Reservation of products for exclusive manufacture in the small scale sector was introduced for the first time in 1967 with the reservation of 47 items. This number increased progressively as under:
February, 1970 - 55
February, 1971 - 128
November, 1971 - 124
February, 1974 - 177
June, 1976 - 180
April, 1978 - 504
After the introduction of National Industrial Classification (NIC) code the list was recast. As a result, the list of reserved items expanded from 504 to 807 in 1978 and was 836 in 1989. Out of this, 39 items were dereserved in four phases viz., 15 items on 3.4.1997, 9 items on 3.2.1999, 1 item on 1.1.2001 and 14 items on 29.6.2001. Subsequently, 51 items were dereserved in May 2002, 75 items in May 2003 and 85 items in October, 2004,108 items in March 2005, 180 items in May 2006, 87 items in January 2007, 125 items in March 2007.
As of March, 2007, 114 items are reserved for exclusive manufacture in the small scale sector (see complete list).
Reservation affords support to SSIs against competition from medium/large/ multinational companies. The policy received statutory backing in 1984 under Section 29B of Industries (Development & Regulation) Act, 1951.
Reservation/dereservation is a continuous process. The Advisory Committee on Reservation constituted under the Industries (Development & Regulation) Act, 1951 recommends items to be added and deleted from the reserved list including bringing changes in nomenclature. The Advisory Committee on Reservation consists of the following:-
Secretary (MSME) . Chairman
Secretary (IP&P) - Member
Secretary (Commerce) - Member
Adviser (VSI), Planning Commission - Member
Additional Secretary & DC(MSME) - Member Secretary
Non-SSI units (i.e. medium/large units including multi-nationals) can manufacture reserved items if they have obtained a carry on business licence or accept an export obligation of 50% of their production.
As only manufacturing of items is reserved, trading in these items is not a violation of the reservation policy.