May 30, 1989
Jyaistha 9, 1911

All Scheduled Commercial Banks

Dear Sir,

Financing of Marketing Expenses of SSI Units

     Please refer to circular DBOD.No.BP.BC.20/C.469-87 dated 21 February 1987 (copy enclosed as Annexure I for ready reference). The question of financing of marketing expenses of SSI units has been re-examined by us. It has been decided as below:

1. Normal marketing expenses should be included in the cost of finished goods/value of receivables and therefore be taken into account while arriving at the working capital requirements of the units.

2. At the time of appraisal of a new project, banks as well as term lending institutions should invariably take into account the marketing expenditure as an item of project cost. (In this connection a copy of IDBI’s circular No.6763/DFIC.REF.1 dated 2 March 1987 is enclosed for information vide Annexure II).

3. Normally if existing units go in for a new product which involves heavy marketing expenses, it will be in the nature of a separate project and the financing of such an expansion/diversification activity should be considered on the basis of the usual norms. If existing units have to incur large special expenditure towards marketing of their existing products and such expenditure cannot be written off to the profit and loss account in that year, it may have to be treated as deferred revenue expenditure recoverable over a reasonable period during which the benefits of such expenditure will be reaped. The bank should sanction appropriate amount of assistance for the purpose in such cases. The financing bank may consider such request on merits, taking into account various factors like working of the unit, market potential, reasonableness of the expenditure, security and repayment period.

2. You are requested to issue suitable instructions for the guidance of your branches and controlling offices at an early date.

Yours faithfully

Sd/-
(S. SANKAR)
Deputy Chief Officer

ANNEXURE-I

Reserve Bank of India
Central Office
Department of Banking Operations & Development
BOMBAY

DBOD.No.BP.BC.20/C.469-87

February 21, 1987
Phalguna 2, 1908

All Scheduled Commercial Banks

Dear Sir

Bank Credit for Marketing Organisations

      It has been observed that considerable difficulty is being experienced by small scale industrial units in marketing their products due to their size, limited scale of operations and inability to set up an adequate network of retail outlets. With a view to facilitating the marketing efforts of small scale units, it is considered desirable to encourage the operations of marketing organisations specially engaged in promotion of sales of products of cottage, tiny and small scale industrial units. Any requests from such marketing organisations for financial assistance to meet their working capital needs should, therefore, be favourably considered by banks with due regard to the performance of such organisations in respect of recycling of bank credit; and in respect of new units, on the basis of their potential for market development and operational viability.

Yours faithfully,

(K.K. Mukherjee)
Chief Officer

ANNEXURE - II

INDUSTRIAL DEVELOPMENT BANK OF INDIA
DEVELOPMENT FINANCING INSTITUTIONS DEPARTMENT
BOMBAY-400 039

Ref.No.6763/DFID.REF.1

March 2, 1987

Eligible Commercial Banks,
RRBs and State Co-operative Banks

Dear Sir,

Financing of Marketing Expenses of SSI units at the initial stage

      It is generally recognised that new SSI units, especially those launching new products, would need to make special marketing efforts to establish themselves and push up sales. Such initial marketing efforts ential sizeable expenditure and it would help if a reasonable provision is allowed to be made in the project cost towards market development. This would enable SSI units to build up market for their products and operate on a viable basis, thereby improving the prospects of return flow of funds to the institutions from them.

We shall be glad if you will keep the above aspect in view while appraising SSI project proposals.

