Dr. B. Augustine Arockiaraj
SMALL SCALE INDUSTRIES MANAGEMENT Issues, Challenges and Opportunities
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SMALL SCALE INDUSTRIES MANAGEMENT Issues, Challenges and Opportunities
By: Dr. B. Augustine Arockiaraj Head and Assistant Professor Department of Business Administration School of Management Studies St. Joseph’s College (Autonomous), Tiruchirappalli, Tamil Nadu
First Impression: 2019 Small Scale Industries Management: Issues, Challenges and Opportunities
ISBN : 978-81-941253-9-6
Rs. 650/- ( $18 )
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DISCLAIMER Information contained in this book has been published by Empyreal Publishing House and has been obtained by the author from sources believed to be reliable and are correct to the best of his knowledge. The author are solely responsible for the contents of the articles compiled in this book. Responsibility of authenticity of the work or the concepts / views presented by the author through this book shall lie with the author and the publisher has no role or claim or any responsibility in this regards. Errors, if any, are purely unintentional and readers are requested to communicate such error to the author to avoid discrepancies in future.
Published by: Empyreal Publishing House
DEDICATED To My Grand Parents Beloved Parents S. Balu Rethinam V. Mary Victoriya (Late) & My Wife & Children’s
Preface I am happy to be able to contribute to the emerging concept of entrepreneurship. The need of the hour in our country is to develop entrepreneurship. Our future lies in entrepreneurship. The unique characteristics of our country are huge population, vast country, dependence on agriculture and its allied operations in rural areas, high unemployment and under-employment among educated youth, low levels of literacy, diversity in religion, culture, long history, rich resources and multiplicity of language.
People of our country are intelligent and talented. However they need to be encouraged and supported by government polices and programmes. They should be provided with opportunities, given confidence and courage to be on their own and perform. It is here, that students of a young age should get motivated to be job provides rather than job seekers. India needs entrepreneurs of different types and in large numbers. There is a strong correlation between entrepreneurial growth and economic growth. Growth in entrepreneurship will accelerate economic growth.
I have to share my research experience of being an entrepreneur and with young minds. I have made an attempt to put before you, the relevant concepts, benefits, problems, issues of the subject matter and present step approach to become an entrepreneur. Hope Small Scale Industries Management: Issues, Challenges and Opportunities book will motivate the students to become an entrepreneur one day
Author
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Acknowledgements
I owe to express my special gratitude to my beloved Parents, my Wife, my children and relatives for their benign support at the time of my career, research work and publication of book.
I express my sincere and whole hearted thank to the Jesuit Management, St. Joseph’s College, (Autonomous), Tiruchirappalli. Tamil Nadu, India for having moral support and encourage for my academic career.
I record with great pleasure my love and gratitude to my beloved School teachers, College teachers and my research guide for their special contributions, suggestions, interactions and inspiring comments towards my book work.
I owe a special thanks to all the faculty members of School of Management Studies, St.Joseph’s College(Autonomous), Tiruchirappalli, Tamil Nadu for their valuable and inspiring guidance which enable me to bring out this book successfully.
I would like to express my heartfelt gratitude to a number of people without whose guidance, support and encouragement this book would not have been possible.
Above all, I am indeed thankful to God Almighty for the successful completion of my work.
Dr. B. Augustine Arockiaraj
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Table of Contents Preface V Acknowledgement VI Table of Contents VII
Chapter – I : Introduction 1 – 12
Chapter – II : Concepts and Review of Literature 13 – 35
Chapter – III : Profile of the Study Area 36 – 48
Chapter – IV : Performance of SSI Units in India, Tamil Nadu and 49 – 84 Tiruchirappalli District
Chapter – V : Analysis of Data and Interpretation 85 – 109
Chapter – VI : Summary and Conclusion 110 – 120
List of Tables 121 – 123
List of Figures 124
List of Abbreviations 125
VII
Small Scale Industries Management: Issues, Challenges and Opportunities Chapter – I
Introduction 1
Small Scale Industries Management: Issues, Challenges and Opportunities 1.1. INTRODUCTION “It is only when India has acquired the ability to design fabricate and erect its own plants without foreign assistance that it will have become a truly advanced and industrialized country”. - Jawaharlal Nehru
“Let us make umbrellas and ploughshares; Let us make gunnies and nails of iron………. Let us make painting and needles Let us willing undertake all trades of world” - Mahakavi Bharathiyar The Micro, Small and Medium Enterprises (MSME) play a pivotal role in the economic and social development of the country, often acting as a nursery of entrepreneurship. The MSME sector contributes significantly to the country’s manufacturing output, employment and exports. In the Global Economy Micro, Small and Medium Enterprises (MSMEs) are a very heterogeneous group of business usually operating in the manufacturing, trade, agri-business, and service sectors. They include a wide variety of firms such as village handicraft makers, small machine shops, and computer software firms that possess a wide range of sophistication and skills. Some are dynamic, innovative, and growth-oriented while others are satisfied to remain small and perhaps family owned. MSMEs usually operate in the formal sector of the economy and employ mainly wage-earning workers. MSMEs are often classified by the number of their assets. The size classification varies within regions and advantage of across countries relative to the size of the economy and its endowments. The majority of the sector is its employment potential at low capital cost. The labour intensity of the MSME sector is much higher than that of large enterprises. MSMEs constitute more than 90% of total enterprises of the countries. In India MSMEs play an essential role in the overall industrial economy of the country. In recent years the MSME sector has consistently registered higher growth rate compared with the overall industrial sector. With its agility and dynamism, the sector has shown admirable innovativeness and adaptability to survive the recent economic downturn and recession. The MSME sector in India is highly heterogeneous in terms of the size of the enterprises, variety of products and services, and level of technology. The sector not only plays a critical role in providing employment opportunities at comparatively lower capital cost than large industries but also helps in industrialization of rural and backward areas, reducing regional imbalances and assuming more equitable distribution of national income and wealth. MSMEs complement large industries as ancillary units and contribute enormously to the socio-economic development of the country. MSME sector plays a major role in India’s present export performance. As per available statistics (4th Census of MSME Sector), this sector employs an estimated 597 lakh persons spread over 261 lakh enterprises. It is estimated that in terms of value, MSME sector accounts for about 45% of the manufacturing output and around 40% of the total export of the country. As a result, MSMEs are today exposed to greater opportunities for expansion and diversification across the sectors. The Indian market is growing rapidly and Indian industry making remarkable progress in various Industries like Manufacturing, Precision Engineering, Food Processing, Pharmaceuticals, Textile & Garments, Retail, Information Technology (IT), Agro and Service sectors. MSMEs are finding increasing opportunities to enhance their business activities in core sectors. The MSME sector has a major contribution to the economy to the economy of Tamil Nadu has 8.44 lakh registered MSMEs (as on 28.12.2013). This sector contributes about 10% to the GSDP, provides employment to about 58.83 lakh persons and accounts for a total investment of Rs.48,189 corers. MSNEs in Tamil Nadu produce over 8000 varieties of products including engineering products, electrical, electronic, chemicals, plastics, matches, textiles, hosiery and readymade garments. As per the 4th All India Census of MSMEs (2006-2007) Tamil Nadu Accounts for 14.95% of the total working enterprises in the country. 15.24% of these enterprises are micro enterprises, which is the highest in the country. 9.60% of them are 2
Small Scale Industries Management: Issues, Challenges and Opportunities small enterprises, which is the 3rd highest in the country. Further 9.21% are medium enterprises, which is the 2nd highest in the country. MSMEs in Tamil Nadu provides the largest number of employment in the country (15.32%). Government of India enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 to facilitate integrated development of Micro, Small and Medium Enterprises. It provides the first-ever legal framework for recognition of the concept of “enterprises” which comprises both manufacturing and service entities. It defines Medium Enterprises for the first time and seeks to integrate the three tiers of these enterprises, namely, Micro, Small and Medium. The Act also provides for a statutory mechanism at the National level with balanced representation of all sections of stake-holders, particularly the three classes of enterprises and with a wide range of advisory functions. As per the MSMED Act 2006, the enterprises are classified into manufacturing and service enterprises based on their investment in plant and machinery / equipment (excluding land and buildings) as indicated below: Table No-1.1: The defined limit on investment for enterprises to be classified as micro, small and medium enterprises is as follows: Classification Manufacturing Enterprises* Service Enterprises** Micro Rs.2.5 million / Rs. 25 lakh Rs.1 million / Rs. 10 lakh Small Rs.50 million / Rs. 5 crore Rs. 20 million / Rs. 2 Crore Medium Rs.100 million / Rs. 10 crore Rs. 50 million / Rs. 5 crore Source: MSMED Act, 2006 * Investment limit in Plant & Machinery **Investment limit in equipment The term “Village industries” has been redefined in amended KVIC, Act 1956 as “any industry located in rural area which produces any goods or renders any service with or without the use of power and in which the fixed capital investment per head of artisan or workers does not exceed Rs. one lakh (Rs one lakh and fifty thousand in case of village industry located in a hilly area) or such other sum as may, by notification in the Official Gazette, be specified from time to time by the central Government”. 1.2. SMALL SCALE INDUSTRIES (SSIs) The Small scale industries are a place of semi-urban and rural areas, promoting entrepreneurship and earning foreign exchange. The development of small scale industries is an integral part of overall economic, social and industrial development of our country. They have developed a spirit of self-reliance and improved the socio-economic conditions of the entrepreneurs and the people depending on them. Small-scale industries have emerged as vibrant and dynamic sector of the Indian economy that contributes around 40 per cent of the total industrial production and over 34 per cent of the national exports. At present the SSI sector is providing employment to over 200 lakh persons. The captains of our economy are more than aware of the importance of the small-scale industries in terms of employment potential, productivity, utilization of indigenous resources, balanced regional development etc. In the words of Dr. Manmohan Singh, “the key to our success in employment lies in the success of manufacturing in the small scale sector”. The small scale sector is important not only for its contribution to GDP but also for its stellar performance in exports and generating employment. In the present Liberalized, Privatized, and Globalized economy the significance of productivity in the development of SSI sector needs to be recognized. This sector is ideally suited to build on the strengths of our traditional skills and knowledge by infusion by technologies and innovative marketing practices. Small scale industry has been accorded an important place in the national economy by the national decision makers. Small units generate employment at relatively small capital cost, mobilize resources of capital and skill at micro levels and are expected to meet the rising demand for various goods and services required by the economy. Small scale industries form an important sector constituting nearly 40 percent of the total output in the private sector. Small scale sector as a priority sector of the national economy is protected and promoted in a number of ways. The growth of small scale industry has been sought to be promoted over years through various government policies and measures. However, presently the small scale industrial sector suffers from a high rate of mortality and growing incidence of sickness. Accordingly to latest estimates, the percentage of sick unit in the small scale industry varies from ten to fifty percent in various 3
Small Scale Industries Management: Issues, Challenges and Opportunities states. The closure of debilitated existence of an industrial unit involves heavy cost to the society; it renders idle its manpower; lays waste scarce financial and material resourced invested in land and building, machinery and equipment inventories and stocks. The social cost involved in much more. Ayanar (2012) expressed that the employment opportunities and Export performance of SSIs in India. By its less capital intensive and high labour absorption nature, SSI sector had made significant contribution to employment generation and also to rural industrializations. This sector is ideally suited to build on the strength of our traditional skills and knowledge by infusion of technologies, capital and innovative marketing practices. Small scale sector has emerged as dynamic and vibrant sector of the economy due to the new reform. In the year to come the SSI would be exploited of its fullest export potential. Our former president Dr. A.P.J. Abadul Kalam visualizes India as a developed nation by the year 2020. Certainly SSIs have a pivotal role to play in this transformation. Yogesh Madhukarrao Kulkarni (2011) explained that the role of SSI in employment generation. The small scale industries sector has shown considerable resilience and inbuilt strength and is in a position to make much greater contribution to national economy as well as to meet the competition from large industries including small scale sector multinational corporations. Small scale industries to-day contributes increase of industrial productivity, rise of exports, generate more jobs and contribute very impressive of the GDP. For the sustainable higher growth of the Small Scale Industries (SSIs) sector, top priority should be given to financial support State and Central Government should facilitate the growth of small scale sector mainly through creating conductive environment for producing and marketing of products and services of small scale sector. Ganesamurthy et al. (2002) explained that the small scale sector now produces more than 8000 products. It has emerged as a major supplier of mass consumption items like leather products, sheet metal goods, paints and varnishes etc,. Among the sophisticated items mention may be made of television sets, electronic motors and pesticide formulations etc. The contribution of the small scale sector in saving the precious foreign exchange through production of a large number of import substitute items has been equally significant. Subbiah and Navaneethakrishnan (2006) expressed that the SSI units have solved the problems of poverty and unemployment. They pave the way for equitable distribution of income and wealth. This is the reason why all the Countries give importance to enhance the performance of small scale industrial sector. Recently, it constitutes a very important segment of the Indian Economy. SSI units have high potentiality in generating employment, promoting entrepreneurship and earning Foreign exchange, compared to other sectors. Ramappa et al. (2006) emphasized that in India, SSIs occupy 133.68 lakh units; contribute 40 per cent of industrial production; 35 per cent of its exports; and provide employment to about 322.28 lakh people. SIDBI Annual Report (2009) clearly explained that the SSIs contributing to the development of the economy can be perceptibly seen in three areas, viz., production, employment and export. The SSIs have registered a remarkable growth in production, export and employment. The value of output of the total SSI sector increased from Rs.2,61,297 crores in 2000-01 to Rs.6,95,126 crores in 2007-08 indicating a two fold increase at current prices during the period. The number of persons employed increased from 238.73 lakhs in 2000-01 to 322.28 lakhs in 2007-08. SIDCO Annual Report (2009) pointed out that the faster growth in production as compared with employment indicates that the output per employee has increased over time at least in terms of current prices. Similarly during the above period the value of exports increased from Rs.69,797 corers to Rs.1,77,600 corers i.e., threefold increase. The sector has acquired a larger degree of export orientation over the years. Ganesan and Navaneethakrishnan (2006) observed that the growth of SSIs has improved a lot due to the support of Government policies. Particularly, Indian banks have positively responded by providing adequate credit to the SSIs in the country. The Government support can be in the form of interest rate subsidies credit- linked capital subsidy, credit guarantee, credit enhancement facilities and tax incentives. Ganesamurthy et al. (2002) explained that the small scale sector now produces more than 8000 products. It has emerged as a major supplier of mass consumption items like leather products, sheet metal goods, paints and varnishes etc,. Among the sophisticated items mention may be made of television sets, electronic motors 4
Small Scale Industries Management: Issues, Challenges and Opportunities and pesticide formulations etc. The contribution of the small scale sector in saving the precious foreign exchange through production of a large number of import substitute items has been equally significant. The easy availability of financial assistance, incentives and subsidies influenced many entrepreneurs to start SSIs units. Investment limit was also reduced. This resulted in the growth of number of SSI units. Despite the performance of some SSI units was functioning well, few units were not performing well due to marketing problem, dearth of finance, administrative hurdles, infrastructural bottlenecks particularly power and Government intervention etc. Hence, the researcher is interested in doing research work on problems and prospects of SSI units in Tiruchirappalli district of Tamil Nadu. 1.3. THE CONCEPT OF SMALL SCALE INDUSTRIES The role played by small industries in the economies of advanced industrialized countries like Japan, Germany, Great Britain and the United States of America is significant. Many nations, both developed and developing, see in the small industry sector a useful vehicle for growth; in the former as complementary to large industries and in the latter as generators of new employment opportunities. Japan, for instance, began developing in the latter half of the 20th century and the role of small entrepreneurs in generating economic growth has been significant. The Japanese Small Enterprise Development Programme has been a model for India and other countries and although now a developed country, Japan still relies largely on the vast network of small enterprises to supply components and intermediate products to the large industries. It is also significant that a sizeable proportion of the goods exported are produced in the small sector through trading companies or through well-known brand names of large companies. Small and medium enterprises play an important role as the nucleus for regional economic development. In the development of sparsely populated areas such as Hokkaido Island in the North, they have been a valuable tool for development. In the first half of the sixties, small and medium enterprises accounted for more than 50% of Japanese exports. Such business was mostly labouredly intensive and not dependent on imports of raw materials and hence, its net contribution to foreign exchange was very high. Small and medium enterprises have also contributed to improving the quality of life through providing the local communities with goods and services. Even in the developed countries of Western Europe, the United Kingdom and the United States of America there is a wide-spread recognition that small and rural industries play a significant role in complementing the large industries and in providing opportunities for the creative energies of the skilled artisans. The watch industry in Switzerland, the largest in the world, is based on the work of a multitude of small, almost cottage- industry units. So important were small firms considered in the United Kingdom that a report (Boiton Committee, 1971) parodied the famous saying of Voltaire and observed, “If small business does not exist, it would be necessary to invent it”. In the USA Small Business Administration, has been placed on a statutory footing reporting directly to the President. Small-scale industries constitute one of the vibrant sectors of the Indian economy too in terms of employment generation, the strong entrepreneurial base it helps to create and its share in industrial production and exports. The government created the Ministry of Small-Scale Industries and Agro, and Rural Industries (SSI & ARI) in October 1999 as the nodal ministry for the formulation of policies and the co- ordination of central assistance relating to promotion and development of small-scale industries in India. The Ministry of Small-Scale Industries, Agro and Rural Industries were bifurcated into two separate ministries, namely, Ministry of Small-Scale Industries and Ministry of Agro and Rural Industries in September 2001, taking into account the high potential for growth in the small-scale sector in terms of output, employment and exports. The role of the Ministry of Small-Scale Industries is to strengthen the small-scale industries sector and to enable it to remain competitive in a market-led economy and help it to generate additional employment opportunities. The development of a country depends mainly on the level of industrialization. Industrialization is a process, which accelerates economic growth and effects structural changes in the economy. Pandit Jawaharlal Nehru emphasized that real progress must ultimately depend on industrialization. For rapid industrialization, existence of both large scale and small-scale industries are necessary. Industrialization has a major role to play in the economic development of under developed countries. The gap in per capita income between the
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Small Scale Industries Management: Issues, Challenges and Opportunities developed and underdeveloped countries is largely reflected in the disparity in the structure of their economies; the former have a large industrial economy, while in the latter production is confined predominantly to agriculture. Industrialization is the only effective answer to the problems of the underdeveloped countries. The process of industrialization is associated with the development of mechanical knowledge, the attitude and skills of the industrial workers, the experience of the industrial management and other attitudes of a modern society, which in turn, is beneficial to the growth of productivity in agriculture, trade, and distribution and other related sectors of the economy. Due to these factors, any successful transfer of labour from agriculture to industry contributes to economic development. Industrialization is thus inseparable from substantial and sustained economic development. Tiny Units Tiny units are those undertakings, which have investment in plant and machinery not exceeding Rs.5 lakh and are located in towns with a population of 50,000 or below. Besides these, service establishments are there with an investment not exceeding Rs.2 lakh. The investment limit in the tiny sector had been raised in the year 1997 to Rs.25 lakh. Ancillary industries Ancillary industries are defined as those units that have an investment not exceeding Rs.100 lakhs on fixed assets (for plant and machinery). They are engaged in manufacture of parts, components, sub-assemblies, tooling or intermediates or render services and supply or propose to supply, 50% of their production to other units, provided that no such undertaking shall be the subsidiary of or be owned or controlled by any other undertaking. Sole Proprietorship Sole proprietorship is a form of business organization in which an individual invests his own capital, uses his own skill and intelligence in the management of its affairs and is solely responsible for the results of its operation. Partnership A partnership firm can be defined as the relationship between persons who have agreed to share the profits or losses of the business carried on by all or any of them, the maximum number of persons being 20 in case of ordinary business and 10 in the case of banking business. The provisions of the Indian Partnership Act, of 1932 govern the partnership form of organization. Private Limited Companies A private limited company is defined as a voluntary association for profit with capital divisible into transferable shares with limited liability having a corporate body and a common seal, with membership not exceeding fifty. Village Industries Village industries have been defined or small industrial units in villages and small towns with a population not exceeding 50,000 and involving utilization of locally available natural resources or human skill Cottage Industries Cottage industries are domestic industries in the initial stage. These are managed mostly by artisans and skilled artisans and are involved in traditional activities such as agriculture, handlooms, and handicraft. 1.4 DEFINITION OF SMALL SCALE INDUSTRIES The definition of ‘Small-Scale Industry’ varies from one country to another. In most of the countries of the world, the criterion for defining a small enterprise is the size of employment and investment. In some countries, both employment and investment are taken into account. Various countries have stipulated different ceilings on the number of employees and the quantum of investment in small-scale industries. In some countries like Pakistan and Sri Lanka, no upper limit for employees has been fixed for small-scale industries. The traditional definitions of SSI: In 1955, a Small-Scale units was defined as “A unit employing less than 50 persons, using it power and less than 100 persons without the use of power and with capital assets not exceeding Rs.5 lakhs”. And then, 1960, the above definition was modified as “Small-Scale Industries will 6
Small Scale Industries Management: Issues, Challenges and Opportunities include all industrial unit with a capital investment of Rs.5 lakhs irrespective of number of persons employed”. Accordingly, a small-scale industry is presently defined as, “A unit engaged in manufacturing, servicing, repairing, processing and preservation of goods having investment in plant and machinery, at an original cost not exceeding Rs.1 corer”. Current definition of SSI: “An industrial undertaking in which the investment in fixed asset in plant and machinery whether held on ownership in lease or on hire purchase does not exceed Rs.100 millions” www.ssi.nic.in Definition as per the MSMED Act 2006 The defined limit on investment for enterprises to be classified as micro, small and medium enterprises is as follows: Classification Manufacturing Enterprises* Service Enterprises** Micro Rs.2.5 million / Rs. 25 lakh Rs.1 million / Rs. 10 lakh Small Rs.50 million / Rs. 5 crore Rs. 20 million / Rs. 2 Crore Medium Rs.100 million / Rs. 10 crore Rs. 50 million / Rs. 5 crore * Investment limit in Plant & Machinery **Investment limit in equipment 1.4.1. DEFINITION OF SMALL-SCALE INDUSTRIES GLOBAL VIEW China: In China, the definition of small-scale industry depends in the product and unannounced of insignificant. These industries have been designed to mobilize local raw materials, local skills, local finance and local markets. Indonesia: There is no differentiation between small-scale industries and cottage enterprises. More than 90% of the enterprises in the small-scale group are cottage industries. The World Bank has characterized small-scale industries in Indonesia as hybrids of the traditional and modern industries. Malaysia: Small-scale industries constitute 22.6% of the business establishments, and account for 32% of the total employment, 29% of the value added and 25% of the gross output. Thailand: Small industrial enterprises are defined as enterprises, the fixed deposits of which do not exceed 2 million units of covering (Approximately Rs.12 lakh). Industrial enterprises are grouped under four categories namely, manufacturing, servicing, handicraft and cottage industries. Germany, Sweden, Norway & Denmark: There is no official definition of a small-scale industry. Units employing up to 300 workers are considered small. Iran: Small Scale Units, have 100% Iranian ownership and management. Their assets should not exceed 5 million riyal. The products should not be artistic in nature. Investment in land and buildings must not exceed 25% of the total capital. Italy: Units having a capital investment of not more than 1500 million and employing not more than 500 workers are considered small industries. Japan: Small industries denote those that have a relatively small scale of management and capital investment. The government applies the term to those industries: that employ assets of less than 300 millions yens. Korea: In manufacturing, with more than 5 and less than 200 employees or with total assets of less than 50 million. In mining with more than 5 and less than 300 employees or with assets of less than 50 million won (275 won: 1 US dollar). UK: There is no demarcation between small and large-scale industries. Units employing less than 500 workers one generally referred to as small units. USA: A manufacturing firm is officially a small business for government procurement purposes, if it is not dominant in its field of operations and if it has fewer than 500 employees, or if it is certified as ‘small’ by the small business administration. 7
Small Scale Industries Management: Issues, Challenges and Opportunities 1.5. IMPORTANCE OF SMALL-SCALE INDUSTRIES In a labour abundant and capital scarce country like India, small-scale industries have come to occupy a significant position in the planned industrialization of the economy. Most small-scale industries have low capital intensity and high potential for employment generation and dispersal of industries. They promote entrepreneurship and enable earning of foreign exchange through exports. Small is Beautiful “Small is beautiful” said E.F. Schumacher. He emphasizes the need for small working units, communal ownership and regional work places utilizing local labour and resource. Innovative and Productive Small units are highly innovative, though they do not maintain their own research and development wings. Individual tastes, fashions and personalized service Small firms are quick in studying changes in the tastes and fashions of the consumers and in suitably adjusting the production process and technology. Symbols of national identify Small enterprises are almost, always locally owned and controlled and they can strengthen the extended family and other social systems and cultural traditions that are perceived as valuable in their own right and as symbols of national identity. Happier in work People who work in small enterprises are happier in their work than those who work in large ones, in spite of lower wages and poor standards of safety, comfort and welfare facilities. Always winners of the game Small enterprises and new entrepreneurs were in the forefront in practically every business boom. Dispersal over wide areas Small-scale units have the tendency to disperse over wider areas. As per the second all India Census, 62.19% of the small-scale units are located in backward areas. Small-scale industries play a key role in the industrialization of a developing country. They provide immediate large-scale employment and-higher labour capital ratio, on lower investment. They stimulate the growth of industrial entrepreneurship especially disfavored locations. 1.6. THEORETICAL BASE Anil Bhuimali (2004) stated that small-scale industries were the dreamof Mahatma Gandhi, father of our nation. He has supported the growth of small-scale industries in India, because he had the vision that it would help the poor people of India to come up. Small-scale or cottage industries are not capital based, but the talent and effort based business. Hence, the middle class people can also own and run SSI units. Our father of Nation Mahatma Gandhi is of the view that full employment of human resources is basic need of a country. It is true that national income will increase if each and every person’s skill (whether skilled or unskilled) is employed fully. This cannot be possible only with the development of large scale industries because of their labour saving nature. Agriculture sector too cannot solve the problem of unemployment and underemployment due to its seasonal nature. Therefore, mechanization and large scale production cannot provide the solution to the problem of poverty and unemployment. But the SSIs holds key role to solve this type of problem. Small Scale Sector is able to provide employment to 26 persons if it expands Rs. one lakh of fixed investment whereas it is only four persons in case of the large scale industrial sectors. SSIs are playing at present an important role for the development of Indian economy in terms of employment and growth. Manoharan and Selvamoorthy (2010) observed that the overall credit of developing small scale sector goes primarily to the vision of Jawaharlal Nehru, the first prime minister of free India, who proposed and implemented the development of core industry and a supporting sector in the form of small scale enterprises. In the words of our honourable former Prime Minister Dr. Manmohan Singh, “the key to our success in employment lies in the success of manufacturing in the small scale sector”. The small scale sector is
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Small Scale Industries Management: Issues, Challenges and Opportunities important not only for its contribution to GDP but also for stellar performance in exports and generating employment. 1.7. SIGNIFICANCE OF SMALL SCALE INDUSTRIES Small Scale industries occupy a significant place in the industrial set up of a country irrespective of the stage of its economic development. The importance of small-scale industries in the economic life of an under- developed and developing country is indeed very great, particularly in view of its large employment potential and contribution to national income. The principal elements in the economic picture of India are the rapid growth of population, increasing size of labour force, large volume of unemployment and under-employment and a low rate of savings. This panorama can be effectively altered through the establishment of small-scale industries. The banking sector being a part of the economic system has its crucial role in economic development. The scope for banks to play a vital role as development agencies is practically unlimited. In earlier periods, commercial banks were concentrating on metropolitan areas and industrial centers with the Nationalization of Bank and the assigning of priority in their credit to small-scale industries, there has been a rapid expansion of bank credit to the small-scale industries sector. Bank finance has diversified and is finding its way to the rural and semi-urban areas. Commercial banks have become the principal financial institutions in meeting the financial needs of small-scale industries. 1.8. STATEMENT OF THE PROBLEM The small-scale sector has become the hub for many economic activities in developing countries, by virtue of its special features like its capital-sparing and labour-intensive nature. The small-scale sector has a major role to play in developing nations, which suffer from slow capital formation and over population. Realizing the potential of the small-scale sector, the Government of India took several measures for the promotion and smooth functioning of this sector. Besides these, the Government has carefully planned the development of the small-scale industrial sector in the country. It has earmarked millions of rupees for their development during the plan periods. Nevertheless, to the dissatisfaction of many, including government agencies, the sector has not been working well owing to various problems both at the promotional and operating stages. In this backdrop, the present study has been taken up to identify the problem areas in this sector and to suggest appropriate measures to resolve the problems. To carry out the study on sound lines, it was hypothesized that the small-scale sector is suffering from several problems in production, marketing and management. Small scale industrial sector is an important segment of Indian economy. It generates employment opportunity next to agriculture sector. India is divided into 29 states, among which some of the states such as Uttra Pradesh, West Bengal, Gujarat, Tamil Nadu are industrially advanced and retaining the dominant position in India. Tamil Nadu is the third largest economy in India, but it stands second position in number of industrial units, number of workers employed in factories and retaining the third position in terms of industrial output. In 2011, the state of Tamil Nadu was divided into 32 districts. Chennai, Coimbatore, Tiruchirappalli, Kanchipuram, Salem, Thriuvallur, Vellore and Tuticorin are the main districts of industrial and commercial activities. From which Tiruchirappalli is an industrially and economically advanced district in Tamil Nadu. Some of the SSIs in Tiruchirappalli district are flourished a lot and some of them are not showing good performance. So, the researcher is interested to take up the research work on problems and prospects of SSIs in Tiruchirappalli district of Tamil Nadu. 1.9. OBJECTIVES OF THE STUDY The overall objective of this study is to analyses the general working of SSI units in Tiruchirappalli district. The specific objectives of the study are furnished below: 1. To study the various types of the small scale industrial units in Tiruchirappalli district. 2. To analyze the performance of different small scale industrial units in Tiruchirappalli district. 3. To identify the problems faced by the small scale industrial units in the study region. 4. To analyze the prospects of small scale industrial units in Tiruchirappalli district; and 5. To suggest appropriate policy measures to enhance the performance of SSI units in the study area. 9
Small Scale Industries Management: Issues, Challenges and Opportunities 1.10. HYPOTHESES OF THE STUDY Based on the above objectives the following hypotheses are drafted. These hypotheses add analytical vigour to the analysis of the objectives. 1. There is a significant relationship between the amount of investment and employment generation of small scale industrial units in Tiruchirapplli district. 2. There is a significant relationship between capital invested and the profitability of SSI units in Tiruchirappalli district. 3. There is a sizeable variation in the profitability of SSI units operating in the study area. 1.11. METHODOLOGY OF THE STUDY Tiruchirappalli district is one of the industrially advanced districts in Tamil Nadu. Tiruchirappalli district is divided into nine taluks namely Tiruchirappalli, Tiruverumbur Srirangam, Manachanallur, Lalgudi, Musiri, Thuraiyur, Thottiam, and Manapparai. Tiruchirappalli taluk is considered as an industrially advanced taluk in Tiruchirappalli District. Total number of SSIs registered at District Industries Centre (DIC) is 12 322 at the end of March 2012. This list includes all sectors namely tiny, small and medium and large scale industries. According to Ministry of MSME, Government of India gave the details of existing Micro & Small Enterprises and Artisan units in the district is based on NIC code number is included. In order to get to know the details of SSI units specifically, the study did follow the details of Inspector of Factories. There were 664 SSI units registered at Inspector of factories in Tiruchirappalli district level at the end of December 2013. From which, the majority of 214 units are from Tiruchirappalli taluk itself. This study aims at analyzing the problems and prospects of SSIs in Tiruchirappalli district. Due to the insufficiency and discrepancy of secondary data, the researcher had to collect the primary information too for the amenable data. From the 664 units, only 150 units are indeed viable as per the assumption (registered with the Inspector of Factories in the year 2013 & earlier and still functioning) of the study. From the 150 units, five units have found to be closed. And 45 units have not properly responded even after repeated visit. Finally, the primary data have been collected from the hundred SSI units through a well structured interview schedule. This study is based on complete enumeration method. The hundred SSI units have been divided in to ten categories of industries such as Engineering industries, Steel fabrication, Rice mills, Readymade Garments industries, Agro based industries, Metal industries, Furniture Industries, Saw Mills, Auto Garage industries, and Crusher industries. The study has also used secondary data collected from District Industries Centre, Inspector of Factory, District Statistical Office, published materials like Journals, News Papers, Periodicals, and Books. Table No-1.2: Taluk-wise classification of SSIs in Tiruchirappalli District (as on 31.12.2013) S. No. Name of the Taluk 2m(i) 2m(ii) 85(i) Total Percentage 1. Tiruchirappalli 213 1 - 214 32.23 2 Tiruverumbur 162 2 - 164 24.70 3 Manapparai 39 - - 39 5.87 4 Thottiam 22 - 2 24 3.61 5 Srirangam 44 - - 44 6.63 6 Musiri 32 - 1 33 4.97 7 Lalgudi 28 - 1 29 4.37 8 Thuraiyur 31 - - 31 4.67 9 Manachannalur 86 - - 86 12.95 Total 657 03 04 664 100.00 Source: Inspector of Factories, Tiruchirappalli-23. Note: Law Provision 2m (i) - With power using 10 persons 2m (ii) - Without power using 20 persons 85(i) - Match Industries 10
Small Scale Industries Management: Issues, Challenges and Opportunities Table No-1.3: Category-wise classification of SSIs sample units in Tiruchirappalli District S. No. Types of industries No. of Units Percentage 1 Engineering Industries 25 25 2 Steel Fabrication 15 15 3 Rice Mills 15 15 4 Readymade Garments Industries 10 10 5 Agro based Industries 10 10 6 Metal Industries 05 05 7 Furniture Industries 05 05 8 Saw Mill 05 05 9 Auto Garage Industries 05 05 10 Crusher Industries 05 05 Total 100 100.00 Source: Inspector of Factories, Tiruchirappalli-23. 1.12. PERIOD OF THE STUDY This study comprises of the problems and prospects of SSI units at Tiruchirappalli District. The period of the study from 2011 to 2015. The study was concentrated on initial period (then) and current period (now) of SSI units. The initial period of operation was different from industry to industry and the current period denotes the period of data collection. The initial information about the units has been collected from the elder members of the families of entrepreneurs in order to ascertain the problems and prospects of SSI units. Through comparing the initial period of information and current period of information, the researcher would obtain the scientific result. 1.13. TOOLS USED FOR THE STUDY The researcher has availed the statistical tools such as F-test, correlation, percentage, average, Chi-square test, Frequency test, per unit, per worker calculations, bar diagram and pie diagram for the scientific analysis of the study. The ‘F’ test is used to find out the intra industry and inter industry variations in the capital investment. The correlation is used to gauge the intricate relationship between investment and employment in the SSI units. 1.14. UTILITY OF THE STUDY The findings of this study would bring about the facts of SSI units in the study region. This helps the policy makers to design the suitable schemes and the packages for the rapid development of SSI units at macro level. This research work also provides various suggestions for the problems faced by small scale industrial units and to ameliorate performance of these units in the study area. 1.15. LIMITATIONS OF THE STUDY This study has the following limitations: 1. The study deals with units located only nine Taluks in the district 2. The study has covered only the registered units and it has not covered the unregistered and sick units. 3. The money values of some variables such as fixed capital, working capital and wages have been used in this study are different from initial and current period. So, imputed values are calculated for such variables. 1.16. CHAPTER SCHEME . The research work is presented in six chapters. The first chapter consists of Introduction, Theoretical basis, Statement of the problem, Objectives of the study, Hypotheses of the study, Methodology of the study, Period of the study, Tools of the study, Utility of the study, Limitation of the study, and Chapter scheme. . The second chapter deals with the concepts and review of related literature. . The profile of the study area is given in third chapter.
