CHAPTER 2
OBJECTIVES, HYPOTHESIS AND METHODOLOGY
2.1 INTRODUCTION;-
Methodology of the present study is covered in this chapter, hiitially the background of the study is explained briefly. The chapter then deals with the details
regarding the sources of data, methods adopted for collection of data, selection of sample, the rationale for different types of ratio analysis and questionnaires, and the methods of
analysis of data.
2.2 BACKGROUND OF THE RESEARCHER:-
The researcher is a practicing Chartered Accountant since 1984, and a senior lecturer at Annasaheb Magar College of Commerce, Hadapsar, Pune - 28. He is from a small village Pategaon that is 2 kms from Paithan having a population of near about 2900. Sant Eknath and Sant Dnyaneshwar have born in Paithan Taluka. Sant
Eknath was properly from Paithan and Sant Dnyaneshwar from Apegaon village, a village located 4 kms from Paithan. Paithan is having a historical importance since king
Shake Shaliwahan. Paithan is at 50 kms distance from Aurangabad and at 200 kms distance from Pune. There are 37 to 40 villages in Paithan Taluka, namely Pategaon,
Dadegaon, Kawsan, Chanakwadi, Khadke-Madke, Mungi, Pimplegaon, Katpur,
Apegaon, Navgaon, Narale, Dhorkin, etc. The total population of Paithan is near about
1.95 lacks having a Nagar Palika.
Being bom and brought up in Paithan Taluka naturally have a love and affection for Paithan Taluka, so this is one of the reasons for being selected this subject
98 for my research work for Ph. D.
LIKELY CONTRIBUTION OF THE RESEARCHER: Since no research work on the topic has been undertaken so far i.e. Rehabilitation of Small Scale Industries in M. I. D. C. Paithan in Aurangabad District for the period under review. The researcher is sure that the work will be useful for the development of
Small Scale Industries in Aurangabad District. It will throw light on the many important issues relating to Small Scale Industries functioning in the Paithan Taluka. This study will definitely come out with the listing of constraints, difficulties and achievements of the Small Scale Industries, the suggestions, to improve the overall perfomiance of the
Small Scale Industries. The conclusions of this study will be advantageously used to improve the performances of the Small Scale Industries in Paithan Taluka.
2.3 REVIEW OF LITERATURE:-
The literature was not available on any sources relating to small scale industries.
Few researchers have studied the problems of “small scale industries” but no research is conducted on Rehabilitation of these small scale industries. There are no any other literatures available on this subject except some articles in the daily newspapers like
"'Sakai". Most of these articles were written for complaining against the non availability of labour, non availability of finance, and heavy overdue, applicability of Income Tax laws to the small scale industries.
The research conducted by few others, are found to be at macro level only and therefore, have not dealt with the day to day management problems of the small scale industries. Therefore, the researcher has decided to study the problems of small scale
99 industries at micro level, so that, realistic conclusions can be drawn and suggestions can
be made to help improve, the management of the small scale industries. Therefore,
instead of covering the whole district and studying the problems superficialK' it is
decided to restrict the study for limited geographical area but to go into much depth ol'the
problems. Hence, the study is resliicted only to Aurangabad district and mainly the
Paithan Taluka. The researcher is well acquainted uith the socio-economic conditions of
Paithan Taluka and therefore it has helped hi to study the subject in more details. Hence,
only Paithan Taluka was selected for the study.
2.4 TYPE OF RESEARCII:-
The present study had an e.xploratory research design initially. It considered
dilTcrent aspects of the problem under study. Literature on the topic was not a\ ailable
e.xtensively. However existing mateiial and available information was reviewed to arrive
at specillc hypothesis.
The survey conducted by the researcher covered respondents who had
practical experiences of the small scale industries. The personal inter\ iews of:---
1) Some successful industrialist. “\\\
2) Some famous Economist.
3) The persons who has the past experience in the industrial area.
4) Some people w ho had worked as a manager in some famous industries.
5) Super\ isors of some industries.
6) Employees of some small scale industries.
7) Workers of the industries.
They could contribute ideas representing dilTcrent types of experiences. The study is
100 descriptive research also. It covers facts and characteristics concerning small scale industries and persons associated with them.
The objective of the study was clearly defined. Techniques for collecting information namely questionnaire, observation, examination of financial indicators were carefully decided. The researcher carried out the whole exercise himself with the help of the computer to make the study reliable and unambiguous.
The sampling techniques used for the study are described under the relevant head separately.
2.5 RESEARCH ME T H O D O L O G Y AND IT’S LIMITATIONS:-
Methodology:-
The present study is based on the time series of secondary data pertaining to the period from 1991 - 2004 ( 14 years ) for Small scale industries in the Paithan Taluka of
Aurangabad district. The data collected was published annual reports of small scale industries of the small scale industries, various issues of Statistical Data of Maharashtra state, and socio-economic review data available for each of the Taluka, the Census
Reports of government of India etc. the total period of 10 years is divided into 3 sub periods for simplicity as under :
Period 1.: 1990-91 to 1994 - 1995
Period II. : 1995 -96 to 1999 - 2000
Period III: overall period from 1990-91 to 1999-2000
In selecting the sample for this, multistage puiposive random sampling technique is adopted to select non agricultural small scale industries and also beneficiaries.
101 At the first stage almost all the small scale industries from Paithan Taluka of
Aurangabad district were selected by census method for the purpose of study.
At the second stcii^e all the small scale industries of the Paithan Taluka was categorized according to their sizes with respect to Share Capital. Each small scale industries were allotted appropriate code no. according to its category.
While selecting small scale industries due weightage has been given to factors like the size with respect to Share Capital, the period of standing, success story or failure story of the society and proportion in the total number of small scale industries in the
Taluka.
In all the small scale industries selected from the Taluka as given in the above table no. 2. The number of small scale industries selected for the study constitutes about
10 % of the total small scale industries.
At the third stase for all these small scale industries, the financial and other data available for the five years were collected from the annual reports of the small scale industries, all the data for the five years were averaged by simple average method. These averages of 15 small scale industries were subjected to all types of ratio analysis, and statistical tests. The conclusions were made for both the periods. To illustrate the trends, their calculations, their inteipretations, one small scale industry was selected frorn various areas of M. I. D. C. of Paithan Taluka and the calculations are exhibited at appropriate places. Break even analysis and ratio analysis are applied to analyze the operational perfonnances.
In the next stage the survey method and questionnaire method were applied to study the opinions of the B.O.D., employees, SDLs, The observation technique was
102 applied by attending Annual General Meetings and by paying visits to Small Scale
Industries to observe day to day working. The interview technique was applied for collecting the opinions from the Auditors. Income Tax Department and over above few co-operators. The researcher also attended the conferences held exclusively for Small
Scale Industries and for co- operative societies in general. All these methods enabled the researcher to give a balanced picture.
The detailed methodology adopted in each case is further discussed at the relevant places. The extensive use of computers has made the whole calculations work easy for the researcher. At appropriate places to show the degree of relationship between different parameters of different ratios, Break- even analysis and ratio analysis arc applied to analyze the operational performance. For all the calculations computers are extensively used.
In the course of discussing a particular aspect, the information collected from primary records of the Small Scale Industries and the infonnation collected in the form of opinions from the management's beneficiaries. This has enabled the researcher to discuss a particular aspect comprehensively from different angles to give a balanced picture.
LIMITATIONS:-
1. Since, the data are obtained from more than one source there may be slight
Discrepancies between one source and the another about the same variable.
2. The primary data collected through administrating questionnaires has its own
103 limitations. The respondents were hesitant to write their incomes, deposit amount etc.
3. Since the questionnaires covered various aspects, the respondents were unable
/ unwilling to answer certain questions. As such logical conclusions were drawn on the basis of the replies obtained.
4. Since there was no uniformity in the definitions of working capital and owned
funds, the definitions as applied by the RBI are adopted.
2.6 RESEARCH DESIGN:-
Research design is the heart as well as brain to complete any research work.
Without research design no research work can be completed. Research design is the guideline and road to completion of the Research project on sound fooling and to carry out the work of collection and observations. The researcher has adopted following chart of Research Design to complete his research work, which are of more significant in the study.