Yours faithfully,

Sd/-
(N. GANGA RAM)
General Manger

June 8, 1989
Jyaistha 18, 1911

All Scheduled Commercial Banks
(Excluding Regional Rural Banks)

Dear Sir,

Rehabilitation of Sick Small Scale Industrial Units

     Please refer to our circular letter RPCD.No.PLNFS.BC.48/SIU.20-87 dated 6 February 1987 indicating guidelines in regard to rehabilitation of sick small industrial units with specific reference to definition of sick SSI units, viability norms as also the extent of reliefs and concessions which may be provided by banks/financial institutions for implementation of rehabilitation packages in the case of potentially viable units. Certain issues have been raised by the banks in the context of these guidelines. These have been examined by us and the following modifications have been made :

1. Definition of sick SSI units

   1. The definition of sick SSI unit has been modified as under :-

      "A small scale industrial unit should be considered as sick if it has, at the end of any accounting year, accumulated losses equal to or exceeding 50% of its peak net worth in the immediately preceding five accounting years."

      In the case of the tiny/decentralised sector also a unit may be considered as sick if it satisfies the above defination. However, in the case of such units, if it is difficult to get financial particulars, a unit may be considered as sick if it defaults continuously for a period of one year, in the payment of interest of installments of principal and there are persistent irregularities in the operation of its credit limit with the bank.

   2. In the SSI sector, particularly among the tiny and decentralised sector as well as those assisted under schemes like SEEUY, a number of units, financed by the banks, are no longer in existence or are not traceable and/or have no assets left, etc. It has been decided to treat such units as a category distinct from sick SSI units and collect data thereof separately. Necessary instructions are being issued in this regard separately.

   3. The above definition [vide item (i)] may be adopted for the purpose of reporting data from the half-year ending September 1989, while for the purpose of identifying sick units/formulating nursing programme, banks should go by this definition with immediate effect. However, cases of SSI units identified as sick and already put under nursing programmes on the basis of the previous definition, need not be reopened.

2. Period upto which concessions can be granted to a unit where there is more than one package

    There have been instances where within a year or two after commencement of implementation of the package, it had become necessary to work our a fresh package. A question has been raised as to whether, in such cases, the period of five years for grant of concessions/determining viability should be reckoned from the date of original package or from the date of the revised package. It has been decided that for the purpose of extending reliefs and concessions/determining viability, the period of five years should be reckoned with reference to the date of implementation of the original package only. In cases, however, where there is a change of management as a part of a fresh package, the period may be reckoned with reference to the date of the fresh package.

2. Funding of interest - Need for uniform approach

   In item (v) of Annexure II to our circular dated 6 February 1987 referred to above, it has been specified that future cash losses incurred in the initial stages of the rehabilitation programme till the unit reaches break-even level, should be financed as indicated therein. The following further clarifications are issued in this regard:

   1. Future cash losses in this context will refer to losses from the time to implementation of the package up to the point of cash break-even as projected.

   2. Future cash losses as above, should be worked out before interest (i.e., after excluding interest) on working capital etc., due to the banks and should be financed by the financial institutions if it is one of the financiers of the unit. In other words, the financial institutions should not be asked to provide for interest due to the banks in the banks in the computation of future cash losses and this should be taken care of by future cash accruals.

   The interest due to the bank should be funded by it separately. Where. however, a commercial bank alone is the financier, the future cash losses including interest will be financed by it.

   The interest on the funded amounts of cash losses/interest will be at the rates prescribed by Industrial Development Bank of India under its scheme for rehabilitation assistance as indicated in our circular of 6 February 1987 ibid.

   3. It has been observed that although a uniform date for the purpose of segregation of interest for funding is required to be followed both by banks and financial institutions in accordance with the instruction issued by the Reserve Bank of India, i.e., the first date of the accounting year from which the unit started incurring cash losses continuously, there is no uniformity in this regard in actual practice. In several cases, units have paid interest to banks and financial institutions for varying periods. Thus, although the banks may be funding the entire interest debited to the account after the above date, the financial institutions may be funding the entire interest debited to the account after the above date, the financial institutions may not be doing the same as they might have received some payments towards interest relating to a period after the above date. In order to ensure uniformity, it has been decided that the institutions should refund the interest received by them after the above date by suitably increasing the amounts of interest funded by them so as to cover the entire interest for the period the units has incurred cash losses continuously.