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Small Scale Industries Management: Issues, Challenges and Opportunities . The fourth chapter is discussed with an overall view about SSIs. . The fifth chapter is concerned with the analysis of data and interpretation. . The sixth chapter gives a summary of findings, suggestions and conclusion. . In addition the Bibliography, questionnaire are given in the Appendix REFERENCES 1. Anil Bhuimali (2004), “Relevance of M.K. Gandhi’s Ideal of Self-Sufficient Village Economy in the 21st Century”, Sarvodaya, Vol. 1, No.5, p.80. 2. Annual Report of MSME, Government of India, 2012-13. 3. District Industries centre (DIC), Tiruchirappalli-1. 4. Ganesan and Navaneethakrishnan (2006), “Financing of small and medium Enterprises”, Facts For You, Vol. 26, No. 8, p.32. 5. Ganesamurthy V.S and S. Manikkam (2002), “Export performance of Small Scale Industries”, Facts For You, Vol. IV, No. 31, pp. 29-31. 6. Inspector of Factories, Tiruchirappalli-23. 7. Manoharan and Selvamoorthy (2010), “Performance of SSI in India: An Overview”, Southern Economist, Vol. 48, No. 20, p. 13. Parthasarathy M.S. (1996), “whither small scale industry”, The Hindu News paper, survey of Indian Industry, p. 418. 8. Micro, Small and Medium Enterprises Department, (policy Note 2013-2014), Government of Tamil Nadu, 2103. 9. Ramappa and Basavaraja (2006), “Impact of Liberalisation and Globalisation on SSI in India”, Southern Economist, Vol. 45, No. 7, p. 11. 10. Ram K. Vepa (1983), “Small Industry Development Programme”, Indian Institute of Public Administration (IIPA), New Delhi, pp. 5-12. 11. SIDCO Annual Report, 2009. 12. SIDBI Annual Report, 2012. 13. Subbiah and Navaneethakrishnan (2006), “Small scale Industrial units and their problems”, Facts For You, Vol. 26, No. 6, p. 35. 14. www.mkgandhi-sarvodaya.org/articles/bhuimali.htm
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Small Scale Industries Management: Issues, Challenges and Opportunities Chapter – II
Concepts and Review of Literature 13
Small Scale Industries Management: Issues, Challenges and Opportunities 2.1. CONCEPTS Concepts Related To Small Scale Industries Small-scale enterprises are a global phenomenon encompassing both the developing and developed countries. The use of “Small” as a designation in industry differentiates such units from others, as small in operation, employment, production, capital, technology etc. Small-scale industries have been defined as units or undertakings, which are engaged in manufacturing/production, and enterprises engaged in services. While the manufacturing enterprises were defined in terms of investment in plant and machinery, the service enterprises are defined in terms of investment in equipments. The Act has also defined medium scale enterprises for the first time. The enterprises are further classified into Micro, Small and medium categories. (MSMED ACT 2006) The defined limit on investment for enterprises to be classified as micro, small and medium enterprises is as follows: Classification Manufacturing Enterprises* Service Enterprises** Micro Rs.2.5 million / Rs.25 lakh Rs.1 million / Rs.10 lakh Small Rs.50 million / Rs.5 crore Rs.20 million / Rs.2 Crore Medium Rs.100 million / Rs.10 crore Rs.50 million / Rs.5 crore * Investment limit in Plant & Machinery **Investment limit in equipment The term “Village industries” has been redefined in amended KVIC, Act 1956 as “any industry located in rural area which produces any goods or renders any service with or without the use of power and in which the fixed capital investment per head of artisan or workers does not exceed Rs. one lakh (Rs. one lakh and fifty thousand in case of village industry located in a hilly area) or such other sum as may, by notification in the Official Gazette, be specified from time to time by the central Government”. The small-scale sector has stimulated economic activities, and played a significant role in attaining the following objectives. a) Elimination of economic backwardness in rural and under developed regions in the country. b) Attainment of self – reliance c) Reduction of regional imbalances d) Reduction of disparities in income wealth and consumption Growth and performance of micro small and medium enterprises and 4th census of MSME Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five opportunities at comparative to largely lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth. MSMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio-economic development of the country. Overview of the SSIs / MSME sector Performance of Micro, Small & medium Enterprises (MSME) sector is assessed by conduct of periodic All India Census of the Sector. The latest census conducted with reference year 2006-2007, wherein the data was collected till 2009 and results published in 2011-2012. Fourth All India census of MSME the first census conducted post implementation of Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, the sector was defined, as per the provision Industries Development and Regulation Act 1951, as Small Scale Industries (SSI) sector and its constituent tiny and auxiliary units as per periodic revision of criteria for defining such units. Third All India Census of SSI was conducted with coverage and concepts are prevailing during 2001-2002. The scope and coverage of the MSME sector was broadened significantly under the MSMED Act, 2006, which recognized the concept of “enterprise” and to include both manufacturing and services sector, besides defining the medium enterprises under MSME sector of economy was brought under to the revised criteria prescribed for defining Micro, Small and Medium Enterprises separately for manufacturing and service sectors, besides defining the medium enterprises under MSME sector. Thus the
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Small Scale Industries Management: Issues, Challenges and Opportunities entire non-agricultural sector of economy was brought under the coverage of MSME sector to the revised criteria prescribed for defining Micro, Small and Medium Enterprises separately for manufacturing and services sector. DEFINITION (i) Registered Sector: Enterprises registered with district Industries Centres in the state / UTs., KVIC / Khadi and Village Industries Board, Coir Board as on 31.03.2014 and factories under the coverage of section 2m(i) and 2m(ii) of the Factories Act 1948 used for Annual Survey of Industry having investment in plant and machinery upto Rs.10 crore were considered to belong to registered sector. (ii) Unregistered Sector: All enterprises engaged in the activities of manufacturing or in providing/rendering of services, not registered permanently or not filed EM with State Directorates of Industries/District Industries Centers on or before 31.3.2014 are called unregistered enterprises. Those enterprises that are temporarily registered on or before 31.3.2014 as also the units that are temporarily or permanently registered or filled EM after 31.3.2014 till date of Sample Survey, conducted as part of Fourth All India Census of MSME, 2011-2012 were treated as unregistered enterprises for the purpose of this survey. Enterprises found forming part of registered sector as defined above were excluded from the coverage of unregistered sector. (iii) Small Scale Industrial Unit: An industrial undertaking in which the investment in fixed assets in plant & machinery, whether held on ownership terms, or on lease, or by hire purchase, does not exceed Rs.100 lakhs as on 31.3.2001 is to be treated as small Scale Industrial Unit. (iv) Micro Small Medium Enterprises (MSME): MSME sector consists of any enterprises, whether proprietorship, Hindu undivided family, association of persons, co-operative society, partnership or undertaking or any other legal entity, by whatever name called, engaged in production of goods pertaining to any industry specified in the first schedule of Industries Development and regulation Act, 1951 & other enterprises engaged in production and rendering services, subject to limiting factor of investment in plant and machinery and equipment respectively as noted below: 2.1.1. Small Scale Industry The concept of smallness is with reference to the scale of operation and its definition differs from country to country. Usually the definition of small-scale industry invests in plant and machinery as the yard-stick to define small industry. The concept of smallness is with reference to the scale of is based on a single index that is either on the basis of investment in plant and machinery or labour and power. Nowadays almost all countries consider investment in plant and machinery as the yard-stick to define small industry (Math, 1991). After independence, the Government of India realized the importance of the SSIs as the chief means of livelihood for a large number of people. Accordingly, a conference was convened by the Government of India in 1947. At that conference an importance of cottage and SSIs was recognized. The report of the Fiscal Commission 1949-50 makes a reference to SSIs. It defines a cottage industry as “one which is operated mainly or primarily with the help of the members of the family either as a whole time or a part time occupation”. It further defines a small scale industry as one “which is operated mainly with hired labour normally numbering 10 to 50 hands” (Sivayya and Das, 1990). According to the Planning Commission, cottage industries are mainly rural in character and are generally associated with agriculture involving operations mostly by hand and are carried on at home either as a whole time or as a part time occupation, primarily with help of members of the family. Small-scale industries are located in urban centres and produce goods with partially or wholly mechanized equipment employing outside labour, small in size, having capital resources and a small labour force. A small-scale industrial unit may be one using power but employing less than 50 persons or one not using power but employing less than 100 persons. All small-scale enterprises, however, have capital investment of less than Rs.5 lakhs in 1950 (Nasir Tyabji, 1984). Investment will imply investment in fixed assets in plant and machinery, whether held in ownership term or by lease or by hire purchase. In 1975 this limit was raised to Rs.10 lakhs for small-scale enterprises and 15
Small Scale Industries Management: Issues, Challenges and Opportunities Rs.15 lakhs in the case of ancillaries. Subsequently in the industrial policy statement of 1980, the limit was further raised to Rs.15 lakhs, in the case of small-scale units and Rs.20 lakhs in the case of ancillary units. Simultaneously, in the case of tiny units, the limit of investment has been raised from Rs.1 lakh to Rs.2 lakhs. In March 1985, the Government of India again revised the investment limit of SSIs Rs.35 lakhs and for ancillary units Rs.45 lakhs As per the industrial policy statement of May 1990, the investment ceiling in plant and machinery for SSIs (fixed in 1985) has been raised from Rs.35 lakhs to Rs.60 lakhs and correspondingly for ancillary units from Rs.45 lakhs to Rs.75 lakhs. Investment ceiling with respect to tiny units has been increased from Rs.2 lakhs to Rs.5 lakhs. According to the modified definition, an ancillary unit is one, which sells not less than 50 per cent of its manufactured goods to one or more industrial units (Ruddar Datt & K.P.M Sundaram, 1996). According to, the notification issued by the government of India in pursuance of this policy SSIs which will export 30 per cent of their output by the third year of their starting production, will have an investment limit of Rs.75 lakhs. As per Government of India Notification 1999, an industrial undertaking in which the investment in fixed assets in plant and machinery whether held on ownership terms on lease or on hire purchase does not exceed Rs.10 million (Uma Kapila, 2002). There was a drastic change in the definition of SSI in 2006. A comprehensive Act was enacted during the year 2006 named as Micro, Small, and medium Enterprises Development Act, 2006 which brings these three segments under a single comprehensive legislation. An industrial undertaking in which the investment in plant and machinery, whether held on ownership terms or on lease or hire purchase basis does not exceed Rs. Five crores for manufacturing enterprises and Rs. Two crores for service enterprises are regarded as small scale industrial undertaking (Manoharan and Selvamoorthy, 2010). 2.1.2. Registered factory Factories registered under the Factories Act of 1948 (with the Inspector of Factories), employing 10 or more workers using power or those employing 20 or more workers without using power respectively on any day of the proceedings for 12 months, were taken as registered factories . Closed factories would be removed from the list and is maintained by the Chief Inspector of Factories. 2.1.3. Investment In finance, the purchase of financial products or other value of items with an expectation of favorable future returns. In general, investment means the use of money in the hope of making more money. Investment also means the money that is invested with an expectation of profit. This may be invested either on fixed capital or on working capital. 2.1.4. Fixed capital Fixed capital is that portion of the total capital that is invested in fixed assets (such as land, buildings, vehicles and equipment) that stay in the business almost permanently. In national accounts, fixed capital is conventionally defined as the stock of tangible, durable fixed assets owned or used by resident enterprises for more than one year. This includes plant, machinery, vehicles & equipment, the value of land improvements, and buildings. Land itself is not included in fixed capital even though it is a fixed asset, because it is not a product (a reproducible good). But the value of land improvements is included. 2.1.5. Working capital It comprises the value of raw materials in production, the value of stock of materials at stores, fuels, value of semi-finished goods and finished goods, cash in hand and at bank, net balance of amounts recoverable over amounts payable as at the end of the accounting year. It includes power and fuel charges, wages, rent, telephone charge, and leased amounts payable at the end of the month, but excludes fixed deposits, long term loans and investments. 2.1.6. Productive Capital The capital induces the production of goods and services. It is the blend of both fixed capital and working capital.
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Small Scale Industries Management: Issues, Challenges and Opportunities 2.1.7. Sole proprietorship Sole proprietorship is a form of business organization in which an individual invests his own capital, uses his own skill and intelligence in the management of its affairs and is solely responsible for the results of its operation. 2.1.8. Partnership Partnership can be defined as the relationship between persons who have agreed to share the profit or losses of the business carried on by all or any of them. Minimum numbers of persons are two and maximum numbers of persons are twenty in case of ordinary business and ten in case of banking business. The partnership form of organization is governed by the provisions of the Indian Partnership Act in 1932. 2.1.9. Workers Workers are persons who are mentally or physically exerted their labour for remuneration and wages. The term “worker” is used in the same sense as defined in the section 2 (i) of the Factories Act 1948, where a worker is defined as a person employed directly or through any agency whether for wages or not in any manufacturing process or in cleaning any part of the machinery or premises used for manufacturing process or any kind of work incidental to or connected with the manufacturing process. However persons holding positions of supervision and management or employed in a confidential position are excluded. 2.1.10. Wages It includes all payments made to workers in cash as compensation for work done during the year. For example, basic wages, namely; piece wages, monthly wages, time wages, daily wages, dearness allowance, overtime payments, shift allowance, leave wages, wages for paid holidays, regular bonus, and incentives bonus etc., which are paid more or less regularly for each period. 2.1.11. Production Production means creation of utility through transforming the raw material into final product. However, the degree of transformation varies from one unit to another unit and from one industry to another industry. Some units may call the Transformation as manufacturing while others may call as processing. This study has not made any attempt to analyze the degree of processing but only the changing process. For instance, wood units may cut a log into pieces and sell them. Whereas engineering unit may change the total structure and rice mill may remove the bran. 2.1.12. Excise duty Excise duty is a tax on manufacture or production of goods. Excise duty on alcohol, alcoholic preparations, and narcotic substances is collected by the State Government and is called “State Excise” duty. The Excise duty on rest of goods is called “Central Excise” duty and is collected in terms of Section 3 of the Central Excise Act, 1944. Sales Tax is different from the Excise duty as former is a tax on the act of sale while the latter is a tax on the act of manufacture or production of goods. Excise duty concessions have been given to the small scale industries in what is called the General Excise Duty Exemption Scheme for small industries. This is to enable the small scale industries to compete on favourable terms with their counterparts in the large and medium sector. Excise exemption to small scale units is mainly / chiefly granted under notification no. 175/86-CE dated 1.3.1986 as amended from time to time. But the study has found that the saw mill unit would pay more for excise duty. 2.1.13. Sales tax A sales tax is a consumption tax charged at the point of purchase for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale. A portion of the sale may be exempt from the calculation of tax, because sales tax laws usually contain a list of exemptions. Laws governing the tax may require it to be included in the price (tax-inclusive) or added to the price at the point of sale. Most of the sales taxes are collected from the buyer by the seller, who remits the tax to a government agency. The economic burden of the tax usually falls on the purchaser, but in some circumstances may fall on the seller. Sales taxes are commonly charged on sales of goods, but many sales taxes are also charged on sales of services. Ideally, a sales tax would have a high compliance rate, be difficult to avoid, and be simple to calculate and collect.
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Small Scale Industries Management: Issues, Challenges and Opportunities 2.1.14. Income tax An income tax is a tax levied on the income of individuals or business (corporations or other legal entities). Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate tax, corporate income tax, or profit tax. Individual income taxes often tax the total income of the individual (with some deductions permitted), while corporate income taxes often tax net income (the difference between gross receipts, expenses, and additional write-offs). Various systems define income differently, and often allow notional reductions of income (such as a reduction based on number of children supported). Personal income tax is often collected on a pay-as-you-earn basis, with small corrections made soon after the end of the tax year. These corrections take one of two forms: payments to the government, for taxpayers who have not paid enough during the tax year; and tax refunds from the government for those who have overpaid. Income tax systems will often have deductions available that lessen the total tax liability by reducing total taxable income. They may allow losses from one type of income to be counted against another. For example, a loss on the stock market may be deducted against taxes paid on wages. Other tax systems may isolate the loss, such that business losses can only be deducted against business tax by carrying forward the loss to later tax years. 2.1.15. Marketing The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. Marketing practice tends to be seen as a creative industry, which includes advertising, distribution and selling. It is also concerned with anticipating the customers' future needs and wants, which are often discovered through market research seen from a systems point of view, sales process engineering views that marketing as a set of processes that are interconnected and interdependent with other functions, whose methods can be improved by using a variety of new approaches. 2.2. REVIEW OF LITERATURE Many studies have been made on small-scale industries, in general. Both the Central and State Governments have taken up a number of research projects on small-scale industries through people from the academic and non-academic sides since they provide employment to millions of workers besides bringing enhanced national income in terms of domestic income and foreign exchange. There are numerous works dealing with the various problem faced by small-scale industrial units. This field of study is voluminous and various studies are available regarding the financial, production, marketing, and personnel management problems of small-scale industrial units. Every aspect of small-scale units and their problems have been studied and some concrete results have been obtained but still there is scope to study the problems of small-scale industrial units. This chapter attempts to review the literature related to small-scale units. This section focuses on a brief idea about the studies pertaining to SSIs. The studies have been grouped into (1) Performance (2) Prospects and (3) Problems. 2.2.1. Performance The performance envelops the growth of SSI units and generation of employment. The available material lucidly explains the content. Nathan Stone (1977) has studied the Small-Scale Catfish Production in Arkansas and many southern states. The study has revealed that the Catfish production has grown readily in the past ten years and has proven to be a profitable enterprise for many farmers. However, the high capital investment and operating capital requirements of commercial catfish production have prevented may small scale farmers from participating in this enterprise. The SSI sector survey conducted by the National Informatics Centre with the base year of 1987-88, has discussed the employment aspects of SSIs. Food products industry has ranked first in generating employment, providing employment to 4.82 lakhs persons (13.1 per cent). The next two industry groups are non-metallic mineral products with employment of 4.46 lakh persons (12.2 per cent) and metal products with
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Small Scale Industries Management: Issues, Challenges and Opportunities 3.73 lakhs persons (10.2 per cent). Per unit of employment was the highest (20) in units engaged in beverages, tobacco & tobacco products mainly due to the high employment potential of this industry (www.thehindu.com). Murthy (1986) explored in his study the growth of entrepreneurship in Anakapalle and Gudivad districts. An evaluation of entrepreneurship performance was carried out on the basis of factors like employment, turnover, profit, pre-investment and capacity utilization. B.S. Bhatia and R.K Sharma (1989) surveyed 108 small entrepreneurs in the state of Punjab to find out the influence of various socio-economic variables to find out the influence of various socio-economic variables on the performance of the enterprises. The study revealed that variables such as specific occupation, family background, technical education, caste etc., had a positive influence on the performance of the enterprise. Finance was one of the important problems of the entrepreneurs and it was found that a majority of the entrepreneurs have not benefitted much from the support facilities of the state agents because of their rigid procedures and insistence on adequate security coverage for the loan. Sundari and M.S Manimekalai (1990) have assessed the “Role of DIC in promoting entrepreneurship in Trichy District, Tamil Nadu’. In their research paper, an attempt is made to study the performance of DIC in promoting entrepreneurship in small scale industries. The study relates to the number of industrial units, capital invested, value of production and employment for the period prior to the establishment of DIC and after. It also highlights the structural change in the small scale industrial development with the introduction of DIC. S. Joseph Xavier (2000) conducted a study on the contribution of commercial banks in the development of small scale industries in Tiruchirappalli District, Tamil Nadu. The performance efficiency of SSI units was studied with the help of financial ratios, with a view to understand whether financial assistance from commercial banks helped to improve their net worth and profit. Mensah (2002) has studied the promotional institutions and business performance of small scale industries in central region of Ghana. This study has compared the business performance of the SSIs with the support of promotional institution and without support. The study indicated that 73 per cent of the sample entrepreneurs would identify at least one promotional institution operating in the central region. The study has found that the actual support from promotional institutions to the SSIs was limited to few firms; only 13 per cent of the sample entrepreneurs received the support in different forms such as credit, managerial training, advice, tree planting and equipment. Besides, the promotional institutions respondents are of the opinion that the support services have not reached the majority of the firms in the districts. Only seven per cent of the firms have received the credit facilities from the promotional institutions. Firms with institutional support had the higher capacity of utilization and labour productivity than their counterparts without support. The results suggest that the existing institutional support had a marginal effect on the operations of the SSI sector. The performance of small scale industries in Kerala, from 1980-81 to 2000- 01 has been studied by Jeromi (2003). During this period, the number of SSIs has increased rapidly (12.5 times). In the same period, the total numbers of employment and total amount of investment have increased abundantly. The government provides easy credit facility in order to wipe out unemployment problem. So there is large number of SSI units made available right now. Gohil (2006) has observed the growth and development of SSI in Gujarat state. He has indicated the development of small scale units during the last decade. He has used secondary data for this study. The study has expressed the increasing trend in number of units and number of employment in every year. He has found that the repairing and service industries dominate in the Gujarat state and the highest number of units is working in Ahamedabad district. The growth of SSI sector in India after globalization is remarkably increased with reference to Gujarat state. The study reveals that in Gujarat state the average number of workers per factory has decreased. The SSI business men were facing various challenges in operation with global players.
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Small Scale Industries Management: Issues, Challenges and Opportunities Rathod, C.B. (2007) described the importance of small scale industrial sector and also the contribution of Indian small scale entrepreneurs in world economy. The main objective of the study the growth and pattern of the SSI sector and identify the reason for success/failures, to evaluate the impact of globalization on SSIs and export opportunity, to identify the barriers and constrains that SSIs were facing to cope with globalization. The study concluded that both opportunities and challenges were raised as the impact of globalization on Indian Industry as a whole and the small scale sector in particular. The study concluded that both opportunities and challenges were raised as the impact of globalization on Indian Industry as a whole and the small scale sector in particular. The study has suggested that there was need for simplified legal and regulatory frame work, good governance, sufficient and accessible finance suitable infrastructure and competitive environment. Abhishek Kapoor (2008) has studied the Regional bias seeps into small scale industries and employment at Gandhinagar in Gujarat. The regional bias that has got ingrained in the industrial development of the state, as brought out by an internal document of the Industries department, is also seeping down to the small scale sector. As a result of the study, 46 per cent of the total investments expended on three districts of Ahmedabad, Vadodara and Surat because of the infrastructural facilities which account for half of the additional small scale units registered in the state till date. The total investments lined up would generate over seven lakhs jobs in the Golden Corridor - between Ahmedabad and Vapi - north Gujarat. Lozi and Basem Mohammed (2008) have studied the Small-scale industries in Jordan in the globalization era performance and prospects. This study has revealed that the Small scale industrial sector was a major contributor to the industrial economy of Jordan. It accounts for 50% of the total manufacturing sector, has 20% share in exports and provides 80% of employment in industrial sectors. Despite, the global and domestic recession, small scale industries registered a higher growth rate when the overall industrial sector in terms of number of units. The over all performance and contribution of small scale industries to Jordanian economy is generally described in terms of its absolute growth in units, employment, production and exports. Vetrivel and Iyyampillai (2009) have observed that the development of Small Scale Sector occupies a powerful position in Tamil Nadu state. The study found out that there would be a rapid growth of SSI units, employment generation and value of output during the period 1991-2008. Besides, the study also analyzed that there would be an increment on investment per SSI unit and value of product on per SSI unit under the aegis of government policies and financial assistant. Mariammal and Darling Selvi (2010) stated that India’s spice sector is zooming at great pace. During the period of April - June 2008, the export of various spices and spice products has shown a remarkable increase of 23 per cent both in terms of their quantity and value. India is producing more than four million tones of spice and is exporting around 180 spice products in over 150 nations. Manoharan and Selvamoorhty (2010) have ascertained that the number of SSI units, quantity of production, employment opportunities and exports of goods have increased in India, from 1990-1991 to 2007-2008. This is due to the fact that the various policy measures have been taken by the Government and incentives given in the form of concessions, assistance, facilities and subsidies. As a result, Small Scale units have registered tremendous growth. Anirban Ghatak (2011) has observed Small and Medium Enterprises have remained high on the agenda of all political parties, intelligentsia and policy makers since Independence as a legacy of Gandhian philosophy. The special thrust to this sector has been with the multiple objectives of employment generation, regional dispersal of industries and as a seedbed for Entrepreneurship. The contribution of SME has been remarkable in industrial development of the country. SMEs contribute approximately 40% of industrial employment. More importantly, employing approximately 19 million people. Numerous surveys and researches area done on this un-organized sector, to analyse them and to give them some uniformity. But the diversity and accessibility, coupled with the unwillingness on their part with lack of information makes this job more difficult. This study to bridge the gap in various sources of SME financing like short term loan, medium term loan, venture capital financing, institution financing, employee financing, government schemes or programmes, IPO issue etc. The times of recession are especially bad for the SME who primarily depend on the traditional sources of finance-Banks and FIs. They face acute liquidity crunch and working capital crisis,
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Small Scale Industries Management: Issues, Challenges and Opportunities besides seeing their fixed-capital for expansion plans drying up. The study gives conviction to the possibility that the different SME financing will provide the much needed bridging of financial gap arising from the FIs. Taslima Khan (2011) has studied the Small is Successful in engineering exports. The Small and medium enterprises lead the remarkable revival in engineering exports. Almost all sector were hit by the global economic downturn of 2008/09, but some were hit harder than others. One of the worst affected was engineering exports, which make for a quarter of India’s export basket. Having grown at 30 percent annually between 2003 and 2008, in saw a sharp 18 per cent fall in 2009/10, from $40 billion in the preceding year to $34 billion. But equally stunning was the recovery in 2010/11 when engineering exports soared 84 per cent to touch $60 billion. And the prime movers not the engineering giants but the small and medium enterprises, or SMEs, in the sector. Vijayalakshmi (2011) has observed the Entrepreneurial Competencies of Small Scale Industrialists. The entrepreneur is an important agent of change, contributing significantly to the economic development in terms of wealth and employment creation, stimulation of indigenous entrepreneurship and so on. The government on her part recognizes the strategic and economic role of the entrepreneur and has continuously crafted policies that would enhance the development of entrepreneurship in the country. The government policy initiatives have tended to emphasize more of financial resources than other critical factors to entrepreneurial success. The other critical success factors-the entrepreneurial competencies-which have been neglected as very essential and necessary variables in entrepreneurial development. Yogesh Madhukarrao Kulkarni (2011) has studied the role of SSI in employment generation. The secondary data has been collected from published and unpublished annual reports, Government Manuals/Orders, websites etc. Small scale Industries in India have recorded spectacular growth during the last five decades. The overall performance of this sector can be judged if one looks at the parameters like number of units, value of people employed and export revenues earned by this sector. The SSI units have the most significant increase from 20.82 lakh in 1991-1992 to 133.68lakh in 2007-08. The value of production of SSI was placed at Rs.178699 crore in 1991-92 to Rs.695126 crore in 2007-08 and employment increased from 129.80 lakh persons to 322.28 lakh persons during the same period. So far as these exports earning are concerned this sector contributed Rs.13883 crore in 1991-92 to an estimated level of Rs.189560 crore in 2007-08 in post reforms period compared to pre-reforms period compared to performs period 8.7lakh in 1980-81 to 19.48 lakh in 1990-91. So far as the exports earning are concerned this sector contributed Rs.1643 crore in 1980-81 to an estimated level of Rs.9664 crore in 1990-91. The detailed of employment generated by small scale industrial sector was 129.80 lakhs people in 1991-92 and which increased to 322.28 lakhs people in 2007-08 in the post-reforms period as compared to the pre-reforms period as compared to the pre-reforms period from 71.0 lakhs people in 1980-81 to 19.48 lakhs people in 1990-91. The rising trends of performance although the post-reforms post-reforms period in terms of the above parameters speaks about the growing importance or role of small scale industries in the Indian economy. Kalyan et al. (2011) in their study entitled “Competitive Performance of Micro, Small and Medium Enterprises in India” found that the MSMEs have performed extremely well and enable the country to make the process of providing additional employment and rural industrialization possible G. Ayyanar (2012) has observed employment opportunities and export performance of SSIs in India. By its less capital intensive and high labour absorption nature, SSI sector had made significant contributions to employment generation and also to rural industrializations. This sector is ideally suited to build on the strength of our traditional skills and knowledge by infusion of technologies, capital and innovative marketing practices. Small scale sector has emerged as a dynamic and vibrant sector of the economy due to the new reforms. In the year to come the SSI would be exploited of its fullest export potential. Our former president Dr. A.P.J. Abdul Kalam visualizes India as a developed nation by the year 2020. Certainty, SSIs have a pivotal role to play in this transformation. SSI sector plays a major role in India’s present export performance. 45 per cent to 50 per cent of the India exports is contributed by SSI sector. Direct exports from the SSI sector account for nearly 35 per cent of total exports. Besides direct exports, it is estimated that small-scale industrial units contribute around 15% to exports indirectly. This takes place through merchant exporters, trading houses and export houses. They may also be in the form of export orders
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Small Scale Industries Management: Issues, Challenges and Opportunities from the large units or the production of parts and components for use of finished exportable goods. It would surprise many to know that non-traditional products account for more than 95% of the SSI exports. Pull Subramanyam and B Ramachandra Reddy (2012) have observed MSME in India - An Overview is an imperative comprise of India’s industrial sector. It contributes significantly India gross domestic products and export earnings besides meeting the social objectives including that of providing employment opportunities 2 millions of people across the country. If the accumulated losses of an industry reach equal to or exceed its entire net worth i.e., capital and reserve, it is called a sick industry. A small scale unit is considered sick when it’s accumulated losses equal to or exceeds 50% of its peak net worth in the immediately preceding five accounting years. Sickness in industry does not occur overnight rather it takes 5 to 7 years to erode the health of an industrial unit. Singh et al. (2012) in their study entitled “Small Scale Industries: An engine of growth”, found that the performance of Small Scale Industries on policy changes which have opened new opportunities for this sector. The study recommended the emergence of technology development and strengthening of financial infrastructure to boost SSI and to achieve growth target. Garg and Walla (2012) in their study entitled “Micro, Small and Medium enterprises in India” found that the MSMEs have performed extremely well and enable the country to make the process of providing additional employment and rural industrialization possible. Economic Time (2015) Data as reported by scheduled commercial banks to RBI. Credit flow of to Micro, Small and Medium Enterprises (MSMEs) grew 19% during the year to March 2014, down from 27% in the previous year, but stayed above the 11% level recorded in 2011-12. Uninterrupted credit flow is crucial for MSMEs. These entities generate nearly 8% of the country’s GDP, 45% of manufacturing output and 40% of exports. They also provide the largest share of employment after agriculture. The Hindu (July 2015) Stated the MUDRA (Micro Units Development and Refinance Agency) card under the Pradhan Mantri MUDRA Yojana (PMMY) scheme was launched by the Corporation Bank. The MUDRA card was released by Ministry of finance. The card facilitates withdrawal and use of the working capital finance by micro entrepreneurs. Corporation Bank was the first bank to launch the MUDRA Card based on the RuPay platform. Three loan schemes are offered to the entrepreneurs based on the capacity to repay. “shishu” scheme provides loan up to Rs.50,000 while a loan amount up to Rs.5 lakh will be lent under “Kishore” scheme. Under “Tarun” scheme loan up to Rs.10 lakh will be offered. 2.2.2. Prospects Siddharthan (1985) has observed that in Japan till 1962 and in South Korea till 1967 the import substitution policies have enabled these countries to develop a strong industrial base and which later on enabled them to expand their exports. Their rapid growth of exports was the result of their development and not the other way of round. Thangamuthu and Iyyampillai (1991) have conducted a study entitled “Industrial Promotional Agencies and Entrepreneurship Development: A case study of two backward districts in Tamil Nadu, namely, Pudukkottai and Dharmapuri”. They have chosen fifty respondent industrial owners in each district. This study has identified the efforts made by IPAs for the development of new entrepreneurs and socio-economic profile. The study has also highlighted about the entrepreneurs who have evinced a strong tendency to migrate to make use of the facilities extended by the IPAs. The study has found that the role of IPAs in provision of industrial infrastructure and overhead facilities has been fairly satisfactory, which has effectively induced many potential entrepreneurs into the field. As per Anil Bhardwaj’s (2002) study, the average rate of growth of manufacturing sector in India during 1991-92 to 1999-2000 had been around six per cent; SSIs recorded eight per cent growth. At the same time, the number of Non - SSI sick units during 1991 to 1999 increased by 19.4 per cent. The increase for SSIs during the corresponding period has been almost double, that is 38 per cent. Further, the reform process also saw the increase in SSIs’ participation in international trade. The de-reservation of 800 and odd items reserved for SSIs remains one of the important unfinished agenda of the first generation reforms. The continuation of the policy of reservation is at best redundant. As the exercise for the removal of the
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Small Scale Industries Management: Issues, Challenges and Opportunities Quantitative Restrictions (QRs) was completed in 2001, all items reserved for SSIs are freely importable now. Bala Subrahmanya et al. (2002) studied the nature and magnitude of Research and Development carried out in small firms in Karnataka. This study has used both primary and secondary data. The primary data has covered 1358 units of the non-tiny sector small firms on a census basis and identified only 716 firms which have done R & D. External factors on competition, technological changes and customer requirements have driven a majority of the small firms to R & D. The nature of R & D activities carried out by tiny as well as non-tiny small firms reveals that improving quality / product performance, solving common problems and changing product shapes / designs / dimensions to suit market requirements are the primary characteristics of R & D in small firms in Karnataka. Total R & D expenditure is higher in the non-tiny sector than in the tiny sector. R & D intensity of the latter is higher. Small firms have achieved quality improvement, reduced the rate of rejection of output and increased the quantity of output. Murali Patibandla and B.V. Phani (2002) have stated that the removal of industrial licensing policies would imply lower transaction costs for dealing with government and for entry of new firms into industries. Rajendra Prasad (2004) has observed that Bangalore has achieved a remarkable success in establishing large number of SSI units as it is equipped with required infrastructure and assistance which attracts the entrepreneurs to establish the small scale units. He has also discussed the investment potential of small units in Karnataka. Bangalore district has made a huge amount of investment in establishing small units followed by Belgam district. Murali Krishna (2006) has expressed that the engineering industry in Visakhapatnam has a place of prominence in the process of industrial development of Visakhapatnam. These industries have provided direct employment to more than thirty two thousand people in study region. He has said that the adequate availability of skilled and semi-skilled work force, raw material, proper infrastructural as well as marketing facilities are the main reasons for many entrepreneurs to have established the units in the study area. Vetrivel and Iyyampillai (2009) have expressed that the small scale industrial sector’s growth is being driven by registered and unregistered manufacturing units, which have achieved a growth of 9.3 per cent during the year 2000-2006 in Tamil Nadu. This study has also explained that Tamil Nadu has a large number of cotton industries which accounts for 39 per cent of India’s production capacity. Small Scale Textile Industries are very popular in Coimbatore, Tiruppur, Karur, Madurai, Rajapalayam and Chennai. There are 3000 exporters well known for knitting wears in Tiruppur itself. In Tiruchirappalli district many of the SSI units are at present equipped with modern machines producing qualitative products at international level and are engaged in manufacturing wide range of products such as high presser boiler, rice mill boiler etc. After the advent of Bharath Heavy Electricals Limited (BHEL) more changes have been taken place in SSIs at Tiruchirappalli district. Krishnamurthy S. and Alagarsamy P. (2011) have observed Bank credit to SSI Sector: A Case Study in Theni. The SSI sector is coming under primary sector the Banks regularly provide loans to Small Scale Industries. But sector are delay in sanctioning of bank loans in right time. The small industries also face the problem in giving collateral securities for obtaining loans. Most of the SSI units could not avail the bank Loans because of insistence of collateral securities, which the SSI units could not provide. Hence the government should instruct the banks to sanction loans under credit the Banks should not ask for securities. Ramprasad Sengupta (1984) has discussed the inter-related problems of technical change and industrial organization with special reference to the public sector steel industry in India. This study has highlighted the dynamic character of technology and industrial leadership, capacity utilization and profit performance. Both Durgapur and Burnpur plants are today making huge losses. In spite of its staggering losses the State has not yet initiated modernization of the plant by introducing cost reducing innovations in these plants. It has not bothered to replace any of the old technologies of the existing plants by scrapping obsolete machines. The setting up of new production functions in Indian public sector has not been followed or accompanied by the rejection of old ones. As a result the average energy consumption of steel industry, for example, has declined only slowly and marginally while the industrially advanced countries have reduced it substantially over time by change in technology. The factor productivities in some of the existing public sector steel plants have 23
Small Scale Industries Management: Issues, Challenges and Opportunities been observed to be following a declining trend instead of improving. The shortage in iron production would imply underutilization of capacity of the downstream shops of an integrated steel plant causing overall imbalances. The lack of adequate concern for all these imbalances combined with the perpetuation of outmoded highly energy inefficient technology has led to the all round deterioration of SAIL plants causing heavy losses. Finally, the macro-economic factors like low rate of industrial growth of our economy, inadequacy of public spending on account of resource constraint and wrong import policy have been largely responsible for the stagnation of the Indian steel market. The author suggests for avoiding obsolete methods of production. Nagaraj (1985) has studied some aspects of SSIs in India. This study, based on the Reserve Bank of India’s sample survey of SSI units conducted during 1976-77, has discussed the broad trends in the growth in number of small enterprises and some characteristics of this sector. In the first of the two-stage random sample, 869 bank branches were selected which were stratified by bank groups - State Bank and its associates, nationalized commercial banks and other scheduled commercial banks and by type of district, that is backward and non-backward districts. In the second stage the assisted units were classified according to credit limits and type of industry to select the sample units. Finally, 16,336 units were selected for the survey. But, of these, 2,390 units were found to be closed and further 1,890 units did not respond. Hence the effective sample size was reduced to 12,356 units. The data have been collected through the bank branches. It is quite possible that the information collected is more reliable. This study has found that the majority of units started production after the mid sixties. Ancillary units form just about two per cent of the total number of registered small units. Engineering and chemical industries are more important in the registered small scale sector. The average annual earnings per worker in the sample industries are Rs.2,119 and the proportion of unskilled workers is not very large. Finally, and more interestingly the profitability as well as capital efficiency in the small scale sector as a whole is much higher than that of the corporate sector. The plausible reason for the relatively higher profitability in the small scale sectors seems to be the lower wages and greater exploitability of labour on the one hand and fiscal concessions on the other. Subrahmanian and Mohanan Pillai (1986) have attempted to understand weak links in the production structure in Kerala within an inter-regional framework of analysis. They have examined the industrial backwardness of Kerala. Particularly, the focus is on examining the empirical basis of the alleged ‘inefficiency’ of Kerala’s industrial system in terms of labour militancy, high wage cost and low productivity. This study has used secondary data. They have found that in terms of employment generation, Kerala’s performance appears far below the national average in 1961-1981. Kerala has recorded a growth rate much below the national average. Also the rate of growth in the aggregate output has shown a steady slow-down in Kerala. The steady decline in growth rates in successive periods implies that Kerala has been suffering from industrial stagnation since 1970s. More than one half of the total industrial employment in Kerala is accounted by food products, electricity and beverages industries in 1980-81. The relatively small share of engineering industries is noteworthy. Barely eight per cent of total 2.8 lakh factory workers in Kerala are today employed in manufacturing activities connected with metals. The development of engineering industries in the region is rudimentary and domestic demand is largely met by imports. As the process of industrialization gains momentum one expects the industrial base of the region to get diversified. Large numbers of product groups still however do not find a place in Kerala’s industrial structure. Kerala’s industrial backwardness may be due to its lopsided industrial structure. Industrial system in Kerala is dominated by less capital intensive industries as compared to all -India. Industry-wise a relatively higher wages per worker is seen only in those areas where Kerala has no specialization. The wage rate is much lower than the national average in food products and cotton textiles and with their dominance in the region’s industrial structure; the overall wage rate is also low as compared to all-India level. Kerala’s industrial system overall is characterized by lower labour productivity with lower wages as compared to all-India. The share of wages in value-addition in Kerala’s industrial system is below the national average now. The pattern of cost of production and profit in major industries in Kerala indicates that the region’s industrial system is in a disadvantageous position with respect to material cost structure. Profit as a proportion of value of output is relatively low in Kerala as compared to industrially developed regions in the country. Vasant Desai (1988) critically examined the problems and prospects of small industries. According to him, this sector accounts for roughly 45 percent of total industrial production in our country. However, small 24
