from a registered Chartered Accountant.
(xiii)In order to check any misuse of transport subsidy Directorates of Industries in the State/Union
Territories will carry out periodical checks to ensure that the raw materials and the finished goods
in respect of which transport subsidy has been given were actually used for the purpose by a
system of scrutinizing of consumption of the raw materials and the output of the finished goods.
(xiv) Directorate of Industries of the State and Union Territories concerned will draw up
procedures and arrangements not only for scrutinizing the claims for transport subsidy but also
arrange for prompt payment of the claims. The number of transport subsidy claims that may be
preferred by an industrial unit should not ordinarily exceed one in a quarter. However, the Director
of Industries may at his discretion entertain more number of claims in a financial year, if the
financial position of the industrial unit so warrants.
(xv)Directorate of Industries of the States and Union Territories concerned will lay down a system
of pre-registration of industrial units which are eligible for transport subsidy. At the time of
registration the Directors of Industries will fix and indicate the capacity of such units. They will also
lay down procedure to ensure regular inflow of information regarding the movement of raw
material and finished goods to and from the industrial units. The Directorate of Industries of the
States and Union Territories should also lay down that statistics of production and utilization of raw
material should be maintained and kept open for inspection on request by the Directorate of
Industries.
(xvi) The Ministry of Industrial Development (now Department of Industrial Policy and Promotion)
will continuously review the arrangement made by the Directorate of Industries of the concerned
States and Union Territories and suggest modifications in the procedure for scrutinizing the claim,
payment of transport subsidy etc.
(xvii) Not withstanding the provisions of the Scheme, Government of India and/or the Government
State/Union Territory concerned have full discretion to refuse to entertain or reject any claim for
transport subsidy.
[ Renumbered & amended vide Notification No. 6/3/75-RD dated 19.7.1978]
(xviii) All false statement made deliberately by an industrial unit or any misrepresentation of facts
by it will disqualify it from the grant of transport subsidy for such period of time as the Government
of India and/or the Government of State/Union Territory concerned may decide after giving a
reasonable opportunity to the industrial unit to state its case.
[Amended vide Notification No. 6(26)/71-IC dated 28.2.1974]
39

CENTRAL CAPITAL INVESTMENT SUBSIDY
Central Capital Investment Subsidy Scheme, 2007
In pursuance of the North East Industrial and Investment Promotion Policy, 2007 (NEIIPP, 2007)
issued by the Ministry of Commerce and Industry (Department of Industrial Policy and Promotion)
dated the 1st April, 2007, the Government of India is pleased to make the following Scheme of
Capital Investment Subsidy for industrial units in the North Eastern Region (NER) comprising the
States of Arunachal Pradesh, Assam, Manipur, Meghalaya,Mizoram, Nagaland, Sikkim and Tripura
with a view to accelerating the industrial development in the NER.
1. Short Title:-This Scheme may be called the 'Central Capital Investment Subsidy Scheme, 2007'.
2. Commencement and duration: - It will come into effect from the 1st April, 2007 and remain in force
upto and inclusive of 31.3.2017.
3. Applicability:- Unless otherwise specified, all new industrial units as well as existing units which
go in for substantial expansion and are located anywhere in NER, will be eligible for capital
investment subsidy under this Scheme. The Scheme will also be applicable to the following service
sector activities/industries: I. Service Sector:
(i) Hotels (not below Two Star category), adventure and leisure sports including ropeways
(ii) Medical and health services
(iii) Vocational training institutes
II. Bio-technology industry
III. Power Generating Industries:
4. Definitions:
(a) 'Industrial unit' means any industrial undertaking, suitable servicing unit other than that
run departmentally by Government.
(b) 'New industrial unit' means an industrial unit for the setting up of which effective steps were not
taken prior to 1.4.2007
(c) 'Existing Industrial Unit' means an industrial unit for the setting up of which effective steps were
taken prior to 1.4.2007.
40