104 RESEARCH DESIGN
PRIMARY DATA SECONDARY DATA a) Selection of Sample b) Questionnaires c) Field visits A) Internal Sources B) External Sources d) Interviews a) Annual Reports a) Published Information e) Observations b) Audit Report b) Professional Journals
c) Profit & Loss c) Govt. Periodicals
Accounts d) RBI Bulletin
d) Balance Sheet e) Library Work
f)By Laws of SSI f) Magazines on Co
g) Silver/ Golden Jubilee operation
Publications of SSI g) Newspapers
ANALYSIS AND INTERPRETATION
1) Tabulation 2) Classification 3) Simple Average 4) Diagrams and Graphs 5) Correlation 6) Regression 7) Comparison 8) Ratio Analysis etc T PROBLEMS AND SUGGESTIONS
1r SUMMARY. CONCLUSIONS AND RECOMMENDATIONS
105 COLLECTION OF PRIMARY DATA:
Questionnaires: Two sets of interview schedules were prepared to collect detailed information for research work
Questionnaire: Set 1
First set of questioiuiaires will be prepared to collect the data regarding the working of small-scale industries from the owners of business, proprietor, partner, or director of Pvt. Ltd. Company or Public Ltd. Company. Questionnaire will contain the infomiation regarding the name and data of establishment of industrial unit, name and qualification of owner of unit, status of Unit, total numbers of employee's in management cadre and at work level, hifonnation regarding loan funds and own funds, rate of interest, amount blocked in stock in trade and sundiy receivables, credit period given by the suppliers of raw materials and stores, spares, accessories, components, tools etc.
Gestation period. Break even analysis of product, measures of quality controls, quality of services rendered by the local or district level professionals.
Questionnaire: Set 2
Second Set of questionnaire will be prepared for the employee's of the organization, no. of qualified employee's, no. of training period, pay stmcture of employee's attitude of employee's, level of co-operation between employer and employee’s. No. of grievances of employee's and how such grievances are dealt with, whether employees are having their unions or not (organized or unorganized).
106 Field Visit: In the addition of the above techniques of data collection Field visits were also arranged to know the actual functioning and services provided by the sample SSI.
Interviews: The focus group intcr\iew technique was applied for collecting the opinions from the auditors. Personal interviews and meetings with the management of the
SSI. Officials of Aurangabad District Banks and the Financial Institutions.
Collection of Secondary Data: Over and above the basic primary sources, the secondary sources for data collection will also be utilized. The secondary data for the study will be collected from
the publication and official records from the following sources.
1) Annual Reports and Directors Report, Auditors Report.
2) Silver/ Golden Jubilee Publications
3) Data Published by various publications, books, journals, weekly magazines of
Govt, and semi Govt, or private agencies.
ANALYSIS AND INTERPRETATION OF DATA:
First of all researcher collected the financial statements from the SSI of last 5 years. After the collection of data, analysis of data, inteipretation of the results in necessary. Analysis of data will be made with the reference to the puipose of research.
Problems of research at hand to the hypothesis to be tested, for analysis and inteipretation of data the researchers will use the following statistical methods.
107 1) Classification and grouping and sub-grouping
2) Tabulation
3) Simple and Weighted averages
4) Graphs and Diagrams
5) Maps and Charts
6) Correlation
7) Regression
The researcher will also use the management technique of ratio analysis whenever necessary and required.
METHODS ADOPTED FOR PRIMARY SURVEY;-
Scheduled questionnaire method:-
The questionnaires were first delivered to the small scale industries offices by hand. The managers and the staff were requested to the through the questionnaires designed for all types of respondents. They were requested to give appointed day to once again visit their places to get the questionnaire filed in personally. Then the research personally visited the small scale industries on the appointed days, and got the questionnaire filed- in by interviewing the respondents. It worked out fine. The response to the scheduled questionnaire was nearly 95%. The researcher found that 5% of the selected societies to secure proper representation of all kinds of small scale industries.
The researcher got the questionnaire filled randomly from depositors, loanees and shareholders who came for their work in the small scale industries during the day of his visit to the small scale industries. However to cover all types of shareholders,
108 loanees and depositor, it was decided to increase tlie number of respondents suitably. In
some cases the depositors, loanees and shareholders were scattered. They were not
available at one particulars address. The managements of the small scale industries were
very co-operative and kind enough to call the SDLs even at evening hours at small scale
industries to fill up their questionnaire. The researcher got a very wann response from all
the respondents. The researcher, being practicing C.A. in the area, faced no any serious
difficulties in obtaining even personal information from the loanees, shareholders and
depositors, especially in Paithan Taluka.
The researcher has prepared as many as 200 profit and loss accounts and
balance-sheets per year during each of the last 10 years, whereby he has got with him
very personal infonnation about the loanees who wish to obtain loans from different
banks and financial institutions for the small scale industries. The prime infonnation has
helped the researcher to draw important conclusions regarding the impact of loans on
loanee’s socio-economic status.
OBSERVATION TECHNIQUE:-
The researcher adopted the observation technique of data collection. The researcher spent on full day in each small scale industry to observe its working. The infoiTnation collected by observation method was especially useful in following respects.
1. It helped him to observe the day to day working of the small scale industries. And more especially the different practices followed by the different small scale industries.
2 .It was useful for him to identify the difficulties of the directors and the staff in running the small scale industries.
109 3. It helped him to know the dii'ficuhies of shareholders, loanees and depositor.
4. It helped him to note the behavior of director and employees towards depositors,
loanees and shareholders and vice- versa.
5 .It helped him to observe the weakness and the strength of different small scale
industries.
INTERVIEW TECHNIQUE:-
The researcher adopted the technique of interviews. The interviews were taken in two ways: - I. Formal
2. Informal
He had taken the formal interviews of auditors, namely, internal auditors and external auditors, A. R,s and D.D.R,s. A structured questionnaire was used for these interviews. The response to the interviews was 100%. The co-operators were kind enough to make themselves available for the informal interviews.
ATTENDING CONFERENCES AND AGMS.
The researcher had attended the workshop on audits of small scale industries organized by WIRC of the Institute Chartered Accountants of India in Pune. He had acted as a resource person in the workshop for small scale industries. He had also attended the AGM's of the 4 small scale industries which were being audited by him.
ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT:
First of all researcher obtained financial statements from the small scale
10 industries for last 10 years. He collected such financial statements initially from 20 small scale industries, in Paithan Taluka. He then conducted extensive ratio analysis on the basis of secondary data available from financial statements. The statistical techniques were also used for the analysis. This technique helped to study the causes of failure and success of the small scale industries. On the basis of the results the researcher has gone for collecting, primary data by including appropriate and only necessary questions in the different questionnaires. The questionnaires included only such questions which helped the researcher to collect infomnation which is beyond the books of accounts, and were generally not included in annual reports of the small scale industries.
The researcher has adopted the scheduled questionnaire method for his survey. He prepared 6 types of questiomiaires. They were for
1. Director of the small scale industries
2. Shareholders, loanees of the SSI.
3. Employee of the SSI.
4. Auditors.
5. Income Tax Department.
6. Nationalized banks and co-operative banks.
It helped him to study the problem of the small scale industries from every angle.
The questionnaire consisted of following types of questions:- a. Open ended questions b. Multi choice questions. c. Dichotomous questions.
11 d. Check and cross check questions.
Before starting the main survey, the researcher made the pilot survey on a small scale industry on a small scale. The puipose of such survey was to know the following:
1. Whether the questions were understood by the respondents.
2. Whether the questions needed rearrangement to enable better understanding.
3. How many time the respondents took to fill the questionnaire.
Three types of questionnaires were used in the pilot study. One for director, one for shareholders, depositors and loanees and one for employees of the small scale industries.
The director took about 40 minutes fill in the questionnaire. They understood all the questions. They filled in answers for all the questions. The space left in the questionnaire for the open-ended questions was found to be adequate. The researcher was not required to make any changes in the questionnaire for the employees.
The depositors, shareholders and the loanees took about 30 minute to fill in the questionnaire. They were able to write all the answers. Few SDLs asked doubts about maintaining secrecy about their personal information. Some of them were hesitant to mention their incomes, deposits etc. the researcher convinced them. So there was no necessity for making any changes in the questionnaire of depositors, loanees and shareholders.
The pilot study thus confinned that the researcher was working on proper lines.
12 PILOT STUDY:-
The researcher used schedule of questionnaire method for his pilot survey. He used random sampling as well as deliberate sampling for administering the questionnaire.
Sampling of Small Scale Industries for pilot studies:
The researcher first selected only 4 Small Scale industries by deliberate sampling method. These 4 societies were being audited by the researcher as an internal auditor. The scheduled questionnaires were administered to respondents of these 4 Small Scale
Industries as under (Nos.)
a) Directors 100 % All the directors 39 (100%) of the SSI were
interviewed. b) Employees 100 % All the employees 46 (100%) of the SSI
were interviewed. c) Shareholders, depositors, In all 330 SDLs of these 4 SSIs were
loanees 20% interviewed.
The researcher made deliberate sampling of SDLs for these four selected SSIs.
The selection was based on audit findings, a) Shareholders:-
The shareholders of all these 4 SSIs were selected by deliberate sampling method to include lower middle class and well to do shareholders. In all 126 share holders were selected for pilot survey.
13 b) Depositors:-
The Depositors of all these 4 Small Industries were selected to include deposits a/c holders of FDs, DDs and SDs. In all lOVdepositors were interviewed in pilot survey.
FDs (Above 20000) 28
FDs (Below 20000) 15
FDs (Below 10000) 26
DDs 26
SDs 12
Total 107
c) Loanees:-
The Loanees of all these 4 Industrial units were selected to include majority of such accounts who have become overdue. Some very good loans were also interviewed.