Small Scale Industries Management: Issues, Challenges and Opportunities industries face a lot of problems relating to finance, marketing arrangements and modernization. The author suggests ways to overcome all the hurdles with the coordinated efforts of all concerned namely the Government, the financial institutions and the small entrepreneurs. Patnaik (1989) conducted a research on the “Growth of small Industries and problems of small Entrepreneurs” and the study was undertaken with the prime objective of studying the rate of growth of the SSI sector in the country and discussing the important problems faced by them which ultimately lead some of the units to premature death. He has analysed the growth pattern and after the launch of the programme. In his study, he took four variables to find out the growth of SSI Sector. They were Numbers of units, Production, Export and Employment generation and investment. RBI Report (1990), in relation to some of the problems that need urge solutions, they offer some distinct advantages. They provide immediate large-scale employment. They offer a method of ensuring a more equitable distribution of national income, they facilitate an effective mobilization of resources of capital, and skills, which might otherwise remain unutilized, some of the problems that unplanned urbanization tends to create will be avoided by the establishment of small centers industrial production all over the country. T. Ramesh (1991), the main factors adversely affecting the health of small-scale industries are promoter has limited capacity to raise equity. Problems in raising institutional funds, delayed and insufficient working capital loans from banks, competition from multi-nationals and large-scale industries. Wild fluctuations in prices of raw materials, sub-optimal capacity utilization, fall in finished goods prices, scarce labour turnover, and scarcity of skilled work force. Poor maintenance management, lack of cooperation and understanding by the revenue collecting authorities, untimely and sudden seizures and closure of units by financial institutions. Palanivelu (1995) has studied the factors responsible for induestrial sickness in small scale industries in Tamil Nadu, particularly in Pudukkottai district. His study has compared the sick and non-sick SSI units. This study has used both primary and secondary data. The primary data were collected from 61 sick units and 30 non-sick units. Secondary data were collected from DIC in Pudukkottai district. This study has chosen the units started before 1985. This study’s main objectives are finding out the relationship between levels of development and incidence of sickness among the districts of Tamil Nadu; and, entrepreneurial background of sick and non-sick units in study region. He has found that there are no sick units in rubber, leather, and flour industries and they show better performance. He has found that the industrially well developed districts have got the largest number of sick SSI units. Main reasons for the default in payment of principle and interest are under-utilization of capacity and lack of skilled labour. This study has also reported the inadequate industrial infrastructure. More sickness in food product units is due to failure of monsoons. More of technically qualified entrepreneurs have also ended up in sick units. Sick units sell their products on credit basis but the non-sick units do not resort to this kind of marketing. Skilled persons are more in non- sick units than in sick units. The sick units have more unskilled persons and hence the sickness. Delayed payment by the BHEL (after 90 days) to ancillary units has aggravated the problem of finance and has accelerated the process of sickness. Total number of SSI units increased only after the establishment of BHEL which also suffers from lack of orders and the distribution of lesser orders to the SSI units cause under-utilization on the part of sick units. He has also observed that longer the age and experience the better is the performance and lower the age lesser the performance. Parthasarathy (1996) has shown that an overwhelming 90 per cent of the SSIs face working capital problems in India. As a result, they are forced to raise funds from the open market at huge cost. The National Confederation of Small Scale Industry (NACOSI) has found that in 67 per cent of the cases, working capital shortage was so acute that the units might have to down the shutters. Sudip Chaudhuri (2002) has analysed the impact of economic reforms on industrial structure and productivity in India and reveals the disappointing over all performance in industrial output growth and employment. He has found that the growth record during reforms of the 1990s has been worse than that during the reforms of the 1980s, when an attempt was made to reform the control mechanism without totally negating the role of the government. More than half of the growth has been accounted for by consumer goods. Employment situation was worse than what was seen in the case of output. Annual rate of growth of employment of workers has been negative in five out of nine years considered in the 1990s. He has said that
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Small Scale Industries Management: Issues, Challenges and Opportunities a basic reason behind disappointing performance is the adverse impact of import liberalization and the decline in the role of the government. Mallikarjun and Kasyap Thakar (2002) have observed the impact of liberalized economic policy changes on the technical efficiency of Indian industries, particularly, three major (food, cotton, chemical) industrial groups from Gujarat state. It is one of most developed province of India. Industrialization helps to develop a technically up-to-date and diversified domestic economic structure characterized by a dynamic manufacturing sector, producing means of production and consumer goods. They have observed that the industries like food and textiles, which are defined as consumer goods industries, develop first during the process of the industrial development. Chemical and engineering industries and repair &services etc. develop thereafter but develop faster than the first stage industries. The earlier industries promote the shift in the industrial structure. They have used the secondary data (18 years) and analyzed with statistical tools. The analysis shows that all the three industries in Gujarat were using their inputs efficiently. There has been no significant shift in figures. They have compared a pre and post reform period. One important finding has been that the cotton industry which is based on monsoon, has managed to use its inputs efficiently even during bad years. The food products industry, which is also directly dependent on the monsoon, has failed to utilize its resources fully during bad monsoons. Finally, the result of this study is that the economic reforms may increase competition but increased competition does not necessarily lead to an efficient utilization of resources. Third All India Census of SSIs report (2003) has found that the proportion of sick units among the registered small scale industrial units is high in India. The reasons for sickness and proportion of sick units in registered SSI units are; lack of demand (58 per cent), shortage of working capital (57 per cent), non- availability of raw material (12 per cent), power problems (17 per cent), labour problems (six per cent), marketing problems (37 per cent), equipment problems (nine per cent), and management problems (five per cent). A study by Gohil and Dimple Dave (2003) explained that in Jetpur city on dying and printing units of Gujarat state reveals that after 1993, 30 per cent of total existing units have been closed down and remaining were facing problem in inventory and sales management related operations. Sharma and Abha Agarwal (2003) have analysed sickness in the small units located in the industrial estate of Rudrapur in Uttaranchal. They have collected primary data from one industrial estate. The estate was divided into 50 plots of land and no sheds were constructed by the government. The entire land area has been distributed to small entrepreneurs. They have found that only nine units were not working and then were closed, seven industries had not been established, only nine units were found to be healthy, and ten units were not found healthy. They have said that the unique industries which were engaged in the production activities of agricultural equipment and go bar gas had become sick due to high taxation. They have found plausible reasons for the sickness in small units. One coke industrial unit was never able to utilize the full capacity due to lack of demand. Illegal sales have affected marketing of petroleum gas. Another reason for the decline has been family disputes. Shortage of electricity, high cost of electricity and irregular power supply are the major threats for the units’ profitability. High magnitude of industrial sickness and malpractices on the part of small entrepreneurs of this estate is alarming. Mwang'ombola has analysed the main problem of wood-based SSIs in Kilimanjaro region of Tanzania. His study has revealed that wood based industries in the region account 270 units in operation. The range was from those employing one person to those which have about 5 employees (both permanent and trainees). He has selected 49 units. Of them 42 carpentry units, and the rest sawmills. Most of the units visited lacked modern tools that could help improve efficiency. Where they used machinery, the equipment was often old and needed replacement or was often out of order for lack of spare parts. Since most spares must be imported and foreign exchange is practically unavailable, this problem can play serious havoc with production. Another important problem is that the main raw material (wood) is not readily available in this region, though Tanzania has an abundance of forests. In this particular area of study, forests are scarce, and the few that can be found, do not produce the good type of wood needed for, e.g. carpentry; timber has to be brought in from very distant places, a factor that leads to very high prices of finished goods. Because of the rapid
26
Small Scale Industries Management: Issues, Challenges and Opportunities depletion of forests in Tanzania, the government has instituted very strong measures against tree felling all over the country. This has brought about a very low supply of timber in the market. Naturally, this has contributed a great deal to the high prices of finished goods and a big lay off of labour in the wood industry. Also due to lack of foreign exchange, supply of components like nails, screws, glue, varnish, locks, hinges, upholstery etc., is poor. These have to be imported. The few available can be bought in the black market where prices are exorbitant. Besides, most of the industrialists interviewed were found to be the traditional type of craftsmen who were inert to change. They see fashion as foreign among them and do not respond to changing market tastes. This is reinforced by nearly total lack of a market information acquisition system. It is a matter of “make what you can”. No product differentiation is done to evade competition. And, another problem is finance related to both liquidity and investment funds. Firstly, liquidity is often very low, because turnover is also low; and secondly, much money is tied up in stocks of raw materials that are often bought in unnecessarily large quantities due to their uncertain availability. The liquidity problem also prevails amongst some of these units because the enterprises are just supplementary sources of income to agriculture and so receive only limited attention. Long-term investment finance is also not readily available. Most of the small industrialists cannot secure loans from financial institutions because they lack proper financial records from which assessment can be made to demonstrate their viability to lending institutions. SSI entrepreneurs also have problems in convincing banks of their managerial competence which is an important consideration for institutional lenders. It is also reported that SSI is unable to give security in the form of real estate, i.e. land or buildings. Shortage of skilled labour is a common feature of small industries. Many workers are self trained artisans whose skills are normally low. Family affiliations of the owner often dictate selection of workers, regardless of their skills. The more skilled workers often move from small industries to larger ones, in search of better pay and employment security. SSIs are therefore often forced to rely on cheap casual workers or less qualified personnel and as a result their productivity is poor, and workmanship is irregular and unreliable (www.fao.org). Murali Krishna (2006) has studied the entrepreneurship in small scale engineering industries in Autonagar, Visakhapatnam. Main objectives of this study are to analyse the socio-economic origins of entrepreneurs in small scale engineering industries, the entrepreneurial spirit and motivation. This study has used secondary and primary data; secondary data are collected from DIC in Visakhapatnam. Totally there are 4809 units working in the district. Of them 33.74 per cent are engineering units, engaged in different lines of activities like, Fabrication works, precision making, iron and non-ferrous casting, ship repairs etc. This study has collected primary data from 80 entrepreneurs through direct field interview. Majority of the entrepreneurs have started their ventures at an early age. Previous job experience in the same line of activity has helped the entrepreneurs to run their units smoothly and successfully. Self-reliance is the main compelling reason for 40 per cent of entrepreneurs to pursue entrepreneurship. Most of the entrepreneurs did not like their children to be entrepreneurs. Successful entrepreneurs devoted more than 10 hours per day to their enterprises. Most of entrepreneurs did not avail of subsidies and incentives or concession given by government. This study has observed that in case of majority of the units, the percentage of capacity utilization was less than 60. Inordinate delays in the supply of raw material, shortage of skilled labours and shortage of working capital led to interruption in production process. Furthermore, the marketing operations were neither a systematic nor scientific as it was expected to be. Dearth of capital was another important constraint and many units approached different financial institutions but did not get loan. Some enterprises faced problem of significant rate of absenteeism due to lower wages, lack of social welfare measures and uncongenial work environment. A study by Chandawarkar and P.K Kulkarni (2006) found out that the amount invested in SSIs in South Karnataka is more than the amount invested in SSIs in North Karnataka. And, percentage of sickness is more in North Karnataka, which means that SSIs in North Karnataka have been facing crucial problem of lack of infrastructure facilities, lack of technology, and machinery and impact of large and medium scale industries etc. A study by Venkatesh (2007) has collected primary data from 49 bank offices in Mysore city in Karnataka. There were 253 officers in 134 branches of 43 commercial banks situated in Mysore city in Karnataka state. The study was planned to elicit the opinions from 60 officers. Based on alphabetically arranged list of officers, every fourth officer was selected to be the prospective respondent. Out of sixty, only 49 filled-in questionnaires were received and 11 respondents failed to respond. This study has found out that the 27
Small Scale Industries Management: Issues, Challenges and Opportunities dominant causal factor in sickness was perceived to be the competition from MNCs; and, that the credit institutions suffered from the inadequate technical and financial analysis of the project. The study has given an important note that the financial institutions have the economic and moral responsibilities to evaluate the project reports of entrepreneurs on an objective basis. Lozi and Basem Mohammed (2008) have studied the Small-scale industries in Jordan in the globalization era performance and prospects. The study indicated that the small scale industries were facing the slight adverse effects of globalization in the stringent requirements of quality costs, tight delivery schedules and productivity in Jordan. Vetrivel and Iyyampillai (2009) have indicated that the SSIs have faced the severe problem of marketing because of the hectic competition. Recently, the shortage of power is another major problem of SSI units for the last few years. This study has also given suggestions such as organized marketing facility and continuous power supply by the Government can be made for the above problems. John Suriya Kumar E. (2011) has observed that Tamil Nadu Exports: Problems and Prospects. Tamil Nadu contributes for 13.99 per cent. But presently Tamil Nadu exports have lack of infrastructure, shortage of staff, delays in the clearance procedures for several days has caused major losses to customers house agents besides. Container Freight Stations (CFS) and lack basic amenities. Evacuation time of the containers from port to CFS is getting delayed and financial penalties and grouped charges are rising for importers. Poor connectively with ports of South India is the main hurdle for exports from the districts of Tamil Nadu. Transactions costs are constantly congestion, slow customs clearance and screening express cargo charges by customs. Satyanarayan and PV Purna Kumari (2011) have indicated that the SSIs have faced the Industrial Sickness in India. Syndrome of industrial sickness has been persisting in the Indian economy since the past three decades. But during the past few years, it has assumed serious proportions. Now it has become a vexing problem. The RBI, in its Report on Currency and Finance, revealed that there were 224012 sick units in the country by end of March 1998 with an amount of Rs.15 6820.25Crore locked up in those units (RBI, 1998-99). Since industrial sector plays a major role in the Indian economy, sickness in this sector hinders the growth of the economic development. Studies have been done to understand the various causes and consequence of sickness in Indian industries. Various causes such as acute power shortage, high cost of production, high interest burden, shortage of working capital were identified. As a consequence, a number of SSI and non-SSI units have become sick and there was a fluctuating trend in their outstanding bank credits. The government has, in fact, played a very pivotal role by taking a number of measures to detect sick units and rehabilitate them. The role of RBI in rehabilitating the sick units by issuing considerable set guidelines through various committees is indeed appreciable. 2.2.3. Problems Ramprasad Sengupta (1984) has discussed the inter-related problems of technical change and industrial organization with special reference to the public sector steel industry in India. This study has highlighted the dynamic character of technology and industrial leadership, capacity utilization and profit performance. Both Durgapur and Burnpur plants are today making huge losses. In spite of its staggering losses the State has not yet initiated modernization of the plant by introducing cost reducing innovations in these plants. It has not bothered to replace any of the old technologies of the existing plants by scrapping obsolete machines. The setting up of new production functions in Indian public sector has not been followed or accompanied by the rejection of old ones. As a result the average energy consumption of steel industry, for example, has declined only slowly and marginally while the industrially advanced countries have reduced it substantially over time by change in technology. The factor productivities in some of the existing public sector steel plants have been observed to be following a declining trend instead of improving. The shortage in iron production would imply underutilization of capacity of the downstream shops of an integrated steel plant causing overall imbalances. The lack of adequate concern for all these imbalances combined with the perpetuation of outmoded highly energy inefficient technology has led to the all round deterioration of SAIL plants causing heavy losses. Finally, the macro-economic factors like low rate of industrial growth of our economy, inadequacy of public spending on account of resource constraint and wrong import policy have been largely
28
Small Scale Industries Management: Issues, Challenges and Opportunities responsible for the stagnation of the Indian steel market. The author suggests for avoiding obsolete methods of production. Nagaraj (1985) has studied some aspects of SSIs in India. This study, based on the Reserve Bank of India’s sample survey of SSI units conducted during 1976- 77, has discussed the broad trends in the growth in number of small enterprises and some characteristics of this sector. In the first of the two-stage random sample, 869 bank branches were selected which were stratified by bank groups – State Bank and its associates, nationalized commercial banks and other scheduled commercial banks and by type of district, that is backward and non-backward districts. In the second stage the assisted units were classified according to credit limits and type of industry to select the sample units. Finally, 16,336 units were selected for the survey. But, of these, 2,390 units were found to be closed and further 1,890 units did not respond. Hence the effective sample size was reduced to 12,356 units. The data have been collected through the bank branches. It is quite possible that the information collected is more reliable. This study has found that the majority of units started production after the mid sixties. Ancillary units form just about two per cent of the total number of registered small units. Engineering and chemical industries are more important in the registered small scale sector. The average annual earnings per worker in the sample industries are Rs.2,119 and the proportion of unskilled workers is not very large. Finally, and more interestingly the profitability as well as capital efficiency in the small scale sector as a whole is much higher than that of the corporate sector. The plausible reason for the relatively higher profitability in the small scale sectors seems to be the lower wages and greater exploitability of labour on the one hand and fiscal concessions on the other. Subrahmanian and Mohanan Pillai (1986) have attempted to understand weak links in the production structure in Kerala within an inter-regional framework of analysis. They have examined the industrial backwardness of Kerala. Particularly, the focus is on examining the empirical basis of the alleged ‘inefficiency’ of Kerala’s industrial system in terms of labour militancy, high wage cost and low productivity. This study has used secondary data. They have found that in terms of employment generation, Kerala’s performance appears far below the national average in 1961-1981. Kerala has recorded a growth rate much below the national average. Also the rate of growth in the aggregate output has shown a steady slow-down in Kerala. The steady decline in growth rates in successive periods implies that Kerala has been suffering from industrial stagnation since 1970s. More than one half of the total industrial employment in Kerala is accounted by food products, electricity and beverages industries in 1980-81. The relatively small share of engineering industries is noteworthy. Barely eight per cent of total 2.8 lakh factory workers in Kerala are today employed in manufacturing activities connected with metals. The development of engineering industries in the region is rudimentary and domestic demand is largely met by imports. As the process of industrialization gains momentum one expects the industrial base of the region to get diversified. Large numbers of product groups still however do not find a place in Kerala’s industrial structure. Kerala’s industrial backwardness may be due to its lopsided industrial structure. Industrial system in Kerala is dominated by less capital intensive industries as compared to all -India. Industry-wise a relatively higher wages per worker is seen only in those areas where Kerala has no specialization. The wage rate is much lower than the national average in food products and cotton textiles and with their dominance in the region’s industrial structure; the overall wage rate is also low as compared to all-India level. Kerala’s industrial system overall is characterized by lower labour productivity with lower wages as compared to all-India. The share of wages in value-addition in Kerala’s industrial system is below the national average now. The pattern of cost of production and profit in major industries in Kerala indicates that the region’s industrial system is in a disadvantageous position with respect to material cost structure. Profit as a proportion of value of output is relatively low in Kerala as compared to industrially developed regions in the country. Palanivelu (1995) has studied the factors responsible for industrial sickness in small scale industries in Tamil Nadu, particularly in Pudukkottai district. His study has compared the sick and non-sick SSI units. This study has used both primary and secondary data. The primary data were collected from 61 sick units and 30 non-sick units. Secondary data were collected from DIC in Pudukkottai district. This study has chosen the units started before 1985. This study’s main objectives are finding out the relationship between levels of development and incidence of sickness among the districts of Tamil Nadu; and, entrepreneurial background of sick and non-sick units in study region. He has found that there are no sick units in rubber, leather, and flour industries and they show better performance. He has found that the industrially well 29
Small Scale Industries Management: Issues, Challenges and Opportunities developed districts have got the largest number of sick SSI units. Main reasons for the default in payment of principle and interest are under-utilization of capacity and lack of skilled labour. This study has also reported the inadequate industrial infrastructure. More sickness in food product units is due to failure of monsoons. More of technically qualified entrepreneurs have also ended up in sick units. Sick units sell their products on credit basis but the non-sick units do not resort to this kind of marketing. Skilled persons are more in non-sick units than in sick units. The sick units have more unskilled persons and hence the sickness. Delayed payment by the BHEL (after 90 days) to ancillary units has aggravated the problem of finance and has accelerated the process of sickness. Total number of SSI units increased only after the establishment of BHEL which also suffers from lack of orders and the distribution of lesser orders to the SSI units cause under-utilization on the part of sick units. He has also observed that longer the age and experience the better is the performance and lower the age lesser the performance. Parthasarathy (1996) has shown that an overwhelming 90 per cent of the SSIs face working capital problems in India. As a result, they are forced to raise funds from the open market at huge cost. The National Confederation of Small Scale Industry (NACOSI) has found that in 67 per cent of the cases, working capital shortage was so acute that the units might have to down the shutters. Sudip Chaudhuri (2002) has analysed the impact of economic reforms on industrial structure and productivity in India and reveals the disappointing over all performance in industrial output growth and employment. He has found that the growth record during reforms of the 1990s has been worse than that during the reforms of the 1980s, when an attempt was made to reform the control mechanism without totally negating the role of the government. More than half of the growth has been accounted for by consumer goods. Employment situation was worse than what was seen in the case of output. Annual rate of growth of employment of workers has been negative in five out of nine years considered in the 1990s. He has said that a basic reason behind disappointing performance is the adverse impact of import liberalization and the decline in the role of the government. Mallikarjun and Kasyap Thakar (2002) have observed the impact of liberalised economic policy changes on the technical efficiency of Indian industries, particularly, three major (food, cotton, chemical) industrial groups from Gujarat state. It is one of most developed province of India. Industrialization helps to develop a technically up-to-date and diversified domestic economic structure characterized by a dynamic manufacturing sector, producing means of production and consumer goods. They have observed that the industries like food and textiles, which are defined as consumer goods industries, develop first during the process of the industrial development. Chemical and engineering industries and repair & services etc. develop thereafter but develop faster than the first stage industries. The earlier industries promote the shift in the industrial structure. They have used the secondary data (18 years) and analysed with statistical tools. The analysis shows that all the three industries in Gujarat were using their inputs efficiently. There has been no significant shift in figures. They have compared a pre and post reform period. One important finding has been that the cotton industry which is based on monsoon, has managed to use its inputs efficiently even during bad years. The food products industry, which is also directly dependent on the monsoon, has failed to utilize its resources fully during bad monsoons. Finally, the result of this study is that the economic reforms may increase competition but increased competition does not necessarily lead to an efficient utilization of resources. Third All India Census of SSIs report (2003) has found that the proportion of sick units among the registered small scale industrial units is high in India. The reasons for sickness and proportion of sick units in registered SSI units are; lack of demand (58 per cent), shortage of working capital (57 per cent), non- availability of raw material (12 per cent), power problems (17 per cent), labour problems (six per cent), marketing problems (37 per cent), equipment problems (nine per cent), and management problems (five per cent). A study by Gohil and Dimple Dave (2003) explained that in Jetpur city on dying and printing units of Gujarat state reveals that after 1993, 30 per cent of total existing units have been closed down and remaining were facing problem in inventory and sales management related operations.
30
Small Scale Industries Management: Issues, Challenges and Opportunities Sharma and Abha Agarwal (2003) have analysed sickness in the small units located in the industrial estate of Rudrapur in Uttaranchal. They have collected primary data from one industrial estate. The estate was divided into 50 plots of land and no sheds were constructed by the government. The entire land area has been distributed to small entrepreneurs. They have found that only nine units were not working and then were closed, seven industries had not been established, only nine units were found to be healthy, and ten units were not found healthy. They have said that the unique industries which were engaged in the production activities of agricultural equipment and gobar gas had become sick due to high taxation. They have found plausible reasons for the sickness in small units. One coke industrial unit was never able to utilize the full capacity due to lack of demand. Illegal sales have affected marketing of petroleum gas. Another reason for the decline has been family disputes. Shortage of electricity, high cost of electricity and irregular power supply are the major threats for the units’ profitability. High magnitude of industrial sickness and malpractices on the part of small entrepreneurs of this estate is alarming. Mwang'ombola has analysed the main problem of wood-based SSIs in Kilimanjaro region of Tanzania. His study has revealed that wood based industries in the region account 270 units in operation. The range was from those employing one person to those which have about 5 employees (both permanent and trainees). He has selected 49 units. Of them 42 carpentry units, and the rest sawmills. Most of the units visited lacked modern tools that could help improve efficiency. Where they used machinery, the equipment was often old and needed replacement or was often out of order for lack of spare parts. Since most spares must be imported and foreign exchange is practically unavailable, this problem can play serious havoc with production. Another important problem is that the main raw material (wood) is not readily available in this region, though Tanzania has an abundance of forests. In this particular area of study, forests are scarce, and the few that can be found, do not produce the good type of wood needed for, e.g. carpentry; timber has to be brought in from very distant places, a factor that leads to very high prices of finished goods. Because of the rapid depletion of forests in Tanzania, the government has instituted very strong measures against tree felling all over the country. This has brought about a very low supply of timber in the market. Naturally, this has contributed a great deal to the high prices of finished goods and a big lay off of labour in the wood industry. Also due to lack of foreign exchange, supply of components like nails, screws, glue, varnish, locks, hinges, upholstery etc. is poor. These have to be imported. The few available can be bought in the black market where prices are exorbitant. Besides, most of the industrialists interviewed were found to be the traditional type of craftsmen who were inert to change. They see fashion as foreign among them and do not respond to changing market tastes. This is reinforced by nearly total lack of a market information acquisition system. It is a matter of “make what you can”. No product differentiation is done to evade competition. And, another problem is finance related to both liquidity and investment funds. Firstly, liquidity is often very low, because turnover is also low; and secondly, much money is tied up in stocks of raw materials that are often bought in unnecessarily large quantities due to their uncertain availability. The liquidity problem also prevails amongst some of these units because the enterprises are just supplementary sources of income to agriculture and so receive only limited attention. Long-term investment finance is also not readily available. Most of the small industrialists cannot secure loans from financial institutions because they lack proper financial records from which assessment can be made to demonstrate their viability to lending institutions. SSI entrepreneurs also have problems in convincing banks of their managerial competence which is an important consideration for institutional lenders. It is also reported that SSI is unable to give security in the form of real estate, i.e. land or buildings. Shortage of skilled labour is a common feature of small industries. Many workers are self trained artisans whose skills are normally low. Family affiliations of the owner often dictate selection of workers, regardless of their skills. The more skilled workers often move from small industries to larger ones, in search of better pay and employment security. SSIs are therefore often forced to rely on cheap casual workers or less qualified personnel and as a result their productivity is poor, and workmanship is irregular and unreliable (www.fao.org). Murali Krishna (2006) has studied the entrepreneurship in small scale engineering industries in Autonagar, Visakhapatnam. Main objectives of this study are to analyse the socio-economic origins of entrepreneurs in small scale engineering industries, the entrepreneurial spirit and motivation. This study has used secondary and primary data; secondary data are collected from DIC in Visakhapatnam. Totally there are 4809 units working in the district. Of them 33.74 per cent are engineering units, engaged in different lines of activities
31
Small Scale Industries Management: Issues, Challenges and Opportunities like, fabrication works, precision making, iron and non-ferrous casting, ship repairs etc. This study has collected primary data from 80 entrepreneurs through direct field interview. Majority of the entrepreneurs have started their ventures at an early age. Previous job experience in the same line of activity has helped the entrepreneurs to run their units smoothly and successfully. Self-reliance is the main compelling reason for 40 per cent of entrepreneurs to pursue entrepreneurship. Most of the entrepreneurs did not like their children to be entrepreneurs. Successful entrepreneurs devoted more than 10 hours per day to their enterprises. Most of entrepreneurs did not avail of subsidies and incentives or concession given by government. This study has observed that in case of majority of the units, the percentage of capacity utilization was less than 60. Inordinate delays in the supply of raw material, shortage of skilled labours and shortage of working capital led to interruption in production process. Furthermore, the marketing operations were neither a systematic nor scientific as it was expected to be. Dearth of capital was another important constraint and many units approached different financial institutions but did not get loan. Some enterprises faced problem of significant rate of absenteeism due to lower wages, lack of social welfare measures and uncongenial work environment. A study by Chandawarkar and P.K Kulkarni (2006) found out that the amount invested in SSIs in South Karnataka is more than the amount invested in SSIs in North Karnataka. And, percentage of sickness is more in North Karnataka, which means that SSIs in North Karnataka have been facing crucial problem of lack of infrastructure facilities, lack of technology, and machinery and impact of large and medium scale industries etc. A study by Venkatesh (2007) has collected primary data from 49 bank offices in Mysore city in Karnataka. There were 253 officers in 134 branches of 43 commercial banks situated in Mysore city in Karnataka state. The study was planned to elicit the opinions from 60 officers. Based on alphabetically arranged list of officers, every fourth officer was selected to be the prospective respondent. Out of sixty, only 49 filled-in questionnaires were received and 11 respondents failed to respond. This study has found out that the dominant causal factor in sickness was perceived to be the competition from MNCs; and, that the credit institutions suffered from the inadequate technical and financial analysis of the project. The study has given an important note that the financial institutions have the economic and moral responsibilities to evaluate the project reports of entrepreneurs on an objective basis. Lozi and Basem Mohammed (2008) have studied the Small-scale industries in Jordan in the globalization era performance and prospects. The study indicated that the small scale industries were facing the slight adverse effects of globalization in the stringent requirements of quality costs, tight delivery schedules and productivity in Jordan. Vetrivel and Iyyampillai (2009) have indicated that the SSIs have faced the severe problem of marketing because of the hectic competition. Recently, the shortage of power is another major problem of SSI units for the last few years. This study has also given suggestions such as organized marketing facility and continuous power supply by the Government can be made for the above problems. M. Ramesh-The Hindu-Business Line (On October 3, 2012) has explain about BHEL suppliers in Tiruchi in trouble due to lack of power and finance. The 600-odd small and medium fabricators that supply to BHEL face closure of business due to multiple factors mainly lack of power, finance and “intermitted periods of dried up orders”. The power situation in the state is crippling the units productivity. Some units are often on the verge of shutdown due to acute power shortage. Power from diesel gensets, it is way too expensive. The other major problem the industries face is that of funding. The slowdown in the economy, coupled with the problems specified to the power industry is taking its toll on these SMEs. In critical period, units are facing severe pressure from banks towards their repayment of obligations. This financial pressure is totally weakening the units. Without the support of financial institutions at this critical juncture, many units will get wiped out. BHELSIA request banks to grant interest and principal moratorium for a period of one year for all member units. These repayment obligation can be spread over an increased repayment period. There are lot of instance both domestically and internationally, where banks have willingly granted moratorium and extended repayment periods thus easing cash flows and supported industry.
32
Small Scale Industries Management: Issues, Challenges and Opportunities The Hindu (2013) has indicated BHELSIA pleads for banker’s support to come out of crisis. With production slumping to just 30 percent of capacities member units of BHEL Small and Medium Industries associated have sought the support of financial institutions in the form of a moratorium on payment of interest and repayment of principal amount of year. Due to the slowing down of industrial projects, the high cost of bank loan was making it difficult for the industries to fulfill their repayment obligations. The financial pressure was weakening units. Without the support of financial institutions at the critical juncture, many units will get wiped out, according to BHELSIA president. The Hindu (May 2014) has explain the Perambalur district has been a major coir manufacturing centre in state. A large number of people were employed in the coir manufacturing units provide economic support to scores of families. At presently they have faced poor demand, lack of financial support sound death knell for the units. If government and banks come forward to provide loan and other marketing support needed for reviving the industry. 2.3. CONCLUSION Though there are many studies available regarding industrial performance, problems and prospects, only few have attempted to study the industrial development over a period, taking more than one point of time for the study. The Present study has made an attempt for understanding the performance, problems and prospects of SSIs over a period of time. Table No-2.1: Investment limits for SSIs Year Investments Limits Additional condition Less than 50 / 100 person with or 1950 Up to Rs.0.5 million in fixed assets without power 1960 Up to Rs.0.5 million in fixed assets No Condition 1966 Up to Rs.0.75 million in plant and machinery No Condition 1975 Up to Rs.1 million in plant and machinery No Condition 1980 Up to Rs.2 million in plant and machinery No Condition 1985 Up to Rs.3.5 million in plant and machinery No Condition 1991 Up to Rs.6 million in plant and machinery No Condition 1997 Up to Rs.30 million in plant and machinery No Condition 1999 Up to Rs.10 million in plant and machinery No Condition Source: Academic Foundation, New Delhi, 2002. REFERENCES 1. Ayyanar (2012), “Employment Opportunities and Export Performance of SSIs in India”, Southern Economics Golden Jubilee Year, January 15, 2012, pp 25-28. 2. Aniban Ghatak(2011), “A Study on Financing of SMEs in Bangalore”, Ushus JBMgt, 10, 2(2011), pp 20-52, ISSN 0975-3311. 3. Abhishek Kapoor (2008), “Regional bias seeps into small-scale industries, employment” - http://www.expressindia.com/latest-news/regional-bias-seeps-intosmallscale-industries- employment/308427/ 4. Anil Bhardwaj (2002), “Reforms and Small Scale Industries in India”, Global Business Review, Vol. 3, No. 2, pp. 341-349. 5. Bala Subrahmanya M.H and M. Mathirajan and P. Balachandra (2002), “Research and Development in Small Industry in Karnataka”, Economic and Political Weekly, Vol. XXXVIII, No. 39, pp. 4010-4017. 6. Chandawarkar M.R and P.K. Kulkarni (2006), “Small Scale Industries: A Glance”, Southern Economist, Vol. 45, No. 1, pp.33-35. 7. MSMED Act, 2006, “Government of India, Ministry of Micro, Small and Medium Enterprises”, Annual Report 2012-2013.
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Small Scale Industries Management: Issues, Challenges and Opportunities 8. Gohil D.C (2006), “Growth and Development of SSI in Gujarat: A study”, Southern Economist, Vol. 44, No. 17, pp. 10-12. 9. Gohi lD.C and Dimple Dave (2003), “Small Scale Sector of Jetpur city with reference to textile sector” M.Phil level research work, Saurshtra University, Rajkot. 10. John Suriya Kumar (2011), “Tamilnadu’s Exports: Problems and Prospects” Southern Economist Golden Jubilee Year, August 1 2011, pp. 32-34. 11. Jeromi P.D (2003),”What Ails Kerala’s Economy: A Sectoral Exploration”, Economic and Political Weekly, Vol. XXXVIII, No. 16, p. 1588. 12. Krishnamurthy. S and Alagarsamy. P,” Bank Credit to SSI Sector: A Case Study”, Southern Economist, March 1, 2011. 13. Lozi and Basem Mohammed (2008),“Small-scale industries in Jordan in the globalization era performance and prospects”, Journal of Social Sciences , 14. http://findarticles.com/p/articles/mi_7076/is_2_4/ai_n28552780/ 15. Mallikarjun M and Kasyap Thakar (2002), “Economic Reforms and Technical Efficiency: A Study of Selected Indian Industries”, The Indian Journal of Economics, Vol. LXXXII, No.327, pp. 559-568. 16. Manoharan and Selvamoorthy (2010), “Performance of SSI in India: An Overview”, Southern Economist, Vol.48, No.20, p.13- 16. 17. Mariyammal and Darling Selvi (2010), “Spices industry in a Global Perspective”, Southern Economist, Vol.49, No.1, pp.42-44. 18. Math S.M (1991), “Rural Development Growth of Small Scale Industries on India”, Rural India, Gulbarga University, p.16. 19. Mensah J.V (2002), “Promotion Institutions and Business Performance of Small-Scale Industries: Evidence from the Central Region in Ghana”, The Indian Journal of Economics, Vol. LXXXII, No.327, pp. 465-482. 20. Murali Krishna S. (2006), “Entrepreneurship in Small Scale Engineering Units”, Southern Economist, Vol. 45, No. 5, pp. 23-26. 21. Murali Patibandla and B.V. Phani (2002), “Market Reforms and Industrial Productivity”, Economic and Political Weekly, Vol. XXXVII, No. 1, pp. 59-64. 22. Mwang'ombola H.M, “Extension services to small-scale industries: the Tanzania experience”, Small- Scale Industries Development Organisation (SICATA), Tanzania (www.fao.org/docrep/s8380e/s838 0e0e.htm). 23. Nathan Stone (1977), “Small-Scale Catfish Production: Introduction”, University of Arkansas, United States Department of Agriculture and County Governments Cooperating, University of Arkansas at Pine Bluff. 24. Nagaraja R (1985), “Some Aspects of Small Scale Industries in India: Findings Based on the Two All- India Sample Surveys”, Economic and Political Weekly, Vol. XX, No. 41, pp. 1741-1746. 25. Nasir Tyabji (1984), “Nature of Small Enterprises Development: Political Aims and Socio-Economic Reality”, Economic and Political Weekly, Vol. XIX, Nos. 31, 32 & 33, pp. 1425 – 1434. 26. Palanivelu S (1995), “Economic Aspects of Industrial Sickness in Small Scale Industries in Tamil Nadu with special reference to Pudukkottai district”, Unpublished Ph.D thesis, Bharathidasan University, Trichirappalli-24. 27. Parthasarathy M.S (1996), “Whither small scale industry?”, The Hindu News Paper, Survey of Indian Industry, pp.415-418 & pp. 590-605.
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Small Scale Industries Management: Issues, Challenges and Opportunities 28. Puli Subramanyam and B. Ramachandra Reddy,(2012) “VSRD International Journal of Business and Management Research” Vol.2 No 11 November 2012. 29. Ramesh T. (1991), “Problems of small scale industries”, The Charted accountant, 1991, pp. 577-559. 30. RBI Report (1990), “Report on Currency and Finance”, Vol. 1, Economic Review, Bombay, 1990, pp. 77-80. 31. Rajendra Prasad T (2004), “Corporate Policy and Small Enterprises in Karnataka”, Southern Economist, Vol. 45, No. 14, pp. 21-24. 32. Ramprasad Sengupta (1984), “Technical Change in Public Sector Steel Industry”, Economic and Political Weekly, Vol. XIX, No. 5, pp. 206-215. 33. Ruddar Datt & K.P.M Sundaram (1996), “Small Scale Enterprises”, Indian Economy, Sultan Chand Publication, New Delhi, pp. 590-605. 34. Sharma D.R. and Abha Agarwal (2003), “Sickness in Industrial Estate: Case study in Uttaranchal”, Economic and Political Weekly, Vol. XXXVIII, No. 39, pp. 4092-4095. 35. Siddharthan N.S. (1985), “Industrial Development: Issues and Policy Options”, Economic and Political Weekly, Vol. XX, No. 19, p. 840. 36. Sivayya and Das (1990), “Cottage and Small Industries”, Indian Economy, Sultan Chand Publication, New Delhi, p.320. 37. Subrahmanian K.K and P. Mohanan Pillai (1986), “Kerala’s Industrial Backwardness: Exploration of Alternative Hypotheses”, Economic and Political Weekly, Vol. XXI, No. 14, pp. 577-592. 38. Sudip Chaudhuri (2002), “Economic Reforms and Industrial Structure in India”, Economic and Political Weekly, Vol. XXXVII, No. 2, pp. 155-162. 39. Satyanarayan.A and P.V Purna Kumart, (2011) “Industrial Sickness in India: Causes, Consequences and Curses” The IUP Journal of Entrepreneurship Development, Vol. VIII, No. 2, 2011. 40. Thangamuthu C and S. Iyyampillai (1991), “Industrial Promotional Agencies and Entrepreneurship Development: A case study of two backward districts in Tamil Nadu”, Unpublished ICSSR Project Report, Bharathidasan University, Tiruchirappalli-24. 41. Third all India Census of SSIs Report (2003), Development Commissioner (SSI), Ministry of Small Scale Industries, Government of India, New Delhi. 42. Taslima Khan (2011), “Small is Successful”, Industry SME Exports, Business Today June 26, 2011. 43. Uma Kapila (2002), “Understanding the problems of Indian economy”, Academic Foundation, New Delhi, p. 376. 44. Venkatesh S (2007), “Industrial Sickness in SSI: A Perception Analysis of Bankers”, Southern Economist, Vol. 45, No. 14, pp. 21-24. 45. Vetrivel K and S. Iyyampillai (2009), “Problems and Prospects of SSIs in Tamil Nadu”, Southern Economist, Vol. 48, No. 14, pp. 31-34. 46. Vijaylakshmi S. (2011), “Entrepreneurial Competencies of Small Scale Industrialists” Southern Economist Golden jubilee Year, July 15, 2011, pp 8-10. 47. Yogesh Madhukarrao Kulkarni (2011), “Role of SSI in Employment Generation”, Southern Economist Golden Jubilee Year, August 15, 2011, pp. 9-11.
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Small Scale Industries Management: Issues, Challenges and Opportunities Chapter – III
Profile of the Study Area 36
Small Scale Industries Management: Issues, Challenges and Opportunities 3.1. INTRODUCTION Tiruchirappalli district is an important region in the state and had been a Centre of activities for many historical events from the days of the early Cholas. Rock Fort, Thayumana Swamy, Pillaiyar Temple, Teppakulam, the Nawab’s palace, the Nadir Shah Mosque, Sri Rangam Temple, ThiruvanaiKoil, Subramanyaswami Temple, Upper Anicut and Grand Anicut are someof the important monuments, and temples reflecting the history, culture and traditions of the district. Tiruchirappalli district is one of the important districts in Tamil Nadu and had a population of 27.13 lakh, of which 13.46 lakh were males and 13.66 lakh were female as per 2011 census. The composition of total population living in rural and urban areas is 13.77 lakh and 13.36 lakh respectively. The density of population is 616 persons per Sq. Km. In terms of urbanization live, according to the composition of urban and rural population, Tiruchirappalli district ranks 10th place among the other districts in Tamil Nadu. 3.2. GEOGRAPHICAL LOCATION Tiruchirappalli district is a centrally located district in Tamil Nadu State, has an area of 4403.83 Sq. Km stretching between 10 and 11.30 of the Northern Latitude and 74.858 of the Eastern Longitude. Altitude is 78m above sea level bounded by Namakkal and Perambalur districts on the North, Thanjavur and Pudukkottai in the east, Sivaganga, Madurai and Dindugal districts in the South and Karur district in the west. It is not only an Inland district without any coastal line but also most centrally located district in the state. The district has no marked natural divisions. The topography of Tiruchirappalli district is almost plain except for the short range of Pachaimalai hills in the North. Cauvery is the major river flowing across the central portion of the district. Alluvial sandy loam and loamy soil constitutes major portion of the Delta regions bordering the river. In Lalgudi, Mannachanallur and Andanallur Blocks, loamy soils are predominant. In dry tracks Red soil is predominant, followed by Black soil. The Pachamalai Hill is situated partly in Perambalur district and Thuraiyur Taluk and is the important hill in the district. The Cauvery and Colroon are the major rivers and there are other small rivers, which are contributed to the irrigation potential of the district. The presence fin numerable streams and river lets in the region, drainage has not been a problem for the district. It is subjected to extremes of climates. The normal annual rainfall works out to be 842.60 mm. 3.3. METEOROLOGICAL INFORMATION The variation of temperature throughout the year exhibits hot and dry climate with high temperature and low degree of humidity. The region experiences four main seasons: Cool Months - December to February Hot Months - March to May Windy Months - June to August and Rainy Months - September to November Generally, the region has a long spell of hot climate with a short spell of rainy season and winter. 3.4. TEMPERATURE Temperature is low during the month of January with average mean daily temperature of 28°C. The maximum daily temperature recorded during the hot season in the month of May is 42°C. 3.5. RAINFALL The district receives seasonal rainfall from September to December. The average annual rainfall is in North East monsoon 356. 1mm and South West monsoon 270.3 mm. the Northeast Monsoon period is from October to December. Southwest monsoon generally sets in at the beginning of June and blows with great force till the end of August. The normal annual rainfall is 842.60 mm.