(d) 'Substantial expansion' means increase in the value of fixed capital investment in plant and
machinery of an industrial unit by not less than 25 %, for the purpose of expansion of capacity
/modernization and diversification.
(e) 'Effective steps' means one or more of the following steps:(i) that 10% or more of the capital issued for the industrial unit has been paid up.
(ii) that any part of the factory building has been constructed.
(iii) that a firm order has been placed for any plant and machinery required for the industrial unit.
(f) 'Fixed Capital Investment' means investment in 'plant and machinery', for the purpose of this
scheme.
5. Extent of admissible Subsidy
All eligible industrial units located anywhere in the North Eastern Region shall be given capital
investment subsidy at the rate of 30% of their investment in Plant and Machinery or additional
investment in Plant and Machinery. Such subsidy will be applicable to units in the private sector,
joint sector, cooperative sector as well as the units set up by the State Governments concerned of
the North Eastern Region. The limit for automatic approval of subsidy at this rate would be Rs.1.5
crore. For grant of capital investment subsidy higher than Rs.1.5 crore but upto a maximum of
Rs.30 crore, there will be an Empowered Committee set up on dated the 21st May 2007.
Proposals which are eligible for a subsidy higher than Rs.30 crore will be placed by Department of
Industrial Policy and Promotion before the Union Cabinet for its consideration and approval.
6. Plant and Machinery (for manufacturing sector)
(i) In calculating the value of plant and machinery, the cost of industrial plant and machinery
as erected at site will be taken into account which will include the cost of productive equipments,
such as tools, jigs, dies & moulds, insurance premium etc.
(ii) The amount invested in goods carriers to the extent they are actually utilized for transport of raw
materials and marketing of the finished products, will be taken into account.
(iii) Working capital including raw materials and other consumables stores, will be excluded for
computing the value of plant and machinery.
6(a). Definition of 'Plant and Machinery' and 'components' which should be taken in to account for
the purpose of this Scheme in respect of Service Sector, Bio-technology industry & Power
Generating industries referred to in para 3 (I), (II) & (III) above would be notified separately.
7. Designated Agency for disbursement of subsidy
North Eastern Development Financial Corporation (NEDFi), Guwahati shall be the designated
nodal agency for disbursement of capital investment subsidy under the Scheme on the basis of the
41

recommendation of State Level Committee (SLC) of the concerned State Government, the
Empowered
Committee and the Union Cabinet, as the case may be.
8. Procedure for claiming capital investment subsidy
Industrial units eligible for subsidy under the Scheme will be required to get themselves registered
with the State Industry Department concerned prior to taking effective steps for setting up new
industrial units or undertaking substantial expansion of existing units and to indicate their
assessment of the total new or additional fixed capital likely to be invested by them in the plant and
machinery.
9. Procedure for disbursement of capital investment subsidy
Each State Government concerned will set up a State Level Committee (SLC) consisting of a
representative of each of the State Finance Department, State Industries Department, State
Directorate of Industries, NEDFi and the Financial Institution concerned (if the industrial unit is to
be assisted by a financial institution), to go into details of each case to decide whether the unit
qualifies for the grant of subsidy and also about the quantum of subsidy.
10. In respect of a new industrial unit set up without assistance from a Financial Institution or the
State Government concerned, the subsidy will be disbursed to the unit by NEDFi on the
recommendation of the State Government, the Empowered Committee and the Union Cabinet, as
the case may be, at the time the unit goes into production. Similarly, in respect of substantial
expansion by an existing industrial unit without assistance from the financial institutions or the
State Government concerned, the subsidy will be disbursed to the unit by NEDFi on the
recommendation of the State Government concerned, the Empowered Committee and the Union
Cabinet, as the case may be after substantial expansion has been effected and the unit has
commenced enhanced commercial production.
However, in such cases where the concerned State Government is satisfied about the safety of the
public funds, not more than half of the amount of the estimated subsidy may be released prior to
the unit going into production on the entrepreneur's furnishing a proof of having taken effective
steps to thesatisfaction of State Director of Industries and the remaining amount be released only
after the unit goes into production.
11. In respect of an industrial unit assisted/ to be assisted by a Financial Institution or the
StateGovernment concerned, the subsidy will be disbursed to the unit by NEDFI on the
recommendation of the State Government concerned, the Empowered Committee and the Union
42