Sampling of shareholders:-
The researcher followed the random sampling method for the shareholders. He decided to obtain at least 5 questionnaires from the representative of shareholders of every selected industry. He visited the Industries personally and selected the respondents at Random from shareholders who were present in the Industries for their work at the time of his visit. However to cover all the types of members it was decided to increase the number of respondents suitably.
114 Response from the sample:-
Initially the researcher adopted scheduled questionnaires method 4 Industries were selected for scheduled questionnaire method. All the 4 industries (100%) gave positive response because the researcher was auditing their accounts.
The researcher then decided to adopt the scheduled questionnaire method for the entire survey. He obtained the list of SSIs of Paithan region from various sources.
He selected at random the industries for scheduled questionnaire. The A. R. offices gave a list of small scale industries in working, list of closed small scale industries, and list of liquidated industries. The researcher tried to contact the B.O.D. of closed small scale industries also find out their reasons and problems but, he found that almost all such industries were closed whenever the researcher visited to the sick small scale industries.
Finally the researcher got the response as summarized below. He visited the sick industries, got the questionnaire filled in personally. The response to this method was 84.74 % (50 out of 59.)
9 industries were found closed whenever the researcher visited the small scale industries.
The responses obtain from different respondents is summarized below:
Responds Contacted Responded %
Employee 59 50 84.74 %
Directors 59 50 84.74 %
SDLs 504 392 77.77 %
Auditors 10 10 100%
I.T. Department 2 2 100%
15 Nationalized Banks 5 5 100%
Therefore finally number of small scale industries, selected for financial calculations and interview techniques as under:
Responds Contacted Responded %
Employee 59 50 84.74 °/7 o
Directors 59 50 84.74 %
SDLs 504 392 77.77 %
Auditors 10 10 100%
I.T. Department 100%
Nationalized Banks 100%
METHODS OF ANALYSIS OF DATA COLLECTED THROUGH SURVEY:-
Comparison of data has been made mainly on the basis of percentages.
Whenever the respondents were asked to give preferential order, the weightage to the preference was given in an ascending order. i.e.P' preference was given the highest weightage and lower preferences were given lower weightage in sequential order.
For the questions where multiple choice were to be denoted, totals of all choices were taken as a basis for working out the percentage of choice to a specific preferences. The total of replies therefore is greater than the number of respondents.
16 MANAGEMENT ASPECT OF SMALL SCALE INDUSTRIES
In small scale industrial units, the principles of management must combine with principles of co- operation. It implies co- operation and co- ordination in all spheres. It should be a management of people for imparting real benefits. Policies are decided by its own Board of Directors or committee members who are elected by members.
Different sub- committees are appointed for different functions, as the nature of industry. In case of consumer product industi7 , for its proper administration, there will be different sub-committees, such as purchase committee, sales committee, price and rates committee, development committee, etc.
HUMAN RESOURCE DEVELOPMENT ( H. R. D .)
Of all the resources available, human resource is the most valuable resource. And therefore not only proper recruitment of right personnel for different types of jobs but their proper induction and continuous reorientation are an essential pre requisite.
ADOPTION OF MODERN SELECTION METHODS:-
The selection of appropriate and qualified managers and employees is a crucial factor for effective and efficient functioning of any organization. The existing selection procedures in many of the co-operatives are out-dated and/or subjected to vested interests. It is not uncommon to find that people without even the essential qualifications and experience are recruited which having negative impact on the
117 organizational development. It is high time that the selection procedure should be scientifically evolved to cope up with the modern requirements.
Training and development;-
Needless to emphasis that co-operatives will have to continuously invest in the training and development of their own managers and employees. It is not that co operatives have not been doing so. However, absence/lack of scientific assessment of the training needs; non-restmcturing of training policy/philosophy in the light of emerging developments; improper post- training development of personnel trained , lack of feed back of inaction on the feedback from the trainees and above all not-so-conductive organization culture are some of the major factors responsible for ineffectiveness of training in many areas.
By and large, the training institutions do enter into discussion and dialogue with the user organization before they prepare their annual calendar of programs.
However, the response from user organization is, to say the least, hardly encouraging and/or of use. Hence the conduct of training programs is not based on proper identification of training needs. Quiet often the training programs are organized based on the general market trend without prompt and proper communication problem solving, information sharing, etc. further the training programs need to be conducted more through participation and discussion method based on live case studies and should lead to creating a positive work culture. Also further the superior and subordinates, top management in co-operative should get into an environment that encourages free communication thereby clearing the hierarchical hurdles. Self Developmeiit:-
Besides training, self development through one's own efforts in the direction of up-gradation of their knowledge, skills and attitude is equally important. The management has also very significant role to play in this regard; by way of providing support services in the form of financial support to purchase magazines / newspapers, computer and other aids.
LIMITATIONS OF THE STUDY:
The present study is concerned with the closed industrial Small Scale units in the
Paithan Taluka. Due to above features the study has following can limitations.
1) Period of study is only from 1981 to 2002 for generalization of the findings.
2) The chosen survey area is Aurangabad District and samples Small Scale
hidustries were selected from Paithan Taluka.
3) The questionnaire is prepared in Marathi because respondents know Marathi
only.
4) The finding is based on the ability of respondents to the inquiries of the
researcher. The respondents were very shy to answer the questions because
they feel that their tme information may curtail the concessions and benefits.
A small number of respondents might not have understood the objective of the
study and may not have responded honestly. This could lead a marginal error.
However due to care was taken to keep the degree of error within limits.
19 2.7 SUGGESTIONS / CONCLUSIONS: -
1. CONVERSION COST:
It has been observed that the conversion cost has shown an increasing trend in all the five years under observation. For controlling this cost, urgent step should be taken by the factories. It is suggested that standard cost of conversion according to the stages ol' the production should be fixed and constant comparison of the actual with the standard should be made. Difference between the standard cost and the actual cost should be worked out and corrective action should be taken when it is found that the actual cost is more than the standard. Thus standard cost should be fixed for the primary, secondary and at production stage, which are three main stages in Small Scale Industries.
2. BORROWINGS:
There has been substantial increase in the interest burden of the Small Scale
Industries. The incidence of this interest burden is so much that the existence of the
Small Scale Industries is in danger. Immediate steps should be taken for reducing burden of the interest. It is suggested that the burden of inventory should be liquidated, as it is
responsible for the indebtedness. For this, more incentives should be offered for export of products. Factories should be encouraged to export the product in the world market. It
is also suggested that new licenses should not be given without careful study of the
projected demand of the product. Uneconomic and sick units be allowed to be closed
down and encouragement should be given for mergers and acquisitions of the factories.
3. PROFITABILITY:
The profitability of the Small Scale Industries has been very low. There is no
120 doubts that the profit motive is absent in the Small Scale Industries, but for survival
some amount of suiplus is absolutely necessary. It is therefore suggested that the Small
Scale Industry should adopt more professional approach in cost control and cost
reduction because there is no possibility of product prices becoming more remunerative
in the future. They will have to concentrate on the efficient utilization of the by
products, which will generate profits.
4. TECHNICAL PARAMETERS:
There are technical parameters for evaluating the technical performance of the
Small Scale Industries. It is suggested that there should be qualification of the technical nornis and how much loss is incurred by the factory by non-fulfilling a norm, should be worked out and shown in the annual reports. For example, if a factory is not able to satisfy the nornis regarding the reduced expenditure, the loss extended of incurred should be worked out and shown in the annual reports.
5. COST ACCOUNTING RECORDS:
The Government of Maharashtra has made it compulsorily for all the Small Scale
Industries in the state to maintain cost accounting records and conduct a cost and
perfonnance audit every year from 2002-03. It should be ensured that there is a
compliance of this provision. The cost accounting record is going to help the Small Scale
Industries to find out the cost of production in scientific manner.
121 6. E N E R G Y AUDIT:
The electricity regulatory commission has declared that the rate of electricity
generated through the co-generation projects of Small Scale hidustries will be in very
attractive rates. The Small Scale Industries should take full advantage of this and come
forward to invest in a co-generation project. For this they will have to use the electricity effectively. It is necessary to conduct the energy Audit that will help to identify such losses in the generation and transmission of the power and will ensure more cost effectiveness.
7. TIME BETWEEN PRODUCTION PROCESS:
During this study, it has been observed that there is no system to monitor the time
lost between production process. Therefore it is suggested that the factories should have
a system that will record the time lost between the production process. Similarly the
factories should strengthen their logistic airangements so that the time lost in transportation is minimum.
8. APPORTIONMENT OF COMMON COST:
It has been observed that there is no apportionment of common cost to the by products. It is suggested that there should be apportionment of common costs for the by products on scientific basis so that coixects cost of production of the by-products can be worked out.