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Small Scale Industries Management: Issues, Challenges and Opportunities 3.6. AVAILABILITY OF MINERALS Table No. 3.1 Name of the Mineral Quantity(Tone) Value(Rs.in.’000’) Lime Stone 835594 334.24 Fire Clay 840 0.14 Soap Stone 160 0.04 Gypsum 2600 0.58 Quartz 1920 1.00 Rough Stone 4020 L.L. 5.63 Sand 120490 LL 156.64 Brick Earth 70 LL 0.04 Colour Granite 431.520 Cu.Mts. 6.47 Black Granite 103.408 Cu.Mts. 2.59 Source: Industrial Profile of Trichirappalli District, 2012-13. 3.7. ADMINISTRATIVE ARRANGEMENT IN THE DISTRICT Tiruchirappalli district consists of nine taluks viz., Manapparai, Manachanallur, Thuraiyur, Thottiayam, Musiri, Lalgudi, Srirangam, Thiruverumbur and Tiruchirappalli. It contains one corporation, three municipalities, three revenue division, 14 panchayat unions and 17 town panchayats. The revenue administration is carried out through corporation, 408 village panchayats and 507 revenue villages. There is one community development division. It’s covered 14 blocks. 3.8. EDUCATION The district has good educational institutional framework. There are two universities functioning in the district such as Bharathidasan University and Anna University. These universities have covered on 23 Arts & Science Colleges, and 12 Engineering colleges. And also one Law College, one Agriculture college, one Medical college and 16 polytechnics is available in this district. There are three National institutions functioning in the district such as NIT, IIM-T and BIM. In school education there are 1054 primary schools, 273 middle schools and 210 Secondary & Senior secondary schools functioning in the district. And recently Tamil Nadu Government has inaugurated one Law school and horticultural institutions in the district. 3.9. DEMOGRAPHIC DETAILS In 2011 India has 121,01,93,422 people living in 640 districts of 35 States and Union Territories. Tamil Nadu has 7th place of among the States & UTs in terms of population. The population of Tamil Nadu has 7,21,38,958 persons of which 3,61,58,871 persons were Male and 3,59,80,087 persons were Females. The population density of India has 382 persons Sq/Km and Tamil Nadu is 555 persons Sq/Km as per 2011 census. The population of Tiruchirappalli district was 10,72,756 in 1951, which increased to 27,13,858 persons of which 13,47,863 persons were Male and 13,65,995 persons were Female in 2011. Among the Taluk, the maximum population is concentrated in the Tiruchirappalli taluk, which accounts for 45 per cent to the total population of the district. The composition of total population living in rural and urban areas is 13.77 lakh and 13.36 lakh respectively. The population density is 616 persons/Sq.Km as per 2011 census. Table No-3.2: Taluk-wise classification of population in Tiruchirappalli district (As per 2011 Census) (In no. of Persons) S. No. Name of the Taluk T/R/U Persons Male Female T 849604 419482 430122 1 Tiruchirappalli R 2689 1354 1335 U 846915 418128 428787 T 370482 184674 185808 2 Manapparai R 318127 158578 185808 U 52355 26096 26259 T 225338 114623 110715 3 Thiruverumbur R 54604 27215 27389
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Small Scale Industries Management: Issues, Challenges and Opportunities S. No. Name of the Taluk T/R/U Persons Male Female U 170734 87408 83326 T 135118 67258 67860 4 Thottiyam R 109260 54481 54779 U 25858 12777 13081 T 226372 113033 113339 5 Musiri R 177140 88686 88454 U 49232 24347 24885 T 249060 123062 125998 6 Thuraiyur R 200297 99088 101209 U 48763 23974 24789 T 192818 96142 96676 7 Manachanallur R 136546 68380 68166 U 56272 27762 28510 T 254705 124855 129850 8 Lalgudi R 195516 95851 99665 U 59189 29004 30185 T 210361 104734 105627 9 Srirangam R 182830 91192 91638 U 27531 13542 13989 Note: T- Total, R-Rural, U-Urban Source: Director of census Operations, Tamil Nadu, Ministry of Home Affairs. 3.10. LAND UTILIZATION The total geographical area of Tiruchirappalli district is 4,40,383 hectares, of which net sown area occupy 2,06,587 hectares and this account for 47 per cent of the total area in the district. Area not under available for cultivation accounts for 19 per cent of the total land in the district, i.e. 84,975 hectares. Nearly 26 per cent of the area is classified under fallow lands and eight per cent of the lands are under forest coverage. The remaining lands are classified under groves and orchards category. 3.11. AGRICULTURE AND HORTICULTURE Basically, Tiruchirappalli district is agriculturally rich due to the availability of fertile lands and presence of perennial rivers. The economy of the district mainly depends on agriculture. Nearly 23% of the work force depends on agriculture and about 37.8% of the geographical area (440383 hectare) has been brought under cultivation. Cauvery with numerous tributaries forms the basis of sustained paddy cultivation on an extensive scale throughout the year. Cereals, Pulses and Oil Seeds are the Major crops cultivated in the district and majority of the area is used for the production of Cereals and Pulse In terms of productivity, paddy has increased over the years, due to better utilization of seeds, improved methods of cultivation, intensive use of fertilizer and pesticides. Among the Oil Seeds, coconut is the most important crop followed by groundnut and contributions of pulses are also marked at significant level in the district. The consumption of chemical fertilizers is high when compared to Bio-fertilizers for agriculture production in the district. Banana is the major fruit crop and the cultivation of land under plantation extends an area of 10136 hectares. Tapioca and onion covers more than 60 per cent of the total area under vegetable crops. Chilies and coriander are the predominant crops under the spices. Nearly, 2358 hectares of lands are used for cultivation of spices in the district. 3.12. SOIL In Tiruchirappalli district, majority of the area is under Red Sandy soil and this soil type covers 18 per cent of the total area in the district. Black soil is distributed along the rivers of Cauvery and Ayacuts near big tanks, this soil type cover 14 per cent of the total area in the district. The other soil types like Clay, Red erruginous, etc., are occupying the remaining extent of land cover the district. Out of the total area nearly 91549 hector. Of lands are identified as soil problem area with Salinity and Alkalinity, which is 29 per cent
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Small Scale Industries Management: Issues, Challenges and Opportunities to total area of the district. Moreover, nearly 1, 31,785 hector of lands are identified to be prone to soil erosion in the district. The district has been provided with 463 percolation ponds in order to safeguard the agricultural practices in the region. Soil conservation practices have been taken in about 13934 hectares. 3.13. FOREST RESOURCES Tiruchirappalli district has a forest coverage area of 36 246 hector. Which is 8 per cent to the total area of the district and the forest areas are classified under Reserve Forest Category. The district accounts for 1.65 percentage of the total forest area of the State. Honey and Cashewnut are the main forest produce besides fuel wood. However, the Green cover classification, for the composite Tiruchirappalli district comprising the undivided Tiruchirappalli and Pudukkottai districts indicate that only 25.505 of the forest area are either under dense or sparse forest cover and nearly 35 per cent of the recorded forests are under plantations. Conversion of 2717.41 hector of forest land by Indian Army for shooting range in Veeramalai R.F and 2.10 hector of land by the Southern Railway for the formation of Broad gauge line in Minnalkadu RF area. 3.14. IRRIGATION Nearly 0.89 hectare of forest land is converted for formation of tank by Public Works Department (PWD) in Sembianatham RF in Tiruchirappalli Division. Laying of pipeline and construction of shed for the water supply project in Mayanur RF was done by Tamil Nadu Water Supply and Drainage Board (TWAD), Namakal. Laying of pipeline in Evur RF was done by Tamil Nadu Water Supply and Drainage Board (TWAD), Musiri, Tiruchirappalli district is not endowed with any remarkable mineral wealth except multi colour granites, which is found in Togamalai and Naganoor area. Moreover, after trifurcation this area fall under Karur District, therefore these areas are no more part of Tiruchirappalli district. 3.15. WATER RESOURCE The Cauvery River is the most important river in the district and the tributaries of Cauvery, i.e. Coleroon river, Koraiyar river, Ariyar, Malattar channel, Uyyakondan channel also drain in this district. The river Cauvery irrigates about 51 000 hectare in Trichy, Lalgudi and Musiri Divisions. 3.16. UPPER ANICUT A dam known as upper Anicut was constructed in 1836 at a place where the Cauvery branches off into two at the West End of Srirangam, to regulate the flow of water in the Cauvery and Coleroon rivers. In its original form, the upper Anicut consisted of a simple masonry dam 230 meters in length divided into three parts. Below the Grand Anicut, the Cauvery further split into two, one is being called the Cauvery and the other, the Vennar River. These channels are utilized as the Main Canals for irrigation. 3.17. GRAND ANICUT Karikala Cholan, an early Chola King, constructed the grand Anicut. It is situated on the northern bank of Cauvery about 16 km east of Tiruchirappalli town and mainly used for irrigation purpose. Details of other dams and reservoirs are furnished in Table 28. With regard to water spread area, an about 75 system tanks and 99 seasonal / rainfed tanks are exist which cover 5751.14 hector and 9164.16 hector respectively in the district. 3.18. BIOLOGICAL RESOURCES Tiruchirappalli district is located in the inland area of Tamil Nadu, therefore the significance of marine fisheries are completely absent in the district. The scope for fish production in this district fully depends on inland fisheries and extends to an area of 117.35 hectares. It is seen that inland fish production and fish fingerlings production has shown considerable fluctuations. 3.19. HERITAGE RESOURCES The protected and conserved movements in the Tiruchirappalli district consists of 1. Government Museum - Tiruchirappalli 2. Rock Fort Temple - Tiruchirappalli 3. Srirangam Temple - Srirangam
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Small Scale Industries Management: Issues, Challenges and Opportunities 4. Grand Anicut - Tiruchirappalli 5. The Nawab’s Palace - Tiruchirappalli 6. The Nadir Shah Mosque - Tiruchirappalli The Government of Tamil Nadu maintains the above monuments of Historical, Religious and Archeological importance. The important tourist attractive places and major tourist area includes in the district are Museum, Rock Fort, Ranganatha Swamy Temple, Thiruvanaikovil, Grand Anicut, Kumaravayalur, Manapparai and Samayapuram are the important tourist places in the district Rock Fort Vinayaka temple at the top can be reached by climbing 437 steps, which is cut in a tunnel in the rock. Sri Thayumansawamy Temple dedicated to Lord Siva is also located within the Rock Fort temple, which has a 100-pillar hall and a Vimana covered in gold leaf. Ranganathaswamy temple is located in Srirangam Town, 10 Km away from Tiruchirappalli town. The town and temple covers an area of 250 hector, in the island area,which is connected to mainland by a bridge. Srirangam Temple was build in 13th Century and has 21 Gopurams, surrounded by seven concentric walls within which the town is located. The temple complex is very well preserved and has beautiful carvings, painted walls and ceilings. Thiruvanaikkaval is situated at a distance of 7km north east of Tiruchirappalli Town. The temple here has a valingam at most submerged in water, which flows from a subterranean spring. Grand Anicut, an irrigation dam built across the river Cauvery by Karikala Cholan in the Second Century AD has a picnic spot located at 24 km away from Tiruchirappalli Jambukeswarar temple, Vayalur Murugan temple, Vekkaliamman temple, and Samayapuram Mariamman temple are the other important religious places in the district. 3.20. ENERGY RESOURCES No power plant is located in Tiruchirappalli district. The Mettur Hydro Electric power meets the electricity needs of the district. The power distribution in the district is made through the electricity sub-stations at Tiruchirappalli. The consumption of electricity is highest in the case of Domestic sector, which accounts for 55 per cent to the total consumption and Agriculture is the next important category registered with 16 per cent of power consumption and 17 per cent of the electricity are utilized by industrial and commercial purposes. Streetlights and other purposes consume 12 per cent of electricity in the district. According to the electricity department sources, all the villages in the district are electrified. Data on non-conventional energy sources are not available. 3.21. URBANIZATION Pace of urbanization has been steadily growing in India and 31 percent of India’s populations are inhabited in urban areas in 2011. The phenomenal increase in census towns during 2011 census was also responsible for the increase in urbanization. There has been growing tendency to create n new districts in several states. Among the major states, Tamil Nadu, Maharashtra, and Karnataka are more urbanized. The rapid rural - urban migration is also responsible for significant differences in population densities between rural and urban areas. Urbanization in Tiruchirappalli district registered an increasing trend. As per 2011 census, the district had an urban population of 13.36 lakhs, which is 49.26 per cent to total population and distributed in Tiruchirappalli Corporation, 3 municipalities and 14 Town panchayats in the district. The growth of urban population has gradually increased. Tiruchirappalli Corporation is largest urban centre with the population and Srirangam, next largest town. 3.22. TRANSPORTATION Tiruchirappalli district is well connected with major cities in Tamil Nadu by rail and road network. By virtue of very central location, Tiruchirappalli City has become the meeting place of Transportation lines (both road and rail) from north to south and east to west while traveling across the state. Tiruchirappalli, Srirangam and Golden rock are part of Tiruchirappalli urban agglomeration and also developing as regional metropolis, extending its influence over the entire Tiruchirappalli and Thanjavur districts. The influence of Tiruchirappalli extends upto Cuddalore, Villupuram, Vellore, Salem, Erode, Dindigul Anna, Pasumpon Muthuramalingam Thevar and Pudukottai districts.
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Small Scale Industries Management: Issues, Challenges and Opportunities Tiruchirappalli City is one of the progressive industrial areas of the state. Tiruchirappalli, Manapparai, Srirangam (part of Tiruchirappalli), Thuraiyur and Ponmalai (part of Tiruchirappalli) are the important urban centre in the district and are well connected by roads. The other important roads are the bye-pass roads, which connect Chennai and Madurai road along the eastern side of the city boundary and Kumbakonam road along the banks of the river Cauvery. Tiruchirappalli district has a well-developed system of communication network, nearly 202.6 Kms of National Highways and 210.24 Kms of state highways are being maintained by highways department. The Local bodies maintain 2816.92 Kms, of roads under the classification of major and other district roads. 3.23. RAILWAYS Tiruchirappalli is an important railway junction and is also a divisional head quarters of the Southern Railways. There are all broad gauge lines radiating from Tiruchirappalli junction Via Main line, a broad gauge line to Chennai, Madurai and Rameswaram and Bangalore. Tiruchirappalli junction is the main station for passenger as well as goods movement. 3.24. AIRWAYS Tiruchirappalli has international airport facility and located on the Pudukkottai road at a distance of 6 km from Tiruchirappalli railway junction. Airline services are being operated to Chennai, Delhi, Mumbai, Sri Lanka, Malaysia and so on. 3.25. INDUSTRIAL ACTIVITIES There are several medium and large scale industrial units in the district like the BHEL manufacturing high pressure boilers, Lalgudi taluk has sugar mills, spinning mills in Manapparai. These units provide opportunities for new ancillary units. There is also one small arms factory. The district is noted for synthetic gems cutting industry concentrated in and around Tiruchirappalli town and also in Lalgudi, Manachanallur, and Manapparai taluks. Leather tanning is also an important activity in the district. Tiruchirappalli town is located on the main railway line, connecting Chennai and other important northern centres to Kanyakumari. 3.26. GENERAL CHARACTERISTICS OF THE DISTRICT Tiruchirappali District is located centrally in Tamil Nadu. Major public sector companies like BHEL, HAPP, OFT and Railway workshop function here. The district is renowned for fabrication industry, Gem Cutting, Korai Mat weaving and Ready-made garments and also lot of small, medium and large scale industries functioning in the District. 3.27. INDUSTRIAL SCENARIO OF TIRUCHIRAPPALLI DISTRICT Table No-3.3: Year Wise Trend of Units Registered Investment Year No. of Registered Units Employment (Rs. in Lakhs) 2006-07 7581 75452 108060.92 2007-08 762 8825 7525.65 2008-09 858 7992 5432.55 2009-10 388 3961 4260.32 2010-11 1228 9655 14500.89 2011-12 12322 114064 NA* 2012-13 2065 NA* NA* * Not Available Source: District Industries Centre, Tiruchirappalli Table No-3.4: Industry at a Glance of Tiruchirappalli Distict S. No. Head Unit Particulars 1 Registered Industrial Unit No 10817 2 Total Industrial Unit No 15143 3 Registered Medium & Large Unit No 92 4 Estimated Avg. No. of Daily workers Employed in No 105885 Small Scale Industries 42
Small Scale Industries Management: Issues, Challenges and Opportunities 5 Employment in large and Medium Industries No 42600 6 No .of Industrial Area No 9 7 Turnover of Small Scale Industries Rs. in Lacks 54085 8 Turnover of Medium and Large Scale Industries Rs. in Lacks 1840 Source: Government of India Ministry of MSME, Brief Industrial Profile of Trichirappalli District, 2012-2013. Table No-3.5: Details of Existing Micro & Small Enterprises and Artisan Units in Triuchirappalli District
Nic Number Investment Type of Industry Employment Code No of Units (Rs. Lakh)
1. Agro Based 1130 8047.06 11328
2. Soda Water 0 0 0
3. Cotton Textiles 99 8258.01 1130
4. Woolen, Silk & Artificial Thread Based Clothes 0 0 0
5. Jute & Jute Based 0 0 0
6. Readymade Garments & Embroidery 3991 1815.56 39447
7. Wood/Wooden Based Furniture 397 1788.36 3482
8. Paper & Paper Products 317 2842.11 2784
9. Leather Based 106 1870.68 2784
10. Rubber, Plastic & Petro Based 161 1859.56 1358
11. Chemical / Chemical Based 174 3876.2 2445
12. Mineral Based 244 3201.11 2440
13. Metal Based (Steel Fab.) 829 76812.71 5962
14. Engineering Units 1477 22427.5 18481
15. Electrical Machinery and Transport Equipment 129 1000.35 1121
16. Repairing & Servicing 1482 4337.37 12998
17. Others 281 1643.75 1921
Total 10817 139780.33 105885 Source: Government of India Ministry of MSME, Brief Industrial Profile of Trichirappalli District, 2012- 2013. 3.28. CONCLUSION This chapter (profile of the study area) is lucidly giving an overall view about the industrial infrastructure and other details related to the resources, demography, location of industries etc. This gives broad background reference for the intensive analysis of sample SSI units in the study area. 43
Small Scale Industries Management: Issues, Challenges and Opportunities
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Small Scale Industries Management: Issues, Challenges and Opportunities
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Small Scale Industries Management: Issues, Challenges and Opportunities
REFERENCES 1. Brief Industrial Profile of Tiruchirappalli District, Government of India, Ministry of MSME, 2012. 2. District Statistical Department, Tiruchirapalli -1. 3. Director of Census Operations, Tamil Nadu Ministry of Home Affairs, 2011 4. Government of India Ministry of MSME, Brief Industrial Profile of Trichirappalli District, 2012-2013. 5. Population Census Reports, 1991 and 2011. 6. Tamil Nadu Profile, 2011. 7. Tiruchirappalli Profile, 2011 8. Director of Census Operations, Tamil Nadu Ministry of Home Affairs, 2011 www.tiruchirppallidistrictprofile.com www.google.com
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Small Scale Industries Management: Issues, Challenges and Opportunities
Chapter – IV
Performance of SSI Units in India, Tamil Nadu and Tiruchirappalli District 47
Small Scale Industries Management: Issues, Challenges and Opportunities 4.1. INTRODUCTION Small Scale Industries are small in term but play a significant role in the Indian economy. It is acknowledged by the Government that, alongside agriculture, small scale industry is an important segment of the Indian economy. Small scale industry is widely recognized as a powerful instrument for socio economic growth and balanced development. The SSI sector has emerged as a vibrant and dynamic sector and an engine of growth for present millennium. The economic development of any country mainly depends on the systematic growth of three important sectors viz., industry, agriculture and services. The size of population will be the base for determining the scope for sustained growth. India’s strategy in the first four decades of planning since the first five year plan in 1951 was rapid industrialization. The plans were implemented under the framework of a mixed economy with a substantial role in heavy and key industries and the private sector, mainly the small scale industries. In India, small-scale industries (SSI) occupy 12.3nmillion units, contribute to 40 per cent of industrial production and 35 per cent of their exports and provide employment to about 29.5 million people. The SSI sector has acquired a prominent place in the socio economic development of our country. The small scale sector now produces more than 8000 products. From which, 600 products have got exportable status. SSIs contribute significantly to employment generation, dispersal of industrial activity to rural and backward areas, ushering in all round economic growth by value addition, ensuring the mobilization of local capital and developing entrepreneurial skills. By recognizing the importance of SSI units in the development of economy, the government has been continuously attempting to improve the availability of critical input to this sector and create appropriate infrastructural environment Recently, significant policy initiatives have created easy availability of financial assistance, incentives and subsidies and influenced many enterprises to start SSIs. This has resulted in growth in the number of SSI units. 4.2. GROWTH AND PERFORMANCE OF SMALL SCALE INDUSTRIES IN INDIA Table No-4.1: Growth of SSIs in India from 1990-91 to 2011-212 Number of SSI Production (Rs. Employment Export Year Units (million) in Million) (Million) (Rs. in Million) 1990-91 6.787 635,180 15.834 96,640 1991-92 7.063 730,720 16.599 138,830 1992-93 7.351 855,810 17.484 177,840 1993-94 7.649 988,040 18.264 253,070 1994-95 7.960 1,022,100 19.140 290,680 1995-96 8.284 1,482,900 19.793 364,700 1996-97 8.621 1,684,130 20.586 392,480 1997-98 8.971 1,891,780 21.316 444,420 1998-99 9.336 2,129,010 22.055 489,790 1999-00 9.715 2,342,550 22.910 542,000 2000-01 10.11 2,612,890 23.909 697,970 2001-02 10.521 2,822,700 24.909 712,440 2002-03 11.01 3,119,930 26.138 860,130 2003-04 11.395 3,645,470 27.142 976,440 2004-05 11.859 4,297,960 28.235 1,244,170 2005-06 12.342 4,978,820 29.491 1,502,420 2006-07 26.112 7,093,980 59.566 1,776,000 2007-08 27.279 7,907,590 62.637 1,825,380 2008-09 28.516 8,808,050 65.935 2,020,170 2009-10 29.808 9,828,190 69.538 2,235,720 2010-11 31.152 10,957,580 73.217 2,451,270 2011-12 32.56 12,214,420 77.127 2,691,250 Source: Economic Survey of India 48
Small Scale Industries Management: Issues, Challenges and Opportunities 4.2.1. Growth The details of growth of SSI units registered from 1990-91 to 2011-12 is shown in Table 4.1. It is inferred from above table that the number of SSI units stood at 6.787 million in 1990-1991 which steadily increased to 32.56 million in 2011-2012, resulting in 25.773 million increases. This is due to the fact that various policy measures have been taken by the government and incentives given in the form of concessions, assistance, facilities and subsidies. As a result, SSI units have tremendous growth. 4.2.2. Production The economic development of any nation is basically measured in terms of output of the country. This output value can be ascertained in terms of current prices or constant prices. There is a correlation between the production of SSI sector and the growth of overall national economy. This sector helps our nation to save the foreign exchange through the large scale industries which produce huge products; the production of small scale industrial units gets more importance. The production performance of a SSI units during the period from 1990-91 to 2011-12 is depicted in Table 4.1. Table 4.1 shows the growth of production in 1990-91 Rs.635, 180 million and 2011-12 Rs.12,214,420 million prices and resulting in 11,579, 240 million increases. Fig. No-4.1: No of registered units and Employment of SSIs in India From 1991 to 2012
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Small Scale Industries Management: Issues, Challenges and Opportunities Fig. No-4.2: Production and Export of SSIs in India From 1991 to 2012
4.2.3. Employment SSI Sector in India creates largest employment opportunities for the Indian populace, next only to Agriculture. It has been estimated that 100,000 rupees of investment in fixed assets in the Small-Scale Sector generates employment for four persons. The SSI sectors are given more priorities because they are labour intensive and can cure acute problem of unemployment in our country. SSI sector provided employment to 15.834 million people in India during the period 1990-91.The number of persons employed has increased from 23.909 million people in 2000-01. At the end of the year 2011-12 it went up to 77.127 million, resulting from a growth rate which is more. However, the increase of employment generated over previous year ranged between 3.91 million people employed. The faster growth in production as compared to employment indicated. The expansion of industrial sector also leads to improvement in the general standard of living. SSIs have played a key role in planned development with its advantages of low investment and high potential for employment generation. The development of SSIs is being given due importance by the government in order to achieve the objectives. 4.2.4. Export Performance of SSIs The table below highlights the exports growth of SSI sector during the period 1990-91 to 2011-12. Export value of the SSI sector increased from Rs.96,640 million in 1990-91 to Rs.2,691,250 million in 2011-12 indicating a Rs.2,594,310 million increase during the period. This sharp rise in exports was mainly due to the growth in number of units and export promotion policies adopted by the government. The exports of SSI sector continuously showed increasing trends. The share of SSI sector in the total exports of India is 35 per cent. That means the SSI sector accounts for more than one third of the total exports from India. Therefore, the role of SSI sector in the Indian exports is delectable is nature. 4.2.5. Generation of Employment - Industry Group-wise Food products industry has ranked first in generating employment. It provides employment to 0.48 million persons (13.1 per cent). The next two industry groups were Non-metallic mineral products with employment of 0.45 million persons (12.2 per cent) and Metal products with 0.37 million persons (10.2 per cent). In Chemicals & chemical products, Machinery parts except Electrical parts, Wood products, Basic Metal Industries, Paper products & printing, Hosiery & garments, Repair services and Rubber & plastic products, the contribution ranged from five per cent to nine per cent, the total contribution by these eight industry groups being 49 per cent. In all other industries the contribution was less than five per cent. 50
Small Scale Industries Management: Issues, Challenges and Opportunities The expansion of industrial sector also leads to improvement in the general standard of living. SSIs have played a key role in planned development with its advantages of low investment and high potential for employment generation. The development of SSIs is being given due importance by the government in order to achieve the objectives. 4.2.6. Per unit employment Per unit employment was the highest (20) in units engaged in beverages, tobacco & tobacco products mainly due to the high employment potential of this industry particularly in Maharashtra, Andhra Pradesh, Rajasthan, Assam and Tamil Nadu. Next position is retained by Cotton textile products (17), Non-metallic mineral products (14.1), Basic metal industries (13.6) and Electrical machinery and parts (11.2). The lowest figure of 2.4 was in Repair services line. Per unit employment was the highest (10) in metropolitan areas and lowest (5) in rural areas. However, in Chemicals & chemical products, Non-metallic mineral products and Basic metal industries per unit employment was higher in rural areas as compared to metropolitan areas / urban areas. In urban areas highest employment per unit was in Beverages, tobacco products (31 persons) followed by Cotton textile products (18), Basic metal industries (13) and Non-metallic mineral products (12). 4.2.7. Location-wise Employment Distribution - Rural Non-metallic products contributed 22.7 per cent to employment generated in rural areas. Food Products accounted for 21.1 per cent, Wood Products and Chemicals and chemical products shared between them 17.5 per cent. 4.2.8. Urban As for urban areas, Food Products and Metal Products almost equally shared 22.8 per cent of employment. Machinery parts except electrical, Non-metallic mineral products, and Chemicals & chemical products between them accounted for 26.2 per cent of employment. In metropolitan areas the leading industries were Metal products, Machinery and parts except Electrical, Paper products and printing (total share being 33.6 per cent). 4.2.9. State-wise Employment Distribution Tamil Nadu (14.5 per cent) made the maximum contribution to employment. This was followed by Maharashtra (9.7 per cent), Uttar Pradesh (9.5 per cent) and West Bengal (8.5 per cent) the total share being 27.7 (per cent). Gujarat (7.6 per cent), Andhra Pradesh (7.5 per cent), Karnataka (6.7 per cent) and Punjab (5.6 per cent) together accounted for another 27.4 per cent. Per unit employment was high with 17, 16 and 14 per cent in Nagaland, Sikkim and Dadra & Nagar Haveli respectively. It was 12 per cent in Maharashtra, Tripura and Delhi. Madhya Pradesh had the lowest figure of two. In all other cases it was around the average of six per cent. 4.3. MSMEs in Tamil Nadu The MSME sector has a major contribution to the economy to the economy of Tamil Nadu has 8.44 lakh registered MSMEs (as on 28.12.2013). This sector contributes about 10% to the GSDP, provides employment to about 58.83 lakh persons and accounts for a total investment of Rs.48,189 corers. MSNEs in Tamil Nadu produce over 8000 varieties of products including engineering products, electrical, electronic, chemicals, plastics, matches, textiles, hosiery and readymade garments. As per the 4th All India Census of MSMEs (2006-2007) Tamil Nadu Accounts for 14.95% of the total working enterprises in the country. 15.24% of these enterprises are micro enterprises, which is the highest in the country. 9.60% of them are small enterprises, which is the 3rd highest in the country. Further 9.21% are medium enterprises, which is the 2nd highest in the country. MSMEs in Tamil Nadu provides the largest number of employment in the country (15.32%). Growth of the SSI (MSME) Sector over the plan periods in Tamil Nadu is furnished in the following table: Table No-4.2: Growth of the SSI (MSME) Sector over the plan periods in Tamil Nadu No. of Registered Investment Production Employment Period SSI (MSME) Units (Rs. in Crores) (Rs. in Crores) (Nos.) End of V Five Year plan 7 544 325.74 1 391.24 22 164 (1974-1979) 51
Small Scale Industries Management: Issues, Challenges and Opportunities End of VI Five Year plan 45 891 829.84 3 949.53 4 48 163 (1980-1985) End of VII Five Year plan 99 290 2 198.92 7 322.69 9 28 464 (1985-1990) End of VIII Five Year plan 2 55 694 6 547.73 17 055.42 2 25 055 (1992-1997) End of IX Five Year plan 4 19 524 12 166.19 83 904.80 3 104 477 (1997-2002) End of X Five Year plan 5 30 552 16 819.82 1 05 979.51 3 703 408 (2002-2007) End of XI Five Year plan 7 60 269 39 438. 13 1 65 951.19 52 99 875 (2007-2012) Source: Micro, Small and Medium Enterprises Department, (policy Note 2013-2014), Government of Tamil Nadu,2103. Fig. No-4.3: Growth of the SSI (MSME) Sector over the plan periods in Tamil Nadu
The table given below indicates the growth of Micro, Small and Medium Enterprises during the last ten years and the level of investment, production, employment, etc., in Tamil Nadu. Table No-4.3: Growth of MSMEs in Tamil Nadu for the past 10 years Number of Investment Production Employment Year units (Rs. in Crores) (Rs. in Crores) (Numbers) 2003-2004 25 794 722.16 5 158.80 3 22 967 2004-2005 16 253 1 105.81 4 556.97 60 280 2005-2006 20 399 1 705.20 4 414.87 67 800 2006-2007 19 201 714.41 2067.87 1 10 026 2007-2008 27 209 2 547.14 8 739.95 2 42 855 2008-2009 32 049 3 557.89 13 354.86 2 94 255 2009-2010 41 799 3 214.22 10 880.01 1 51 743 2010-2011 57 902 5 872.37 12 500.86 4 05 233 2011-2012 70 758 7 429.59 15 496.00 5 02 381 2012-2013 (Up to Feb) 83 348 8 751.54 17 503.08 5 83 436 Source: Micro, Small and Medium Enterprises Department, (policy Note 2013-2014), Government of Tamil Nadu,2103. 52
Small Scale Industries Management: Issues, Challenges and Opportunities There has been a phenomenal growth in the number of small scale industries in Tamil Nadu from 4,74,699 units in 2003 to 8,43,617 units as on 28.02.2013. Fig. No-4.4: No. of units Registered in the Past 10 Years in Tamil Nadu (MSME)
Fig.No-4.5: Investment and Production in the Past 10 Years in Tamil Nadu (MSME)
4.3.1. Growth Performance of SSIs in Tamil Nadu Tamil Nadu is obviously one of the industrially advanced states in India. Tamil Nadu shares seven per unit of Indian SSI units in the year 1991-92, which has increased to 11.48 per cent in the year 2000-01. In the case of industrial production, Tamil Nadu’s share in India was 10.7 per cent for the year 1990-91, which has increased to 12.25 per cent in the year 2000-01. In case of man power employed in SSI sector, Tamil Nadu’s share in India during 1990-91 was 9.39 per cent; it has increased to 15.63 per cent in the year 2000-01. Thus, considering all the three aspects, Tamil Nadu’s share has increased. Another important point that signifies 53
Small Scale Industries Management: Issues, Challenges and Opportunities Tamil Nadu’s position is that its percentage shares of industrial production and industrial employment is greater than the percentage share of SSI units in both the periods. This means that Tamil Nadu’s SSI units contribute more than other state’s SSI units’ production and employment generation. Tamil Nadu ranks 6th state in India, but stands second in number of industrial units, number of workers employed in factories and value addition and third position in value of industrial output. The performance of Tamil Nadu SSIs is shown in Table 4.5. The development of Small Scale Sector occupies a powerful position in Tamil Nadu state. The performance evaluation of Tamil Nadu SSIs in terms of the value of output produced by the SSIs, it is inferred that the performance has steadily risen at current price from Rs.16,747.00 crore in 1991-92 to Rs.1,14,719.96 crore in 2007-08. The number of SSIs has increased from 1,38,404 in 1991-092 to 5,57,761 in 2007-08. During the same period, the number of employment in SSIs has also risen from 11,76,700 in 1991-92 to 39, 46,263 in 2007-08. Thus, it is clear that in actual terms the number of SSI units, magnitude of employment and production have increased in the same period. Besides, investment per SSI unit and value of production per SSI unit has also increased due to the support of Government policies and financial assistance. Table No-4.4: Performance of SSI units in Tamil Nadu No. of Permanent Production (Rs. in Crores Employment Year Registered Units at current prices) (in No’s) 1991-92 1,38,404 16747.00 11,76,700 1992-93 1,57,892 20219.00 13,10,500 1993-94 1,78,114 24048.00 14,25,300 1994-95 2,07,357 29436.00 16,38,200 1995-96 2,34,409 35161.00 18,28,600 1996-97 2,63,845 41687.00 20,33,000 1997-98 2,95,004 48675.00 22,50,900 1998-99 3,24,627 58432.00 24,51,000 1999-2000 3,54,939 70987.00 26,67,200 2000-2001 3,87,597 78261.66 29,02,122 2006-2007 5,30,552 105979.51 37,03,408 2007-2008 5,57,761 114719.96 39,46,263 Source: Tamil Nadu Statistical Hand Books 1995, 2001, 2002, 2007, 2008. However, Tamil Nadu has almost followed the trend of all India level in the following aspects. In Tamil Nadu, number of SSI units, investment in current prices and employment in SSI sector and SSIs value of production at current prices, investment per SSI unit, value of production per SSI unit, investment per worker in SSI units have increased. This is welcome trend. But unfortunately the number of workers employed per SSI unit has decreased due to the advent of capital intensive technology. Table-4.5: Performance of SSIs on Workers per unit and Production per worker in Tamil Nadu Year Number of Workers per unit Production per worker (at current prices) 1991-92 8.50 142.29 1992-93 8.30 154.23 1993-94 8.00 168.76 1994-95 7.90 179.71 1995-96 7.80 192.24 1996-97 7.71 205.05 1997-98 7.63 216.24 1998-99 7.55 238.40 1999-2000 7.52 266.17 2000-2001 7.49 269.68 2006-2007 6.98 286.17 2007-2008 7.08 290.71 Source: Compiled from the sources given in Table 4.5. 54
Small Scale Industries Management: Issues, Challenges and Opportunities 4.4. PERFORMANCE OF SSIS IN TIRUCHIRAPPALLI DISTRICT 4.4.1. Growth of Small Scale Industries in Tiruchirappalli District There has been a steady growth of Small Scale Industries in Tiruchairappalli District during the study period. The number of Small Scale units rose from 16155 (registered under District Industries Centre Tiruchirappalli) at the end of the year 2000-2001 to 19,014 by the end of the year 2004-2005. At the end of the march 2008, it increased to 21,338. This rapid growth in Small Scale Sector has been the result of various incentives granted by the state and central Governments. Table-4.6: Growth of Small Scale Industries in Tiruchirappalli District Year No. of units Percentage increase over the previous year 2000-01 16155 5.22 2001-02 16957 4.96 2002-03 17685 4.29 2003-04 18409 4.09 2004-05 19014 3.29 2005-06 19842 4.36 2006-07 20576 3.70 2007-08 21338 3.70 Source: District Industries Centre, Truchirappalli-1 However, there are only 21,338 units in the live registers of District Industries Centre. The percentage increase in the number of units registered under DIC during the year 2000-01 and 2007-08 is 4.20 per cent. Figure-4.6: Growth of Small Scale Industries in Tiruchirappalli District
4.4.2. Employment generation of SSI in Tiruchirappalli District The small enterprises are given higher priorities because they are labour intensive and thus can cure the acute problem of unemployment in our country. The small industries are said to create more employment per unit of capital employed. Growth of Small Scale Industries considerably increased the employment potentiality in Tiruchirappalli district during the study period. Small Scale Industries provided employment to 66,820 persons in the Tiruchirappalli district during 2001 to 2008 end of the march. The number of person employed has increased from 47,940 in 2000-01 to 53,780 in the year 2004-05. At the end of the march 2008 it went up to 66,820. The average annual growth rate of employment in the SSI sector for the period 2000-2001 to 2007-08 works out to be five per cent. 55
Small Scale Industries Management: Issues, Challenges and Opportunities Table-4.7: Employment Generation of Small Scale Industries in Tiruchirappalli District Year Employment Percentage increase over the previous year 2000-01 47940 5.41 2001-02 49760 3.80 2002-03 51350 3.20 2003-04 52690 2.61 2004-05 53780 2.07 2005-06 55010 2.29 2006-07 58000 5.44 2007-08 66820 15.21 Source: District Industries Centre, Truchirappalli-1 Figure-4.7: Employment Generation of Small Scale Industries in Tiruchirappalli District
Employment
Years 4.4.3. Investment of Small Scale Industries in Tiruchirappalli District The total amount invested by small scale industries in Tiruchirappalli district during the period of study is Rs.2,02,618.20 lakhs. The investment has risen from Rs.20,018.45 in 2000-01 to Rs.75,625.81 lakhs in current prices in 2004-05 and further increased as Rs.2,02,618.20 lakhs at the end of march 2008. In this district, the investment structure of SSIs has changed in favour of structure engineering industry mainly because of the establishment of Bharath Heavy Electricals Limited (BHEL). Now most of SSIs investment has increased drastically due to the modernization process. The small scale industries in Tiruchirappalli district have provided employment to 66,820 persons during 2001-2008. It is observed that there is a negative correlation between amount of investment and employment generation of SSIs in the study area. The correlation coefficient is -0.95. This implies that investment and employment are moving in the opposite direction. But the employment generation is not proportional to the amount invested. It can be attributed that SSI’s in the district are capital intensive. Table-4.8: Investment and Employment Generated by SSIs in Tiruchirappalli District Year Investment (Rs. in lakhs) Employment (in numbers) 2000-01 20018.45 (6.24) 47940 2001-02 26268.24 (31.22) 49760 2002-03 37592.31 (43.11) 51350
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Small Scale Industries Management: Issues, Challenges and Opportunities 2003-04 64037.11 (70.35) 52690 2004-05 75625.81 (18.10) 53780 2005-06 103732.18 (37.17) 55010 2006-07 170789.04 (64.64) 58000 2007-08 202618.20 (18.64) 66820 Source: District Industries Centre, Truchirappalli-1 Note: Figures within the parenthesis are represented the percentage of investment increased in the previous years Figure-4.8: Investment and Employment Generated by SSIs in Tiruchirappalli District
ount of Investment and Investment ount of Number ofEmployment Number Am
Years 4.4.4. SSIs in Tiruchirappalli District The amount of investment per unit and investment per worker has increased during the study period. But the worker per unit has declined to 2.77 in 2000-01 from 2.97 in 2005-06 due to the modernization process and change of technology from labour intensive to capital intensive technology. After 2006, the worker per unit has increased due to skilled and qualified workers. It is lucidly explained in Table 4.10. Table No-4.9: SSIs in Tiruchirappalli District Investment per unit Investment per worker Year Worker per unit (Rs. in lakhs at current (Rs. in lakhs at current prices) prices) 2000-01 2.97 1.24 0.42 2001-02 2.94 1.55 0.53 2002-03 2.90 2.13 0.73 2003-04 2.86 3.48 1.26 2004-05 2.82 3.98 1.41 2005-06 2.77 5.23 1.89 2006-07 2.82 8.30 2.94 2007-08 3.13 9.50 3.03 Source: Compiled from the sources given in Table 4.6 and 4.9. 57
Small Scale Industries Management: Issues, Challenges and Opportunities Figure-4.9: SSIs in Tiruchirappalli District
Worker/ Worker/ Investment per Unit Worker per Worker Unit / Investmentper
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4.4.5. Growth of Different Types of Small Scale Industries in Tiruchirappalli District All types of Small Scale Industries have increased during the period of study in the district. Growth of all types of Small Scale Industries has increased during the period 2007 to 2012 in no of registered units has increased 12322. Following table describes the distribution of the SSI units divided into 40 groups based on the goods they produce, during the study period (2007 to 2012). The group wise classification of SSI units as on 2007 shows Manufactures of fabricated metal products except machinery and equipments the top of the list with 267 units Then (group code 20, 21) Food and Food products industries are far behind with 98 units of SSI and followed by Manufactures of wearing apparels dressing or dying of purse with 49 units and Computer and related activities with 40 units, the 5th position retained by Manufactures of furniture with 40 units. In the year 2012, five industries namely Manufactures of wearing apparels dressing or dying of purse with 4208 units, Manufactures of fabricated metal products except machinery and equipments with 1787 units and followed by Manufactures of food products with 1273 units, manufactures of furniture in the fourth position of 851 units. The 5th position retained by Manufactures of Repairs and personal household goods with 772 units.