Cabinet, as the case may be. However, in such cases, the contract/agreement to be drawn up
between the Financial Institution/ State Government and the unit concerned, may cover
mortgage, pledge, hypothecation of the assets upto the amount of the subsidy payable/paid to the
units. In respect of new industrial unit or in respect of substantial expansion of an existing
industrial unit to be assisted by a financial institution, the subsidy willbe disbursed to the unit by
NEDFi in as many instalments in which the loan is disbursed by the financialinstitution and
simultaneously claimed by the Financial Institution/State Government from NEDFi.
12. Rights of the Centre/State Government/Financial Institutions
If the Central Government/State Government/Financial Institution concerned is satisfied that the
subsidy to an industrial unit has been obtained by misrepresentation as to an essential fact,
furnishing of false information or if the unit goes out of production within 5 years after
commencement of commercial production, the Central Government/State Government/NEDFi
may ask the unit to refund the grant or subsidy after giving an opportunity to the unit of being
heard.
13. Without taking prior approval of the Union Ministry of Commerce & Industry (Department of
Industrial Policy and Promotion) /State Government/Financial Institution concerned, no owner of
an industrial unit after receiving a part or the whole of the subsidy will be allowed to change the
location of the whole or any part of industrial unit or effect any substantial contraction or dispose of
a substantial part of its total fixed capital investment within a period of 5 years after its going into
commercial production.
14. In respect of all units to whom the subsidy is disbursed by the NEDFi, certificate of utilisation of
the subsidy for the purpose for which it was given shall be furnished to the Central Ministry of
Industry(Department of Industrial Policy and Promotion) by the financial institution/State
Government concerned, within a period of one year from the date of receipt of the last
instalment/full amount.
15. After receiving the subsidy, each industrial unit shall submit Annual Progress Report (APR) to
the Union Ministry of Industry (Department of Industrial Policy and Promotion)/ State Government
concerned, about its working for a period of 5 years after going into production.
16. A High Level Monitoring Committee has been set up as in Annexure-III which would monitor
implementation of the Scheme.
43

CENTRAL INTEREST SUBSIDY
In pursuance of the North Eastern Industrial and Investment Promotion
Policy, 2007(NEIIPP, 2007) issued by Ministry of Commerce and Industry, dated the 1st April, 2007,
the Government of India is pleased to make the following Scheme of interest subsidy on the
working capital loans for industrial units in the North-Eastern Region (NER) comprising the States
of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura with
a view to accelerating industrial development in the region.
1. Short title: This Scheme may be called the Central Interest Subsidy Scheme, 2007.
2. Commencement and duration: It will be effective from the 1st April, 2007 and remain in force upto
and inclusive of 31.3.2017.
3. Applicability: Unless otherwise specified, all new industrial units as well as existing units which
go in for substantial expansion and are located anywhere in NER, will be eligible for interest
subsidy under this Scheme. The Scheme will also be applicable to the following service sector
activities/industries: II. Service Sector:
(iv) Hotels (not below Two Star category), adventure and leisure sports including ropeways ;
(v) Medical and health services in the nature of nursing homes with a minimum capacity of 25
beds and old-age homes ;
(vi) Vocational training institutes such as institutes for hotel management, catering and food crafts,
entrepreneurship development, nursing and para-medical, civil aviation relatedtraining, fashion,
design and industrial training.
II. Bio-technology industry
III. Power Generating Industries:
Power Generating plants upto 10 MW based on both conventional and non-conventional sources.
3.(a). The Scheme shall not be applicable to the industries l
4. Definitions:
(a) 'Industrial unit' means any industrial undertaking, suitable servicing unit other than that run
departmentally by Government.
(b) 'New industrial unit' means an industrial unit for the setting up of which effective steps were not
taken prior to 1.4.2007.
(c) 'Existing Industrial Unit' means an industrial unit set-up prior to the operative date of the scheme
44