122 9. REVIVAL OF SICK UNITS:
As per the report of the various publications, in M. I. D. C. Paithan area at present there are 25 Small Scale hidustries, which are sick units with huge accumulated losses. It is suggested that a rehabilitation plan should prepare and implemented for these units.
The preparation and monitoring of the plan should be entrusted to a professional
institution. These units should be given a period of ten years showing improvement in the results. If these units cannot achieve this they should be allowed to liquidate or merge with other profitable units.
10. LOGISTICS STUDY:
In order to reduce the time lost in production process, it is suggested that there should be a logistic study of the transportation arrangements made by the factories. In many cases the factories themselves make the transport arrangements, but in few cases the transportation is made either by the small scale industries themselves or by the transporters' agencies. A study can be conducted to find out the possible reduction in the transport cost due to proper transportation arrangements and also its impact on the time lost between harvesting and crushing.
11. INVENTORY CONTROL:
One of the important aspects of the cost control and cost reduction is the inventory control. It has been observed that large quantity of inventory is piled up with the Small Scale Industry, both in case of the finished goods and in case of the consumables. A study in this aspect is necessary to implement the cost reduction
123 programmed in the Small Scale Industry,
12. MECHANIZATION OF VARIOUS OPERATIONS:
It has been observed that at present loading of the products on the trucks, transporting the product to the Godown etc. are being done manually. It is necessary that a detailed study of the various equipments that can be installed should be made for selecting the most suitable system for the implementation. A detailed feasibility study of the same should be done so that the program of mechanization and automation can be implemented in a phased manner.
13. UTILIZATION OF THE BY-PRODUCT:
It has been realized that the product sale prices are not going to be more remunerative in future. For the survival in the long run, it is necessary for the Small
Scale Industries to make efficient use of the by-products and their feasibility should be worked out. In future, it is expected that the sugar will be a by-product and the products like molasses, alcohol will become the main product. It is therefore suggested that a detailed research should be conducted in all aspects of the use of the by-products, from technical feasibility to the financial and marketing feasibility. It is felt that perhaps by adopting this way, the Small Scale Industries will be able to survive.
After correctly carrying out the said research the following suggestions are made. The
Small Scale Industries should take urgent steps to liquidate the large inventory of the stock with them. More diversified uses of the by-products should be developed which will contribute to the profitability of the Small Scale Industries. Steps should be taken to
124 control the conversion cost, which has been showing an increasing trend in all the five under observation.
The Small Scale hidustries resorting to heavy borrowings for working capital and this has result an increase in the burden of interest. It is suggested that for reducing the
indebtedness, they be allowed to export products in the international market. More incentives should be offered to the exporting units.
It has been observed that the Small Scale Industries has come in ti'ouble due to excess capacity being built up due to proliferation of factories as a result of the liberalization policy of the Government. There is a need to look into the licensing policy followed by the Government and new pemiission should be given after careful study of availability of the raw materials in the area, and also the projected demand and supply position of the product manufactured.
2.8 SOURCES OF DATA:-
The research is based on primary and secondary data collected trough
various sources.
The sources of secondary data were;
• Reference Books
• Schedule questionnaire method
• Government publications, Notifications, circulars.
• Information available with the co-operative departments.
Federations, training institutions, libraries.
125 • Analysis and inteipretation of Annual Reports of the Small Scale
Industries for last 5 years.
Primary data was mainly collected thi'ough an extensive survey. The following methods were used for survey;-
1. Schedule questionnaire method.
2. Observations,
3. hidividual interviews.
hi addition, primary data was also available through the following;-
> Attending conferences and annual general meetings, attending study courses on the audit of co-op societies conducted by the histitute of Chartered Accountants of India.
Conducting internal audits, statutory audits and Tax audits of Small Scale Industries and
Nationalized Banks.
> For the purpose of survey, the researcher prepared questionnaires for the following respondents
1. Directors of Small Scale Industries.
2. Shareholders, depositors, and loans of Small Scale Industries.
3. Employee of SSI.
4. Auditors of SSI.
5. Consumers of related industiy.
6. And all the sources co-related to industries.
126 The survey helped him to study the problem of Small Scale Industries at
Paithan M.I.D.C. from all aspects and also from the view-point of every class of persons related to SSI.
2.9 SPECIFIC OBJECTIVES OF RESEARCHER
1. To analyze and verify the financial strength of each and every industrial units:-
Finance is the most important factor in the Small Scale hidustries because of limited
Capital Investments. It shows the strength or the weakness of the Industry. So it is very important to study in depth, to understand, to analyze and to verify the overall complete financial position of each and every industrial units.
In the M. I. D. C. Paithan area the financial position of the Small Scale Industries get poor and the weaker due to the misappropriation of the funds invested as a capital formation of the industrial units and the subsidies received from the M.S.F.C. and the
District Industrial Center.
In the year 1981, in the M. I. D. C. Paithan area there were total 125 Industrial units were started. The total plot area was from 10,000sq.ft. to l,25,000sq.ft. In that area the industrial units, which were established, contains Small-Scale units as well as large-scale units. Basically the owners of the industrial units established in the M. I. D. C. Paithan area were from the big cities like Mumbai, Nagpur, Ahemdabad, Baroda, Chennai,
Hyderabad, Delhi, Pune, Surat etc. The objective behind the starting of industrial plant at
M. I. D. C. Paithan area was to get 25% subsidy from M. S. P. C. on Plat and Machinery installed in the industry and 15% from the District Industrial center. Most of the people had acquired the land to establish industrial unit at the cheapest rate from the local
127 fanners and instead of putting own funds in the Industrial unit, they had resorted to the financial assistance from the rural as well as urban banks
and the financial institutions. Most of the owners of the Small-Scale Industrial units were giving utilization certificates from the Chartered Accountants and the funds received from the banks and the financial institutions, which were used for the purpose of constmction of houses and purchasing luxury vehicles and marriages of their sons and daughter. It means that the money received as a subsidiary was being utilized for the puipose of other than industrial activities. So even though the owners of industrial units were rich, the industrial base was remain very poor and weak.
The loans borrowed from the Banks and the Financial Institutions for the Capital
Fonnation at the time of establishment of the industrial units were becoming as a burden on them as the interest portion on the loan outstanding was increasing. Because of which the liability is increasing and the unit is becoming sick and financially weaker and weaker.
So unless and until funds are diverted to the industrial units of M. I. D. C. Paithan area from other places the financial strength of each and every industrial unit is going to be weak and Industrial unit is bound to be sick. So in order to rehabilitate and restart the closed industries of the M. I. D. C. Paithan area, it is very important to invest the own funds in the industrial units by the owner rather that depending upon the finance from the
Banks and the Financial Institutions.
128 2. To Classify The Existing Labour Force in to Organized and Unorganized
Group: -
Labour is the most important factor of production. It is the only factor of production, which is active in nature. So to study in deep about the skill and ability pattern of the labour force and to bifurcate them into organized and unorganized groups is very important because the labour force of the industry determines the production capability of the industry. As much the skillful labour force is available in the industry that much will be the more production capability of that industry.
The existing labour force, which is skilled as well as unskilled, is generally from the rural sector in Paithan Taluka or Aurangabad District. Paithan is in the Marathwada region and
Marathwada is always called as undeveloped or developing region. Marathwada is undeveloped due to the uncertain rain factor. There were no irrigation facilities in this region. The Aurangabad land was totally dependent on the natural rainwater, which was a uncertain factor.
There is a big requirement of the proper, efficient and effective working conditions. Whichever the industrial unit whether Small Scale Industries, Cottage
Industries or Large Scale Industries. Whether in Co-operative sector. Public sector,
Corporate sector or Private Sector, the effective and powerful labour force is most important than any other factors of production. Due to lack of proper guidance, experience and training facilities in the rural villages and Talukas, labour available there is not well organized and disciplined.
Organized as well as disciplined labour force is most significant in any industrial
129 segment or sector. If the available labour force is assessed properly according to their capabilities, experience, training, education, leadership tendency then there will be organized and unorganized groups. Such organized groups of labour force certain fulfill the demands of the large amount of customers and a particular industry according to its requirement and necessity with their skill and efficiency.
hi the Paithan Taluka there were no recognized labour unions, so the industrial sector could not maintain standard relationship between the labour force and the management. Satisfactory labour force is very important and powerful to increase the industrial productivity and the industrial overall growth and there will be expansion diversification. So this is one of the reasons for the sickness of the industrial units at M. 1.
D. C. Paithan area and its closure.
So the specific objective of this research work is to create awareness in the minds of the labour as well as the management to rehabilitative the closed and sick industrial units.
3. To Study the approach of the Organized Labour Unions and Its Impact on the
Functioning of the Industrial Units: -
Labour Unions are the unions established under certain acts of the labour force to represent their demands in front of the management of the industry. Labour unions are very important and the very effective factors as concerned to labour force. If the labour union is properly control and the well organized then the whole labour force certain be use in a impressive manner which will help to increase in the productivity of the Industry, as the whole labour force act under the guidance of labour union. But if the labour union is unorganized and out of control of the management then the disputes may arises
130 between the management and the labour force, which may affect adversely to the industrial growth.