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Small Scale Industries Management: Issues, Challenges and Opportunities Table No-4.10: Trend in industrial wise classification of Small Scale Industries in Tiruchirappalli District No. of Units S. Division as Group Wise Enterprises Issued SSI Registration / EN Registers No. per NIC Code Number as 31.03.2012 2007 2012 1 01 Agriculture, Hunting and related service activites 0 3 2 15 Manufactures of food products 98 1273 3 16 Manufactures of Beverages, Tobacco & Tobacco products 0 2 4 17 Manufactures of cotton textiles 9 160 5 18 Manufactures of Wearing apparels dressing & Dying of purse 49 4208 Tanning and dressing of leather manufacturing Luggage 6 19 5 261 handbag, saddlers, footwear Manufacturing of Wood, cork, articles of straws plating articles 7 20 21 419 except furniture 8 21 Manufactures of paper & Paper products, 1 50 9 22 Publishing and printing and reproducing of records media 13 298 10 23 Manufactures of coke, refined products and Nuclear fuel 0 3 11 24 Manufactures of Chemical & Chemical products 36 179 12 25 Manufactures of Rubber & Plastic products 20 174 13 26 Manufactures of other non-minerals products 23 209 14 27 Manufactures of basic metals 13 73 Manufactures of fabricated metal products except Machinery and 15 28 267 1787 equipments 16 29 Manufactures of Machinery & Equipments N.E.C 19 146 17 30 Manufactures of Office Accounting & Computing machinery 1 3 18 31 Mfg. of Electrical Machinery and Apparatus 24 95 Mfg. of Radio, Television, Communication Equipments & 19 32 3 14 Apparatus Mfg. of Medical, Precision and optical Instruments and Watches 20 33 1 14 and clocks 21 34 Mfg. of Motor, vehicles, Trailers and Semi Trailers 1 9 22 35 Mfg. of other Transport Equipments 1 13 23 36 Mfg. of Furniture, Mfg of NEC 40 851 24 37 Recycling 0 2 25 40 Electricity, Gas, steam and Hot water supply 1 1 26 41 Collection, Purification and distillation of water 0 4 27 42 Construction 0 1 Maintenance and Repair of Motor vehicles Motor cycles 28 50 13 457 (NIC:1998 Code:50200) Maintenance and repair of personal Household goods (NIC 29 52 29 772 1998:code 52601, 52609) 30 55 Restaurant Services (Code-55209) 0 9 31 60 Land Transport(NIC 1998 code 60211) 0 6 Supporting and Auxiliary Activities (NIC 1998 codes: 63022 & 32 63 3 21 630911) Post and Telecommunication (NIC 1998 code:64205, 64206 & 33 64 2 53 64207) Retaining of Transport Equipments other Machinery and 34 71 0 13 equipments NEC Computer and Related Activities(NIC 1988 code: 72201, 72202, 35 72 40 350 72203, 7230, 72501, and 77502)
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Small Scale Industries Management: Issues, Challenges and Opportunities No. of Units S. Division as Group Wise Enterprises Issued SSI Registration / EN Registers No. per NIC Code Number as 31.03.2012 2007 2012 Other Business activities(NIC 1998: 74131, 74132, 74133, 36 74 9 236 74221, 74300, 74941, 74993 and 74994) 37 80 Education (NIC 1998 code 80101 to 80904) 0 3 38 85 Health and Social work (NIC and 85321) 0 2 Recreational, Cultural and sports (NIC 1998 code: 92111, 92113, 39 92 1 12 92114) 40 93 Other Service activities (NIC 1998 codes 93010 and 93011) 19 136 Total 762 12322 Source: District Industries Centre, Truchirappalli-1. Fig. No-4.10: Trend in industrial wise classification of No. of Units Registers From 2007 to 2012 (SSIs), Tircuhirrappalli District
Table-4.11: Employment Generation in different types of Small Scale Industries in Tiruchirappalli District Total Employment S. Division as Group Wise Enterprises Issued SSI Registration / EN in Nos No. per NIC Code Number as 31.03.2012 2007 2012 2 15 Manufactures of food products 672 11825 Manufactures of Beverages, Tobacco & Tobacco 3 16 0 18 products 4 17 Manufactures of cotton textiles 53 1676 Manufactures of Wearing appreals dressing & Dying of 5 18 317 41295 purse Tanning and dressing of leather manufacturing Luggage 6 19 62 1189 handbag, saddlers, footwear Manufacturing of Wood, cork, articles of straws plating 7 20 90 3550 articles except furniture 60
Small Scale Industries Management: Issues, Challenges and Opportunities Total Employment S. Division as Group Wise Enterprises Issued SSI Registration / EN in Nos No. per NIC Code Number as 31.03.2012 2007 2012 8 21 Manufactures of paper & Paper products, 11 299 9 22 Publishing and printing and reproducing of records media 58 2585 10 23 Manufactures of coke, refined products and Nuclear fuel 0 35 11 24 Manufactures of Chemical & Chemical products 436 2420 12 25 Manufactures of Rubber & Plastic products 175 1361 13 26 Manufactures of other non-minerals products 233 1756 14 27 Manufactures of basic metals 227 792 Manufactures of fabricated metal products except 15 28 4892 21602 Machinery and equipments 16 29 Manufactures of Machinery & Equipments N.E.C 451 1482 Manufactures of Office Accounting & Computing 17 30 47 91 machinery 18 31 Mfg. of Electrical Machinery and Apparatus 208 712 Mfg. of Radio, Television, Communication Equipments 19 32 23 107 & Apparatus Mfg. of Medical, Precision and optical Instruments and 20 33 12 103 Watches and clocks 21 34 Mfg. of Motor, vehicles, Trailers and Semi Trailers 4 115 22 35 Mfg. of other Transport Equipments 43 113 23 36 Mfg. of Furniture, Mfg of NEC 183 4913 24 37 Recycling 0 13 25 40 Electricity, Gas, steam and Hot water supply 5 5 26 41 Collection, Purification and distillation of water 0 44 27 42 Construction 0 2 Maintenance and Repair of Motor vehicles Motor cycles 28 50 90 3911 (NIC: 1998 Code: 50200) Maintenance and repair of personal Household goods 29 52 97 6399 (NIC 1998: code 52601, 52609) 30 55 Restaurant Services (Code-55209) 0 53 31 60 Land Transport (NIC 1998 code 60211) 0 25 Supporting and Auxiliary Activities (NIC 1998 codes: 32 63 17 172 63022 & 630911) Post and Telecommunication (NIC 1998 code:64205, 33 64 4 388 64206 & 64207) Retaining of Transport Equipments other Machinery and 34 71 0 126 equipments NEC Computer and Related Activities(NIC 1988 code: 72201, 35 72 333 2471 72202, 72203, 7230, 72501 and 77502) Other Business activities (NIC 1998: 74131, 74132, 36 74 23 1274 74133, 74221, 74300, 74941, 74993 and 74994) 37 80 Education (NIC 1998 code 80101 to 80904) 0 14 38 85 Health and Social work(NIC and 85321) 0 18 Recreational, Cultural and sports (NIC 1998 code: 92111, 39 92 5 148 92113, 92114) Other Service activities (NIC 1998 codes 93010 and 40 93 56 833 93011) Total 8825 114064 Source: District Industries Centre, Truchirappalli-1.
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Small Scale Industries Management: Issues, Challenges and Opportunities Fig. No-4.11: Employment Generation in different types of Small Scale Industries From 2007-2012, Tiruchirappalli District
4.4.6. Employment Generation of Different Types of Small Scale Industries in Tiruchirappalli District Growth of Small Scale Industries considerably increased the employment potentiality in Tiruchirappalli district during the study period. Small Scale Industries provided employment to 1,14,064 persons in the Tiruchirappalli district during 2007 to 2012 at the end of March. Total number of SSIs has divided into 40 groups in Tiruchirappalli district. Employment generation of all types of Small Scale Industries has increased during the period 2007 to 2012. Total number of off employment in 2012 has been 114064. But in the year 2007 the total number of employment has been 8825 persons. The group wise classification of employment as on 2012-2013 shows that Manufactures of wearing apparels dressing & dying of purse had created employment opportunity for 41295 person. Then Manufactures of fabricated metal products except machinery and equipments units had created employment opportunity 11825 persons of NEC. Manufactures of food products created employment opportunity 11825 persons. Manufactures of furniture, manufactures of NEC had created 4913 person got job opportunities and followed by Manufactures of wood, cork, articles of straws plating articles except furniture had create employment opportunities 3850 person. These five groups of industries provide employment of 72.92 per cent of the total number of employment. It is clearly explained in Figure 4.11. 4.5. CONCLUSION The above analysis gives an impression that the growth of SSIs has helped to enhance the rapid economic development of our country, state and district. After the advent of Bharath Heavy Electricals Limited (BHEL), the performance of SSIs and employment generation has considerably increased in Tiruchirappalli district due to the continuous work orders offered by BHEL to these SSI units. 62
Small Scale Industries Management: Issues, Challenges and Opportunities REFERENCES 1. Anil Bhuimali (2004), “Relevance of M.K. Gandhi’s Ideal of Self-Sufficient Village Economy in the 21st Century”, Sarvodaya, Vol. 1, No. 5, p. 80. 2. District Industries Centre, Tiruchirappalli-1. 3. Economic survey, Annual Report-2013 4. Government of Tamil Nadu, Statistical Hand Books 1995, 2001, 2002, 2007, 2008. 5. Inspector of Factories, Tiruchirappalli-23. 6. Micro, Small and Medium Enterprises Department, (policy Note 2013-2014), Government of Tamil Nadu, 2103. 7. SIDCO Annual Report (2009), Ministry of SSIs, Government of India, New Delhi. 8. SIDCO Annual Report 2007, 2012, Tamil Nadu. 9. Tamil Nadu Profile, 2011. 10. Third all India Census of SSIs Report (2003), Development Commissioner (SSI), Ministry of Small Scale Industries, Government of India, New Delhi. 11. Tiruchirappalli Profile, 2011.
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Small Scale Industries Management: Issues, Challenges and Opportunities Chapter – V
Analysis of Data and
Interpretation 64
Small Scale Industries Management: Issues, Challenges and Opportunities 5.1. INTRODUCTION This chapter analyses the performance and prospects of SSI units in the study area. An attempt has been made to ascertain differential performances of SSIs through analyzing the primary data. The primary data collection one hundred Small Scale industrial units established in Tiruchirappalli district, registered with the Inspector of factories in the year 2013-2014 and earlier and still functioning were taken for the study. The hundred sample industries have been classified into ten categories of industries such as Engineering industries, Steel fabrication, Rice mills, Readymade garments industries, Agro based industries, Metal industries, Furniture industries, Saw mills, Auto garage and Crusher industries. All the ten industries are chosen for the study. In the beginning of 1970’s, there was only a single engineering unit functioning in the study area. Number of units has been gradually increasing over the study period. After the advent of BHEL, SSIs have got more work orders. This is the major reason why the performance of SSIs has increased considerably in the study area. Table No-5.1: Taluk wise classification of selected units in Tiruchirappalli District
Source: Compiled from the primary data X2 = 39.703, Df = 32.164 > 0.05 Not Significant 5.1.1. Taluk wise classification of selected units in Tiruchirappalli District The primary data have been collected from the hundred SSI units through a well structured interview schedule. This study is based on complete enumeration method. The hundred SSI units have been divided in to ten categories of industries such as Engineering industries, Steel fabrication, Rice mills, Readymade Garments industries, Agro based industries, Metal industries, Furniture Industries, Saw Mills, Auto Garage industries, and Crusher industries. The hundred SSI units have been classified in to nine taluk based on industrial registration from inspector of factories trichy. 5.1.2. Year wise Classification of Sample SSIs During the year 1994-2003, most of the SSI units had come into existence under the aegis of BHEL, because there were slew of work orders for BHEL from different parts of countries. The survey revealed that the entire hundred units were set up and managed by males. More partners are found in engineering units as compared to other categories of industries. This is mainly because of the huge investment and lucrative business. Out of 664 various units available in the study area viz. Tiruchirappalli district consist of nine taluk, a sample size units of 100 which forms stratified random sampling method been selected proportionately from each category. The following table shows year wise classification of sample SSI units. 65
Small Scale Industries Management: Issues, Challenges and Opportunities Table No-5.2: Year wise classification of sample SSIs
Source: Compiled from the primary data 5.1.3. Activity wise Classification of SSIs The selected hundred units from the Small Scale Industries for the review study were classified into different types of business promotional activities such as Job work, Repairing & services, Processing & Trading, Manufacturing & Job work, Manufacturing & Trading, Job work and Repairing & Service, Manufacturing & Job work and trading Service and so on. The survey study identified that most of the Rice mills and readymade garments units adopt the activity of process and trading units and Engineering and Steel Fabrication units would adopt the activity of job work. This is directly given by BHEL. Table No-5.3: Activity wise classification of SSIs
Source: Compiled from the primary data X2 = 14.713, Df = 20.793 > 0.05 Not Significant 5.2. SOCIO ECONOMIC BACK GROUND 5.2.1. Nature of organization The nature of organization is analyzed in six major headings. These are classified as Sole proprietorship, Partnership, Cooperative establishments, Private limited companies, Public limited companies and Joint family concerns. From which most of the SSI units come under sole proprietorship and partnership. Of the SSI units incorporated in the survey area, seventy five units are sole proprietorship, twenty two units are partnership and three units are joint family business. 66
Small Scale Industries Management: Issues, Challenges and Opportunities Table No-5.4: Nature of Organization
Source: Compiled from the primary data X2 = 8.292, Df = 8.406 > 0.05 Not Significant 5.2.2. Form of organization From the ten categories of SSI units, it is observed that ten engineering units are run by founders, thirteen units are run by partners and rest of the two units are run by heir. This reveals partnership is very viable industrial proposition in the study area. Table No-5.5: Form of Organization
Source: Compiled from the primary data X2 = 11.145, Df = 8.194 > 0.05 Not Significant From the hundred SSI units, fifty three units are operated by founders, and forty four units are run by partners (contribution of engineering units, rice mills towards partnership is more because of huge investment). Three units are run by heir (hereditary occupation). 5.2.3. Ownership of Premises Out of hundred SSI units, eighty five units have run in their own premise (contribution of engineering units towards own premises is more). This shows the capacity of engineering units. Twelve SSI units have functioned in rented premises. And three units have functioned on leased (one rice mill unit, one engineering unit and one crusher unit). This shows the optimistic view on the performance of SSIs in the study area. Table No-5.6: Ownership of Premises
Source: Compiled from the primary data X2 = 7.203, Df = 8.515 > 0.05 Not Significant 67
Small Scale Industries Management: Issues, Challenges and Opportunities 5.2.4. Types of Business Premises The business premises are classified into five types. They are Shopping Complex, Factory, Trading Centers, stall, and Service centers. In the study, it is observed that most of the SSI units such as engineering units, rice mills, steel fabrication, furniture industries, saw mill etc., are run in Factory buildings. Most of the Auto Garage units are run in service centers. Table No-5.7:Types of Business Premises
Source: Compiled from the primary data X2 = 7.242; Df = 16.968 > 0.05 Not Significant 5.2.5. Region of Location Of the hundred SSI units, Sixty one units are from semi urban area. Mostly engineering units are located in semi urban area. This contributes a major role in the development of SSI units in the study area. Twenty six SSI units are urban area and thirteen units are rural area. The main reasons for the location of SSI units in the semi urban area are transport facility, marketing facility, availability of raw materials, employment opportunity and so on. These facilities are lacking in rural areas. Hence, the industrialists have set up their SSI units in semi urban area for their prosperous future. Table No–5.8: Region of Location
Source: Compiled from the primary data X2=10.893 Df=8.208>0.05 Not Significant 5.2.6. Original Location and Relocation of Units From the study, it is observed that most of the SSI units are located in same place of their establishment (90 units). Only ten units are located in the other place namely engineering units, rice miles and ready- made garments. The main reason for the relocation of these units are high rent, the expiry of lease period, own premises, marketing and popularity and so on. 68
Small Scale Industries Management: Issues, Challenges and Opportunities Table No-5.9: Original location and Relocation of units
Source: Compiled from the primary data X2 = 2.298, Df = 4.681 > 0.05 Not Significant 5.2.7. Age and Education wise classification of Entrepreneurs Age wise classification of Entrepreneurs From the age wise classification of the entrepreneurs, it is found that most of the SSI units are run by entrepreneurs between the age group of 46-55 years. This is mainly because of the maturity and experience in the field of small scale units. Thirty three units are run by entrepreneurs between the age group of 36-45 years. Fifteen units are run by entrepreneurs between the age group of 26-35 years. Twelve units are run by entrepreneurs between the age group of 55-65 years. Three units are run by entrepreneurs between the age group of 18-25 years. This is mainly because of the lack of maturity and experience. Three units are run by entrepreneurs between the age group of 66 and above years. This is mainly because of maturity and experience Table No- 5.10: Age - Wise classification of Entrepreneur
Source: Compiled from the primary data X2 = 40.954; Df = 20.004 < 0.05 Significant 5.2.7a. Education wise classification of Entrepreneurs Of the hundred SSI units incorporated in the survey area, twenty units are managed by ITI holders. Eighteen units are run by UG holders, Eighteen units are run by plus two holders, Sixteen units are run by Diploma holders, Fourteen units are run by up to SSLC holders, Eleven units are run by PG holders and Three units are run by BE holders. It is closely observed that technical education is the major criteria for engineering units. Even then five units are run by UG and PG graduates and one engineering units are run by plus two holders. Most of the Steel Fabrication units are run by ITI and Diploma holders. Rice miles, ready-made garment, Agro based industries, Metal industries, Saw mill, Auto Garage and Crusher industries are run by minimum educator of from SSLC, Plus two and UG Degree holders. From this table, it is clearly understood that the post graduate holders are interested in extending their education for higher professions other than industrial sectors. This is the reason why number of engineering units found in the category of PG Technical is low as compared to UG Technical and ITI & Diploma.
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Small Scale Industries Management: Issues, Challenges and Opportunities Table No-5.11: Educational-Wise Classfication of Entrepreneur
Source: Compiled from the primary data X2 = 23.663; Df = 24.481 > 0.05 Not Significant 5.2.8. Marital Status of Entrepreneurs Martial status of entrepreneurs is the best indicator for ascertaining the performance of SSI units. When the entrepreneurs are got married, more attention would be paid to their business. Besides, Family members are also upholding the entrepreneurs to enhance the performance of the SSI units. From the study, it is observed that ninety seven units are run by married people. So that, most of the entrepreneurs are not given up their efforts in business. This is the reason why more SSI units are found in the study area. Only three small scale engineering units are run by the entrepreneurs who are not married. This does not mean that nobody is upholding them. These entrepreneurs are supported by their parents. Thus, it is proved that marital status is one of the important factors in ascertaining the performance of SSI units Table No-5.12: Marital Status of Entrepreneurs
Source: Compiled from the primary data X2 = 2.980; Df = 4.561 > 0.05 Not Significant 5.2.9. Pattern of Families / Family living From the pattern of families, it is observed that most of the SSI units are run by Nuclear families. These units do not have that much support as joint family. Remaining forty three units are owned by the entrepreneurs who belong to Joint family. Through which, the entrepreneurs are supported by their family members and extend their fullest co-operation for the development of SSI units Table No- 5.13: Types of Family
Source: Compiled from the primary data X2 = 4.059; Df = 4.398 > 0.05 Not Significant 70
Small Scale Industries Management: Issues, Challenges and Opportunities 5.2.10. Nativity of the Entrepreneurs Through the nativity of the entrepreneurs, it is observed that majority of the eighty five entrepreneurs are from the same district. This is mainly because of the lucrative business in SSI units. Twelve entrepreneurs are from other districts. (five from engineering units, three from steel fabrication units, two from rice mills and each one from metal industries and crusher industries).Three entrepreneurs are other states namely Andhra Pradesh and Gujarat respectively. This clearly shows the positive growth in the performance of SSI units in the study area. Table No-5.14: Nativity of the Entrepreneurs (Now)
Source: Compiled from the primary data X2 = 5.945; Df = 8.653 > 0.05 Not Significant 5.2.11. Religious Background of Entrepreneurs It is clearly shown that most of the SSI units are run by entrepreneurs who belong to Hindu religion (63 units). Twenty seven units are owned by the entrepreneurs who belong to Muslim religion. And rest of the units is run by Christians. It is lucidly observed that the Hindu religion is playing a dominant role in SSI units in the study area. Table No-5.15: Religious wise classification of Entrepreneurs
Source: Compiled from the primary data X2 = 10.131; Df = 8.256 > 0.05 Not Significant 5.2.12. Distribution of units based on Community wise classification: The Community wise of the entrepreneurs are divided into five groups are Forward Castes, Backward Castes, Most Backward Castes, Scheduled Castes and Scheduled tribes. Of the 100 SSI Units under the study. Fifty two units are owned by the entrepreneurs who belong to Backward Community. Nineteen units are run by the entrepreneurs who belong to Most Backward Community. Sixteen units are run by the entrepreneurs who belong to Forward Community. Eleven units are run by Scheduled Caste and two units are run by who belong to Scheduled Tribe. 71
Small Scale Industries Management: Issues, Challenges and Opportunities Table No-16: Community wise classification of Entrepreneurs
Source: Compiled from the primary data X2 = 46.996; Df = 16.000 < 0.05 Significant 5.2.14. Details of the house From the residential details of the entrepreneurs, it is observed that the eighty four entrepreneurs have lived in their own residence. This shows their capacity through the performance of SSI units. Sixteen entrepreneurs are lived in rented houses mainly because of short distance. Through which, the entrepreneurs reach their destination soon and concentrate more on SSI units in the study area. Table No-5.17: Details of the House
Source: Compiled from the primary data X2 = 2.480; Df = 4.648 > 0.05 Not Significant 5.2.15. Year of Experience of Entrepreneurs in the SSIs units Year of experience of the entrepreneurs is one of the important tools in enhancing the performance of SSI units. With the years of experience earned through BHEL, most of the employees resigned their jobs and became entrepreneurs in small scale industries. It is evidently shown that experience makes the people to start new SSI units in the study area. Of the 100 units, 27 units are run by the entrepreneurs who have got the experience of 21 years & above and 24 units are run by the entrepreneurs who have got the experience of 16 – 20 years. 20 units are run by the entrepreneurs who have of 6-10 years. 19 units are run by the entrepreneurs who have got the experience of 11-15 years. Only ten entrepreneurs have got the less experience of one-five years. Thus, years of corporate experience is considered as a measuring rod for analyzing the capability of the entrepreneurs in starting the SSI units in the study area. Table No–5.18: Year of Experience of Entrepreneurs
Source: Compiled from the primary data
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Small Scale Industries Management: Issues, Challenges and Opportunities X2 = 30.699; Df = 16.015 < 0.05 Significant 5.2.16. Previous occupation of the Entrepreneur Out of hundred entrepreneurs, majority of the seventy six entrepreneurs from engineering units concentrated more on the same field. This table shows their continuous efforts and experience in the field of engineering. Twenty entrepreneurs worked in the related fields. Four entrepreneurs concentrated on other fields such as milk business, road contract, building contract and brick making because of their ignorance. And the entrepreneurs who worked in the same field contribute more towards SSI units in the study area. Table No-5.19: Previous occupation of the Entrepreneur
Source: Compiled from the primary data X2 = 3.240; Df = 8.918 > 0.05 Not Significant 5.2.17. Change of Technology From this analysis, it is observed that most of the SSI units have adopted the modern methods of production. Especially, Engineering units, steel Fabrication and rice mills units have expended more on modern methods of production in order to speed up the production process. Sixty three per cent of the engineering units have adopted modern methods of production and rest of the units has adopted the primitive methods of production. Even then, the entrepreneurs successfully run their business. Majority of the Auto Garage units have adopted modern method and crusher units have also adopted the modern methods of production (conveyor system). This has reduced the labour force considerably and sped up the production process too. Table No-5.20: Use of Modern Technology
Source: Compiled from the primary data X2 = 3.046; Df = 4.550 > 0.05 Not Significant 5.2.18. Sources of Entrepreneurial skills Out of twenty five entrepreneurs from engineering units, most of the entrepreneurs have developed their entrepreneurial skills through the experience of BHEL and other companies. Fifteen entrepreneurs form Steel fabrication units, most of the entrepreneurs have developed their skills through the experience of BHEL and other companies. Fifteen entrepreneurs from rice mill units have their entrepreneurial skills their ancestors and previous experience. Five entrepreneurs from auto Garage their entrepreneurs skills from previous experience. 5.3. FINANCIAL INFORMATION 5.3.1. Sources of finance Initially, most of the entrepreneurs established their SSI units in the study area with own finance. This shows the capacity of the entrepreneurs under the aegis of SSI units. Out of hundred SSI units, sixty units of their own finance and twenty five units started functioning borrowed finance from Nationalize Banks. Fifteen entrepreneurs units run by own and borrowed finance.
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Small Scale Industries Management: Issues, Challenges and Opportunities Currently, majority of the entrepreneurs (45 units) had started the units with their own funds and thirty four entrepreneurs had started the units with own funds and borrowed funds. This indicates that the positive opinion on both funds. Because entrepreneurs have their hope of earning abnormal profits in the future. Moreover, Nationalized Banks also extend their fullest support to the entrepreneurs by the way of providing loans with low rate of interest. This encourages the entrepreneurs to concentrate more on SSI units in the study area. Table No-5.21a: Source of finance (Then)
Source: Compiled from the primary data X2 = 17.898; Df = 8.022 < 0.05 Significant Table No- 5.21b: Source of finance (Now)
Source: Compiled from the primary data X2 = 12.524; Df = 8.129 > 0.05 Not Significant 5.3.2. Fixed capital Fixed capital represents the value of all fixed assets of the factory as on closing day of the accounting year. It covers all such goods new or used that have a normal economic life of one year or more (for example, land, building including those under construction, plant & machinery, transport equipments etc.). Fixed capital is playing a pivotal role in starting SSI units. There would be a vast difference of amount between initial fixed capital and current fixed capital. This is mainly because of the vast decrement in the value of money. In the earlier stage, total amount fixed capital was Rs.1509.2 lakhs. From which, engineering industries contribute (29.99 per cent) a major role and followed by the steel fabrication industries. At present, the total amount fixed capital is Rs.4463.00 lakhs. The contribution of the share of fixed capital is as similar as the earlier stage. Among the different components of fixed capital of earlier and current stages, most of the amount is spent on land and followed by building and equipment (refer table 5.22a & 5.22b). Value of land In the initial phase, the value of land was very low. So, the entrepreneurs invested more on land for the location of SSI units. Currently, the value of land has gone up. So, the amount would also be seen exorbitant as compared to the initial value of land. Initially the entrepreneurs expended less and bought more areas of land. Currently, entrepreneurs expend more but purchase less areas of land. Despite the value of land has gone up, entrepreneurs never mind in expending amount on land. Moreover, land is indispensable for all kinds of SSI units. 74
Small Scale Industries Management: Issues, Challenges and Opportunities Table No. 5.22a: Fixed capital (Then) (Rs. in lakhs)
Types of
Industries
S. re Industries re
No. Total Saw Mill Saw Rice Mills Rice Industries Sources Percentage Auto Garage Auto Steel fabrication Steel Metal Industries Metal Crusher Industries Crusher Furnitu Agro based Industries based Agro Readymade Garments Garments Readymade Engineering Industries Engineering 1. Value of land 251.0 225.1 145.2 135.7 33.1 24.4 20.4 19.4 10.0 25.2 889.5 55.94 Value of Shed/ 2. 135.5 38.4 30.4 32.5 19.6 22.6 21.4 18.7 13.0 14.0 346.1 21.76 Building Value of plant & 3. 90.5 41.3 36.3 40.3 15.7 21.5 18.7 17.6 18.0 31.1 331.0 20.81 Machinery 4. Value of Transport - 3.2 3.0 3.0 2.0 2.1 1.1 2.0 2.0 5.2 23.6 1.48 Total 477.0 308.0 214.9 211.5 70.4 70.6 61.6 57.7 43.0 75.5 1590.2 100 Source: Compiled from the primary data Table No. 5.22b: Fixed capital (Now) (Rs in lakhs)
Types of
Industries
S. Mill
No. Total Saw RiceMills Industries Percentage AutoGarage Steel fabricationSteel Sources MetalIndustries CrusherIndustries FurnitureIndustries AgrobasedIndustries ReadymadeGarments EngineeringIndustries
Value of 1 836.5 225.2 315.2 210.5 75.6 75.6 59.6 56.2 30.91 49.2 1934.51 43.24 land Value of 2 Shed / 510.5 181.5 112.5 70.5 43.6 86.3 48.6 39.2 37.5 30.5 1160.70 26.00 Building Value of 3 plant & 600.6 95.3 110.5 87.6 38.6 57.6 40.6 34.2 35.2 49.5 1149.70 25.76 Machinery Value of 4 105.0 75.5 6.3 8.5 3.2 6.5 3.9 4.5 3.6 7.5 224.09 5.00 Transport Total 2052.6 577.5 544.5 377.1 161.0 226 152.7 134.1 101.5 136.7 4463.00 100.0 Source: Compiled from the primary Data Value of shed and buildings In the initial phase, the cost of material used for the construction was very low. Currently, the entrepreneurs expend more for the construction of shed and buildings because of the exorbitant cost of materials. Value of plant and machinery At the beginning, the investment in plant and machinery was very low. Currently, the installation and other cost of plant and machinery are very high. Even then the entrepreneurs are ready to expend amount on plant and machinery for the future profit. Value of transport equipment At the inception, most of the SSI units expended fewer amounts on transport. Recently, it is quit indispensable for all kinds of SSI units. Without which, would not be free flow of raw materials and marketing of products. So, the entrepreneurs expend more on transport to excel their business. Fixed Capital per unit The fixed capital per unit was worked out by taking into account the ratio between the total fixed capital and the total number of units. Intially, the total fixed capital was Rs.1590.2 lakhs and the total number of units was 100 and the ratio is found to be Rs.15.90 lakhs. At present, it has increased to Rs.44.63 lakhs. Where the total where the total fixed capital and the total number of units are Rs.4463.00 lakhs and 100 respectively.
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Small Scale Industries Management: Issues, Challenges and Opportunities Table No. 5.23a: Fixed capital per unit (Rs. in lakhs) S. No. Types of Industries Then Now Change 1. Engineering Industries 19.08 82.08 63.00 2. Steel fabrication 20.53 38.46 17.93 3. Rice Mills 14.33 36.30 21.97 4. Readymade Garments Industries 21.15 37.70 16.55 5. Agro based Industries 7.04 16.10 09.06 6. Metal Industries 14.12 45.20 31.08 7. Furniture Industries 12.32 30.54 18.22 8. Saw Mill 11.54 26.82 15.28 9. Auto Garage Industries 8.60 20.30 11.70 10. Crusher Industries 15.10 27 .34 12.24 Total 143.81 301.53 217.03 Source: Compiled data from the tables 5.23a & 5.23b It is observed from the above table that the increase in the fixed capital per unit was due to the development and the expansion of SSI units. The fixed capital per unit of engineering industries is on the increase and followed by metal industries because of the heavy borrowing capital on fixed assets. Table No– 5.23b: Fixed capital per Worker (Rs in lakhs) S. No. Types of Industries Then Now Change 1. Engineering Industries 0.86 1.92 1.06 2. Steel fabrication 0.75 1.20 0.45 3. Rice Mills 0.78 2.45 1.67 4. Readymade Garments Industries 0.89 1.41 0.52 5. Agro based Industries 0.28 0.63 0.35 6. Metal Industries 0.44 1.40 0.96 7. Furniture Industries 1.76 3.63 1.87 8. Saw Mill 3.60 7.45 3.85 9. Auto Garage Industries 1.65 2.90 1.25 10. Crusher Industries 0.39 2.27 1.22 Sources: Compiled data from the tables 5.23a & 5.23b From the table, it is observed that the increase in the fixed capital per worker is found in Engineering units, Rice mills and crusher units, auto Garage industries and furniture industries due to the advent of modern methods of production. The fixed capital per worker has been calculated by the ratio between the total fixed capital and total number of workers. In the earlier stage, the total fixed capital was Rs.1590.2 lakhs and the total number of workers was 2222 Hence, the ratio is found to be Rs.0.715 lakhs and at the time of data collection [the ratio between the total fixed capital (Rs.4463.0 lakhs) and total number of workers (2603)], the fixed capital per worker is Rs.1.714 lakhs. Table No– 5.23c: Variance of fixed capital (Now) (Rs. in lakhs) S. Land Shed / Building Plant & Machinery Transport Types of Industries No. ( X1 ) ( X 2 ) ( X 3 ) ( X 4 ) 1. Engineering Industries 836.5 510.5 600.6 105.0 2. Steel fabrication 225.2 181.5 95.3 75.5 3. Rice Mills 315.2 112.5 110.5 6.3 4. Readymade Garments Industries 210.5 70.5 87.6 8.5 5. Agro based Industries 75.6 43.6 38.6 3.2 6. Metal Industries 75.6 86.3 57.6 6.5 7. Furniture Industries 59.6 48.6 40.6 3.9 8. Saw Mill 56.2 39.2 34.2 4.5 76
Small Scale Industries Management: Issues, Challenges and Opportunities 9. Auto Garage Industries 30.9 37.5 35.2 3.6 10. Crusher Industries 49.2 30.5 49.5 7.5 Total 1934.5 1160.7 1149.7 224.5 Source: Compiled data from the table 5.23b Results of the one way analysis of variance of fixed capital for SSI units are the calculated value (0.19) is less than the table value (3.13), the hypothesis has been accepted for the degrees of freedom 3 and 10 respectively. It implies that there is a significant variation of the fixed capital within and between the SSI units. 5.3.3. Working capital Working capital comprises of stock of materials, power & fuel charges, stock of finished goods and semi finished products, cash in hand and at bank, net balance of amounts recoverable over amounts payable as at the end of an accounting year. It excludes fixed deposits, long term loans and investments. Working capitals are playing a pivotal role in making SSI units more viable. There would be a vast difference of amount between initial working capital and current working capital. Exorbitant cost of raw materials, higher charges for power & fuel, more wages to the workers due to high cost of living, telephone bills etc., are the reasons for the hike in working capital. Value of Raw materials At the inception of SSI units, the cost of raw materials was very low. Currently, it is very high. Since raw materials are indispensable for all SSI units, entrepreneurs do not bother about the cost of raw materials. The availability of raw materials is a pre requisite for the continuous process of production. Value of semi finished products In the earlier period, the cost expended for semi finished products was very low as compared to the current value of semi finished products. This is mainly because of the hike in the cost of materials. Though the cost of materials is more, the entrepreneurs are ready to spend the amount on materials for the future profit. Stock of finished products Initially the value of finished products was very low. Currently, the value of finished products has increased exorbitantly. Even then, there is a good demand for finished products. So, the entrepreneurs are encouraged to expend more on producing finished products. The main reason for the increment in the price of finished products is due to the hike in the price of raw materials. Power and fuel charges In the beginning, the total amount spent on power and fuel for the fifty units for a month was Rs.12 40 000 Of which, the Engineering units had consumed more power worth of Rs.1,75,000 per month. Followed by the steel fabrication industries consumed the power worth of Rs.1,65,000 per month. Currently, engineering industries alone consume the power worth of Rs.6,99,000 per month and followed by the Rice mills, consumed the power worth of Rs.2,63,000 per month. Nowadays, the deposit for electricity is also increased. After the advent of modern machineries, the consumption of power in SSI units is more. This enhances the expenditure of SSI units in the study area (refer tables – 5.24a & 5.24b). Table No. 5.24a: Working capital (Then) (Rs. in lakhs)
Types of
Industries ade S.