i.e.1.4.2007.
(d) 'Substantial expansion' means increase in the value of fixed capital investment in plant and
machinery of an industrial unit by not less than 25 % for the purpose of expansion of
capacity/modernization and diversification.
(e) 'Effective steps' means one or more of the following steps:(i) that 10% or more of the capital issued for the industrial unit has been paid up.
(ii) that any part of the factory building has been constructed.
(iii) that a firm order has been placed for any plant and machinery required for the
industrial unit.
(f) 'Fixed Capital Investment' means investment in land, building and plant and machinery.
Total fixed capital investment will be assessed as follows:
(A) Land: The actual price paid for the land to the extent needed for the purposes of the plant.
Charges for the leased land will not be taken into account.
(B) Building: Same as in the case of land. Rent of a hired building will not be taken into
account.
(C) Plant and machinery (for manufacturing sector).
(a) In calculating the value of plant and machinery, the cost of plant and machinery as
erected at site will be taken into account which will include the cost of productive
equipment, such as tools, jigs, dies & moulds; transport charges, insurance premium,
etc. will also be taken into account.
(b) The amount invested on goods carriers to the extent they are actually utilized for
transport of raw materials and marketing of the finished products, will be taken into account.
(c) Working capital including raw materials and other consumable stores will be excluded for
computing the value of plant and machinery.
(g) Fixed Capital represents the depreciated value of fixed assets owned by the factory on the
closing day of the accounting year. 'Fixed assets' are those which have a normal productive life of
more than one year. 'Fixed capital' covers all types of assets, new or used or own constructed,
deployed for production, transportation, living or recreational facilities, hospitals, schools etc. for
factory personnel. It includes the fixed assets of the head office allocable to the factory and also the
full value of assets taken on hire purchase basis (whether fully paid or not) excluding interest
element. It excludes intangible assets and assets solely used for post manufacturing activities
such as sale, storage, distribution etc.
(h) Physical Working Capital is defined to include all physical inventories owned, held or controlled
45

by the factory as on the closing day of the accounting year such as the materials, fuels & lubricants,
stores etc, that enter into products manufactured by the factory itself or supplied by the factory to
other for processing. Physical working capital also includes the stock of materials, fuels & stores
etc., purchased expressly for re-sale, semi-finished goods and work in progress on account of
others and goods made by the factory which are ready for sale at the end of the accounting year.
However, it does not include the stock of the materials, fuels, stores etc. supplied by others to the
factory for processing. Finished goods processed by others from raw materials supplied by the
factory and held by them are included and finished goods processed by the factory from raw
materials supplied by others are excluded.
(i) Working Capital is the sum total of the physical working capital as defined in para (h) above and
the cash deposits in hand and at bank and the net balance of amounts receivable over amounts
payable at the end of the accounting year. Working capital, however, excludes unused overdraft
facility, fixed deposits irrespective of duration, advances for acquisition of fixed assets, loans and
advances by proprietors and partners irrespective of their purpose and duration, long term loans
including interest thereon and investments. [Note: Definition of Plant and Machinery and other
components which could be taken into account for the purpose of this Scheme in respect of
Service Sector, Bio-Technology industry & Power Generating industries referred to in para 3 (I, II &
III) would be notified separately]
5. Extent of admissible subsidy:
All eligible industrial units located anywhere in the North Eastern Region shall be given an interest
subsidy to the extent of 3% on the working capital advanced to them by the Scheduled Banks or
Central/State financial institutions, for a maximum period of 10(ten) years from the date of
commencement of commercial production.
6. Norms for Working Capital calculation:
For the purpose of this Scheme, the minimum working capital requirement of a unit shall be worked
out @ 25 % of their annual turnover. Inventory norms may be applied , if necessary, after providing
for aforesaid minimum level. In respect of such units for which norms have not been laid down/are
not applicable (due to the units coming below the cut off point of Rs.10 lakhs of working capital), the
request of working capital should be considered favourably so long as the working capital is not
very much above such minimum level. Special norms can also be evolved for inventory and
receivables. Working capital below the minimum level may be justified under special
circumstances in which the requirement is demonstrably lower, as in the case of ancilliary units in
the small scale sector with assured supply of inputs and off-take of output.
46