3. Kindly acknowledge receipt.

Yours faithfully,

Sd/-
(P. K. PARTHASARATHY)
Chief Officer

July 4, 1989
Asadha 13, 1911

All Scheduled Commercial Banks.

Dear Sir,

Small Scale Units engaged in Hot Rolling of Semis, Bars, Wire Rods and Structural sections of Steel -
Financial Assistance

     Government of India, Ministry of Steel and Mines, Department of Steel has advised that hot rolling of semis, bars, wire rods and structural sections of steel has been included in Schedule IV to the Notification No.SO.98(E)/IDRA/29B.73/I dated 16 February 1973 issued by the then Ministry of Industrial Development. This implies that this industry cannot be set up even in the small scale sector without obtaining a licence from the Government under the Industries (Development and Regulation) Act, 1951. However, an industrial undertaking has been defined under the Industries (Development and Regulation) Act, 1951 as any industrial undertaking pertaining to a Scheduled Industry carried out in one or more factories. The word "factory" has been defined as any premises including the percents thereof, in any part of which a manufacturing process is being carried out or is ordinarily so carried on.

1. With the aid of power, provided that fifty or more workers are working or were working thereon on any day of the preceding twelve months;

or

2. Without the aid of power, provided that one hundred or more workers are working or were working thereon on any day of the preceding twelve months and provided further that in no part of such premises any manufacturing process is being carried on with the aid of power.

     In other words, units which carry on manufacturing process with the aid of power and with less than 50 workers or without the aid of power and with less than 100 workers are not covered under the definition of "industrial undertaking" under the Industries (Development and Regulation) Act, 1951. It has come to the notice of the Government that a number of units in the small scale sector are being set up in this industry. The units being so set up are not covered under the definition of "industrial undertaking" as defined in the Industries (Development and Regulation) Act and are, therefore, outside the purview of the licensing provisions of the Act. Since a very large capacity in the re-rolling industry has already been created which is totally disproporrionate to the current and estimated future demand for the products, Government of India have decided that assistance from banks and financial institutions should not be made available to new units which are outside the purview of the Industries (Development and Regulation) Act and are being set up in small scale sector.

4. We shall be glad if you will please issue immediate instructions to all your branches for implementing the above decision.

Yours faithfully,

Sd/-
(S. SANKAR)
Deputy Chief Officer

August 1, 1989
Sravana 10, 1911

All Scheduled Commercial Banks

Dear Sir,

Blood products manufacturing units -
Special concessions from the financial institutions

 Government of India have advised that in the wake of the alleged contamination of some of the blood products with AIDs virus, a decision was taken by the Government to destroy such products as have been withheld from distribution on account of such contamination. In view of the importance of uncontaminated blood products being available in adequate quantity, Government have advised that the affected units should be enabled to recommence production with the safeguards specified by experts through the recommended manufacturing processes. The units would require, urgently, fresh working capital as also term loan for installing additional equipments etc.

2. As this is a special set of circumstances, the blood products manufacturing units need urgent attention from the banks to tide over the difficulty. Banks are, therefore, advised to take action as indicated below:

   1. Request from the affected SSI units for converting the irregular portion of the working capital into a term loan should be considered sympathetically. As the operation of the accounts of these units is expected to be regular otherwise, the question of unadjusted interest or penal interest is not likely to arise. Hence, the working capital converted into working capital term loan may be repaid in 7 years. In the case of SSI units, the rate of interest on such working capital term loan may be reduced by not more than 2 percentage points below the prescribed rate for term loan, the reduced rate in no case being less than the rate of interest charged on loans under IRDP. a reference is invited in this connection, to item (iii) of Annexure-II to our circular RPCD.No.PLNFS.BC.48/SIU.20-87 dated 6 February 1987. Where the affected unit comes under the non-SSI category i.e., if it is a medium/large scale industrial unit, the rate of interest on such working capital term loan may be fixed suitable between 13½ per cent to 15 per cent per annum. A longer period of repayment for the working capital term loan not exceeding 10 years in any case, may be considered for both SSI and non-SSI units, subject to the condition that the concessionality in interest as stated above will be withdrawn after the seventh year. Reference may please be made in this regard to paragraph 4 of circular IECD.No.IRD.BC.132/SIU-A-85 dated 5 November 1985 issued by our Industrial & Export Credit Department.