No. Total SawMill RiceMills Industries Percentage Readym
Details per Engineering AutoGarage Steel fabricationSteel month MetalIndustries CrusherIndustries FurnitureIndustries GarmentsIndustries AgrobasedIndustries Value of 1. Raw 60.25 58.50 59.25 55.20 50.20 25.50 20.25 40.0 0.40 2.80 372.35 33.37 Material Value of semi 2. 72.00 73.00 72.50 60.10 50.20 23.20 18.50 75.0 - 6.0 450.50 40.38 finished product 77
Small Scale Industries Management: Issues, Challenges and Opportunities Stock of 3. finished 31.50 30.50 29.50 23.50 22.50 15.50 5.50 15.50 - 0.90 174.90 15.68 product Power & 4. 1.75 1.65 1.55 1.50 1.25 1.00 1.20 0.95 0.60 0.95 12.40 1.11 fuel charges 5. Wages 18.59 19.25 18.79 13.25 12.25 7.50 6.50 5.65 0.45 1.45 103.68 9.29 6. Others 0.24 0.25 0.23 0.24 0.23 0.20 0.22 0.25 - 0.05 1.91 0.17 Total 184.33 183.15 181.82 153.79 136.63 72.90 52.17 137.35 1.45 12.15 1115.74 100 Source: Compiled from the primary data Wages Wage is an important working capital of SSI units. In the beginning, hundred SSI units totally spent on wages around Rs.1,03,68,000 per month. Of which engineering units alone spent on wages around Rs.18,59,000 per month. Currently, hundred SSI units totally spend on wages around Rs.2,41,10,000 per month. From which, engineering units alone spend on wages around Rs.80,55,000 per month. Despite the use of modern methods of production, the amount of workers (skilled, semi skilled and unskilled workers) has also increased considerably. Since the value of money is considerably reduced in the current period, prices of goods have increased rapidly. This has resulted in higher wages as compared to the initial phase. Table No. 5.24b: Working capital (Now) (Rs. in lakhs)
Types of
Industries
S. No. Total SawMill RiceMills Industries Percentage Details per AutoGarage Steel fabricationSteel MetalIndustries
month CrusherIndustries FurnitureIndustries AgrobasedIndustries ReadymadeGarments EngineeringIndustries
Value of 1. Raw 154.75 260.25 265.00 90.0 70.25 30.21 23.50 95.00 0.75 5.50 995.21 38.69 Material Value of Semi 2. 150.25 160.25 279.00 80.50 60.10 26.20 20.50 120.10 - 10.25 907.15 35.27 finished product Stock of 3. finished 75.00 80.00 85.15 43.50 27.05 18.25 7.50 31.10 - 5.56 373.11 14.50 product Power & 4. 10.50 11.00 12.00 8.50 2.50 3.50 1.25 1.10 0.45 1.05 51.85 2.01 fuel charges 5. Wages 80.55 78.00 25.15 18.25 16.20 9.50 8.10 3.50 0.35 1.50 241.10 9.37 6. Others 0.90 1.00 0.35 0.30 0.25 0.24 0.23 0.25 0.10 0.21 3.83 0.14 Total 471.95 590.50 666.65 241.05 176.35 87.90 61.08 251.05 1.65 24.07 2572.25 100 Source: Compiled from the primary data Other Financial and Net Working capital details Besides the working capitals such as raw materials, semi finished products, stock of finished goods, power and fuel charges and wages, there are other working capitals too namely rent, telephone bills, deposits for power, deposits for raw materials, provident fund etc, are indeed enhancing the performance of SSI units. Thus, these working capitals are considered to be the important expenditure for the SSI units in the study area. Table No. 5.24c: Working Capital per unit (Rs. in lakhs) S. No. Types of Industries Then Now Changes 1. Engineering Industries 7.37 18.87 11.5 2. Steel fabrication 12.21 39.36 27.15 3. Rice Mills 12.12 44.44 32.32 4. Readymade Garments Industries 15.37 24.10 8.73 5. Agro based Industries 13.66 17.63 3.97 6. Metal Industries 14.58 17.58 3.00 78
Small Scale Industries Management: Issues, Challenges and Opportunities 7. Furniture Industries 10.43 12.21 1.78 8. Saw Mill 27.47 50.21 22.74 9. Auto Garage Industries 0.29 0.33 0.04 10. Crusher Industries 2.43 4.81 2.38 Source: Compiled data from the tables 5.24 & 5.24b From the above table, it is observed that the increase in the working capital in each unit has been found. This is mainly due to the exorbitant price of raw materials, power charges and wages of labourers. Saw mill unit was playing a dominant position in the earlier phase. At the time of data collection, the same situation is prevailed because of the expenditure which is spent on raw materials as compared to other types of industries. The main reason for the hike in expenditure on raw materials is mainly due to the import of raw materials from other countries such as Malasia, Burma, Sri Lanka and Singapore (refer table 5.24c). The working capital per unit was worked out by taking into account the ratio between the total working capital and the total number of units. Initially, the total working capital was Rs.1115.74 lakhs. At present, it has increased where the total working capital and the total number of units are Rs.2572.25 lakhs. Table No. 5.24d: Working capital per worker (Rs. in lakhs) S. No. Types of Industries Then Now Change 1. Engineering Industries 0.33 0.44 0.11 2. Steel fabrication 0.48 1.23 0.75 3. Rice Mills 0.66 3.00 2.34 4. Readymade Garments Industries 0.64 0.91 0.27 5. Agro based Industries 0.56 0.69 0.13 6. Metal Industries 0.46 0.55 0.09 7. Furniture Industries 1.49 1.45 -0.04 8. Saw Mill 8.58 13.95 5.37 9. Auto Garage Industries 0.06 0.05 -0.01 10. Crusher Industries 0.05 0.40 0.35 Source: Compiled data from the tables 5.24a & 5.24b. From the table – 5.24d, it is observed that the marginal increase in the working capital per worker is found in all SSI units except Steel fabrication and Saw mill. Negative change is found in furniture industries and auto garage industries of cheap labourers in the study area. It is lucidly explained in table 5.24d. The working capital per worker has been calculated by taking into account the ratio between the total working capital and total number of workers. In the earlier stage, the total working capital was Rs.1115.74 lakhs and the total number of workers was 2222. Hence, the ratio is found to be Rs.0.502 lakhs and at the time of data collection [the ratio between the total working capital (Rs.2572.25l akhs) and total number of workers (2603)], the working capital per worker is Rs.0.9881 lakhs. Table No. 5.24e: Variance of working capital (Now) (Rs. in lakhs) Raw Semi Finished Finished Power & S. Types of Wages Others Materials Goods goods Fuel No. Industries (X5) (X6) (X1) (X2) (X3) (X4) Engineering 1. 155 150 75 11 81 0.90 Industries 2. Steel fabrication 260 160 80 11 78 1.00 3. Rice Mills 265 279 85 12 25 0.35 Readymade 4. 90 81 43 09 18 0.30 Garments Industries Agro based 5. 70 60 28 3 16 0.25 Industries 6. Metal Industries 30 26 18 4 10 0.28 7. Furniture Industries 24 21 08 1 8 0.25
79
Small Scale Industries Management: Issues, Challenges and Opportunities 8. Saw Mill 95 120.10 31.10 1.10 3.50 0.25 Auto Garage 9. 0.75 - 0.45 0.35 0.10 1.65 Industries 10. Crusher Industries 5.50 10.25 5.56 1.05 1.50 0.21 Total 995.25 907.35 374.11 53.50 241.10 5.44 Source: Compiled data from the table 5.24b Result of the one way analysis of variance of working capital for SSI units are the calculated value (0.41) in the less than the table value (3.31) the hypothesis has been accepted for the degrees of freedom 5 and 10 respectively. It implies that there is a significant variation in the working capital within and between the SSI units. 5.3.4. Borrowing capital Out of hundred SSI units surveyed in the study area, most of the SSI units availed financial assistance from nationalized banks. In order to encourage the SSI units, nationalized banks provide more loans with low rate of interest. Hence, most of the entrepreneurs got loans from nationalized banks for the purpose of development and modernization of the SSI units. It is observed that majority of the engineering units and rice mill units contracted more loans comparing up with other SSI units. Initially, only ten units borrowed funds from nationalized banks. Currently, most of the engineering units resorted to borrow more funds during the year (2011-2014), due to the continuous orders from BHEL. During the first time of borrowing, the entrepreneurs used their own funds for SSI units. Due to the financial deficiency, entrepreneurs had to borrow loans from some other sources to meet out their expenditure. Since the SSI units are more in the study area, the entrepreneurs must expend more amounts on modern methods of production and other additional expenditures. This makes the entrepreneurs to borrow more from nationalized banks. Table No. 5.25a: Year of Borrowing at the first time
Source: Compiled from the primary data X2 = 11.577; Df = 12.480 > 0.05 Not Significant Table No. 5.25b: Year of Borrowing at the time of data collection
Source: Compiled from the primary data X2 = 11.741; Df = 8.163 > 0.05 Not Significant 80
Small Scale Industries Management: Issues, Challenges and Opportunities Most of SSI units in the study area are wholly relying upon BHEL. Sometimes, entrepreneurs are forced to borrow funds from some other sources. This is mainly because of the delay in payment. Due to the failure of monsoon, the productivity of agriculture was severely affected in the year 2001. The entrepreneurs from rice mills found it very difficult to get raw materials with in the districts. So, the entrepreneurs had to purchase paddy from other districts and other states. This led to additional expenditure (transport cost) for the entrepreneurs. The cost of machinery and transport equipments is more. At the time of data collection engineering industries entrepreneurs are forced to borrow funds from some other sources. This is mainly because of the delay in payment. Table No. 5.25c: Repaid amount and outstanding amount (Then) (Rs. in lakhs)
Types of
Industries
S. No. Industries Total Saw Mill Rice Mills Rice Industries Details Percentage Auto Auto Garage Steel fabrication Steel Metal Industries Metal Crusher Crusher Furniture Furniture Industries Agro based Industries Agro Readymade Garments Readymade Garments Engineering Engineering Industries 1. Loan amount 190 180 35 20 10 5 16 10 6 8 480 100 Repaid 2. 145 120 25 15 7 2 7 5 3 5 334 69.58 amount Outstanding 3. 45 60 10 5 3 3 8 5 3 3 146 30.42 amount Source: Compiled from the primary data Table No. 5.25d: Repaid amount and outstanding amount (Now) (Rs. in lakhs)
Types of
Industries
S. arage No. Total Saw Mill Rice Mills Rice Industries Percentage Auto Auto G Steel fabrication Steel
Details Industries Metal Crusher Industries Crusher Furniture Furniture Industries Engineering Industries Engineering Agro based Industries Agro Readymade Garments Readymade Garments 1. Loan amount 280 265 155 149 120 60 50 45 35 25 1184 100 Repaid 2. 130 135 85 65 85 45 30 28 21 12 636 53.72 amount Outstanding 3. 150 130 70 84 35 15 20 17 14 13 548 46.28 amount Source: Compiled from the primary data From the table, earlier and now steel fabrication units were playing a dominant role in getting more borrowings out of ten type of SSI. At the time of data collection, Engineering industries were playing important role in getting more borrowing because to the modernization units Table No. 5.25e: Borrowing capital per unit (Rs. in lakhs) S. No. Types of Industries Then Now Change 1. Engineering Industries 7.60 11.2 3.6 2. Steel fabrication 12.0 17.66 5.66 3. Rice Mills 2.33 10.33 8 4. Readymade Garments Industries 2.0 14.9 12.9 5. Agro based Industries 1.0 12.0 11
81
Small Scale Industries Management: Issues, Challenges and Opportunities 6. Metal Industries 1.0 12.00 11 7. Furniture Industries 3.2 10.00 6.8 8. Saw Mill 2.0 9.00 7 9. Auto Garage Industries 1.2 7.00 5.8 10. Crusher Industries 1.6 5.00 3.4 Source: Compiled from the primary data From the table, it is observed that the increase in the borrowing capital per unit is found in Steel fabrication, Engineering units, Readymade Garments Industries, Rice mills, and agro based industry due to the advent of modern methods of production. It is evidently shown that most of these units borrow more loans comparing up with other SSI units. Repayable capacity of these units is more. So, the nationalized banks are not reluctant to provide long term loans to these units. This is the reason why the amount is also seen exorbitant in the table. This constitutes more to the total loan amount. Initially, Three SSI unit namely Metal industry, Saw mills and readymade garments industries had few gone in for borrowings due to the poor work orders. The borrowing capital per unit has been calculated by the ratio of the total borrowing capital to the total number of units. In the earlier stage, the total borrowing capital was Rs.480 lakhs and at the time of data collection the total borrowing capital was Rs.1184 lakhs. 5.4. DETAILS OF PARTNERSHIP Partnership can be defined as the relationship between persons who have agreed to share the profit or losses of the business carried on by all or any of them. Minimum numbers of persons are two and maximum numbers of persons are twenty in case of ordinary business and ten in case of banking business. The partnership form of organization is governed by the provisions of the Indian Partnership Act in 1932. From the study, it is perceived that out of ten categories of industries, only seven industries namely engineering industries, steel fabrication, rice mills, meal readymade garments, furniture and crusher industries has adopted the more no of partnership and agro based industries, saw mill and auto Garage industries has followed the pattern of sole proprietorship. Table No. 5.26a: Partners details (Then) (No. of units)
ies
Types of
Industries S. No. Total Saw Mill Industries Rice Mills Rice Industries Percentage Agro based Agro Engineering Engineering Readymade Readymade
Details Auto Garage Steel fabrication Steel Metal Industries Metal Crusher Industries Crusher Furniture Furniture Industries Garments Industr Garments 1. One 2 2 2 1 ------7 14.90 2. Two 10 3 4 1 - 1 1 - - 1 20 42.55 3. Three 3 6 3 3 - - - - - 1 16 34.04 4. Four 2 - 2 ------4 8.51 5. Five and above ------Total 17 11 11 5 - 1 1 - - 1 47 100.00 Source: Compiled from the primary data From the inception of SSI units in the study area, there were 47 units run in partnership basis. Ten Engineering units were run with two partners, three engineering units with three partners and two engineering units with four partners. Mostly the engineering units run in partnership. This lucidly explains the mutual understanding among partners and fewer burdens on the part of partners. For example, huge investment cannot be borne by a single individual, at the time, partnership is the only panacea. This is the major reason why the entrepreneurs give more importance to partnership. This clearly explains the tacit collusion among entrepreneurs and huge amount of investment. Recently most of the rice mills have become modern. This needs huge amounts of investment. Entrepreneurs mobilize funds easily through the partnership. 82
Small Scale Industries Management: Issues, Challenges and Opportunities Table No. 5.26b: Partners details (Now) (No. of units)
Types of
Industries S. No . Total Saw Mill Rice Mills Rice Industries Percentage Details Auto Garage Steel fabrication Steel Metal Industries Metal Crusher Industries Crusher Furniture Furniture Industries Agro based Industries Agro Readymade Garments Readymade Garments Engineering Engineering Industries 1. One 1 1 1 1 - 1 - - - - 5 20 2. Two 4 3 3 ------1 11 44 3. Three 3 1 1 2 ------7 28 4. Four 2 ------2 8 Five and 5. ------above Total 10 5 5 3 - 1 - - - 1 25 100 Source: Compiled from the primary data From the inception of SSI units in the study area at the time of data collection there were 25 units run in partnership basis four Engineering units were run with two partners, three engineering units with three partners and two engineering units with four partners. Mostly the engineering units run in partnership. This lucidly explains the mutual understanding among partners and fewer burdens on the part of partners. For example, huge investment cannot be borne by a single individual, at the time, partnership is the only panacea. This is the major reason why the entrepreneurs give more importance to partnership. This clearly explains the tacit collusion among entrepreneurs and huge amount of investment. Recently most of the rice mills have become modern. This needs huge amounts of investment. Entrepreneurs mobilize funds easily through the partnership. Relationship of partners is classified in to relatives, same caste but not relatives, same religion and other caste, friends and other religion. In the study, most of the engineering units are run through relatives and few units are run through friends. Most of the rice mills are run through friends. Crusher units are also run through friends. 5.5. DETAILS OF EMPLOYEES OR WORKERS Employees include all workers and persons receiving wages and holding supervisory or managerial engaged in administrative, store keeping, welfare activities and sales as also those engaged in purchase of raw material etc. Workers are defined to include all persons employed directly or through any agency for wages or engaged in any manufacturing process or in clearing of any part of the machinery or premises used for manufacturing process or in any other kind of work incidental to or connected with the manufacturing process, and labour engaged in the repairs and maintenance of fixed assets for factory’s own use. However, persons holding position of supervision and management or employed in a confidential position. Initially, total number of male and female workers was 1626 and 596 respectively at the inception of SSI units. Currently, the male workers are 2203 and female workers are 400. This the increment in the number of male workers and the decrement in the number of female workers due to the advent of modern of production in SSI units in the study area. Skilled workers are technically qualified or through experience, show their fullest potentiality for the benefit of the organization and earn more wages as compared to unskilled workers. Initially, there were 171 skilled male workers are working in engineering units. Recently the skilled male workers are 395 working in SSI units. These shows after the advent of modern methods of production, more number of skilled workers are needed in the engineering units. Unskilled workers are not necessarily technically qualified but quite indefatigable, strive more for the benefit of the organization and earn relatively less with skilled workers. Initially there were 380 unskilled 83
Small Scale Industries Management: Issues, Challenges and Opportunities male workers working in engineering units. Recently the unskilled male workers are 670 working in the same SSI units. This shows that more orders from BHEL, urges the entrepreneurs to recruit more unskilled workers in the engineering units. Gender composition Initially there were 641 skilled male workers and 166 skilled female workers in SSI units. Number of unskilled male workers was 567 and number of unskilled female workers was 297. After the advent of modern methods of production at present, there are 910 skilled male workers and 133 skilled female workers (much wanted) in SSI units. Number of unskilled male workers and unskilled female workers are also wanted in SSI units due to the continuous orders. These results in enhancing the number of male workers and the female workers as compared to the initial phase of SSI units (refer table 5.27). Table No. 5.27: Details of worker (No. of workers) Then Now S. Types of Industries Gender Skilled Unskilled Skilled Unskilled No. Total Total Worker Worker Worker Worker Engineering Male 171 380 551 395 670 1065 1. Industries Female ------Male 158 251 409 210 270 480 2. Steel fabrication Female ------Male 60 95 155 55 77 132 3. Rice Mills Female - 120 120 - 90 90 Readymade Male 50 60 110 67 82 149 4. Garments Industries Female 60 67 127 53 64 117 Agro based Male 54 65 119 68 75 143 5. Industries Female 79 48 127 55 56 111 Male 35 57 92 39 60 99 6. Metal Industries Female 27 38 65 25 37 62 Male 15 20 35 19 23 42 7. Furniture Industries Female ------Male 10 6 16 8 10 18 8. Saw Mill Female ------Auto Garage Male 10 16 26 14 21 35 9. Industries Female ------Male 78 35 113 35 5 40 10. Crusher Industries Female - 157 157 - 20 20 Total 807 1415 2222 1043 1560 2603 Percentage 36.31 63.69 100 40.07 59.93 100 Source: Compiled from the primary data Table No. 5.27a: Workers per unit (in numbers) S. No. Types of Industries Then Now Change 1. Engineering Industries 22.04 42.6 20.56 2. Steel fabrication 27.26 32.0 4.74 3. Rice Mills 18.33 14.8 -3.53 4. Readymade Garments Industries 23.70 26.6 2.9 5. Agro based Industries 24.60 25.40 0.8 6. Metal Industries 31.40 32.20 0.8 7. Furniture Industries 07.00 8.40 1.4 8. Saw Mill 03.20 3.60 0.4 9. Auto Garage Industries 5.20 7.0 1.8 10. Crusher Industries 54.0 12.0 42 Source: Compiled data from the table 5.27 84
Small Scale Industries Management: Issues, Challenges and Opportunities From the table, it is observed that the increase in the workers per unit found in Engineering units, crusher Industries and steel fabrication. Negative change is found in Rice mills. This is mainly because of the modern methods of production in Rice mills. Workers in Auto Garage are reduced due to the advent of exchange offer for vehicles in the study area. It is lucidly explained in table 5.27a. The workers per unit have been calculated by the ratio between the total numbers of workers and total number of units. In the earlier stage, the total number of workers were 2 222 and total number of units was 100. Hence, the ratio is found to be 22.22 and at the time of data collection [the ratio between the total number of workers (2603) and total number of units (50)], the workers per unit is 26.03. 5.6. RAW MATERIAL DETAILS From the details of raw materials, it is observed that there are no changes taken place in the intake of raw materials in both periods (initial period and current period). Most of the SSI units get raw materials indigenously and remaining few SSI units get raw materials from both local area and abroad. Saw mill alone gets raw materials from abroad. This is mainly because of the prohibition of felling trees order by the Indian Government. Entrepreneur of saw mill gets raw materials from Malaysia, Parma and other countries. This results in hike in the price of raw materials. Raw materials are not at all a problem for Engineering units and Steel fabrication industries. These units get raw materials directly from BHEL and other large Scale industries. Rice mill units get raw materials from Thanjore and imported from Karnataka. Readymade Garments industries get raw material from Thirupur, Erode, Karur and other places. Crusher units are much affected because of the prohibition of quarrying order by the Tamil Nadu Government. These units get raw materials from Karur. This leads to more transport cost. This is indeed a major problem in the study area. From the primary data collection most of the raw materials get from indigenous (78 percent), imported (11 percent) and both (11 percent). Raw materials are not problem not at all a problem of the study area. Readymade Garments industries are get raw material from within Tamil Nadu. Table No– 5.28: Raw materials used Crosstab (No. of units)
Types of
Industries
S. Mill
No. Total Saw Rice Mills Rice Industries Percentage Auto Garage Auto Steel fabrication Steel Details Industries Metal Crusher Industries Crusher Furniture Industries Furniture Agro based Industries based Agro Readymade Garments Garments Readymade Engineering Industries Engineering
21 7 11 8 10 5 4 2 5 5 1. Indigenous 78 78 84% 46.7% 73.3% 80% 100% 100% 80% 40% 100% 100% 3 3 2 1 2 2. Imported - - - - - 11 11 12% 20% 13% 10% 40% 1 5 2 1 1 1 3. Both - - - - 11 11 4% 33.3% 3% 10% 10% 20% 25 15 15 10 10 5 5 5 5 5 Total 100 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: Compiled from the primary data. Note: Percentage within sample Chi-Square Tests Particulars Value Df Asymp. Sig. (2-sided) Pearson Chi-Square 24.348(a) 18 .144 Likelihood Ratio 26.809 18 .083 85
Small Scale Industries Management: Issues, Challenges and Opportunities Linear-by-Linear Association 1.392 1 .238 N of Valid Cases 100 A 25 cells (83.3%) have expected count less than 5. The minimum expected count is .55. INFERENCE From the above Chi-square test, the significance value is 0.144 which is greater than 0.55, the level of significance; we conclude that there is no significant association between raw material used indigenous, imported and both. 5.7. DETAILS OF TAX EXPENDITURE OF THE ENTERPRISES Taxes such as excise duty, sales tax, income tax and purchase tax are considered to be the major expenditure for SSI units in the study area. 5.7.1. Excise duty Excise duty is a tax on manufacture or production of goods. Excise duty on alcohol, alcoholic preparations, and narcotic substances is collected by the State Government and is called “State Excise” duty. The Excise duty on rest of goods is called “Central Excise” duty and is collected in terms of Section 3 of the Central Excise Act, 1944. Sales Tax is different from the Excise duty as former is a tax on the act of sale while the latter is a tax on the act of manufacture or production of goods. Excise duty concessions have been given to the small scale industries in what is called the General Excise Duty Exemption Scheme for small Industries. This is to enable the small scale industries to compete on favourable terms with their counterparts in the large and medium sector. Excise exemption to small scale units is mainly/chiefly granted under notification no. 175/86-CE dated 1.3.1986 as amended from time to time. At the initial phase, SSI units expended Rs.53.35 lakhs per year for excise duty, sales tax, income tax and purchase tax. From which, the single engineering unit alone paid Rs.3 lakhs per year and steel fabrication unit paid Rs.2.50 lakhs per year for excise duty. At present, Engineering units pay Rs.8 lakh per year and saw mill alone pays Rs.1.25 lakh per year for excise duty. This shows the productive capacity of these industries. 5.7.2. Sales tax A sales tax is a consumption tax charged at the point of purchase for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale. A portion of the sale may be exempt from the calculation of tax, because sales tax laws usually contain a list of exemptions. Laws governing the tax may require it to be included in the price (tax-inclusive) or added to the price at the point of sale. Most sales taxes are collected from the buyer by the seller, who remits the tax to a government agency. The economic burden of the tax usually falls on the purchaser, but in some circumstances may fall on the seller. Sales taxes are commonly charged on sales of goods, but many sales taxes are also charged on sales of services. Ideally, a sales tax would have a high compliance rate, be difficult to avoid, and be simple to calculate and collect. Initially, Most of the SSI units paid maximum of sales tax. Engineering units alone contributed Rs.10.50 lakhs per year and followed by steel fabrication industries Rs.8.50 lakhs for sales tax. Currently, engineering units alone contribute Rs.20.25 lakhs per year and followed by steel fabrication units Rs.10.50 lakhs for sales tax. Engineering units do not pay sales tax but BHEL deducts the amount for sales tax during the settlement of bill. 5.7.3. Income tax An income tax is a tax levied on the income of individuals or business (corporations or other legal entities). Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate tax, corporate income tax, or profit tax. Individual income taxes often tax the total income of the individual (with some deductions permitted), while corporate income taxes often tax net income (the difference between gross receipts, expenses, and additional write-offs). The definition of income differs and often allows the notional reductions of income (reduction based on number of children supported). 86
Small Scale Industries Management: Issues, Challenges and Opportunities Personal income tax is often collected on a pay-as-you-earn basis, with small corrections made soon after the end of the tax year. These corrections take one of two forms: payments to the government, for taxpayers who have not paid enough during the tax year; and tax refunds from the government for those who have overpaid. Income tax systems will often have deductions available that lessen the total tax liability by reducing total taxable income. They may allow losses from one type of income to be counted against another. For example, a loss on the stock market may be deducted against taxes paid on wages. Other tax systems may isolate the loss, such that business losses can only be deducted against business tax by carrying forward the loss to later tax years. In the beginning, most of the SSI units paid less amount of income tax. Currently, engineering units alone pay Rs.24 lakhs per year for income tax. Steel fabrication units pay Rs.21.10 lakhs per year. This shows the capacity of SSI units which earn more, so that, these units do not bother about paying more income tax. This is indeed a major source of tax revenue for the Government. 5.7.4. Purchase tax A purchase tax would be similar to a value-added tax (VAT) except that it would be on the purchase rather than the sale, and could be a fixed per cent of the gross amount rather than on the net after deductions. This would make accounting less costly and susceptible to fraud, and allow for the complexities of production processes in which many inputs go into a product or service. Table No. 5.29a: Tax Expenditure (Then) (Rs. in lakhs)
Types of
Industries S. No. Total Saw Mill Saw Rice Mills Rice Industries Percentage Auto Garage Auto Steel Steel fabrication Details Metal Industries Crusher Crusher Industries Furniture Industries Furniture Agro based Industries Agro based Readymade Garments Garments Readymade Engineering Industries Engineering 1. Excise Duty 3.00 2.50 - - - - - 0.80 - - 6.30 11.81 2. Sales Tax 10.50 8.50 1.50 1.40 1.20 0.90 1.20 0.70 - 0.80 26.70 50.05 3. Income Tax 3.50 4.00 1.10 1.20 1.10 0.85 0.80 1.10 0.60 0.70 14.95 28.02 4. Purchase Tax - - 1.75 1.90 1.50 0.25 - - - - 5.40 10.12 Total 17 15 4.35 4.5 3.80 2.00 2.00 2.60 0.60 1.50 53.35 100 Source: Compiled from the primary data Table No. 5.29b: Tax Expenditure (Now) (Rs. in lakhs)
Types of
Industries
S. No.
de Garments
Details
Engineering Industries Engineering fabrication Steel Mills Rice Readyma Industries Industries based Agro Industries Metal Industries Furniture Mill Saw Garage Auto Industries Crusher Total Percentage 1. Excise Duty 5.00 6.00 - - - - - 1.25 - - 12.25 8.80 2. Sales Tax 20.25 10.50 3.50 2.50 2.85 1.15 3.90 2.75 - 1.95 49.35 35.47 3. Income Tax 24.00 21.10 2.60 2.70 3.15 1.60 1.50 0.90 0.95 2.20 60.70 43.62 4. Purchase Tax - - 12.50 1.50 2.10 0.75 - - - - 16.85 12.11 Total 49.25 37.60 18.60 6.70 8.10 3.50 5.40 4.90 0.95 4.15 139.15 100 Source: Compiled from the primary data From the study, it is observed that out of ten categories of industries, Rice mills alone have contributed more for purchase tax because of the purchase of raw materials (paddy) from other districts Comparing up with the previous years, contribution towards the purchase tax by the entrepreneurs is more. This is mainly because of 87
Small Scale Industries Management: Issues, Challenges and Opportunities the poor productivity of agriculture in India and coercing the entrepreneurs to obtain the raw materials at the higher cost. 5.8. DETAILS OF OTHER EXPENDITURES Maintenance cost, electric bill, cost for fuels, transport cost, wages for workers etc., are designated as working capital or other expenditures. These expenditures play a vital role in enhancing the performance of SSI units in the study area. Table No. 5.30a: Other Expenditure (Then) (Rs. in lakhs)
Types of
Industries S. No ndustries . Total
Other Mill Saw Rice Mills Rice Industries Percentage
Expenditure Garage Auto Steel fabrication Steel (per month) Industries Metal Crusher I Crusher Furniture Industries Furniture Agro based Industries based Agro Readymade Garments Garments Readymade Engineering Industries Engineering 1. Power & Fuel 2.10 2.05 1.10 0.80 0.80 0.55 0.53 0.40 0.21 0.27 8.81 1.66 2. Raw Materials 95.08 90.10 76.50 55.50 60.50 15.25 12.25 21.10 0.04 18.20 444.52 83.78 Plant & 3. 1.65 1.25 0.75 0.70 0.55 0.65 0.40 0.20 0.16 0.18 6.49 1.22 Machinery Building / 4. 1.10 1.50 1.55 1.55 1.65 1.60 1.30 1.05 0.80 0.18 12.28 2.32 Plot / Shed 5. Transport Cost 1.85 1.50 1.65 1.20 1.10 1.05 1.02 1.05 - 0.90 11.32 2.23 6. Wages 15.70 14.75 1.90 1.80 1.85 1.55 1.40 1.20 0.95 1.10 42.20 7.95 7. Any Others 0.95 0.50 0.49 0.45 0.43 0.38 0.40 0.15 0.10 0.08 3.93 0.75 Total 118.43 111.65 83.94 62.00 66.88 21.03 17.30 25.15 2.26 21.91 530.55 100 Source: Compiled from the primary data Table No. 5.30b: Other Expenditure (Now) (Rs. in lakhs)
Types of
Industries
S. No. Total Saw Mill Saw Rice Mills Rice Other Industries Percentage Expenditure Garage Auto Steel fabrication Steel (per month) Industries Metal Crusher Industries Crusher Furniture Industries Furniture Agro based Industries based Agro Readymade Garments Garments Readymade Engineering Industries Engineering Power & 1. 8.10 7.05 1.50 0.95 0.90 0.85 0.53 0.45 0.27 0.87 21.47 2.19 Fuel Raw 2. 35.08 37.10 175.50 85.50 60.50 35.25 22.25 51.10 0.06 28.20 530.54 54.17 Materials Plant & 3. 101.65 105.25 2.75 1.70 1.55 1.45 0.40 0.50 0.17 4.18 219.60 22.37 Machinery Building / 4. 1.30 1.50 1.55 1.75 1.85 1.40 1.35 1.08 0.85 0.21 12.84 1.31 Plot / Shed Transport 5. 12.85 15.50 10.65 3.80 1.30 1.05 1.08 1.06 - 0.90 48.19 8.32 Cost 6. Wages 55.70 58.75 6.90 6.80 5.85 1.15 1.45 1.40 0.96 1.18 140.14 14.31 7. Any Others 1.95 1.70 0.59 0.48 0.49 0.30 0.42 0.19 0.15 0.15 6.42 0.65 Total 216.63 226.85 199.44 100.98 72.44 41.45 27.48 55.78 2.46 35.69 979.20 100 Source: Compiled from the primary data Table No– 5.30c: Expenditure per unit (Rs. in lakhs) S. No. Types of Industries Then Now Change 1 Engineering 4.73 8.66 3.93 2 Steel Fabrication 7.44 15.12 7.68 3 Rice Mills 5.59 13.29 7.7 4 Readymade Garments 6.2 10.09 3.89 5 Agro Based Industries 6.69 7.24 0.55
88
Small Scale Industries Management: Issues, Challenges and Opportunities 6 Metal Industries 4.20 8.29 4.09 7 Furniture 3.46 5.49 2.03 8 Saw Mills 5.03 11.15 6.12 9 Auto Garage 0.45 0.49 0.04 10 Crusher Industries 4.38 7.13 2.75 Source: Compiled data from the tables 5.29a & 5.29b. From the above table, it is observed that the increase in the expenditure per unit has been found. This is mainly due to the scarcity of raw materials, hike in the surcharge of electricity and telephone bills and hike in fuel cost. The expenditure per unit was worked out by taking into account the ratio between the total expenditure and the total number of units. Initially, the total expenditure was Rs.530.55 lakhs and the total number of units was 100 and ratio is found to be Rs.5.30 lakhs. At present, it has increased to Rs.9.79 lakhs where the total expenditure and the total number of units are Rs.979.20 lakhs and 100 respectively. 5.8.1. Power and fuel At the initial phase, most of the SSI units did expend less for power and fuels. Without which, no industry would run. Recently, most of the SSI units do expend more for power and fuels because of the hike in unit cost and price of fuel. All SSI units contribute Rs.21.47 lakhs per month for power and fuels. From which, engineering units alone contribute more for power. This shows that the entrepreneurs are least bothered about paying more for power; their avowed aim is to produce more goods. 5.8.2. Raw materials During the initial periods, the total expenditure on raw materials was Rs.444.52 lakhs per month. Recently, it is about Rs.530.54 per year for raw materials. From which, engineering and steel fabrication units alone expend Rs.35.46 lakhs and Rs.37.10 lakhs per month. This is the poorest amount as compared to the previous phase. The reason is BHEL supplies raw materials to Small Scale Engineering units in the study area. From which recently rice mills was spent more raw material cost Rs.175.50 lakhs because more paddy import from other state. 5.8.3. Transportation cost Without transport, entrepreneurs cannot get raw materials. So, it is considered to be the most important element in SSI units. Initially, total transport cost was Rs.11.32 lakhs per month. Recently, it has gone up to Rs.48.08 lakhs per month because of the hike in price of fuel. Engineering units and rice mills incur more transport cost comparing up with other SSI units in the study area. 5.8.4. Wages (Remuneration) During the initial stages, the total amount of wages Rs.42.20 lakhs per month was expended. Currently, it has been increased to Rs.140.14 lakhs per month for all SSI units in the study area. Engineering and Steel fabrication units expend more on wages because the number of workers working in engineering and steel fabrication units are more. Remuneration in the form of wages and salaries has considerably increased due to high inflation, more work load, high cost of living, Government policies and functional remuneration according to the types of work performed. 5.8.5. Others Apart from the working capital such as raw materials, transport cost, taxation, power and fuel expenditure. There are other incidental expenses such as rent, interest on loan, telephone bills and lease payments, staff welfare etc., have to be incurred for the development of SSI units. Though the amount is less, these expenses are indispensable for the hassle free running of SSIs. 5.9. DETAILS OF MARKETING Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives.