7. Designated Agency for disbursement of Subsidy
North Eastern Development Financial Corporation (NEDFi), Guwahati shall be the designated
agency for disbursement of interest subsidy on the basis of the recommendation of the State Level
Committee (SLC) of the concerned State Government.
8. Procedure for claiming interest subsidy:
New industrial units eligible for subsidy under the Scheme will be required to get themselves
registered with the State Industry Department concerned prior to taking effective steps for setting
up. Similarly, existing industrial units undertaking substantial expansion should also get
themselves registered with the State Industry Department prior to such expansion. All the units,
whether new or existing would be required to indicate their assessment of the total new or
additional fixed capital likely to be invested by them in the plant and machinery.
9. Procedure for disbursement of Interest Subsidy:
(i) Each State Government concerned will set up a State Level Committee consisting of
arepresentative each of the State Department concerned, State Finance Department, State
Industry Department, State Directorate of Industries, NEDFi and the Financial Institution
concerned from where working capital loan has been raised by the unit, to go into each case to
decide whether the unit qualifies for the grant of interest subsidy under the scheme and also about
the quantum of eligible subsidy under the scheme.
(10) The subsidy will be disbursed to the industrial unit by NEDFi on the recommendation of the
State Level Committee of the State Government concerned.
11. Rights of the Centre/State Government/Financial Institutions:
If the Central government/State Government/Financial Institution concerned is satisfied that the
subsidy or grant to an industrial unit has been obtained by misrepresentation of the essential facts,
furnishing of false information or if the unit goes out of production within 2 years after
commencement of commercial production or after having availed the subsidy under the scheme,
the Central Government/State Government/Financial Institution concerned, may ask the unit to
refund the subsidy after giving opportunity to the concerned to be heard.
12. Without taking prior approval of the Ministry of Industry, Department of Industrial Policy
&Promotion/State Government/Financial Institution concerned, no owner of an industrial unit will
be allowed to change the location of the whole or any part of the industrial unit or effect any
substantial contraction or dispose of a substantial part of its total fixed capital investment within a
period of 2 years of receiving a part or the whole of the subsidy under the scheme.
13. In respect of all units to whom the grant or subsidy is disbursed by the NEDFi/State
47

Government, certificate of utilization of the grant or subsidy for the purpose for which it was given
shall be furnished to the Central Ministry of Industry (Department of Industrial Policy and
Promotion) by the financial institution/State Government concerned within a period of one year
from the date of receipt of the last instalment /full amount.
14. After receiving the subsidy, each industrial unit shall submit annual progress report to the
Ministryof Industry, Department of Industrial Policy and Promotion/State Government concerned,
about its working for a period of 5 years after going into production.
15. A High Level Monitoring Committee has been set up as in Annexure-II which would monitor
implementation of the Scheme.
NEGATIVE LIST
The following industries will not be eligible for benefits under NEIIPP, 2007:(i) All goods falling under Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of
1986) which pertains to tobacco and manufactured tobacco substitutes.
(ii) Pan Masala as covered under Chapter 21 of the First Schedule to the Central Excise Tariff Act,
1985 (5 of 1986).
(iii) Plastic carry bags of less than 20 microns as specified by Ministry of Environment and Forests
Notification No.S.O. 705(E) dated 02.09.1999 and S.O.698 (E) dated 17.6.2003.
(iv) Goods falling under Chapter 27 of the First Schedule to the Central Excise tariff Act, 1985 (5 of
1986) produced by petroleum oil or gas refineries.
VALUE ADDITION
Benefits under NEIIPP, 2007 will not be admissible to goods in respect of which only
peripheralactivities like preservation during storage, cleaning operations, packing, re-packing,
labelling or relabelling, sorting, alteration of retail sale price etc. take place.
48