If the Labour Unions are registered under tiie Trade Union Act then they have to follow certain mles and regulations in the conduct of labour force. They cannot act as per their wishes or arrogantly to torture the management group. There is a code of conduct, which the trade union has to follow.
There are also certain rules and certain norms before going to strike. The management should be get a legal paper notice. If there is any disputes between any person of management or labour union, then that has to be handled smoothly and also properly so that their should not be big issue arises from it.
In the year 1983, there was dispute between the leaders of Trade Union of Aristocrat
Co. Ltd. and its Management, the matter sharply took different mode. During these disputes the General Manager of the Aristocrat Company Mr. Puri get assassinated. The matter never resolved and the result was that the management has taken very serious steps of lock-out to the factory and still now the company is not restarted and it is closed as a sick industrial unit in M. I. D. C. Paithan area.
So now there is need to settlement of disputes between the management and the labour union to rehabilitate the Industrial Small Scale units of M. I. D. C. Paithan area in
Aurangabad district in the State of Maharashtra. The labour unions should be in proper control and well-organized manner. Management should also look after the demands of the labour unions and should handle those in such a manner so that it will be beneficiary to both labour force and the industrial growth. So because of which the overall
131 productivity of the industry certain get enhanced and it will help in the growth of the
industry in overall manner.
To Ascertain the Methods of Production Process Adopted by the Industrial Unit;-
To adopt a appropriate method of production process by any industry plays a
important role for the productivity and the growth of the industry. Because method of production process determines the cost of production to each unit of product and the quality of the product produced by the industry. If the wrong method of production process is adopted the cost of production of the product may increase or there is the possibility to reduce the quality of the product even many times there might be possibility
of wastage of raw materials. Sometimes Government policies may affects the method of
production process. The type of goods produce also detennines the method of production
process because each type of product requires different types of production process.
The production processes adopted by the Small Scale Industries are playing a vital
role in the development of Industrial Sector. Due to research and development, always
the process of production are modified to make the production easy and simple. If the old
methods are hard and requires more time then easy and less time consuming methods has
to be adopted. Efficient and effective processes of production should be followed on
continues trial basis. If the production process are changed then to suit the new process of
production there should be proper training and guidance given to the existing labour force
as well as new employment has to be made to suit the new production process.
Generally unskilled and less educated labour force resist the changes in the
process of production because they have fear in their mind weather they certain suit or
112 not with the advanced methodologies and to the new process of production.
So in the process of rehabilitation of closed sick industrial units it is very necessary to give the confidence to the workers and employee. They should be given assurance that there will not be any retrenchment of employees and instead of new employment to suit the changed process of production, existing work force will be given proper facilities to handle the jobs efficiently and effectively. Similarly there will be continues guidance and suggestions with practical to suit the charged process of production. Proper guidance will reduce or remove the fear in the minds of workers and they will propel to work as per the new plants, policies, procedures and process, programs.
5. To Evaluate the Impact of Methods of Financial Controls adopted by various
units by applying the data collection, its Analysis and Ratio Analysis; -
Evaluation technique is the very important technique because it gives a general idea to the industry and trade or business to measure its financial strength. Financial strength of any industry is most important because it is just like a blood to the human body. There should be enough blood in the human body to keep the human body fit and working similarly, the financial position of the industry should be firm and strong because it detemiines the capability to survive of the industry.
There should be ample capital funds to invest in plant and machineiy, factoiy building, tools and equipment's etc. Similarly, there should be adequate working capital for smooth running of industry. Total current assets less current liabilities are called as working capital.
133 So how much is the working capital of the industry and how much is the own fund and loan funds this is decided by the analysis of collection of various data with successful industrial units as well as by the ratio analysis techniques. Generally current ratio should be such that the total of Sundry Debtors, total finished semi-finished goods, inventory and cash and bank balances should be double than the total of sundry creditors and liabilities payable within the period of one year.
The ratio of particular industry is matching with standard industries in the same group. We may say that the financial liquidity of the firm is adequate and standard. If the rate of returns on the investment is more than the Bank rate or rate payable on the borrowed funds then it is always profitable to borrow loan funds and invests in the industry or business. While making investments, risk factor should be considered with a due importance. Similarly ratio of outstanding funds from debtors and amount payable to the creditors should be analyzed.
Generally credit period of 30 to 40 days is good but if the debtors are outstanding for more than six months then serious attention should be paid for the recovery of funds from
Debtors. If the industiy fails to make payment to the suppliers within the stipulated period of time then there is a risk of non-supply of the raw materials by the suppliers, which may cause in the intermption in the production process. Because of inteiTuption in the production process there will be the low productivity and the heavy losses to the industry and the business. Which affects the huge adverse effect to the growth of the industry or the business.
Like this finance plays a key role in the industry, which leads to the management to
134 have a proper financial controls in the industry. There is a big requirement to deep study and understand the overall financial positions of the industries, hi order to do so the data and information should be gather properly, arrange it properly take all necessary financial ratios of it, study properly all the matei ial facts, analyze it and make conclusions.
6. To Study the Pattern of Loan Sanctioned and Distributed by Various Financial
Institutions, Banks and Development Corporations: -
Finance is the key factor in any industry. Small Scale Industries are mainly depending on the bank finance and the financc from the Financial Institutions because owner of'the
Small Scale Industries having a limited capital investments in the industry. The need of hour is to supply finance at a reasonable rate of interest. So it is very important to understand the complete pattern of loan sanctioned and distributed by various Financial
Institutions, Banks and Development Coiporations.
The loan pattern is important for Small-Scale industrial units for the smooth and unintermpted functioning. Generally the loans taken by the Small-Scale industrial units in
Paithan Taluka are from Nationalized or Scheduled Banks Like State Bank of India, Bank of Baroda, Bank of Maharashtra and from the M. S. F. C. and District Development
Banks. The pattern of loan of Nationalized Bank was in the forni of tenn loan for financing plant and machinery and constmction of factory buildings. The duration of such tenn loan was for a period from 7 years to 10 years and the rate of interest was between 12% to 14%. There was also a holiday period from six months to one year. The interest components were added in the principal amount in the initial stages. The finance for working capital was in the form of Cash Credits and Bank Overdrafts and
135 Discounting of Bills of Exchange. The limit was fixed on the basis of projected output on the basis of Project-Reports given by the Small and Medium Scale Industrial Units.
The Cash-Credit limit was crossed by many Small Scale hidustries in the Paithan M.
I. D. C. area and it was found that the amount of finance either in the fonn of Term-Loan or Cash-Credit was used for other household purpose of the owner of unit. On the survey and inquiry it was found that 20% to 80% amount of Term-Loan and Cash-Credit was used for the purpose other than the main object of the industrial units. After the acquisition of plant and machinery or even without acquisition of plant and machinery the subsidy of 25% of cost of plant and machinery was acquired by the industrial unit from M. S. F. C. and 10% to 20% from the District Development Banks. After acquisition of subsidiary most of industrial units started construction and installation of plant and machinery but with a slow speed and in many cases the object was to misappropriate the subsidies.
The findings of the research are that the subsidy is not used for the object of the industrial units and there was misappropriation of funds, which has caused the closure of many industrial units before its commercial production. So in the process of rehabilitation of industrial units, the use of funds should be made only for the object of the industrial units as given in its revised project and feasibility report.
7. To Conduct a Survey of Controller of the Industrial units to find out weather
they are satisfied with the finances advanced to them by various Financial
Institutions: -
The main source of finance was the initial capital introduced by he owners of
136 Industrial Units and loans and Cash-Credits, overdrafts, term loans, from nationalized and scheduled and co-operative banks and subsidy from the M.S.F.C. and District
De\ elopnient Banks.
The object of survey was that to find out weather the particular industrial unit was satisfied or not with the finance made available to him. The owners, partners, or directors were happy at the time of disbursement of loans. They received the funds with a smiling face and with a pleasures welcome. They were happy and satisfied and happy till the funds were as a balance with Banks. But once there was outflow of funds, either for construction of Factory Buildings or residential bungalows for their household puipose, the owners, partners and directors lost their smiles on the faces because funds were used both ways, one way for the object of the Industrial unit and the other way for the household private puipose. So there was neither completion of factory building and nor plant and machineiy was installed. Only they were in parts, which was not enough to start the commercial production. So there was increase in the loan funds in the fonn of interest on loans because of passes of time and output was not started to reply the investments of loans and interest as directed by the Project Reports and Financial Statements.
The findings of the research is that the commercial production not started in the stipulated period of time, to repay the loans as per schedules given to the Financial
Institutions and Banks which has resulted in the delay in the start of Commercial production and unhappy trend in the minds of owner of industrial owner.