89
Small Scale Industries Management: Issues, Challenges and Opportunities Marketing channels are divided in to four categories namely marketing of industrial products directly to the customers, through the agencies, through the retailers and through the customers. From the study, it is observed that engineering units and Steel Fabrication do not market their products anywhere because BHEL and other agencies gives order and get back the finished products. Rice mills market their products through the Whole seller retailer and customer. Readymade Garments and Crusher industries market their products through all the four channels of marketing. Furniture industries saw mill, and metal industry are marketing their products on the basis of orders and based on sales. Agro based industry markets its products through customer, agencies and retailers. Table No- 5.31: Area of Marketing Crosstab (No. of Units)
Types of S. Industries
No Garage . Total Saw Mill Saw Rice Mills Rice Industries Percentage Auto Auto Steel fabrication Steel
Details of Industries Metal Crusher Industries Crusher
Marketing Industries Furniture Agro based Industries based Agro Readymade Garments Garments Readymade Engineering Industries Engineering 17 8 10 6 7 5 3 4 5 3 1. Within the District 68 68 68% 53.3% 66.7% 60% 70% 100% 60% 80% 100% 60% 5 4 5 3 3 2 1 2 2. Within the State - - 25 25 20% 26.7% 33.3% 30% 30% 40% 20% 40% 3 3 1 3. Throughout India ------07 07 12% 25% 10% 25 15 15 10 10 5 5 5 5 5 Total 100 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: Compiled from the primary data. Note: Percentage within sample Chi-Square Tests Particulars Value Df Asymp. Sig. (2-sided) Pearson Chi-Square 14.761(a) 18 .678 Likelihood Ratio 19.042 18 .389 Linear-by-Linear Association 2.923 1 .087 N of Valid Cases 100 a 24 cells (80.0%) have expected count less than 5. The minimum expected count is .35. Area of marketing From the study, it is observed that most of the SSI units market their products within district, twenty five SSI units market their products within state and seven SSI units market their products within India. Seventeen Engineering units market their products within district because of the continuous BHEL orders. Finished products from rice mills are directly marketed by whole seller and retailer and the Government. Three Crusher industries sell their products within district and other two units sell their products within state. Most of the readymade, Agro based industries, furniture and saw mills sell their product within district. Metal and Auto Garage units was sell their products only within district. Only few engineering units, Steel fabrication and one readymade Garments units was sell their products thought India. INTERENCE From the above Chi-square test, the significance value is .678 which is less than 5, the level of significance; we conclude that there is significant association between within district, within state and thought the year. 5.10. PRODUCTIVITY OF THE SSI UNITS Productivity refers to the physical relationship between the quantity produced (output) and the quantity of resources used in the course of production (input). It is the ratio between the output of goods and services and the input of resources consumed in the process of production. Though there are different indicators of productivity of SSI units such as production, capacity utilization, sales, stock and profit, the ratio of
90
Small Scale Industries Management: Issues, Challenges and Opportunities profitability before and after payment of tax to the capital employed has been analyzed since the profitability ratio is considered as a one of the major indicators of productivity of SSI units in the study area. 5.10.1. Details of the production, sales, stock and profit Production means creation of utility through transforming the raw material into final product. However, the degree of transformation varies from one unit to another unit and from one industry to another industry. Some units may call the transformation as manufacturing while others may call as processing. This study has not made any attempt to analyze the degree of processing but only the changing process. For instance, wood units may cut a log into pieces and sell them. Whereas Engineering and steel fabrication units may change the total structure and rice mill may remove the bran. 5.10.2. Actual production During the initial stages, the hundred SSI units had produced goods worth of Rs.1976.50 lakhs per month. From which, the Engineering units alone produced goods worth of Rs.585 lakhs per month followed by Steel fabrication industries produced goods worth of Rs.385 lakhs per month and rice mill units with Rs.312 lakhs per month. Table No. 5.32: Value of production (Rs. in lakhs)
Types of
Industries
S. No. Actual Total Saw Mill Rice Mills Rice Industries Industries Agro based Agro Readymade Readymade Engineering Engineering
production Auto Garage Steel fabrication Steel per month Industries Metal Crusher Industries Crusher Furniture Furniture Industries Garments Industries Garments 1. Then 585 385 312 295 280 5 75 17 1.50 21 1976.50 2. Now 2950 1900 790 780 750 25 150 32 4.50 35 7416.50 Source: Compiled from the primary data At present, actual production has increased multifariously due to the continuous orders from BHEL. Hence, Engineering units alone produce goods worth of Rs.2950 lakhs per month followed by Steel fabrication industries produced goods worth of Rs.1900 lakhs per month. And rice mill units with Rs.790 lakhs per month. There is a vast difference between initial production and current production. This is mainly due to the advent of modern methods of production in all SSI units in the study area. Table No. 5.32a: Production per unit (Rs. in lakhs) S. No. Types of Industries Then Now Change 1 Engineering 23.40 118.00 94.60 2 Steel Fabrication 25.67 126.67 101.00 3 Rice Mills 20.80 52.67 31.87 4 Readymade Garments 29.50 78.00 48.50 5 Agro Based Industries 28.00 75.00 47.00 6 Metal Industries 1.00 5.00 4.00 7 Furniture 15.00 30.00 15.00 8 Saw Mills 3.40 6.40 3.00 9 Auto Garage 0.3 0.90 0.60 10 Crusher Industries 4.20 7.00 2.80 Source: Compiled data from the tables 5.32 From the above table, it is observed that the increase in the production of Engineering units, Steel fabrication, rice mills, Furniture industries, readymade and agro based industry is mainly due to the modern methods of production. Crusher industries are pollution emitting industries are led to Global warming. Hence, the Government bans the functioning of these industries. The production per unit was worked out by taking into account the ratio between the total production and the total number of units. Initially, the total
91
Small Scale Industries Management: Issues, Challenges and Opportunities production was Rs.1976.50 lakhs and the total number of units was 100 and ratio is found to be Rs.19.76 lakhs. At present, it has increased to Rs.74.16 lakhs where the total production and the total number of units are Rs.7416.50 lakhs and 100 respectively. Table No. 5.32b: Production per worker (Rs. in lakhs) S. No. Types of Industries Then Now Change 1 Engineering 1.56 2.77 1.21 2 Steel Fabrication 0.94 3.96 3.02 3 Rice Mills 1.13 3.55 2.42 4 Readymade Garments 1.24 2.93 1.69 5 Agro Based Industries 1.13 2.95 1.82 6 Metal Industries 0.33 0.15 -0.18 7 Furniture 2.14 3.57 1.43 8 Saw Mills 1.06 1.77 0.71 9 Auto Garage 0.05 0.12 0.07 10 Crusher Industries 0.77 0.58 -0.19 Source: Compiled data from the tables 5.32 From the table 5.32b, it is lucidly explained that the increase in the production per worker is found in Steel fabrication, Engineering units, Rice mills, Furniture, readymade garments and agro based industries due to the advent of modern technology. Marginal changes have been found in Metal industries and Crusher industries. The production of Saw mill industry is also reduced because of the dearth supply of raw materials domestically. The production per worker has been calculated by the ratio between the total production and total number of workers. In the earlier stage, the total production was Rs.1976.50 lakhs and the total number of workers was 2222. Hence, the ratio is found to be Rs.0.89 lakhs and at the time of data collection [the ratio between the total production (Rs.7416.50 lakhs and total number of workers (2603)], the production per worker is Rs.2.85 lakhs. 5.10.3. Actual capacity of production The capacity of production of SSI units is denoted in percentage. Initially fifty four units had their capacity of production of 71-80 per cent. In this share engineering units was more to the total as compared to other SSI units. It is keenly observed that only two units out of hundred units had its maximum capacity of production of 81 per cent and above. Twenty two SSI units had their capacity of production of 61-70 per cent. Table - 5.33a: Actual Capacity of Production (Then) Cross tab (No. of units)
Types of Industries S. No. Total Crusher Crusher
Actual Mill Saw Furniture Furniture Rice Mills Rice Garments Industries Industries Industries Industries Industries Percentage Agro based based Agro Readymade Readymade Engineering Engineering
Production Garage Auto Steel fabrication Steel in % Industries Metal 1 1. 31 – 40 ------1 1 10% 1 2 2 2. 41 – 50 ------5 5 6.7% 20% 40% 3 4 3 3 1 2 3. 51 – 60 - - - - 16 16 20% 26.7% 30% 30% 20% 40% 5 4 3 3 2 1 1 2 1 4. 61 – 70 - 22 22 20% 26.7% 20% 30% 40% 20% 20% 40% 20% 20 7 8 4 4 2 3 3 3 5. 71 – 80 - 54 54 80% 46.7% 53.3% 40% 40% 40% 60% 60% 60% 1 1 6. 81 – 100 ------2 2 20% 20% 25 15 15 10 10 5 5 5 5 5 Total 100 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: Compiled from the primary data Note: Percentage within sample 92
Small Scale Industries Management: Issues, Challenges and Opportunities Chi-Square Test Particulars Value df Asymp. Sig. (2-sided) Pearson Chi-Square 70.450(a) 45 .009 Likelihood Ratio 60.794 45 .058 Linear-by-Linear Association 4.466 1 .035 N of Valid Cases 100 a 54 cells (90.0%) have expected count less than 5. The minimum expected count is .05. INFERENCE From the above Chi-square test, the significance value is 0.009 which is less than 0.05, the level of significance; we conclude there is significant association of actual production in sample industries. Table No. 5.33b: Actual Capacity of Production (Now) (No. of units)
Types of
Industries stries
S.
No. Total
Actual Mill Saw Rice Mills Rice Industries Percentage Production Garage Auto Steel fabrication Steel Metal Industries Metal
in % Indu Crusher Furniture Industries Furniture Agro based Industries based Agro Readymade Garments Garments Readymade Engineering Industries Engineering 1. 31 – 40 ------2. 41 – 50 ------3. 51 – 60 ------1 1 1 4. 61 – 70 ------3 3 10% 20% 20% 2 2 1 2 3 1 2 1 2 5. 71 – 80 - 16 16 8% 13.3% 6.7% 20% 30% 20% 40% 20% 40% 23 13 14 7 7 5 3 2 4 3 6. 81 – 100 81 81 92% 86.7% 93.3% 70% 70% 100% 60% 40% 80% 60% 25 15 15 10 10 5 5 5 5 5 Total 100 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: Compiled from the primary data Note: Percentage within a sample Chi-Square Tests Particulars Value df Asymp. Sig. (2-sided) Pearson Chi-Square 24.194(a) 18 .149 Likelihood Ratio 20.712 18 .294 Linear-by-Linear Association 7.380 1 .007 N of Valid Cases 100 a 25 cells (83.3%) have expected count less than 5. The minimum expected count is .15. At present, most of the SSI units have the maximum actual capacity of production of 81 per cent and above. This is mainly because of modern methods of production in all SSI units in the study area. INFERENCE From the above Chi-square test, the significance value is 0.149 which is less than 0.05, the level of significance; we conclude there is significant association of actual production in sample industries at present. 5.10.4. Percentage of capacity utilization Initially most of the SSI units availed the capacity utilization of 61-80 per cent. Thirty four SSI units availed the capacity utilization of 41-60 per cent. Only seventeen units availed the fullest capacity of 81-100 per cent.
93
Small Scale Industries Management: Issues, Challenges and Opportunities Table No. 5.34a: Capacity Utilization (Then) Crosstab (No. of Units)
Types of
Industries S. No. Industries Total Saw Mill Saw Rice Mills Rice Industries Percentage Readymade Readymade Engineering Engineering Capacity Garage Auto Steel fabrication Steel utilization % Industries Metal Crusher Crusher Furniture Industries Furniture Garments Industries Garments Agro based Industries based Agro 1 1 1 1. 21 – 40 ------3 3 10% 10 % 20% 07 10 6 3 2 2 2 1 1 2. 41 – 60 - 34 34 28% 66.7% 40% 30% 20% 40% 40% 20% 20% 10 3 7 4 5 3 1 4 5 4 3. 61 – 80 46 46 40% 20% 46.7% 40% 50% 60% 20% 80% 100% 80% 8 2 2 2 2 1 4. 81 – 100 - - - - 17 17 32% 13.3% 13.3% 20% 20% 20% 25 15 15 10 10 5 5 5 5 5 Total 100 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: Compiled from the primary data Note: Percentage within sample Chi-Square Tests Particulars Value df Asymp. Sig. (2-sided) Pearson Chi-Square 34.694(a) 27 .147 Likelihood Ratio 36.088 27 .113 Linear-by-Linear Association .240 1 .624 N of Valid Cases 100 a 34 cells (85.0%) have expected count less than 5. The minimum expected count is .15. At present, most of the SSI units avail the capacity utilization of 61 to 80 per cent. This does not mean that SSI units’ fullest capacity is this much. Despite SSI units have got more capacity, the SSI units cannot produce more because of the poor demand. If SSI units show its fullest capacity, then there will be an overproduction. In order to avoid this situation, entrepreneurs maintain the ceiling level of capacity utilization i.e., production of goods in accordance with the current demand. INFERENCE From the above Chi-square test, the significance value is 0.147 which is less than 0.05, the level of significance; we conclude there is significant association of actual capacity utilization production in sample industries. Table No. 5.34b: Capacity Utilization (Now) Crosstab (No. of Units)
Types of
ustries
Industries
S. Garments No. Total Saw Mill Saw Rice Mills Rice Industries Industries Percentage Engineering Engineering
Capacity Garage Auto Steel fabrication Steel utilization % Industries Metal Crusher Ind Crusher Furniture Industries Furniture Agro based Industries based Agro Readymade Readymade 1 1 1 1 1 2 1. 21 – 40 - - - - 7 7 6.7% 6.7% 10% 20% 20% 40% 5 3 3 2 3 3 1 3 1 2. 41 – 60 - 24 24 20% 20% 20% 20% 30% 60% 20% 60% 20% 18 9 9 6 7 1 3 3 1 2 3. 61 – 80 59 59 72% 60% 60% 60% 70% 20% 60% 60% 20% 40% 2 2 2 1 1 1 1 4. 81 – 100 - - - 10 10 8% 13.3% 13.3% 10% 20% 20% 20% 25 15 15 10 10 5 5 5 5 5 Total 100 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: Compiled from the primary data. 94
Small Scale Industries Management: Issues, Challenges and Opportunities Note: Percentage within sample Chi-Square Test Particulars Value df Asymp. Sig. (2-sided) Pearson Chi-Square 28.473(a) 27 .387 Likelihood Ratio 28.810 27 .370 Linear-by-Linear Association 6.215 1 .013 N of Valid Cases 100 a 34 cells (85.0%) have expected count less than 5. The minimum expected count is .35. Fifty nine units avail the capacity utilization of 61-80 per cent. And ten units avail its capacity utilization of 81-100 per cent. This is mainly because of optimistic view of the entrepreneurs with regard to the future demand. INFERENCE From the above Chi-square test, the significance value is 0.013 which is less than 0.05, the level of significance; we conclude there is significant association of actual capacity utilization production in sample industries at the time of data collection. 5.10.5. Actual sales SSI units such as engineering units, Steel fabrication, and auto garage are not shown the actual sales, because these industries produce goods on the basis of orders. Engineering units and steel fabrication get orders directly from BHEL and other agencies and dispatch the finished goods again to BHEL. So, there is no possibility of actual sales in engineering units. Auto garage are not producing goods but rendering service. Hence, the value of actual sales is not shown in the table. Table No. 5.35a: Actual Sales (Then) (No. of units)
Types of
S. Industries No. Total Saw Mill Rice mills Rice Furniture Furniture Garments Industries Industries Percentage Agro based Agro Sales in Readymade
percentage Industries Metal Crusher Industries Crusher 1. 41 – 60 2 2 1 1 - - 2 8 14.54 2. 61 – 80 4 3 4 2 2 3 2 20 36.37 3. 81 – 100 9 5 5 2 3 2 1 27 49.09 Total 15 10 10 5 5 5 5 55 100.00 Source: Compiled from the primary data Table No. 5.35b: Actual Sales (Now) (No. of Units)
Types of
Industries S. No. Total ice Mills ice Saw Mill R Industries Percentage Agro based Agro Sales Percentage Readymade Metal Industries Metal Crusher Industries Crusher Furniture Furniture Industries Garments Industries Garments 1. 21-40 - - - - 1 1 1 3 5.45 2. 41-60 8 4 5 2 2 2 3 26 47.28 3. 61-80 7 5 4 2 2 2 1 23 41.82 4. 81-100 - 1 1 1 - - 03 5.45 Total 15 10 10 5 5 5 5 55 100 Source: Compiled from the primary data 95
Small Scale Industries Management: Issues, Challenges and Opportunities Out of 50 SSI units, only 18 units maintain its stocks. Engineering units and Electric and Electronic industries do not maintain stock because BHEL gives direct order to these units and gets back the finished goods at once. Tyre industry and Metal industry do not maintain stock because these industries produce goods only on the basis of orders. So, there is no chance of stocks in these industries. The remaining 38 SSI units have fewer stocks (refer table 5.36). 5.10.6. Actual stock Out of 100 SSI units, only 45 units maintain its stocks. Engineering units and Steel fabrication industries do not maintain stock because BHEL and other agencies gives direct order to these units and gets back the finished goods at once. Metal industries do not maintain stock because these industries produce goods only on the basis of orders. Auto garage and crusher industries do not maintain stock. So, there is no chance of stocks in these industries (refer table 5.36). Table No. 5.36: Actual Stock (Now) (No. of units)
Types of
Industries
S.
No. Total Saw Mill Rice Mills Rice
Stock Industries Percentage Percentage Auto Garage Steel fabrication Steel Metal Industries Metal Crusher Industries Crusher Furniture Furniture Industries Agro based Industries Agro Readymade Garments Readymade Garments Engineering Engineering Industries 1. 10 – 30 - - 6 5 3 - 1 1 - - 16 35.56
2. 31 – 60 - - 5 3 6 - 2 2 - - 18 40.00
3. 61 & Above - - 4 2 1 - 2 2 - - 11 24.44
Total - - 15 10 10 - 5 5 - - 45 100
Source: Compiled from the primary data With regard to the Actual stock, it is found that there is no variation or change in the either periods (initial period and current period). So, the current period of actual stock is taken in to account for the analysis. 5.10.7. Profit before and after taxation Initially, 100 SSI units had the yearly net profits of Rs.199.34 lakhs. In this, engineering units contributed more to the total net profit. At present, 100 SSI units have the yearly net profits of Rs.1432.78 lakhs. In this, Engineering units alone contribute more to the total net profit. It is observed that there is a vast difference between initial net profit and current net profit. This is mainly because of the recent technologies adopted in all kinds of SSI units in the study area. Table No. 5.37a: Profit before and after taxation (Then) (Rs. in lakhs)
Types of
S. Industries tries
No. Total Saw Mill Saw Rice Mills Rice Industries
Net Profit tax Garage Auto Steel Steel fabrication Metal Indus Crusher Crusher Industries Furniture Industries Furniture Agro based Industries Agro based Readymade Garments Garments Readymade Engineering Industries Engineering 1. Profit Before Tax 85.11 75.25 10.25 8.25 9.15 5.70 5.50 4.75 4.65 5.50 214.11
2. Profit After Tax 80.12 71.12 8.25 7.01 9.05 4.95 4.99 4.35 4.45 5.05 199.34
96
Small Scale Industries Management: Issues, Challenges and Opportunities Table No. 5.37b: Profit before and after Taxation (Now) (Rs. in lakhs)
Types of
Industries
S.
No. Total Saw Mill Saw Rice Mills Rice Auto Garage Auto Steel fabrication Steel Net Profit Industries Metal Crusher Industries Crusher Furniture Industries Furniture Agro based Industries based Agro tax Industries Engineering Readymade Garments Industries Garments Readymade
Profit 1. 680 620 85.56 60.15 59.10 20.25 16.15 12.25 8.45 10.25 1572.16 Before Tax Profit After 2. 595 575 83.12 58.25 57.25 19.75 15.20 11.90 8.10 9.21 1432.78 Tax 5.10.8. Profits on Fixed Capital and Working Capital To study the productivity of SSI units, various financial ratios like profit (both before and after tax) on fixed capital and profit (both before and after tax) on working capital have been analyzed. The purpose of the analysis of profitability ratio is used to assess the adequacy of profits earned by the SSI units and also to ascertain whether the profitability is increasing or decreasing. 5.10.8.1. Profits on Fixed Capital (Before and After Tax) Profit on Fixed Capital (Before Tax) = Profit Before tax / Fixed Capital per unit. Profit on Fixed Capital (After Tax) = Profit After tax / Fixed Capital per unit. 5.10.8.2. Profits on Working Capital (Before and After Tax) Profit on Working Capital (Before Tax) = Profit Before tax/ Working Capital per unit. Profit on Working Capital (After Tax) = Profit After tax/ Working Capital per unit. The following table analyses the profitability of SSI units then and now. Table – 5.37c: Profit on Fixed Capital (Then) (Rs. in lakhs) Profit Fixed Profit on Profit Fixed Profit on S. Types of Before Capital Fixed After Capital Fixed No. Industries Tax per unit Capital Tax per unit Capital 1. Engineering 85.11 19.08 4.46 80.12 19.08 4.19 2. Fabrication 75.25 20.53 3.66 71.12 20.53 3.46 3. Rice Mills 10.25 14.33 0.48 8.25 14.33 0.57 4. Readymade 8.25 21.15 0.39 7.01 21.15 0.33 5. Agro 9.15 7.04 1.29 9.05 7.04 1.28 6. Metal 5.70 14.12 0.40 4.95 14.12 0.35 7. Furniture 5.50 12.32 0.44 4.99 12.32 0.40 8. Saw Mill 4.75 11.54 0.41 4.35 11.54 0.37 9. Auto Garage 4.65 8.60 0.54 4.45 8.60 0.51 10. Crusher 5.50 15.10 0.36 5.05 15.10 0.33 Source: Compiled data from the tables 5.23c & 5.37a. From the table 5.37c, it is found that the profitability of Rice mills has increased from Rs.0.48 lakhs to Rs.0.57 lakhs. This is mainly because of the autonomous price structure and the reduction of depreciation charges. Even then the rice mill is still on through getting raw materials from other districts. The remaining industries such as other nine industries earn less profit because of the payment of tax. 97
Small Scale Industries Management: Issues, Challenges and Opportunities From the below table (5.37d), it is observed that the profit on fixed capital in all the industries earn less profit after the payment of tax. Hence, the entrepreneurs do not have to spend money on fixed capital. Some entrepreneurs do not have to spend money for expand their business because lot of competition and very poor work order for engineering and steel fabrication industries. Table No. 5.37d: Profit on Fixed Capital (Now) (Rs. in lakhs) Profit Fixed Profit on Profit Fixed Profit on S. Types of Before Capital Fixed After Capital Fixed No. Industries Tax per unit Capital Tax per unit Capital 1. Engineering 680 82.08 8.28 595 82.08 7.24 2. Fabrication 620 38.46 16.12 575 38.46 14.95 3. Rice Mills 85.56 36.30 2.35 83.12 36.30 2.28 4. Readymade 60.15 37.70 1.59 58.25 37.70 1.54 5. Agro based 59.10 16.10 3.67 57.25 16.10 3.55 6. Metal 20.25 45..20 0.44 19.75 45.20 0.43 7. Furniture 16.15 30.54 0.52 15.20 30.54 0.49 8. Saw Mills 12.25 26.82 0.45 11.90 26.82 0.44 9. Auto Garage 8.45 20.30 0.41 8.10 20.30 0.39 10. Crusher 10.25 27.34 0.37 9.21 27.34 0.33 Source: Compiled data from the tables 5.23c & 5.37b. Table No. 5.37e: Profit on Working Capital (Then) (Rs. in lakhs) Profit Working Profit on Profit Working Profit on S. Types of Before Capital Working After Capital Working No. Industries Tax per unit Capital Tax per unit Capital 1 Engineering 85.11 7.37 11.54 80.12 7.37 10.87 Steel 2 75.25 12.21 6.16 71.12 12.21 5.82 Fabrication 3 Rice Mills 10.25 12.12 0.84 8.25 12.12 0.68 Readymade 4 8.25 15.37 0.53 7.01 15.37 0.45 Garments Agro based 5 9.15 13.66 0.67 9.05 13.66 0.66 Industries Metal 6 5.70 14.58 0.39 4.95 14.58 0.33 Industries Furniture 7 5.50 10.43 0.52 4.99 10.43 0.47 Industries 8 Saw Mills 4.75 27.47 0.17 4.35 27.47 0.15 9 Auto Garage 4.65 0.29 16.03 4.45 0.29 15.34 Crusher 10 5.50 2.43 2.26 5.05 2.43 2.07 Industries Source: Compiled data from the tables 5.24c & 5.37a. From the table 5.37e, it is found that the profitability of all the industries earn less profit because of the payment of tax. From the below table (5.37f), it is observed that the profit on working capital in Auto Garage and Metal industry is same in both profit before tax and profit after tax. Auto Garage renders only service so the entrepreneur who runs the industry does not need to pay the tax and the Metal industry too does not pay the tax because the entrepreneurs get the raw materials directly from where they get the orders. The rest of the industries such as Engineering, Steel fabrication industries, Rice mills, and other industries earn less profit after the payment of tax.
98
Small Scale Industries Management: Issues, Challenges and Opportunities Table No. 5.37f: Profit on Working Capital (Now) (Rs. in lakhs) Profit Working Profit on Profit Working Profit on S. Types of Before Working After Working No. Industries Capital Capital Tax per unit Capital Tax per unit Capital 1. Engineering 680 18.87 36.03 595 18.87 31.53 Steel 2. 620 39.36 15.75 575 39.36 14.60 Fabrication 3. Rice Mills 85.56 44.44 1.92 83.12 44.44 1.87 Readymade 4. 60.15 24.10 2.49 58.25 24.10 2.41 Garments Agro Based 5. 59.10 17.63 3.35 57.25 17.63 3.24 Industries 6. Metal Industries 20.25 17.58 1.15 19.75 17.58 1.12 7. Furniture 16.15 12.21 1.32 15.20 12.21 1.24 8. Saw Mills 12.25 50.21 0.24 11.90 50.21 0.23 9. Auto Garage 8.45 0.33 25.60 8.10 0.33 24.54 Crusher 10. 10.25 4.81 2.13 9.21 4.81 1.91 Industries Source: Compiled data from the tables 5.24c & 5.37b. Table No. 5.37g: Profit per unit (Rs. in lakhs) S. No. Types of Industries Then Now Change 1 Engineering 3.20 23.80 20.60 2 Steel Fabrication 4.74 38.33 33.59 3 Rice Mills 0.55 5.54 4.99 4 Readymade Garments 0.70 5.83 5.13 5 Agro Based Industries 0.91 5.72 4.81 6 Metal Industries 0.99 3.95 2.96 7 Furniture 1.00 3.04 2.04 8 Saw Mills 0.87 2.38 1.51 9 Auto Garage 0.89 1.62 0.73 10 Crusher Industries 1.01 1.84 0.83 Source: Compiled from table no. 5.37a and 5.37b It is observed from the above table that the increase in the profit per unit was due to the development and the expansion of SSI units. Profit per unit was worked out by taking into account the ratio between the total profit and the total number of units. Initially, the total profit was Rs.199.34 lakhs and the total number of units was 100 and ratio is found to be Rs.1.99 lakhs. At present, it has increased to Rs.14.32 lakhs where the total profit and the total number of units are Rs.1432.78 lakhs and 100 respectively. 5.10.9. Investment of net profits During the initial period, 40 SSI units out of 100 units had reinvested their net profits ranging between 61-80 per cent for further developments. 14 units reinvested their net profits ranging between 81-100 per cent for the fixed capital.
99
Small Scale Industries Management: Issues, Challenges and Opportunities Table No. 5.38a: Net Profit Re-Investment (Then) Crosstab (No. of Units)
Types of
Industries S.
No. ustries Total Saw Mill Saw Rice Mills Rice Ind
Net Profit Percentage Readymade Readymade Engineering Engineering Auto Garage Auto Steel fabrication Steel Re-Investment Industries Metal Crusher Industries Crusher Furniture Industries Furniture Garments Industries Garments
Percentage Industries based Agro 2 1 1 1 1. 10 – 20 ------5 5 8% 20% 20% 20% 1 1 2 1 2 1 2. 21 – 40 - - - - 8 8 4% 6.7% 20% 10% 40% 20% 6 4 8 3 3 2 2 3 3 3. 41 – 60 - 34 34 24% 26.7% 53.3% 30% 30% 40% 40% 60% 60% 14 5 7 5 4 2 2 4. 61 – 80 - - 40 40 56% 33.3% 46.7% 50% 40% 40% 40% 2 5 2 2 3 5. 81 – 100 - - - - - 14 14 8% 33.3% 20% 40% 60% 6. Nil ------25 15 15 10 10 5 5 5 5 5 Total 100 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: Compiled from the primary data. Note: Percentage within a sample Chi-Square Tests Particulars Value df Asymp. Sig. (2-sided) Pearson Chi-Square 57.637(a) 36 .012 Likelihood Ratio 63.279 36 .003 Linear-by-Linear Association 3.715 1 .054 N of Valid Cases 100 a 44 cells (88.0%) have expected count less than 5. The minimum expected count is .25. INFERENCE From the above Chi-square test, the significance value is 0.012 which is less than 0.5, the level of significance; we conclude there is significant association of actual net profit Re-investment (Then) in sample industries. Table No-5.38b: Net Profit Re-Investment (Now) Crosstab (No. of Units)
Types of ge
Industries S.
No. Total Saw Mill Saw Rice Mills Rice Industries Industries
Net Profit Percentage Agro based based Agro Readymade Readymade Engineering Engineering Auto Gara Auto
Re-Investment fabrication Steel Metal Industries Metal Crusher Industries Crusher Furniture Industries Furniture Percentage Industries Garments 3 2 3 1 1 1 1 1. 10 – 20 - - - 12 12 12% 13.3% 20% 10% 10% 20% 20% 4 3 2 3 2 1 2 1 1 2. 21 – 40 - 19 19 16% 20% 13.3% 30% 20% 20% 40% 20% 20% 10 5 5 5 2 2 2 1 1 2 3. 41 – 60 35 35 40% 33.3% 33.3% 50% 20% 40% 40% 20% 20% 40% 4 3 2 1 4 1 3 2 2 1 4. 61 – 80 23 23 16% 20% 13.3% 10% 40% 20% 60% 40% 40% 20% 4 2 3 1 1 5. 81 – 100 - - - - - 11 11 16% 13.3% 20% 10% 20% 6. Nil ------25 15 15 10 10 5 5 5 5 5 Total 100 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: Compiled from the primary data. Note: Percentage within a sample 100
Small Scale Industries Management: Issues, Challenges and Opportunities Chi-Square Tests Particulars Value Df Asymp. Sig. (2-sided) Pearson Chi-Square 21.489(a) 36 .973 Likelihood Ratio 25.754 36 .897 Linear-by-Linear Association .017 1 .896 N of Valid Cases 100 a 46 cells (92.0%) have expected count less than 5. The minimum expected count is .55. At present, 35 SSI units out of 100 units had reinvested their net profits ranging between 41-60 per cent for further developments. 11 units reinvested their net profits ranging between 81-100 per cent for the fixed capital. INFERENCE From the above Chi-square test, the significance value is 0.973 which is less than 0.55, the level of significance; we conclude there is significant association of actual net profit Re-investment (Now) in sample industries. 5.7. DETAILS OF TAX EXPENDITURE OF THE ENTERPRISES Taxes such as excise duty, sales tax, income tax and purchase tax are considered to be the major expenditure for SSI units in the study area. 5.7.1. Excise duty Excise duty is a tax on manufacture or production of goods. Excise duty on alcohol, alcoholic preparations, and narcotic substances is collected by the State Government and is called “State Excise” duty. The Excise duty on rest of goods is called “Central Excise” duty and is collected in terms of Section 3 of the Central Excise Act, 1944. Sales Tax is different from the Excise duty as former is a tax on the act of sale while the latter is a tax on the act of manufacture or production of goods. Excise duty concessions have been given to the small scale industries in what is called the General Excise Duty Exemption Scheme for small Industries. This is to enable the small scale industries to compete on favourable terms with their counterparts in the large and medium sector. Excise exemption to small scale units is mainly/chiefly granted under notification no. 175/86-CE dated 1.3.1986 as amended from time to time. At the initial phase, SSI units expended Rs.53.35 lakhs per year for excise duty, sales tax, income tax and purchase tax. From which, the single engineering unit alone paid Rs.3 lakhs per year and steel fabrication unit paid Rs.2.50 lakhs per year for excise duty. At present, Engineering units pay Rs.8 lakh per year and saw mill alone pays Rs.1.25 lakh per year for excise duty. This shows the productive capacity of these industries. 5.11.2. Sales tax A sales tax is a consumption tax charged at the point of purchase for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale. A portion of the sale may be exempt from the calculation of tax, because sales tax laws usually contain a list of exemptions. Laws governing the tax may require it to be included in the price (tax-inclusive) or added to the price at the point of sale. Most sales taxes are collected from the buyer by the seller, who remits the tax to a government agency. The economic burden of the tax usually falls on the purchaser, but in some circumstances may fall on the seller. Sales taxes are commonly charged on sales of goods, but many sales taxes are also charged on sales of services. Ideally, a sales tax would have a high compliance rate, be difficult to avoid, and be simple to calculate and collect. Initially, Most of the SSI units paid maximum of sales tax. Engineering units alone contributed Rs.10.50 lakhs per year and followed by steel fabrication industries Rs.8.50 lakhs for sales tax. Currently, engineering units alone contribute Rs.20.25 lakhs per year and followed by steel fabrication units Rs.10.50 lakhs for sales tax. Engineering units do not pay sales tax but BHEL deducts the amount for sales tax during the settlement of bill. 101
Small Scale Industries Management: Issues, Challenges and Opportunities 5.11.3. Income tax An income tax is a tax levied on the income of individuals or business (corporations or other legal entities). Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate tax, corporate income tax, or profit tax. Individual income taxes often tax the total income of the individual (with some deductions permitted), while corporate income taxes often tax net income (the difference between gross receipts, expenses, and additional write-offs). The definition of income differs and often allows the notional reductions of income (reduction based on number of children supported). Personal income tax is often collected on a pay-as-you-earn basis, with small corrections made soon after the end of the tax year. These corrections take one of two forms: payments to the government, for taxpayers who have not paid enough during the tax year; and tax refunds from the government for those who have overpaid. Income tax systems will often have deductions available that lessen the total tax liability by reducing total taxable income. They may allow losses from one type of income to be counted against another. For example, a loss on the stock market may be deducted against taxes paid on wages. Other tax systems may isolate the loss, such that business losses can only be deducted against business tax by carrying forward the loss to later tax years. In the beginning, most of the SSI units paid less amount of income tax. Currently, engineering units alone pay Rs.24 lakhs per year for income tax. Steel fabrication units pay Rs.21.10 lakhs per year. This shows the capacity of SSI units which earn more, so that, these units do not bother about paying more income tax. This is indeed a major source of tax revenue for the Government. 5.11.4. Purchase tax A purchase tax would be similar to a value-added tax (VAT) except that it would be on the purchase rather than the sale, and could be a fixed per cent of the gross amount rather than on the net after deductions. This would make accounting less costly and susceptible to fraud, and allow for the complexities of production processes in which many inputs go into a product or service. Table No. 5.39a: Tax Expenditure (Then) (Rs. in lakhs)
n
Types of
Industries S. No. Total Saw Mill Saw Rice Mills Rice Industries Percentage Details Garage Auto Steel Steel fabricatio Metal Industries Crusher Crusher Industries Furniture Industries Furniture Agro based Industries Agro based Readymade Garments Garments Readymade Engineering Industries Engineering 1. Excise Duty 3.00 2.50 - - - - - 0.80 - - 6.30 11.81 2. Sales Tax 10.50 8.50 1.50 1.40 1.20 0.90 1.20 0.70 - 0.80 26.70 50.05 3. Income Tax 3.50 4.00 1.10 1.20 1.10 0.85 0.80 1.10 0.60 0.70 14.95 28.02 4. Purchase Tax - - 1.75 1.90 1.50 0.25 - - - - 5.40 10.12 Total 17 15 4.35 4.5 3.80 2.00 2.00 2.60 0.60 1.50 53.35 100 Source: Compiled from the primary data Table No. 5.39b: Tax Expenditure (Now) (Rs. in lakhs)
Types of tries
Industries
S. No. Total Saw Mill Rice Mills Rice Industries Percentage Readymade Readymade Engineering Engineering Details Auto Garage Steel fabrication Steel Metal Industries Metal Crusher Industries Crusher Furniture Furniture Indus Garments Industries Garments Agro based Industries Agro 1. Excise Duty 5.00 6.00 - - - - - 1.25 - - 12.25 8.80 2. Sales Tax 20.25 10.50 3.50 2.50 2.85 1.15 3.90 2.75 - 1.95 49.35 35.47 3. Income Tax 24.00 21.10 2.60 2.70 3.15 1.60 1.50 0.90 0.95 2.20 60.70 43.62 102
Small Scale Industries Management: Issues, Challenges and Opportunities 4. Purchase Tax - - 12.50 1.50 2.10 0.75 - - - - 16.85 12.11 Total 49.25 37.60 18.60 6.70 8.10 3.50 5.40 4.90 0.95 4.15 139.15 100 Source: Compiled from the primary data From the study, it is observed that out of ten categories of industries, Rice mills alone have contributed more for purchase tax because of the purchase of raw materials (paddy) from other districts Comparing up with the previous years, contribution towards the purchase tax by the entrepreneurs is more. This is mainly because of the poor productivity of agriculture in India and coercing the entrepreneurs to obtain the raw materials at the higher cost. 5.12. DETAILS OF OTHER EXPENDITURES Maintenance cost, electric bill, cost for fuels, transport cost, wages for workers etc., are designated as working capital or other expenditures. These expenditures play a vital role in enhancing the performance of SSI units in the study area. Table No. 5.40a: Other Expenditure (Then) (Rs. in lakhs)
Types of
Industries S. No. Total Saw Mill Saw Rice Mills Rice Industries Industries
Other Percentage Engineering Engineering Expenditure Garage Auto Steel Steel fabrication Metal Industries
(per month) Crusher Industries Furniture Industries Furniture Agro based Industries Agro based Readymade Garments Garments Readymade 1. Power & Fuel 2.10 2.05 1.10 0.80 0.80 0.55 0.53 0.40 0.21 0.27 8.81 1.66 2. Raw Materials 95.08 90.10 76.50 55.50 60.50 15.25 12.25 21.10 0.04 18.20 444.52 83.78 Plant & 3. 1.65 1.25 0.75 0.70 0.55 0.65 0.40 0.20 0.16 0.18 6.49 1.22 Machinery Building / 4. 1.10 1.50 1.55 1.55 1.65 1.60 1.30 1.05 0.80 0.18 12.28 2.32 Plot / Shed Transport 5. 1.85 1.50 1.65 1.20 1.10 1.05 1.02 1.05 - 0.90 11.32 2.23 Cost 6. Wages 15.70 14.75 1.90 1.80 1.85 1.55 1.40 1.20 0.95 1.10 42.20 7.95 7. Any Others 0.95 0.50 0.49 0.45 0.43 0.38 0.40 0.15 0.10 0.08 3.93 0.75 Total 118.43 111.65 83.94 62.00 66.88 21.03 17.30 25.15 2.26 21.91 530.55 100 Source: Compiled from the primary data Table No. 5.40b: Other Expenditure (Now) (Rs. in lakhs)
Types of
Industries ing ing S. No.