CENTRAL COMPREHENSIVE INSURANCE SCHEME
Central Comprehensive Insurance Scheme, 2007
The Central Government hereby makes the following amendments in the Government of India
Notification dated the 27th July, 2007 titled 'Central Comprehensive Insurance Scheme, 2007'.
2. In place of existing sub-para (b) and (c) under para 4 thereof titled 'Definitions', the following
shall be substituted:
3. Definitions:
(b) 'New industrial unit' means an industrial unit which commences commercialproduction on or
after the first day of April, 2007 but not later than 31st day of March, 2017.
(c) 'Existing industrial unit' means an industrial unit which commenced commercial production
before 1.4.2007.
49

GENERAL OPERATIONAL GUIDELINES FOR REGISTRATION OF
INDUSTRIAL UNITS AND PROCEDURE FOR HANDLING SUBSIDY CLAIMS
UNDER VARIOUS SCHEMES UNDER NEIIPP, 2007
(i) The unit should get itself registered with the District Industries Centre (DIC) concerned under
NEIIPP,2007 prior to taking effective steps as defined for setting up of new or undertaking
expansion / modernization/diversification of the existing unit.
The application form for such registration would be Form-1.A (new unit) and Form-1.B (
expansion).
(ii) The Registration Certificate would be issued within 15 days of the receipt of Application Form.
(iii) The officer concerned in District Industry Centre must visit the location of the unit physically
and verify all the relevant facts and details of the setting up of the industrial unit or the substantial
expansion undertaken by the unit.
(iv) The General Manager of the concerned District Industry Centre shall be the competent
authority to issue the Registration Certificate.
(v) The registration form should be filled in quadruplicate and one copy should be endorsed to
DIPP (without enclosures), after registration has been granted to the industrial unit.
(vi) The registration should not be granted by the District Industries Centre on the basis of
incomplete information/documents.
(vii) It may be ensured that no industrial unit should be registered for benefits under NEIIPP, 2007 if
it is covered under Negative List provided in paras and (x) & (xiii) of the Policy and Annexure-I of the
respective subsidy schemes.
(viii) For submission of claims the unit should apply for the Central Capital Investment Subsidy,
Central Interest Subsidy or Central Comprehensive Insurance Subsidy (as the case may be) in the
prescribed Application Forms no 1.C, 1.D and 1.E respectively.
50

(ix) The DIC/Directorate of Industries must ensure that the claim Application Form for
subsidies is complete in all respects and accompanied by all the documents required as per
the respective check lists appended therewith.
(x) Incomplete application or applications without the required documents should not be
considered under any circumstances.
(xi) All entries in the claim application form will be carefully checked up by the dealing officer
with reference to the original documents submitted with the claim application. It will also be
ensured that the entries are not based on wrong information.
(xii) The subsidy under any Scheme should not be disbursed if the claim under that Scheme is
sub-judice.
(xiii) The quantum of subsidy payable to the unit should be worked out/calculated on the
eligible components as laid down in the respective Schemes. In case of any doubt in this
regard, the matter may be referred to DIPP for clarification. The decision of DIPP will be final in
this regard.
(xiv) All transactions in respect of the cost of plant and machinery/project, as the case may
Operational Guidelines,NEIIPP,2007 Page 3 be, must be through cheque or demand draft
only.
(xv) All expenses must be certified by the registered Chartered Accountant.
(xvi) The cost of land will not be taken into account for the purpose of determining the eligibility
of subsidy under any Scheme.
(xvii) All mandatory 'no objection certificates' (e.g. pollution control certificate etc.) must be
obtained by the unit from the concerned Department/Authority before setting up a new unit or
undertaking substantial expansion.
51