   2. As regards security for the working capital term loan banks may, in individual cases, approach the financial institutions concerned holding first charge on fixed assets for ceding a pari passu charge in their favour in respect of the working capital term loan in confirmity with the practice followed by financial institutions and banks in such cases.

   3. Fresh term loans, where necessary, are to be granted without delay to enable the units to install equipments for changing the manufacturing process to comply with the new directions from the health/drug control authority. In such cased, the banks should be guided by the instructions contained in our circular IECD.No.PMS.207/C.446(C&P)087/88 dated 29 June 1988.

3. It may please be noted that the above instructions will be applicable only to those units engaged in manufacturing of blood products which have been affected by the Government’s decision to destroy stocks contaminated with AIDS virus and not to other units which might have become sick/weak due to other causes.

4. We shall be glad if you will please immediately issue instructions accordingly to all your branches and controlling offices under advice to us.

Yours faithfully,

Sd/-
(S. SANKAR)
Deputy Chief Officer

August 31, 1989
Bhadra 9, 1911

1. All Public Sector Banks*
   (excluding Associate banks of State Bank of India)

2. All Associate banks of State Bank of India

Dear Sir,

National Equity Fund Scheme

     Please refer to our circular RPCD.No.PLNFS.BC.44/SSI-70-88/89 dated 15 November, 1988* and PLNFS.BC.86/SSI-88/89 dated 13 March, 1989 @ requesting you to make maximum expeditious utilisation of the limits allocated to you by Industrial Development Bank of India under the captioned Scheme. As per data furnished to us by Industrial Development Bank of India, it is observed that utilisation of the limits under the Scheme since its inception upto 31 March 1989 in respect of most of the banks has been poor. We shall, therefore, be glad if efforts to ensure fuller utilisation of the limits are boosted up by giving wider publicity to the Scheme at the branch level.

Yours faithfully,

Sd/-
(S.R. KHOPKAR)
Assistant Chief Officer

8 January, 1991
18 Pausa, 1912

All Scheduled Commercial Banks

Dear Sir,

Rehabilitation of Sick Small Scale Industrial Units

Please refer to our circular letter RPCD. No. PLNFS. BC. 48/SIU.20-87 dated 6 February 1987 prescribing certain broad parameters for grant of reliefs or concessions by banks as part of the packages evolved for the rehabilitation packages envisaging concessions in interest rates beyond those specified therein should be referred to us for approval.

2. The above parameters were evolved so as to have uniformity of approach among banks in the matter of reliefs/concessions, to help in expediting the finalisation of rehabilitation packages and to ensure that excessive concessions are not extended in the name of rehabilitation. As adequate time has elapsed since the issue of the aforesaid instructions it is felt that banks would have acquired considerable experience in all aspects relating to grant of concessions and reliefs for rehabilitation of sick SSI units. In the light of the above it has been decided to withdraw with immediate effect, the present system of prior approval by the Reserve Bank for extending reliefs/concessions beyond the prescribed parameters.