8. To Study the Infrastructure Facilities Available to the Industrial Units and
Weather the facilities are adequate or in short supply: -
137 Infrastructure facilities having a great importance and having the direct relationship with the development of industrial units. Both the things are interrelated and both developed with the help of each other. Infrastructure facilities are the main route of industries to communicate with the world. If the infrastructure facilities are not proper then the supply of raw materials foi- the production of the industry gets affected. The industries will have to develop on the local suppliers even if they are not providing good quality raw material. Good suppliers cannot reach to the industries of the M. 1. D. C.
Paithan area.
Industrial units of Paithan Taluka are located in Marathwada region, which is always called as under developed or developing region in the State of Maharashtra. There is no railway transportation facility to M. I. D. C. area in Paithan. Railway facility starts from
40 Kilometers away from the Aurangabad District Paithan M. 1. D. C. is connected to
Aurangabad by road. The roads up to Aurangabad are not of superior quality but kacchi sadak is available. Similarly from Paithan M. I. D. C. Road transport facility is available via Shevgaon in Ahemdabad District to Pune. But the road up to Shevgaon which is 40
Km. from M. I. D. C. Paithan area or 30 Km. from proper Paithan are in horrible condition. It takes one hour to travel 30 Km. Vehicles are subject to the risk of heavy repairs and maintenance, so road transport is very precarious in M. I. D. C. Paithan area.
Similarly in the Paithan Taluka there is a huge load shedding of eight hours in
electricity supply. So electricity is not adequate and timely to continue production process in Paithan Taluka. Similarly there is no proper industrial environment and labour
force available is also unskilled and not guaranteed.
138 So infrastructure facilities in M. I. D. C. Paithan area are inadequate so it has also caused closure of industrial units before they started their commercial production or after one or two years they were closed as sick units. So it is necessary to produce proper infrastructure facilities to start new industrial units or to rehabilitate the closed units in
Paithan M. I. D. C. area.
9. To Ascertain the Methods of Accounting followed by the Industry and weather it
requires any change or modifications in the method of Accounting: -
Generally the Accounting Bodies like the Institute of Chartered Accountants of hidia and International Accounting bodies and committees defines the lay down standard methods of Accounting. Generally single entry, double entry systems were adopted by the business organizations in the past. Similarly cash methods of accounting or mercantile system of accounting are also adopted along with mix system of accounting.
The system of accounting once adopted should not be changed as per the Standard
Accounting Practices adopted by the various national and international accounting bodies. The results certain be compared with the previous year or last three four years.
Similarly by the ratio analysis inter-company comparison certain be made. If there is a change in the method of accounting followed, its effect on the net profit, inventory, sales should be taken in to consideration.
In the M. I. D. C. Paithan Industrial area the system of Accounting followed was generally Roj-Mel in the fonn of Kachcha Cash Book. Just like single entry system of accounting, conclusions were drawn and which were complicated to understand. The units are not in a position weather they have earned real profit or not. Many times without
139 making any provisions for outstanding amount like Labour payment, insurance premium, interest payable to the banks and financial are not taken in to accounting, so even though the unit was in loss the financial statements prepared were showing profit. During the course of research it was found that many proprietors, partners or directors were giving intentionally wrong information regarding sales and purchases, inventories, sundry receivables and sundry payable to the Chartered Accountants who generally certify the financial statements. There were specific objects behind giving the manipulated information to the Accounting Firms. The object was to show the financial position was better than what it is in, so that they certainly borrow other loans or take credit from suppliers.
The valuation of inventories was also manipulated to show and hypothecate to get more overheads and to misappropriate subsidies given by the Maharashtra State Financial
Coiporation on the plant and machinery.
If there are standard methods of Accounting followed by various hidustrial units on the same principal, then the real perfomiance of each and every industrial unit can be known and effects can be made to control the financial position of that particular industrial unit.
So by the improvement in the systems and methods of accounting, there will be timely check on the financial working of the industrial unit to lead it to profitable and unprofitable units can be made profitable or closed units can be rehabilitate by introduction of proper system of Accountancy.
140 10. To Study the Audit Report of Chartered Accountants of Such Industrial Units: -
The object of research of M. I. D. C. Paithan area hidustrial Units is also to study
the Audit Reports ot Chartered Accountants of each and every Industrial Unit. Generally
audited statements of accounts and Auditors Report reflect the true and fair financial
position of industrial units. We certain study the reports and from that report whatever
discrepancies are pointed out by the Chartered Accountant is detected and efforts are made to improve the financial performance of that particular industrial unit vve can classify and analyze the various items of profit and loss account as well as Balance Sheet.
The ratio of Balance Sheets can be compared with other Industi ial units to find out any
derivation and such variations or derivations and such variations or deviations certain be
removed by proper uses of finance and its tools.
The Audit Reports should be unbiased and based on the real facts and figures, so
the conclusions drawn from the Audited Financial Statements and Audit Report certain
be useful to examine and verify the realistic nature of business entrepreneurs. If the
Auditor certifies the Financial Statements on the basis of specific instructions, requests
from the particular industrial unit and the figures and facts produced in the financial
statements are manipulated, then it will not be possible to use Audit Reports and Audited
Financial Statements as a tool of measurement of financial performance. If the Auditor
conducts internal Audit of any industrial unit, he gives all routine suggestions to improve
the system of accounting. In the internal audit the industry gets a opportunity to verify
and detect the frauds.
After the Internal Audit, the external auditors conduct statutory audit and if they
141 are not satisfied with the financial working of company then they report the matter to the real owners of the business who are called as Shareholders. Statutory Audit Report is also placed in the hands of outside agencies like suppliers, Sales and hicome tax Department.
Excise Department, Banks and Insurance Companies. If the Audit Report is clean, then it enhance confidence in the minds of public and Government but if the Audit Report is qualified then there are serious consequences on the financial working and results of
Industrial units.
So the study of Audit Report, Audited Statements certain be used as a tool of financial performance of industrial unit. If the Audit Reports are qualified, we certain concentrate our attention to that particular closed units or unit which is going to close and by proper suggestions and corrections. There is a opportunity to rehabilitate that particular industrial unit particularly at M. 1. D. C. Paithan area.
11. To Elicit the Opinion of Experts and Auditors about the Deficiencies in
Accounting about the deficiencies in Accounting Standard and Financial
Control: -
Management experts are those who have acquired high educational qualification in the subject of management and business administration. Management is an art of getting things done from the others. The others mean sub-ordinates and equal level management staff and their sub-ordinates. The success of any business entrepreneur depends on the successful management and administration of production, finance, marketing and personnel is most important in any business industrial enteiprises.
If highly qualified education management with a considerable experience of three to
142 five years can be valuable angles to the industries. Finance control should be given more important because finance is called a blood of industrial body. Without finance any thing is meaningless.
The local fanners as well as professional owned the Paithan industrial units from the
Maharashtra State or even from outside the State of Maharashtra. The local owners of business closed the units due to absence of managerial skill and mismanagement of funds. Professional owners who were from outside closed the units due to lack of skilled labour force and non-availability of infrastracture facilities. If there is improvement in the infrastructure facilities by continues development and if the local people are given proper management guidance and training and awareness in the minds regarding skilled management and proper use of funds. Then there is an opportunity to rehabilitate the closed Industrial Units in M. 1. D. C. Paithan area or possibility of introduction of new
Small and Large Scale Industries.
12. To Study the Tables of Interest Rates on Loans Offered to the Industrial Units.
Critical Review weather the rates are normal or abnormal, weather it requires
any modifications taking into consideration the directives issued by the Reserve
Bank Of India: -
The object of research is to study the interest rates offered to the Industrial units in
Paithan M. I. D. C. on the loans and advances given by the various National and Co operative as well as schedule banks and various types of Financial Institutions. 1 have visited State Bank of India where I had a detailed talk on the loans given to the Industrial
Units and the General Manager Mr. Pandav has given me all the infomiation regarding
143 the rates and Terms and Conditions for the loans given to the hidustrial Units, hi M. I. D.
C. Paithan area also I have visited State Bank of Hyderabad, Paithan Branch where the officer in charge of loan section Mr. Prabhakar M. Late. He has given the details regarding the rate of interest applicable to the long-term loans for the financing the plant and machinery, construction of buildings and factory shed, purchase of various tools, tackles and instruments and electricity installations.
Generally it was found that the rates which were applicable to the other traders, businessman and professional people were not very different than the rates which were charged to the industrial units in M. I. D. C. Paithan area. The rates of interest were between 11.5% to 16%.
There was no any special discount given to the industrial units in the interest rates and there were no extra loan holiday packages. The industrial units borrowed the funds at the nomial rate of interest, which are prevalent in the banking sector economy of the country.
The emphasis of owners of business was on the availing of subsidies from the
Maharashtra State Finance Corporations and district Central Development and Coiporate
Banks established for the purpose of giving loans and Advances in the form of subsidies to improve the volume of production and quantity and quality of the product efficiently and effectively.