(xviii) The subsidy claim will be considered by State Level Committee (SLC)/District Level
Committee (DLC) only after the unit has started commercial production or has become
operational / functional, unless otherwise provided in the respective Subsidy Scheme. A
certificate of the unit having started the production or having become functional/ operational
must be accompanied with the subsidy claims.
(xix) After issue of these guidelines, the claims for subsidy under any Scheme will be submitted
within one year from the date of commercial production.
(xx) In the case of capital investment subsidy exceeding Rs.1.5 crore, the complete claim file of
the unit along with minutes of the SLC must be forwarded to DIPP for its consideration or for the
consideration of CCEA.
(xxi) SLC/DLC must be held at least once in a quarter to avoid accumulation of claims.
(xxii) The Director of Industries / District Industries Centre should ensure that all claims should
be placed before the appropriate Committee within 180 ( One hundred Eighty) days from the
date of receipt of the claims.
(xxiii) The District Level Committee (DLC) is authorized to approve the subsidy upto a
maximum limit of Rs. 5 lakhs ( five lakhs) in respect of Central Capital Investment Subsidy and
Rs.1 lakh (one lakh) in respect of Central Interest Subsidy. Claims of above the limit of DLC
shall be considered by SLC. The constitution of DLC will be decided by the Industry Department
of the State Government concerned.
(xxiv) The Member Secretary of the SLC/DLC will intimate the unit concerned to complete all
required formalities including Agreement in particular , within 15 (fifteen) days from the date of
the SLC/DLC meeting of the respective claims.
(xxv) The unit shall be required to furnish Annual Progress Report (APR) as per format to the
Directorate of Industries with a copy to DIPP.
52

(xxvi) In addition, the provisions under the respective Office Memorandum/ Notifications issued
earlier in respect of NEIIPP,2007 shall be followed.
(xxvii) In case of any doubt about the registration of the unit or grant of subsidy, the matter may be
referred to DIPP whose decision thereon will be final
53

FORMS REQUIRED TO BE SUBMITTED
ALONG WITH VARIOUS SUBSIDY CLAIMS
PARTICULARS FORM NO
1)
Application form for registration under NEIIPP,2007 ( allschemes under single registration)New UnitForm:1A
2)
Registration Certificate: new unit Form:1A.1
3)
Check List for registration : new unit Form:1A(i)
4)
Application form for registration under NEIIPP,2007 ( all schemes under single registration)Existing Unit Form:1B
5)
Registration Certificate : Existing unit Form:1B.1
6)
Check list for registration : Existing unit Form:1B(i)
7)
Claim Application form for Central Capital Investment Subsidy Form:1C
8)
Statement of Investment on Plant & machinery Form:1C(A)
9)
Check list for Claiming Central Capital Investment Subsidy Form:1C(i)
10 ) Certificate from Registered Chartered Accountant for new unit Form:1C.(B)(i)

11)
Certificate from Registered Chartered Accountant for existing unit Form:1C.(B)(ii)
12)
Affidavit Form:1C(C)
13)
Certificate from Financial Institution/Bank Form:1C(D)
14)
Enquiry Report for Central Capital Investment Subsidy Form:1C(E)
15)
Certificate for Chartered Accountant regarding sources of Finance Form :IC.(F)
16)
Certificate from Registered Architect on Civil Constructionnew unit Form:1C.G(i)
17)
Certificate from Registered Architect on Civil Construction- Existing unit Form:1C.G(ii)
18)
Application form for Claiming Interest Subsidy Form:1D
19)
Certificate from Registered Chartered Accountant for new unit Form:1D(A)(i)
20)
Certificate from Registered Chartered Accountant for existing unit Form:1D(A)(ii)
21)
Certificate from Bank/Financial Institution Form:1D(B)
22)
Check List for Interest Subsidy Form:1D(i )
23)
Enquiry Report for Interest subsidy Form:1D(C)
24)
Application for claiming Insurance subsidy Form:1E
25 ) Check list for Insurance Subsidy Form:1E(i)
54