3. In this connection, it is relevant to take note of the viability of a sick SSI unit and the rehabilitation of such a unit would depend primarily on the unit’s ability to continue to service its repayment obligations including the past restructured debts. It is, therefore, essential to ensure that ordinarily there is no write-off or scaling down of debt such as by reduction in rate of interest with retrospective effect except to the extent indicated in our guidelines. Such a step as well as concessions/reliefs beyond the parameters indicated in our guidelines should be considered only in exceptional cases where such a course of action is deemed absolutely necessary e.g., (i) good export potential for the products manufactured by the unit; (ii) where there is established demand for the products; (iii) the cost of setting up a similar new unit will be disproportionately high as compared to the cost of revival of the unit; (iv) substantial relief/assistance is provided by the Central and/or State Governments and sacrifices are made by the labour for the revival of the unit. The involvement of the promoters particularly in infusing fresh funds for revival of the unit should also be considered in deciding the extent of reliefs/concessions to be offered by the bank. In all such cases banks should invariably incorporate a "right of recompense" clause in the sanction letter and other documentation. All such cases involving concessions/reliefs beyond those stipulated in our guidelines should be put up to the bank’s Board for sanction.

4. While prior approval of the Reserve Bank for individual package involving reliefs/concessions beyond parameters has been dispensed with, we would continue to monitor all such cases. For this purpose, banks should furnish to us information on a half-year basis, for the periods ending September and March every year, in the format enclosed. The statements showing particulars or individual packages approved during the half-year should be furnished to us within one month from the close of the half-year to which it relates. The first such statement should be for the half-year ending 31 March, 1991.

5. As already advised in our circular dated 6 February 1987 referred to above, efforts to rehabilitate sick units in the SSI sector have to reckon with the relative weakness of such units to withstand difficulties. Hence, the emphasis of the rehabilitation effort in the case of SSI unit will have to be on adequate relief measures and their speedy application. Banks should take all necessary steps to adhere to strict time discipline in dealing with various aspects of rehabilitation of sick SSI units. Ordinarily it should be possible to take a decision on the viability of otherwise of a unit identified as sick, within a period of 3 months. The finalisation of the nursing programme should be completed within a period of 3 months from the date of such decision. Assistance from other agencies/Government Department may be necessary in areas like raw material supply, power, marketing. etc. for undertaking the nursing programme in some cases; there may also be cases needing co-ordinated action by the financial institutions and the banks concerned. All such cases should be decided either by convening meetings of the representative of the various agencies/institutions concerned; alternatively, such cases should be referred to the State Level Inter Institutional Committee without delay. A reference may please be made in this context to the instructions contained in para 4 of our circular RPCD.No.PLNFS.BC.72A/SIU.28/89-90 dated 30 December 1989.

6. Please acknowledge receipt.

Yours faithfully,

Sd/-
(R.K. JALAN)
Chief Officer

Encl : as above

Format for reporting individual packages involving reliefs/concessions beyond RBI parameters approved during half year ended ..............................

(Name of the Bank) ____________________________________________

1. Banks*

2. Financial Institutions*

2. Working Capital

July 17, 1991
Asadha 26, 1913

All Scheduled Commercial Banks

Dear Sir,

Bank Credit to Khadi and
Village Industries (KVI) Sector

     Please refer to our circular letter RPCD.No.PLNFS.BC.2/C.464(A)-Spl.KVIC-88/89 dated 12 July, 1988 advising you regarding the steps to be taken to ensure smooth flow of credit to the KVI Sector. The Khadi and Village Industries Commision (KVIC) had been representing to us that despite issue of guidelines by Reserve Bank, some of the problems still persisted and the implementing agencies of KVIC/KVIBs continued to face difficulties in obtaining adequate bank credit for KVI programmes. A meeting was, therefore, held under the Chairmanship of our Deputy Governor (Shri A. Ghosh) on 10 May, 1991 with the Chairman of KVIC, and representatives of SIDBI, NABARD and some of the commercial banks, to discuss the relative issues. In the light of the deliberation and the consensus arrived at in the said meeting, it has been decided that banks should take action on the lines indicated below :-