If there was concession in the interest rates to the industries in Paithan Taluka M. I.
D. C. area, the burden of interest payable might have lowered down provided the loans and advances and subsidies are used for the purpose for which they were sanctioned and appro.ved. But it was found that many closed units have not properly used the funds for
144 the puipose they were approved and sanctioned. Even it was found the loans taken for plant and machinery were found used for the marriages and construction of residential houses. Same industrialist Mr. Chopra who has taken loan for construction of factory building of industrial units in M. I. D. C. Paithan area has utilized the amount for the purpose of constmction of flats, which are sold in Aurangabad C. I. D. C. O. The people who has misappropriated the funds were having specific intention of misuse of funds taken under the umbrella of Industry in M. I. D. C. Paithan area. So the concession or reduced rate of interest might have proved fruitful only if the loan are used for the purpose for which they were sanctioned.
13. To Find out The Deficiencies and Short Coming and Bottle Neclis in the
Working of Industrial Units: -
The object of research is to find the shortcomings and deficiencies in the working of Industrial Units at M. I. D. C. Paithan area. If the bottlenecks are noted and classified and inteipreted, we certain through some light on the deficiencies. Bottlenecks are hurdles in the working of Industrial units. If the Industrial Unit fails to start it’s a commercial production within a stipulated period of time as laid down in the feasibility report we can say that the unit is suffering from the bottlenecks and short working. Short working and deficiencies may be in the proper production process or in the management of sources and utilization of funds and capitals. Bottlenecks may be in the process of procurement of approved and sanctioned loans and advances by the various Banks and
Financial Institutions.
Deficiencies may be in the process of selection of employees and labour, or in the
145 process of training to the selected labour force. Deficiencies may be in the facilities of
infrastructure made available to the particular industry. Once the shortcomings and
bottlenecks are known which are causing obstacles in the effective working of Industrial
Units there will be an opportunity to the researcher to keep a keen control on the
functioning of Industrial Units at M. 1. D. C. Paithan area.
14. To Suggest Measures and Alternatives to Improve the Efficiency and
Effectiveness of Industrial Units: -
One reason why most of the newly set-up industrial units are closed within a short span of period after its commencement or some units are closed even before the commercial production is started. Why such situation has arisen in M. 1. D. C. Paithan area is most important and serious problem to be understand and a proper strategy has to be applied to improve the efficiency and effectiveness of the Industrial Units at M. I. D.
C. Paithan area.
Efficiency means the best way of doing the work and job. There are various ways of doing the various jobs. But most effective and efficient ways are those, which are giving, better results and better performance as compared to the other methods of doing jobs. The process of production is a technical point and on this technical point one has to refer the
matter to the expert and experienced person who is professional and consultant in that particular segment of knowledge and technical know-how. The ways of handling the
plant and machinery should be perfectly studied. The perfect and standard ways of
handling the plant and machinery, tools and equipment's, raw materials, spares,
components and accessories should be compared with the ways with which jobs are done
146 in the factory, the machines, tools and equipment's, raw materials are handled. If there is
any deviation ot variation, it should be noted. The variation weather positive or negative
that should be search out and efforts should be made to remove the deficiencies and
deviations. So the primary object of research is to go in to details to find out the most
elficient and effective ways of doing the various operations either related with the handling of plant and machinery or related to tools and instruments or technology or technical know-how.
15. To study the availability of power and fuel, its continuity and to suggest same
alternatives in the consumption of power and fuel: -
The object of Re-search is to know the availability of power and fuel and its
continuity. In the M. I. D. C. Paithan Area supply of power and fuel and its continuity is
most important for the uninterrupted process of production. Generally the supply of
electricity is an important factor to continue the production and proper working of plant
and machinery. Paithan being in the mral area as per the directives of state and Central
Government there is continues power cut under the umbrella of load shedding.
Similarly many plant and machineries are run on the diesel so there should be ample
petrol and diesel pumps. But in M. I. D. C. Paithan Area there was a single petrol pump
owned by Dr. Pannalal Papdiwal and even there was no continues supply of petrol and
diesel which was very necessary for the proper working of industrial units in M. I. D. C.
Paithan Area. Now the situation has changed and there are two petrol pumps similarly
from Aurangabad which is 40 K.m. away is also a place for the procurement of diesel in
emergency.
147 It was expected from the Jayakwadi dam that power will be generated and it will be useful for the residential purpose in Paithan as well as it will be useful for the industrial units located in the M. I. D. C. Paithan Area. But the hydraulic plant could not produce the required quantity of electricity so the industrial segment in Paithan MIDC suffered a lot and its consequences were that many Industrial units were closed after its commencement and many plants were closed even before its commencement was made.
There was general fear in the minds of owners of industrial units regarding the availability of electricity and power and its continuity. So its proper electricity is provided or fuel in the form of diesel or coal is made available. Then many closed units can be rehabilitating either at its original place or it what near distance than as original place. Government policy may play a major role in the supply of electricity and power.
Alternative to electricity is consumption of diesel or to start such units which are on the water-steam.
16. To study the quality of management and organization in the Industrial Units:
The quality of management and organization is a Tenn which is a very complex and difficult to understand. The quality of management and administration of organization is related with the human psychology. If the human factor is managed properly then there is an opportunity to improve the quality of management and organization in the fonn of administration. The leadership quality is also important in the management and organization process. The management does the various types of jobs not by its own hands. But by the joint hands of many people who are working in the organization or industrial units. Operational Re-search and its classification and analysis is on the working of Industrial units. Generally the local people form Marathwada have little
148 experience in the field of management and leadership. The outsiders or owner from other places also gets it very difficult to manage the local people who are ignorant regarding the external as well as internal environment factors which are very essential for the growth development and improvement of industrial units. Basic training should be given to the people to know what is a quality management, what is scientific management as well as management by exception and stress management. The strategies, which can be applied in the working of industrial units, are very important and significant. There should be proper planning, proper programs, proper procedures and implementation of plans and policies by taking correct and proper management decisions attaching the working of industries. There should be continuous comparison of expected performance with the actual performance to know what the opinion of differences are and how they can be tackled and overcome. Generally in the rural areas there is a overall problem of labour turnover. Due to short pay packages the ratio of Labour-Tuniover is more in rural areas. So the re-searcher should take all such factors in consideration to reduce the
Labour-Tumover Ratio. Highly qualified personnel are always unhappy with their present remuneration so if they got a job at different place offering more emoluments then the whole industrial units become collapsed, if it was dependent on the particular management personnel. The study by the re-searcher and its proper implementation will reduce such shifting of jobs by the qualified personnel and will help in the process of Re habilitation of industrial units particularly at M. I. D. C. Paithan Area.
17. To Study the Number of Disputed Cases with Labors, Land Lords, Government,
Semi- Government, or Private Agencies: -
The object of research to study the number of disputed cases in M. I. D. C. Paithan
149 Area. Disputes arises between the Labour Unions and Management, between employee employers, between the Management and land owners of the premises if they are rented one or disputes may be with Electricity Board, Municipal Corporation on the matters of taxes and supply of water and infrastructure facilities etc. Disputes with Electricity Board may be regarding the charges levied by the Electricity Board. The Electricity Board to the
Industries raises sometimes-heavy bills in M. I. D. C. Paithan Area, but the management do not agree with such bills and there starts a dispute and the supply of electricity gets cut by the Electricity board till the bills are pending to pay by the industries of the M. I. D. C.
Paithan Area. Many units in the area have stopped their production due to the Breakage of electricity supply to them.
Many times there are Labour cases pending in Labour courts or in the civil court.
There is also Criminal cases against the employees and labors, which are pending for a long period of time. Due to very small reasons also the relations are not good between the management and the labors and the employees.
Similarly there are disputes of M. L D. C. units with various Government and Semi
Government depaitments like Sales Tax Department, Professional Tax Department,
Excise Department, Income Tax Department and Service Tax Departments. There are many factors like the heavy demand of taxes from Sales Tax Department, Income Tax
Department etc. also causes to the closure of Industrial units. So identification of such units and their rehabilitation is the most important objective of this research work.
18. To Study the Employee and Employees Relations: -
As similar to the employee and the employer relations, there is also one important
150 relation is get developed which is the employee and employee relations. If the relation between the employees is satisfactory and good then they can be in a strong position to negotiate with the owners of the management for the increase in the pay stmcture or to reduce the number of working hours and to introduce the new technology and ways of production and to improve the healthy working conditions of the employees.
If the employees really having the good unity among themselves then they certain form a unity oi- a union among themselves. When such a unity or union is formed they will be in a position so that they can get their demand either in money or money's worth.
But if the approach of labour union is rigid then the relations with the management get spoiled and there are possibilities of strikes and sometimes lockouts. Many times management lakes a golden opportunity to close its unit due to strikes or on the ground of extra-ordinary demands by the workers, employees and unions.