26)
Certificate from Chartered Accountant Form:1E(A)
27)
Format of Certificate from Fire Insurance Policy Issuing Office Form:1E(B)
28)
Affidavit for claiming Insurance subsidy Form:1E(C )
29
Format of undertaking for claiming Insurance subsidy Form:1E(D)
30)
Proforma of Agenda note for SLC/DLC for all schemes Monitoring Form-1
31)
Proforma to be submitted to NEDFi for Disbursement of Monitoring Form-2 subsidy
32)
Proforma for Agreement Monitoring Form-3
33)
Annual Progress Report (APR) to be submitted by the unit Monitoring Form-4
55

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Knowledge on Bank Loans

Preparation on Bank Loans

Preparation of a Project Report

Central Subsidy Schemes

Central Transport Subsidy Scheme,2007

Central Capital Investment Subsidy Scheme,2007

Central Interest Subsidy Scheme, 2007

Central Comprehensive Insurance Scheme

Operational Guidelines of NEIIPP,2007

Handbook for MSME Entrepreneur

Manufacturing(Original Investment In) Service( Original InvestmentIn)

Plant and machinery Up to Rs 25 lacs

Plant and machinery Rs 25 lac-5 Cr

Plant and machinery Rs 5-10 Cr

Priority Sector Lending:

Handbook for MSME Entrepreneur

Reimbursement of 50% of the transport cost incurred on exhibits for participation in

Handbook for MSME Entrepreneur

up to a credit limit of Rs. 25,000/-, within 2 weeks

and those up to Rs.5 lakh within 4 weeks

UNIQUE FEATURE OF MSME LENDING

Perception of high credit risk

Lack of transparent credit information

Reluctance to submit stock statement

High propensity of loan impairment

Credit Rating in evolution stage

Handbook for MSME Entrepreneur

Lack of skilled / technical staff for appraisal of Hi-tech projects

Lack of co-ordination with Govt. Depts. / FI

Handbook for MSME Entrepreneur

Handbook for MSME Entrepreneur

Handbook for MSME Entrepreneur

Handbook for MSME Entrepreneur

Handbook for MSME Entrepreneur

A concrete project report. Bankers want to see something in black and

Training, exposure visits, contracts with machinery providers should

Market survey needs to be shown.

Land documents must be there. Miyadi patta/ original sales deed in

A 'no objection certificate' from the existing commercial banks of the

Land valuation papers from approved quantity surveyor.

Registration of the unit, either with SSI/ DICC/Sales Tax

Handbook for MSME Entrepreneur

c) Guidelines for preparation of a Project Report

Handbook for MSME Entrepreneur

Handbook for MSME Entrepreneur

Fixed Cost or Marginal Cost

Contribution = Sales Realistion Variable Cost

Break-even points can be of three types:

The Break - even point =

Percentage of installed capacity - To calculate the break-even point as the percentage of

Break - even as % of installed capacity =

Profit after Tax + Depritiation + Interest on term loan + Lease Rentals

Handbook for MSME Entrepreneur

Handbook for MSME Entrepreneur

Raw material stock + Finished goods + Work in progress +

Raw materials holding ratio (months) =

Stock of raw materials

Work - in - process ratio (months) =

Stock of work - in - process

Finished Goods Holding ratio (months) =

Stock of the finished goods

Receivables (including contingent