i)     Sanction of credit limits

     In our circular dated 12 July, 1988, ibid, it was indicated that KVIC assesses the credit requirements of its implementing agencies after taking into account various relevant aspects including the assistance provided by the Commission itself and, as such, it should be feasible for banks to be generally guided by the assessment of the KVIC. Some of the banks had, however, expressed difficulties in accepting the requests of the units for sanction of credit limits as per the "interest subsidy eligibility certificates" issued by KVIC since they were not supported by detailed assessment made by the KVIC and the amounts indicated were not in conformity with the bank’s prescribed norms. The KVIC has now agreed that a ‘worksheet’ showing the detailed credit assessment made by it would be attached to the interest subsidy eligibility certificate while submitting the loan proposals to the banks. Wherever banks have difficulty in sanctioning the full amount of credit indicated by KVIC, the concerned bank should initiate a dialogue with the applicant as well as the KVIC so that the differences could be resolved through discussion. In this connection, NABARD has proposed to organise a few workshops for familiarising KVIC officials with the methodology adopted by banks for assessment of credit requirements so that the divergence could be eliminated.

ii)     Delay in sanction of loans by banks

     In our circular letter dated 12 July, 1988 referred to above, we have advised banks that credit proposals received from the State Khadi and Village Industry Boards (KVIBs) and other associates/implementing agencies of KVIC should be disposed of within 8-9 weeks in any case. It has been brought to our notice that this time limit is not being adhered to by banks and that the borrowing institutions find it difficult to achieve the annual targeted programme due to delay in sanction of credit limits/enhancement of credit limits, by banks, thus resulting in heavy financial losses. Banks should, therefore, ensure that the time schedule prescribed for disposal of loan applications is strictly adhered to. With a view to reviewing specific instances of undue delay in the disposal of loan applications and having interaction at the field level, it has been decided that KVIC or its agency viz. KVIB should be made a member of the State Level Bankers Committees (SLBCs) as also of the District Consultative Committees (DCCs). Lead Banks/convenor banks of SLBCs may please take action accordingly.

iii)     Project Profiles

     It has been decided that banks should not normally call for a separate project profile in regard to small loans to individual artisans/village industries. Large projects of KVIC assisted agencies would, however, have to be supported by suitable project profiles, wherever such project profiles prepared by NABARD/SIDBI are available banks should adopt the same. In respect of other activities KVIC may have dialogue with the concerned banks who will extend assistance in formulating appropriate project profiles.

iv)     Security and Margin requirements

     As far as security and margin requirements are concerned banks should follow the RBI guidelines for advance to priority sector. Bank should not insist on personal guarantees of officials of the implementing agencies for loans sanctioned to the agencies.

v)     Inclusion of physical and financial programmes for KVI sector in the credit plans prepared under Service Area Approach

     In order to ensure that the KVI sector’s programmes are not hampered for want of adequate and timely bank credit, it is necessary that such programmes are included in the credit plans prepared by banks under the Service Area Approach. Some banks had expressed difficulty in getting adequate details of such programmes will in time for being built into the credit plans. It has, therefore, been decided that KVIC/KVIBs would furnish to the concerned lead banks the annual physical and financial programmes under the Khadi and Village Industries Sector with full details of the various schemes blocks-wise and village-wise, well in time so that the same could be included in the respective branch/block/district credit plans.

2. Please acknowledge receipt.

Yours faithfully,

Sd/-
(S. Sankar)
Joint Chief Officer

August 26, 1991
Bhadra 4, 1913

All Scheduled Commercial Banks

Dear Sir,

Computation of value of investment in equipment, Plant and machinery etc. taken on hire-purchase/
Lease by SSI units and other categories of priority sector borrowers

     As you are aware, certain categories of priority sector borrowers such as small scale industrial units and small business are defined on the basis of the value of investment in (original price paid for) plant and machinery and equipment respectively. One of the banks had sought our instructions regarding the correct method of computation of value of plant and machinery/equipment which is taken on lease/hire-purchase by the borrowing unit, in order to determine its status. In this connection, we have to clarify that in the case of SSI units, as per the notification of Government of India, in calculating the value of plant and machinery, whether held on ownership term or by lease or by hire-purchase, the original price paid by the owner, irrespective of whether the plant and machinery are new or second-hand, will have to be taken into account. In other words, in the case of machinery taken on hire-purchase/lease the actual price paid by the owner i.e. hirer/leassor should be taken into account for computing the value of plant and machinery.