If the relation between the employees and employees are damaged, then it's a very horrible situation in the industrial units. Many times the Labor force is not so educated and cultured, so they become rampant and arrogant. By such approach there can be possibility of damages and the breakage of factory building and plant and machinery, tools and equipment, instnaments. There is also possibility of damage to the raw materials, work in progress or finished and semi finished goods.
So it is very necessary that not only the relations between the employees and the employer should be good, harmonious and amicable but the relation between the workers and workers, workers and the staff and between staff and staff should be better and satisfied to improve the efficiency and effectiveness of the industrial units at M. I. D. C.
151 Paithan Area. The organized staff is directed in a proper way to the production process of the industry by the management, the productivity of the industiy will rise at a higher level. So this is also a objective of research for the rehabilitation of industries in M. 1. D.
C. Paithan Area.
19. To Study the Relations of the one Industrial Unit with Other Industrial Units
either in the same line of production or different lines of production: -
It is very important to study the relationship between the Industrial units in a same line of production or in the different line of production because eveiy industry depends on the other industry directly or indirectly. So the relationship among the industries detemiines their own development in some manner. So it is very important to have the relationship between the hidustrial units of the M. I. D. C. Paithan Area good and healthy.
If the other industries are in a same line of production then in many ways it becomes helpful and useful. It becomes helpful so that the cost of product can detennine. Even with the keeping good relations with the other industries in a same line of production it is useful to determine the desired profit, selling price of the product produced. The comparison among them is also possible because of which the weak areas of the industries can be found out. The competition among them gets reduced and the market gets stable. The new production methods can be come to know and the new technologies were easy to get introduced.
If it is within the same line o production then one unit is in a position to receive some technical knowledge of the process or composition of mix of various types of raw
152 materials etc. There will be a co-operation between the two units and it will be possible at all times to make comparison of one unit with the other unit. Such comparisons will throw the light on the efficiency or the inefficiency of Industrial units.
Even if there are different lines of production industries, the relation among them is also useful for the supply of raw materials. They certain also have a discussion and co operation on the common problems like labour problems, supply of water and electricity, procurement of local raw materials, use of common transport facilities and many other matters of common interest. They certain co-operate each other in the development of infrastructure facilities and procurement of funds from the various financial institutions and the banks at the lower rate of interest in the area in which they have established.
So it is hypothesis of the researcher is that inter relationship will help to improve the working of industrial units or to rehabilitate the closed industrial units at M. 1. D. C.
Paithan Area.
20. To Study the Consumer Products and How to Evaluate the Product: -
As far as business concern the consumer is treated as a god. The Industries makes changes as per the need of consumer. So there is need to study overall consumer structure that means demand structure and the product structure that means supply structure. It is very important objective to any Small-Scale Industrial Unit because the evaluation of product may be from different types of angles. Evaluation is important to know how it to be contributed to the social welfare of the common society or how it is useful from financial point of view.
153 The contribution of product for final improvement in the overall growth of unit is also important. If the consumer product is creating social strength and welfare then it should be evaluated more than the other type of product, which is not contributing a lot. If a consumer product is like alcohol or tobacco, it is important is how it is contributing to the government treasury and how it is detrimental to the social and public interest.
21. To Study the Demand Pattern of Various Industrial units at Local State
Countrywide or International Level: -
To study the demand pattern is most important to person carrying the research work.
The success or failure of an entrepreneur depends upon the demand for the produced goods and products. If the product is having great demand in the market, it is called as the sellers market and whatever is produced by the Industrial Unit will be sold in the local state, national or international market.
If the demand pattern of product is local, then the manufacturer will have to see that product should be produced in such a quantity that the local demands will be fulfilled. If the demand is statewide or countrywide, then he will have to produce the product either double or triple shifts, to meet the increased demand. If the demand for the product is from the international market then the producer will have to arrange for the increase in the production capacity of the factory. Additional plant and machinery will have to install, more skilled people have to be employed and more and more constmetion of the factory building has to build to meet the needs of international market.
So from the point of view of the researcher the demand pattern will be more important and its role is to be suggested to rehabilitate those industrial units whose
154 demand is countrywide or international.
22. To Study the Marketing strategies exploited by the Industrial Units to find out
the Scope Area to Exploit the Future Opportunities: -
The research person is more interested in knowing the various types of policies and
plans and strategies adopted by the various types of hidustrial units. Plans, policies,
programs and the strategies adopted are the most important to keep a monopoly status in
the market. Many industrial units take the advantages of even small opportunities in to a
big one and exploit such small opportunities, which opens a door of big opportunities to
them in the future.
Many times some big industrial opportunities are available but due to frustration or
lack of self confidence or due to tendency of ow ner not to take even small risks, such
opportunities are wasted. The opponents take the benefit of such big opportunities and
later on the owner of the business gets even more frustrated and due to heavy increase in the routine expenditure, he comes to the conclusion of closure of units. Many courageous owners of sick units are veiy bold and they fight back and becomes successful in the market,
23. To Draw Concrete Conclusions which will be Fruitful for the Rehabilitation of
closed or Semi-closed Industrial Units: -
The object of the researcher is to draw certain concrete conclusions based on the basis of the research work, which can be fiuitful for the rehabilitation of the closed or semi closed hidustrial units. Researcher can assist and help the owners of the Industrial Units
155 at M. I. D. C. Paithan Area that how to behave in an emergency and to co-operate with the bad situation of the business and environment. This is the success process of research if the objectives of the research are achieved.
2.10 OBJECTIVES OF DIFFERENT RATIO CALCULATIONS AND
STATSTICAL TESTS:-
• Objective of calculating trends:
To study the trends in working capital, share capital, deposits, reserves, etc.
To study the trends in advances of different types.
To study the composition of deposit mix and loan mix.
• Objectives of calculating spread ratio:
To study management by the small scale industries by calculating spread, it's %
age with different parameters and it's impact on profitability and liquidity.
• Objectives of calculating sources and users of funds:-
To know the sources elasticity of funds use and thereby to decide the
efficiency of the management in using sources efficiency.
• Objectives of calculating BEP and MOS:-
To know the profitability through these advanced techniques.
• Objective of calculating efficiency in utilization of cost management :-
To know whether the small scale industries have their cost of management
efficiency.
156 • Objective of calculating financial ratio:-
To study the operating efficiency, profitability and solvency of the small scale
industries.
OBJECTIVES OF DIFFERENT QUESTIONNAIRES:-
1. To get the information about organization structure of the small scale industries.
2. To know the administration problems.
3. To know the level of job satisfaction and its reasons.
4. To know the financial management of small scale industries.
OBJECTIVES OF THE QUESTIONNAIRE FOR THE DIRECTORS:-
The objectives of the questiomiaire for the Directors were as follows:
1. To know the main occupation and age group of directors.
2. To know the objective of establishing small scale industries.
3. To know the age group of employees.
4. To know the financial problems faced the small scale industries and the remedies there on.
5. To know whether they used their cash resources efficiently.
6. To know the organizational and administrative problems of small scale
industries.
7. To know the impact of various financial institutional, co-operative department, and state government plans regarding the help for small scale industries.
8- To know the educational qualifications of the staff and management working
157 over there.
OBJECTIVE OF QUESTIONNAIRE FOR AUDITORS:-
1. To know the organizational problems of the small scale industries as seen by the auditors.
2. To know the problems regarding general administration of the small scale
industries.
3. To know if the training for employees is ncccssary.
4. To know the need of training and guidance to directors.
5. To know the financial problems of the small scale industries.
2.11 HYPOTHESIS: -
Hypothesis is usually considered as the principle instrument in research. Its main function is to suggest new experiments and observations, hi fact, many experiments are carried out with the deliberate object of testing hypothesis. Ordinarily, when one talks about hypothesis, one simply means a mere assumption or some supposition to be proved or disproved. But for a researcher, hypothesis is a formal question that he intends to resolve. So in the light of the above objectives, the researcher desires to test following statements of Hypothesis through this study.
I) The perfonnance of the Small-Scale hidustries in the M. I. D. C. Paithan area is
not satisfactory; however there is a scope for the Rehabilitation of the Small-
Scale Industries in M. 1. D. C. Paithan Area.
158 The Small-Scale Industries does not maintain Accounting Records as per
National Accounting Bodies like Institute of Chartered Accountants of India and
International Accounting Bodies.
The following thought provocating hypotheses with balanced co\erage of the research study have been framed to materialize the objectives of the study. In \ iew of the above objectives the following hypothesis were tested:-
1. Urban and Rural small scale industries are the most suitable form of
organizations for providing credits to the rural population.
2. Their quantitative developments in recent years have adversely affected their
overall qualitative growth.
3. Their operational - efficiency, profitability, and solvency, are reasonably good.
4. There is an urgent need of financial discipline for the small scale industries
through effective audits, effective spread management, professional
management, human resource management, and Tax planning and tax
management.
5. There is an urgent need for effective control on the operations of the small scale
industries.
159