Small, Medium, and Large Enterprises (SMLE)

Introduction; Enterprises are business or productive ventures established for producing goods or providing services with the aim of earning profit and generating employment.
In the context of agricultural and rural development, enterprises may include agro-based industries, food processing units, farm machinery workshops, dairy farms, seed production units, etc.

The classification of enterprises is mainly based on:

• Investment in plant and machinery / equipment, or
• Annual turnover, as per the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, amended in 2020.

Classification of Enterprises (as per Government of India, 2020)

The MSME classification applies uniformly to both manufacturing and service enterprises.

Note: Large enterprises are not covered under the MSME Act but are recognized as industrial undertakings exceeding the medium category limits.

Characteristics of Small, Medium, and Large Enterprises

(A) Small Enterprises

• Operate with limited capital and labor.
• Usually managed by individuals or small groups.
• Locally available resources and raw materials are used.
• Common in rural and semi-urban areas.
• Examples: Dairy farm, honey processing unit, mushroom production unit, handmade papad/pickle industry, organic fertilizer unit.

Features:

• Low investment
• Local employment generation
• Easy management and flexibility
• Suitable for rural self-employment

(B) Medium Enterprises

• Larger in scale and investment than small units.
• Employ moderate technology and workforce.
• Often supply goods to large industries or urban markets.
• Examples: Food processing plant, seed processing and packaging units, poultry feed mill, biopesticide production unit.

Features:

• Semi-mechanized operations
• Organized management structure
• Wider marketing networks
• Potential for export and large-scale employment

(C) Large Enterprises

• High investment and turnover.
• Operate with advanced technology, machinery, and skilled manpower.
• Usually structured as corporations, companies, or cooperatives.
• Examples: Sugar mills, fertilizer factories, textile industries, large dairy plants (Amul, Mother Dairy), agro-chemical industries.

Features:

• High productivity and economies of scale
• National and international market reach
• Formal organizational structure
• Significant contribution to GDP and export earnings

Importance of Enterprises in Rural and Agricultural Economy

Examples of Agri-based Enterprises by Size

Institutional Support for Enterprises

• Several government initiatives support micro, small, and medium enterprises, especially in rural and agri-based sectors.

Role of Enterprises in Farming-based Livelihood Systems

Value Chains as Livelihood Components

(A) Concept; A value chain represents the sequence of activities that add value to an agricultural product — from input supply, production, processing, packaging, storage, transportation, to marketing and consumption.
Each step increases the product’s worth, benefiting multiple stakeholders, including farmers.

(B) Stages of Agricultural Value Chain

1. Input Supply: Seeds, fertilizers, agrochemicals, machinery (Input dealers, agri-startups).
2. Production: Crops, livestock, fisheries, horticulture (Farmers and FPOs).
3. Post-Harvest Handling: Grading, sorting, cleaning, storage.
4. Processing: Milling, drying, extraction, packaging (secondary enterprises).
5. Marketing and Distribution: Wholesale, retail, export chains.
6. Consumption: End-use by consumers or industries.

(C) Importance for Farmers

• Enhances income by reducing middlemen.
• Encourages value addition at the village level.
• Promotes market-oriented production.
• Creates employment in secondary and tertiary sectors.
• Enables farmers’ integration with agribusiness and industry.

Secondary Enterprises as Livelihood Components

(A) Definition; Secondary enterprises are those activities that utilize agricultural produce or by-products to create value-added goods or services.
They are often small or medium-scale and are essential for income diversification and rural industrialization.

(B) Examples of Secondary Enterprises

Integration of Enterprises with Value Chains

An effective livelihood model integrates primary production with secondary enterprises and value chain components to ensure a sustainable rural economy.

• Example 1: Dairy Value Chain; Milk production → Collection → Chilling → Processing → Packaging → Distribution → Marketing
  → By-products: Ghee, butter, paneer → Dung used in biogas or organic manure.
• Example 2: Poultry-Fish Integrated Enterprise; Poultry droppings used as fish feed → Fish produced for market → Waste used for compost → Circular income model.
• Example 3: Horticulture-Based Enterprise; Fruit cultivation → Sorting → Processing into juice/jam → Branding & Marketing → Export.
• These integrated value chains enable small farmers to become entrepreneurs, creating multiple income sources from a single farming system.

Benefits of Value Chain and Secondary Enterprises

Key Facts for Competitive Exams

• MSMED Act enacted: 2006; revised classification: June 2020.
• MSME sector contributes ~30% to India’s GDP and ~48% to exports.
• PMFME Scheme (2020): “One District One Product (ODOP)” approach.
• FPOs: Target of 10,000 FPOs by 2027 under the Central Government.
• Value Chain Financing: Promoted by NABARD, SFAC, and APEDA.
• Secondary enterprises contribute over 60% of rural non-farm income in many states.