2. The above clarification will also apply in the case of "small business" units which take equipment (including vehicles) on hire-purchase/lease.

3. We shall be glad if you will please convey these instructions to your branches/controlling offices.

4. Please acknowledge receipt.

Yours faithfully,

Sd/-
(S. K. GUPTA)
Joint Chief Officer

January 23, 1992
Magha 3, 1913

All Scheduled Commercial Banks

Dear Sir,

Sick Industries-Small Scale Units

     In terms of paragraph 5 of our circular letter DBOD.NO.CAS.BC.64/C.446(SIU)-78 dated 12 May 1978, banks were advised to apprise their Board of Directors, of the position of lendings to small-scale sector, by submitting a comprehensive memorandum on a quarterly basis, indicating regionwise and industrywise classification of credit facilities granted to small-scale industries, the organisational arrangements made for monitoring and counselling, the extent of sickness (number of units, amounts involved), the cause of sickness, corrective measures taken and the results achieved, etc. Banks are required to forward to RBI a copy of the memorandum for our information. It is observed that your bank has not been forwarding a copy thereof to RBI regularly.

2. Further in terms of item 6 of our circular letter RPCD.No.PLNFS.BC.6/PS.72/88 dated 30 July 1988, banks are required to put up separate half yearly reports to their Boards of Directors reviewing the position of applications for financial assistance from the SSI sector, assistance granted to the SSI sector, comprehensively covering, among others, the overall progress, statewise and industrywise details position of sick units and follow up action taken, complaints and grievances, redressal, delays in sanction, etc.

3. We shall be glad if the memorandum and the report referred to at paragraphs 1 and 2 above are prepared at least on a half yearly basis, i.e. as at end of March and September each year and placed before the Board and copies thereof are regularly sent to us. The copies of such memoranda and reports for the half year ended September 1991 may please be sent to us immediately on receipt of this circular letter.

4. Please acknowledge receipt.

Yours faithfully,

Sd/-
(S. JOHN)
Joint Chief Officer

February 12, 1992
Megha 23, 1913

All Scheduled Commercial Banks

Dear Sir,

Ownership of Units - Two or more undertakings
under the same ownership - Status of the unit

     Please refer to paragraph 1 of our circular RPCD.No.PLNFS.BC.76/PS-72-88/89 dated 25 February 1989 advising that if an industrial undertaking/proprietor/partner sets up two or more units within the same State or outside, whether manufacturing similar or different items, the fixed investment in plant and machinery of all such units is to be clubbed together for determining the SSI status of the unit.

2. Government of India, in their policy measures for promoting and strengthening small, tiny and villages enterprises, laid on Table of both the Houses of Parliament on 6 August 1991, decided to allow equity participation by other industrial undertaking in small scale sector, not exceeding 24 percent of the total share holdings of the SSI unit. Since the existing guidelines on clubbing of investment in plant and machinery or one or more units set up by common proprietor/partner(s)/Directors(s) within the country for manufacturing similar/different products for deciding SSI status of the units do not conform with the new policy of Government, which allows equity participation by other industrial undertakings in the SSI, it has been decided by Government of India, to India, to keep operation of the instructions of clubbing of investments referred to above, in abeyance till further orders.

3. We shall be glad if you will please issue suitable instructions to your branches/ controlling offices to implement the decision of Government of India, mentioned in paragraph 2 above.

Yours faithfully,

Sd/-
(S. JOHN)
Joint Chief Officer