Other Total Saw Mill Saw Rice Mills Rice Industries
Expenditure Percentage Readymade Readymade Engineer (per month) Garage Auto Steel Steel fabrication Metal Industries Crusher Crusher Industries Furniture Industries Furniture Garments Industries Garments Agro based Industries Agro based 1. Power & Fuel 8.10 7.05 1.50 0.95 0.90 0.85 0.53 0.45 0.27 0.87 21.47 2.19 2. Raw Materials 35.08 37.10 175.50 85.50 60.50 35.25 22.25 51.10 0.06 28.20 530.54 54.17 Plant & 3. 101.65 105.25 2.75 1.70 1.55 1.45 0.40 0.50 0.17 4.18 219.60 22.37 Machinery Building / 4. 1.30 1.50 1.55 1.75 1.85 1.40 1.35 1.08 0.85 0.21 12.84 1.31 Plot / Shed Transport 5. 12.85 15.50 10.65 3.80 1.30 1.05 1.08 1.06 - 0.90 48.19 8.32 Cost 6. Wages 55.70 58.75 6.90 6.80 5.85 1.15 1.45 1.40 0.96 1.18 140.14 14.31 7. Any Others 1.95 1.70 0.59 0.48 0.49 0.30 0.42 0.19 0.15 0.15 6.42 0.65 Total 216.63 226.85 199.44 100.98 72.44 41.45 27.48 55.78 2.46 35.69 979.20 100 Source: Compiled from the primary data 103
Small Scale Industries Management: Issues, Challenges and Opportunities Table No. 5.40c: Expenditure per unit (Rs. in lakhs) S. No. Types of Industries Then Now Change 1 Engineering 4.73 8.66 3.93 2 Steel Fabrication 7.44 15.12 7.68 3 Rice Mills 5.59 13.29 7.7 4 Readymade Garments 6.2 10.09 3.89 5 Agro Based Industries 6.69 7.24 0.55 6 Metal Industries 4.20 8.29 4.09 7 Furniture 3.46 5.49 2.03 8 Saw Mills 5.03 11.15 6.12 9 Auto Garage 0.45 0.49 0.04 10 Crusher Industries 4.38 7.13 2.75 Source: Compiled data from the tables 5.29a & 5.29b. From the above table, it is observed that the increase in the expenditure per unit has been found. This is mainly due to the scarcity of raw materials, hike in the surcharge of electricity and telephone bills and hike in fuel cost. The expenditure per unit was worked out by taking into account the ratio between the total expenditure and the total number of units. Initially, the total expenditure was Rs.530.55 lakhs and the total number of units was 100 and ratio is found to be Rs.5.30 lakhs. At present, it has increased to Rs.9.79 lakhs where the total expenditure and the total number of units are Rs.979.20 lakhs and 100 respectively. 5.12.1. Power and fuel At the initial phase, most of the SSI units did expend less for power and fuels. Without which, no industry would run. Recently, most of the SSI units do expend more for power and fuels because of the hike in unit cost and price of fuel. All SSI units contribute Rs.21.47 lakhs per month for power and fuels. From which, engineering units alone contribute more for power. This shows that the entrepreneurs are least bothered about paying more for power; their avowed aim is to produce more goods. 5.12.2. Raw Materials During the initial periods, the total expenditure on raw materials was Rs.444.52 lakhs per month. Recently, it is about Rs.530.54 per year for raw materials. From which, engineering and steel fabrication units alone expend Rs.35.46 lakhs and Rs.37.10 lakhs per month. This is the poorest amount as compared to the previous phase. The reason is BHEL supplies raw materials to Small Scale Engineering units in the study area. From which recently rice mills was spent more raw material cost Rs.175.50 lakhs because more paddy import from other state. 5.12.3. Transportation cost Without transport, entrepreneurs cannot get raw materials. So, it is considered to be the most important element in SSI units. Initially, total transport cost was Rs.11.32 lakhs per month. Recently, it has gone up to Rs.48.08 lakhs per month because of the hike in price of fuel. Engineering units and rice mills incur more transport cost comparing up with other SSI units in the study area. 5.12.4. Wages (Remuneration) During the initial stages, the total amount of wages Rs.42.20 lakhs per month was expended. Currently, it has been increased to Rs.140.14 lakhs per month for all SSI units in the study area. Engineering and Steel fabrication units expend more on wages because the number of workers working in engineering and steel fabrication units are more. Remuneration in the form of wages and salaries has considerably increased due to high inflation, more work load, high cost of living, Government policies and functional remuneration according to the types of work performed. 5.12.5. Others Apart from the working capital such as raw materials, transport cost, taxation, power and fuel expenditure. There are other incidental expenses such as rent, interest on loan, telephone bills and lease payments, staff 104
Small Scale Industries Management: Issues, Challenges and Opportunities welfare etc., have to be incurred for the development of SSI units. Though the amount is less, these expenses are indispensable for the hassle free running of SSIs. 5.13. GENERAL PROBLEMS Generally, SSI units are hampered by marketing problem, dearth of finance, raw material problem, competition, labour problem, power problem, Environment problem and Government polices and Investment. Table No. 5.41a: General Problem (Then) (I Rank Only) Crosstab (No. of Units)
Types of
Industries
S. No. Total Saw Mill Saw Rice Mills Rice Industries Percentage Readymade Readymade Engineering Engineering Reasons Garage Auto Steel Steel fabrication Metal Industries Crusher Crusher Industries Furniture Industries Furniture Garments Industries Garments Agro based Industries Agro based 10 7 6 3 3 1 2 2 1 2 1. Finance Problem 37 37 40% 46.7% 40% 30% 30% 20% 40% 40% 20% 40% 4 2 1 2 3 1 2. Marketing Problems - - - - 13 13 16% 13.3% 6.7% 20% 30% 20% Raw Material 3 1 3 3 2 3. - - 240% - - 14 14 Problems 12% 6.7% 20% 30% 20% 1 1 1 1 1 1 3 2 4. Competition - - 11 11 4% 6.7% 6.7% 10% 20% 20% 60% 40% 3 2 3 2 2 2 1 5. Labour Problems - - - 15 15 12% 13.3% 20% 20% 40% 40% 20% 4 2 1 1 6. Power Problems ------08 08 16% 13.3% 6.7% 20% Environmental 1 7. ------1 1 Problems 20% Govt. Policies and 1 8. ------1 1 Investments 10% 25 15 15 10 10 5 5 5 5 5 Total 100 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: Compiled from the primary data. Note: Percentage within a sample. Chi-Square Tests Particulars Value df Asymp. Sig. (2-sided) Pearson Chi-Square 77.186(a) 63 .108 Likelihood Ratio 62.320 63 .501 Linear-by-Linear Association .977 1 .323 N of Valid Cases 100 a 77 cells (96.3%) have expected count less than 5. The minimum expected count is .05. From the study, it is observed that initially finance was the major problem for Engineering units, Steel fabrication units, Rice mills, readymade garments and agro based industries and saw mills in the study area. At the time, the nationalized banks were reluctant to provide loans to these units. So, the entrepreneurs of these units had to depend upon some other sources for their survival. Few Engineering units and steel fabrication units were severely affected by marketing problems due to the hectic competition prevailing in the study area and power problem and labour problem. It was very difficult to get technical labourers in the days. Hence, Engineering units were affected drastically. In auto Garage industries was difficult to face competition. INFERENCE From the above Chi-square test, the significance value is 0.973 which is less than 0.55, the level of significance; we conclude there is significant association of general problem in sample industries (Then) based on the first rank only. 105
Small Scale Industries Management: Issues, Challenges and Opportunities Table No. 5.41b: General Problem (Now) (I Rank Only) Crosstab (No. of Units)
Types of
Industries
S. ndustries
No. Total Saw Mill Rice Mills Rice Industries Industries Percentage Agro based Agro Readymade Readymade Reasons Engineering Auto Auto Garage Steel fabrication Steel Metal Industries Metal Crusher I Crusher Furniture Furniture Industries Garments Industries Garments 5 4 3 3 3 1 1 1 1 1. Finance Problem - 22 22 20% 26.7% 20% 30% 30% 20% 20% 20% 20% Marketing 1 2 4 4 4 1 1 1 2. - 18 18 Problems 4% 13.3% 26.7% 40% 40% 20% 20% 20% Raw Material 3 3 1 1 1 1 3. - - - - 10 10 Problems 20% 20% 10% 10% 20% 20% 8 5 2 1 2 1 1 2 3 1 4. Competition 26 26 32% 33.3% 13.3% 10% 20% 20% 20% 40% 60% 20% 6 1 2 2 1 1 5. Labour Problems - - - - 13 15 24% 6.7% 13% 40% 20% 20% 5 1 1 1 6. Power Problems - - - 08 08 20% 6.7% 10% 20% Environmental 3 7. ------3 3 Problems 60% Govt. Policies and 8 ------Investments 25 15 15 10 10 5 5 5 5 5 Total 100 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: Compiled from the primary data Note: Percentage within a sample. Chi-Square Tests Particulars Value df Asymp. Sig. (2-sided) Pearson Chi-Square 102.148(a) 54 .000 Likelihood Ratio 73.143 54 .042 Linear-by-Linear Association .411 1 .522 N of Valid Cases 100 a 68 cells (97.1%) have expected count less than 5. The minimum expected count is .15. Currently, less number of SSI units has been affected by financial problem as compared to the previous phase. This is mainly because of the provision of Government loans to these SSI units. Recently, most of the SSI units are affected by different problems. From the survey, it is observed that majority of the SSI units have been affected by hectic competition. This is mainly due to large number of units available in the study area. Engineering units are mostly affected by erratic power supply and lack of skilled laborers. Crusher industries are severely affected stringent Government policies (prohibition of quarrying and environmental protection Act). So, entrepreneurs of Crusher industries find it very difficult to run their industries in the study area. Of late, Engineering units are also affected by poor orders through BHEL because of the huge number of Small Scale Engineering units in the study area. Rice mills, readymade garments, and agro based industries are affected by marketing problem. INFERENCE From the above Chi-square test, the significance value is 0.000 which is less than 0.15, the level of significance; we conclude there is significant association of general problem (Now) in sample industries based on first rank only. 5.14. OTHER BUSINESS / ENTERPRISE OF THE ENTREPRENEURS It is lucidly understood that most of the entrepreneurs concentrate on their own professions or related professions. Only 10 out of 100 entrepreneurs have concentrated on other businesses such as milk business, road contract, building contract and brick making too.
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Small Scale Industries Management: Issues, Challenges and Opportunities 5.15. EXPECTATION FROM THE GOVERNMENT / OTHER ORGANIZATION TO IMPROVE BUSINESS It is clearly observed that most of the SSI units are affected mainly because of the erratic power supply. It hampers production severely in SSI units. So, the entrepreneurs would request the Government to take action to rectify the problem of power shortage in SSI units in the study area. Most of the entrepreneurs felt that the Government would have to reduce certain restrictions such as prohibition of quarrying and environmental protection Act on Crusher units. If so, the entrepreneurs can continue their business without any constraints. Table No. 5.42: Entrepreneurs Expectations from the Government Crosstab (No. of respondents)
Types of
Industries S. No. entage Expectations Total Saw Mill Saw Furniture Furniture Rice Mills Rice Garments Industries Industries Industries Industries Perc Agro based Agro based
of the Readymade Engineering Engineering Auto Garage Auto Steel Steel fabrication entrepreneurs Metal Industries Crusher Crusher Industries Continuous 8 3 3 2 2 1 1 1 1 1. power supply & - 22 22 32% 20% 20% 20% 20% 20% 20% 20% 20% Power subsidy Infrastructural 4 3 5 3 2 1 2. - - - - 18 18 Facility 16% 20% 33.3% 30% 20% 20% Reduction of 3 4 2 2 2 1 4 3. Government - - - 18 18 12% 26.7% 13% 20% 40% 20% 80% restriction Reduction of 6 2 2 3 1 1 2 2 1 4. - 20 20 Power tariff 24% 13.3% 13.3% 30% 10% 20% 40% 40% 20% 4 3 3 2 3 1 1 1 4 6. Nil - 22 22 16% 20% 20% 20% 30% 20% 20% 20% 80% 25 15 15 10 10 5 5 5 5 5 Total 100 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: Compiled from primary data. Note: Percentage within a sample Chi-Square Tests Particulars Value df Asymp. Sig. (2-sided) Pearson Chi-Square 40.220(a) 36 .289 Likelihood Ratio 41.226 36 .253 Linear-by-Linear Association 2.919 1 .088 N of Valid Cases 100 a 47 cells (94.0%) have expected count less than 5. The minimum expected count is .90. INFERENCE From the above Chi-square test, the significance value is 0.289 which is less than 5, the level of significance; we conclude there is significant association of entrepreneurs expectations from the government in sample industries. Table No. 5.43: Need for technical consultancy Crosstab (No. of respondents)
Types of
S. Industries Need for
No. Steel Total Metal Metal
technical Crusher Saw Mill Furniture Furniture Rice Mills Rice Garments Industries Industries Industries Industries Industries Industries fabrication Percentage Agro based Agro Readymade Readymade Engineering Engineering consultancy Auto Garage 5 7 4 3 1. Yes ------19 19 20% 46.7% 40% 30% 20 8 15 6 7 5 5 5 5 5 2. No 80 80 80% 53.3% 100% 60% 70% 100% 100% 100% 100% 100% 25 15 15 10 10 5 5 5 5 5 Total 100 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: Compiled from the primary data. 107
Small Scale Industries Management: Issues, Challenges and Opportunities Note: Percentage within a sample. Chi-Square Tests Particulars Value df Asymp. Sig. (2-sided) Pearson Chi-Square 20.511(a) 9 .015 Likelihood Ratio 25.819 9 .002 Linear-by-Linear Association 4.923 1 .027 N of Valid Cases 100 a 15 cells (75.0%) have expected count less than 5. The minimum expected count is .95. 5.16. NEED FOR TECHNICAL CONSULTANCY From the study, it is understood that most of the entrepreneurs do not need technical consultancy because there are more skilled workers in SSI units. So, entrepreneurs are not interested in technical consultancy. INFERENCE From the above Chi-square test, the significance value is 0.015 which is less than 5, the level of significance; we conclude there is significant association of technical consultancy in sample industries. Table No. 5.44: Opinion of the Entrepreneurs on Government schemes Crosstab (No. of units)
Types of
Industries
S. No. Total Saw Mill Rice Mills Rice Industries
Opinion of the Percentage etal industries etal Entrepreneurs Auto Garage M Steel fabrication Steel Crusher Industries Crusher Furniture Furniture Industries Agro based Industries Agro Readymade Garments Readymade Garments Engineering Engineering Industries 1 2 3 3 1 2 3 1. Not Good - - - 15 15 67% 13.3% 30% 30% 20% 40% 60% 20 11 9 6 3 1 3 2 2. Good - - 55 55 80% 73.3% 60% 60% 30% 20% 60% 40% 3 2 3 1 1 1 3. Excellent - - - - 11 11 12% 13.3% 20% 10% 10% 20% 2 1 1 3 3 2 5 2 4 No idea - - 19 19 8% 6.7% 6.7% 30% 60% 40% 100% 40% 25 15 15 10 10 5 5 5 5 5 Total 100 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: Compiled from the primary data. Note: Percentage within a sample 5.17. OVER ALL OPINION OF THE ENTREPRENEURS ABOUT THE GOVERNMENT SCHEMES Most of the entrepreneurs of SSI units in the study area are felt that the Government schemes are indeed upholding their business. Out of hundred entrepreneurs, fifteen are not for the Government schemes because it hampers their business drastically for example, Crusher units. From this study fifty five respondents are felt that government schemes are good for entrepreneur. Out of which 19 respondents are not said any idea. Chi-Square Tests Particulars Value Df Asymp. Sig. (2-sided) Pearson Chi-Square 65.016(a) 27 .000 Likelihood Ratio 66.803 27 .000 Linear-by-Linear Association 3.810 1 .051 N of Valid Cases 100 a 35 cells (87.5%) have expected count less than 5. The minimum expected count is .55.
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Small Scale Industries Management: Issues, Challenges and Opportunities INFERENCE From the above Chi-square test, the significance value is 0.000 which is less than 5, the level of significance; we conclude there is significant association of opinion of the entrepreneurs about the government scheme in sample industries. 5.18. CONCLUSION In the study area, there are slew of prospects and some problems found in the sample SSI units. Most of these industries adopt modern technology in order to upgrade their performance. Even some of the traditional industrial units (Rice mills and Crusher industries) too avail modern methods of production. At present, most of the SSI units perform well when compared to the earlier stage. Besides, this study has found that no units would get any government assistance including financial and non financial benefits. Marketing is a major problem for all SSI units. Under the aegis of the Government, the overall picture on the performance of the sample SSI units is good.
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Small Scale Industries Management: Issues, Challenges and Opportunities
Chapter – VI
Summary and Conclusion
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Small Scale Industries Management: Issues, Challenges and Opportunities 6.1. INTRODUCTION The primary data collection on hundred Small Scale Industrial units established in Tiruchirappalli district, registered with the Inspector of factories in the year 2013 and earlier and still functioning were taken for the study. The hundred sample industries have been classified into ten categories of industries. These industries have both problems and prospects. Under the aegis of the analysis of the study, the researcher has ascertained the findings of the study. 6.2. FINDINGS OF THE STUDY After a detailed analysis of the study, the investigator could arrive at the following findings: . The growth of SSIs has been increased in the Tiruchirappalli district from 16,155 units in 2000-01 to 21,338 units in 2007-08, due to various government incentives. The average annual growth rate of number of SSI sector for the period 2000-01 to 2007-08 works out to be 4.20 per cent. . Trend in industrial wise classification of small scale industries in the Tiruchirappalli district from 762 units in 2007 to 12,322 units in 2012, due to various government incentives schemes and polices based growth of SSI in Tiruchirrappali district. . The generation of employment by SSI has also been increased from 47,940 in 2000-01 to 66820 at the end of March 2008. The average annual growth rate of employment in the SSI sector for the period 2000- 2001 to 2007-08 works out to be five per cent. . Employment generation in different types of SSI has been increased from 8825 in 2007 to 114064 at the end of 2012. . The investment has risen from Rs.20018.45 lakhs in 2000-01 to Rs.2,02,618.20 lakhs at the end of March 2008, due to various schemes, incentives and modernization process. Investment and employment generation have exhibited a negative correlation. The correlation coefficient is -0.95. The investment and employment of SSIs are moving in the opposite direction. But the employment generation is not proportional to the amount invested. It can be attributed that SSIs’ in the district are capital intensive. The amount of investment per SSI unit and investment per worker has increased during the study period. . This study is based on complete enumeration method. The hundred SSI units have been divided in to ten categories of industries such as Engineering industries, Steel fabrication, Rice mills, Readymade Garments industries, Agro based industries, Metal industries, Furniture Industries, Saw Mills, Auto Garage industries and Crusher industries. The hundred SSI units have been classified in to nine taluk, based on industrial registration from inspector of factories Tiruchirappalli. Majority of the twenty one industries are located in Tiruverambur taluk . In the beginning of 1970’s, there was only a single engineering unit functioning in the study area. Number of engineering units has been gradually increasing over the study period. After the advent of BHEL, SSIs have got more work orders. This is the major reason why the performance of SSIs has increased considerably in the study area. During the year 1994-2003, most of the SSI units had come into existence under the aegis of BHEL, because there were slew of work orders for BHEL from different parts of countries. At present more number of SSI engineering and steel fabrication units there were slew of work orders from BHEL. Some of the engineering and steel fabrication units were closed because low work order and labour problem. . The survey revealed that all the hundred units were set up and managed by males. More partners are found in engineering and steel fabrication units as compared to other categories of industries. This is mainly because of the huge investment and lucrative business. . In the beginning, Sole proprietary concerns were numbered seventy five. Later twenty two units did follow partnership. Of which, majority of the engineering units and steel fabrication units followed the paradigm of partnership. This is mainly because of the huge investment, lack of co-operation among family members, old age problem and death of the proprietors and so on. Through the partnership, most of the Small Scale Industries flourished the study area. Majority of the units were run by proprietorship.
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Small Scale Industries Management: Issues, Challenges and Opportunities Three units were run by joint family entrepreneur. The level of significance in nature of organization is not significant. . From the hundred SSI units, fifty three units are operated by founders and forty four units are run by partners (contribution of engineering steel fabrication and rice mills were towards partnership is more because of huge investment). Two Rice mill units are found to be sick because of the hectic competition and marketing problems faced by the entrepreneurs. One Metal industry is run by a heir (hereditary occupation). It is observed three units were run by heir. . Out of hundred SSI units, eighty five units have run in their own premises (contribution of Engineering units, steel fabrication, rice mills and readymade garments towards own premises is more). This shows the capacity of engineering units. Twelve SSI units have functioned in rented premises and three units have functioned on leased (Rice mill, Engineering unit and one crusher unit). This shows the optimistic view on the performance of SSIs in the study area. . In the study, it is observed that most of the SSI units such as Engineering units, steel fabrication, Rice mills, Furniture industries, and Saw mill are run in Factory buildings. Most of the readymade garments and crusher units are run in trading centers. Auto- garage are functioned in service centers. . Of the hundred SSI units, sixty one units are from semi urban area. Mostly engineering units, steel fabrication, rice mills and agro based are located in semi urban area. This contributes a major role in the development of SSI units in the study area. Twenty six SSI units namely readymade garments, Furniture industries, saw mill and metal industry are located in urban areas. Thirteen SSI units run from rural area of the stringent laws prohibiting pollution. . Out of hundred SSI units, ninety SSI units are in original place of operation. Ten units are in the place of locations are the other area. Because of the stringent laws prohibiting pollution and also labour problem. . It is found that most of the SSI units are run by entrepreneurs between the age group of 46-55years (34%). This is mainly because of the maturity and experience in the field of Small Scale Industrial units. Thirty three entrepreneurs between the age group of 36-45 in the study area. . Of the 100 SSI units incorporated in the survey study, 36 units are managed by ITI and Diploma holders. Eighteen units are run by undergraduate technical degree holders. Eighteen units are run by +2 qualified. This is mainly because of the ITI, Diploma and Undergraduate education of the entrepreneurs which motivated them to become successful entrepreneurs. Fourteen SSI entrepreneurs are run successfully by educational qualification up to SSLC. This is mainly because of the experience earned through the ancestors. . It is observed that ninety seven units are run by married people. So that, most of the entrepreneurs are given up their efforts in business. This is the reason why more SSI units are found in the study area. From the study area three units are run by unmarried entrepreneurs. From the structure of families, it is observed that most of the SSI units are run by Individual and joint families. . Out of hundred SSI units, fifty seven entrepreneurs are belonging to nuclear families and forty three units are run by joint families of in the study area. This result shows that more number of individual families came forward to business. . It is observed that majority of the eighty five entrepreneurs are from the same district. This is mainly because of the lucrative business in SSI units. Twelve entrepreneurs are from other districts. Three entrepreneurs (two from Engineering units and one from readymade garments) are from other states namely Andhra Pradesh and Gujarat respectively. This clearly shows the positive growth in the performance of SSI units in the study area. . It is clearly shown that most of the SSI units are run by the entrepreneurs who belong to Hindu religion (63%). And rest of the units is run by Muslims and Christians. It is inferred that SSI units are at present owned and operated by the entrepreneurs belonging to Hindu religion. Other religious people are also owned few SSI units in the study area. 112
Small Scale Industries Management: Issues, Challenges and Opportunities . Of the hundred SSI units under the study, 52 units are owned by the entrepreneurs who belong to Backward Community. 19 units are run by the entrepreneurs who belong to most backward community. 16 units are owned by forward Community and remaining thirteen units are run by the entrepreneurs who belong to Scheduled Caste and Scheduled Tribe community people. . From the residential details of the entrepreneurs, it is observed that 84 entrepreneurs have lived in their own residence. This shows their capacity through the performance of SSI units. 16 entrepreneurs have lived in rented residence. . Years of experience of the entrepreneurs are one of the important determinants in enhancing the performance of SSI units. With the year of experience earned through BHEL, most of the employees resigned their jobs and became entrepreneurs in small scale industries. It is evidently shown that experience makes the people to start new SSI units in the study area. Of the 100 units, 27 units are run by the entrepreneurs who have got the experience of 21 years and above. 24 units are run by entrepreneurs who have got the experience between from 16 to 20 years. Most of the entrepreneurs got well experience of the study area. . Out of 100 SSI units, 63 units are used in modern technology and 37 units are used in traditional method. It is observed that most of the SSI units have adopted the modern methods of production. Especially, all the Rice mill units have expended more on modern methods of production in order to speed up the production process. Eighty per cent of the engineering units have adopted modern methods of production and rest of the units has been following the primitive methods of production. Even then, the entrepreneurs successfully run their business. Majority of the crusher units have also adopted the modern methods of production (conveyor system). This has reduced the labour force considerably and sped up the production process too. . It is observed that most of the SSI units have own fund (45%), 21 SSI units have borrowed fund and 15 units are run both fund (Owned and Borrowed). Initially, most of the entrepreneurs established their SSI units in the study area with own finance. This shows the capacity of the entrepreneurs under the aegis of SSI units. Currently, majority of the entrepreneurs utilize their own funds which are supplemented by borrowed funds. Because entrepreneurs have their hope of earning high profits in the future. Moreover, Nationalized Banks also extend their fullest support to the entrepreneurs by way of providing loans with low rate of interest. . Fixed capital represents the value of all fixed assets of the factory as on closing day of the accounting year. It covers all such goods new or used that have a normal economic life of one year or more. For example, land, building including those under construction, plant and machinery and transport equipments. Fixed capital is playing a pivotal role in starting SSI units. There would be a vast difference of amount between initial fixed capital and current fixed capital. This is mainly because of the vast decrement in the value of money. In the earlier stage, total amount fixed capital was Rs.1590.2 lakhs. Of which, engineering industries contribute (29.99 per cent) a major share and followed by the steel fabrication industries. At present, the total amount fixed capital is Rs.4463.00 lakhs. The contribution of the share of fixed capital is as similar as the earlier stage. . It is found that the increase in the fixed capital per unit was due to the development and the expansion of SSI units. Initially, the total fixed capital was Rs.1590.2 lakhs and the total number of units was 100 and the ratio of fixed capital per unit is found to be Rs.15.90 lakhs. At present, it has increased to Rs.44.63 lakhs where the total fixed capital and the total number of units are Rs.4463.00 lakhs and 100 respectively (refer table 5.23c). . It is observed that the increase in the fixed capital per worker is found in Engineering units, Rice mills and Crusher units, Furniture Industries, Saw mills and Auto Garage due to the advent of modern methods of production. In the earlier stage, the total fixed capital was Rs.1590.2 lakhs and the total number of workers was 2222. Hence, the ratio of fixed capital per worker is found to be Rs.0.715 lakhs and at the time of data collection [the ratio between the total fixed capital (Rs.4463.3 lakhs) and total number of workers (2603)], the fixed capital per worker is Rs.1.714 lakhs (refer table 5.23d). 113
Small Scale Industries Management: Issues, Challenges and Opportunities . It is observed that the increase in the working capital in each unit has been found. This is mainly due to the exorbitant price of raw materials, power charges and wages of labourers. Saw mill unit was playing a dominant position in the earlier phase. At the time of data collection, the same situation is prevailed because of the expenditure which is spent on raw materials as compared to other types of industries. The main reason for the hike in expenditure on raw materials is mainly due to the import of raw materials from other countries such as Malasia, Burma, Sri Lanka and Singapore. Initially, the total working capital was Rs.1115.74 lakhs and the total number of units was 100 and ratio is found to be Rs.11.5 lakhs. At present, it has increased to Rs.25.72 lakhs where the total working capital and the total number of units are Rs.2572.25 lakhs and 100 respectively (refer table 5.24c). . It is observed that the marginal increase in the working capital per worker is found in all SSI units except Saw mill, Steel fabrication and Metal industry. Negative change is found in Furniture and Auto garage industry. This is mainly because of the abundant supply of cheap labourers in the study area. It is lucidly explained in table 5.24d. In the earlier stage, the total working capital was Rs.1115.74 lakhs and the total number of workers was 2222. Hence, the ratio is found to be Rs.0.502 lakhs and at the time of data collection [the ratio between the total working capital (Rs.2572.25 lakhs) and total number of workers (2572.21)], the working capital per worker is Rs.0.9881 lakhs. . Results of the one way analysis of variance of fixed capital for SSI units are the calculated value (0.19) is less than the table value (3.13), the hypothesis has been accepted for the degrees of freedom 3 and 10 respectively. It implies that there is a significant variation of the fixed capital within and between the SSI units . Result of the one way analysis of variance of working capital for SSI units are the calculated value (0.41) in the less than the table value (3.31) the hypothesis has been accepted for the degrees of freedom 5 and 10 respectively. It implies that there is a significant variation in the working capital within and between the SSI units. . Out of 100 SSI units surveyed in the study area, most of the SSI units availed financial assistance from nationalized banks and utilized their own funds. Initially, 57 units borrowed funds from nationalized banks. Currently, most of the engineering units are resorted to borrow more loans during the years (2001- 2013), due to the continuous orders from BHEL. During the first time of borrowing, the entrepreneurs used their own funds for SSI units. Due to the financial deficiency, entrepreneurs had to borrow loans from some other sources to meet out their expenditure. Since the SSI units are more in the study area, the entrepreneurs must expend more amounts on modern methods of production and other additional expenditures. This makes the entrepreneurs to contract more loans from nationalized banks. . It is observed that the increase in the borrowing capital per unit is found in Steel fabrication, Engineering units, Rice mills, Readymade Garments units due to the advent of modern methods of production. It is evidently shown that most of these units borrow more loans comparing up with other SSI units. Repayable capacity of these units is more. So, the nationalized banks are not reluctant to provide long term loans to these units. This is the reason why the amount is also seen exorbitant in the table. This constitutes more to the total loan amount. Entrepreneurs of Furniture and Saw mill industries are reluctant to borrow loans because of the strong financial background. It is lucidly explained in table 5.25e. In the earlier stage, the total borrowing capital was Rs.480 lakhs. At the time of data collection [the ratio between the total borrowing capital (Rs.1184 lakhs) . Initially, total number of male and female workers employed was 1626 and 596 respectively at the inception of SSI units. Currently, the male workers are 2203 and female workers are 400. This shows the increment in the number of male workers (skilled) and the decrement in the number of female workers (unskilled) due to the advent of modern methods of production in SSI units in the study area. . It is observed that the increase in the workers per unit is found in Engineering units, steel fabrication and crusher industries due to the continuous orders. Negative changes are found in Rice mill. This is mainly because of the modern methods of production in Rice mills and Crusher units. Workers in Auto Garage are reduced due to the advent of exchange offer for vehicles in the study area. It is lucidly explained in 114
Small Scale Industries Management: Issues, Challenges and Opportunities table 5.27a. Initially, the total number of workers was 2222 and total number of units was 100. Hence, the ratio is found to be 22.22 and at the time of data collection [the ratio between the total number of workers (2603) and total number of units (100)], the workers per unit is 26.03. . It is observed that there are no changes taken place on raw materials in both periods (initial period and current period). Most of the SSI units get raw materials indigenously and remaining few SSI units get raw materials from both local area and abroad. Saw mill alone gets raw materials from abroad. This is mainly because of the order of prohibition Act by the Indian Government regarding felling of trees. Entrepreneur of saw mill gets raw materials from Malaysia and other countries. This results in hike in the price of raw materials. Rice mill units get raw materials from Thanjore and Karnataka. Readymade Garments industries get raw material from Thirupur, Erode and Karur. Crusher units are much affected because of the prohibition of quarrying order by the Tamil Nadu Government. These units get raw materials from Karur. This leads to more transport cost. This is indeed a major problem in the study area. . It is observed that most of the raw materials get from indigenous (78 percent), imported (11 per cent) and both (11 per cent). Raw materials are not problem not at all a problem of the study area. Readymade Garments industries are get raw material from within Tamil Nadu. . At the initial phase, SSI units expended Rs.53.35per year for excise duty, sales tax, income tax and purchase tax. From which, the single engineering unit alone paid Rs.3 lakhs per year and steel fabrication unit paid Rs.2,50,000 per year for excise duty. At present, engineering units pay Rs.8 lakh per year and saw mill alone pays Rs.1.25 lakh per year for excise duty. This shows the productive capacity of these industries. . Initially, most of the SSI units paid heavy amounts of sales tax. Engineering units alone contributed Rs.10.50 lakhs per year and followed by steel fabrication units Rs.8.50 lakhs for sales tax. Currently, engineering units alone contributed Rs.20.25 lakhs per year and followed by steel fabrication industries pay Rs.10.50 lakhs for sales tax. Engineering units do not pay sales tax but BHEL deducts the amount for sales tax during the settlement of bill. . Most of the SSI units paid less amount of income tax. Currently, engineering units’ alone pay Rs.24 lakhs per year for income tax. Steel fabrication industries pay Rs.21.10 lakh per year. This shows the capacity of SSI units which earn more, so that, these units do not bother about paying more for income tax. This is indeed generating the revenue for the Government. . It is observed that out of ten categories of industries, rice mills alone have contributed more for purchase tax because of the purchase of raw materials (paddy) from other districts Comparing up with the previous years, contribution towards the purchase tax by the entrepreneurs is more. This is mainly because of the poor productivity of agriculture in India which is coercing the entrepreneurs to obtain the raw materials at the higher cost. . It is observed that the increase in the expenditure per unit has been found. This is mainly due to the scarcity of raw materials, hike in the surcharge of electricity and telephone bills and hike in fuel cost. Initially, the total expenditure was Rs.530.55 lakhs and the total number of units was 100 and ratio is found to be Rs.5.30 lakhs. At present, it has increased to Rs.9.79 lakhs where the total expenditure and the total number of units are Rs.979.20 lakhs and 100 respectively (refer table – 5.30c). . At the initial phase, most of the SSI units did expend less for power and fuels. Without which, no industry would run. Recently, most of the SSI units do expend more for power and fuels because of the hike in unit cost and price of fuel. All SSI units contribute Rs.21.47 lakhs per month for power and fuels. From which, Engineering units alone contribute more for power. This shows that the entrepreneurs are least bothered about paying more for power; their avowed aim is to produce more goods. During the initial periods, the total expenditure on raw materials was Rs.444.52 lakhs per month. Recently, it is about Rs.530.54 per year for raw materials. From which, Engineering units and steel fabrication industries expend Rs.35.46 lakhs and 37.10 lakhs per month. This is the poorest amount as compared to the previous phase. The reason is BHEL supplies raw materials to Small Scale Engineering units in the study area.
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Small Scale Industries Management: Issues, Challenges and Opportunities From which recently rice mills was spent raw material cost Rs.175.50 lakhs because more paddy import from other state. . Without transport, entrepreneurs cannot get raw materials. So, it is considered to be the most important factor in SSI units. Initially, total transport cost was Rs.11.32 lakhs per month. Recently, it has gone up to Rs.48.08 lakhs per month because of the hike in price of fuel. Engineering units incur more for transport cost comparing up with other SSI units in the study area. . During the initial stages, the total amount of wages Rs.40.20 lakhs per month was expended for workers. Currently, it has been increased to Rs.140.14 lakhs per month for all SSI units in the study area. Engineering units expend more on wages because the number of workers working in Engineering units is more. . Apart from the working capitals such as raw materials, transport cost, taxation, power and fuel expenditure. There are other incidental expenses such as rent, interest on loan, telephone bills and lease payments, staff welfare etc., have to be incurred for the development of SSI units. Though the amount is fewer, it contributes more for the growth of SSI units in the study area. . Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives. From the study, it is observed that engineering units and steel fabrication do not market their products elsewhere because BHEL and other agencies gives order and get back the finished products. Rice mills market their products through the Government or through the wholesaler, retailer and customer. Crusher industries market their products through all the four channels of marketing. Furniture industries Saw mill, and Metal industry are marketing their products on the basis of orders. Agro based industries markets its products through customers, agencies and retailer. . It is observed that most of the SSI units market their products within district, twenty five SSI units market their products within state and seven SSI units market their products within India. Seventeen Engineering units market their products within district because of the continuous BHEL orders. Finished products from rice mills are directly marketed by whole seller and retailer and the Government. Three Crusher industries sell their products within district and other two units sell their products within state. Most of the readymade, Agro based industries, furniture and saw mills sell their product within district. Metal and Auto Garage units was sell their products only within district. Only few engineering units, Steel fabrication and one readymade Garments units was sell their products thought India. . During the initial stages, the 100 SSI units had produced goods worth of Rs.1976.50 lakhs per month. From which, the Engineering units alone produced goods worth of Rs.585 lakhs per month followed by steel fabrication industries produced goods worth of Rs.385 lakhs per month and rice mill units with Rs.312 lakhs per month. At present, actual production has increased substantially due to the continuous orders from BHEL. Hence, engineering units alone produce goods worth of Rs.2950 lakhs per month followed by steel fabrication industries produced goods worth of Rs.1900 lakhs per month and rice mill units with Rs.780 lakhs per month. There is a vast difference between initial production and current production. This is mainly due to the advent of modern methods of production in all SSI units in the study area. . It is observed that the increase in the production of Engineering units, Steel fabrication, rice mills, Furniture industries, readymade and agro based industry is mainly due to the modern methods of production. Crusher industries are pollution emitting industries are led to Global warming. Hence, the Government bans the functioning of these industries. The production per unit was worked out by taking into account the ratio between the total production and the total number of units. Initially, the total production was Rs.1976.50lakhs and the total number of units was 100 and ratio is found to be Rs.19.76lakhs. At present, it has increased to Rs.74.16lakhs where the total production and the total number of units are Rs.7416.50lakhs and 100 respectively. (refer table 5.32a)
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Small Scale Industries Management: Issues, Challenges and Opportunities . It is observed that the increase in the production per worker is found in Steel fabrication, Engineering units, Rice mills, Furniture, readymade garments and agro based industries due to the advent of modern technology. Marginal changes have been found in Metal industries and Crusher industries. The production of Saw mill industry is also reduced because of the dearth supply of raw materials domestically. The production per worker has been calculated by the ratio between the total production and total number of workers. In the earlier stage, the total production was Rs.1976.50 lakhs and the total number of workers was 2222. Hence, the ratio is found to be Rs.0.89 lakhs and at the time of data collection [the ratio between the total production (Rs.7416.50 lakhs and total number of workers (2603)], the production per worker is Rs.2.85 lakhs. (refer table 5.32a) . Initially, the capacity of production of SSI units is denoted in percentage. Initially fifty four units had their capacity of production of 71-80 per cent. In this share engineering units was more to the total as compared to other SSI units. It is keenly observed that only two units out of hundred units had its maximum capacity of production of 81 per cent and above. Twenty two SSI units had their capacity of production of 61-70 per cent. At present, most of the SSI units have the maximum actual capacity of production of 81 per cent and above. This is mainly because of modern methods of production in all SSI units in the study area. . At present, most of the SSI units avail the capacity utilization of 61 to 80 per cent. This does not mean that SSI units’ fullest capacity is this much. Despite SSI units have excess capacity the SSI units cannot produce more because of the poor demand. If SSI units show its fullest capacity, then there will be an overproduction. In order to avoid this situation, entrepreneurs maintain the ceiling level of capacity utilization i.e., production of goods in accordance with the current demand. 59 units avail the capacity utilization of 61 - 80 per cent. And 10 units avail its capacity utilization of 81-100 per cent. This is mainly because of optimistic view of the entrepreneurs with regard to the future demand. . SSI units such as engineering units, Steel fabrication, and auto garage are not shown the actual sales, because these industries produce goods on the basis of orders. Engineering units and steel fabrication get orders directly from BHEL and other agencies and dispatch the finished goods again to BHEL. So, there is no possibility of actual sales in engineering units. Auto garage are not producing goods but rendering service. Hence, the value of actual sales is not shown in the table. . Out of 100 SSI units, only 45 units maintain its stocks. Engineering units and Steel fabrication industries do not maintain stock because BHEL and other agencies give direct order to these units and gets back the finished goods at once. Metal industries do not maintain stock because these industries produce goods only on the basis of orders. Auto garage and crusher industries do not maintain stock. So, there is no chance of stocks in these industries. . To study the productivity of SSI units, the profitability ratio analysis has been used. The purpose of this analysis is used to assess the adequacy of profits earned by the SSI units and also to ascertain whether the profitability is increasing or decreasing. . It is found that the profitability of Rice mills has increased from Rs.0.48 lakhs to Rs.0.57 lakhs. This is mainly because of the autonomous price structure and the reduction of depreciation charges. Even then the rice mill is still on through getting raw materials from other districts. The remaining industries such as other nine industries earn less profit because of the payment of tax. . It is observed that the profit on fixed capital in all the industries earn less profit after the payment of tax. Hence, the entrepreneurs do not have to spend money on fixed capital. Some entrepreneurs do not have to spend money for expand their business because lot of competition and very poor work order for engineering and steel fabrication industries. . It is found that the profitability of all the industries earn less profit because of the payment of tax. . It is observed that the profit on working capital in Auto Garage and Metal industry is same in both profits before tax and profit after tax. Auto Garage renders only service so the entrepreneur who runs the industry does not need to pay the tax and the Metal industry too does not pay the tax because the 117
Small Scale Industries Management: Issues, Challenges and Opportunities entrepreneurs get the raw materials directly from where they get the orders. The rest of the industries such as Engineering, Steel fabrication industries, Rice mills, and other industries earn less profit after the payment of tax. . It is observed that the profit on working capital in Auto Garage and Metal industry is same in both profits before tax and profit after tax. Auto Garage renders only service so the entrepreneur who runs the industry does not need to pay the tax and the Metal industry too does not pay the tax because the entrepreneurs get the raw materials directly from where they get the orders. The rest of the industries such as Engineering, Steel fabrication industries, Rice mills, and other industries earn less profit after the payment of tax. . It is observed profit per unit was due to the development and the expansion of SSI units. Profit per unit was worked out by taking into account the ratio between the total profit and the total number of units. Initially, the total profit was Rs.199.34 lakhs and the total number of units was 100 and ratio is found to be Rs.1.99 lakhs. At present, it has increased to Rs.14.32 lakhs where the total profit and the total number of units are Rs.1432.78 lakhs and 100 respectively. . Initially, 100 SSI units had the yearly net profits of Rs.199.34 lakhs. Out of which, engineering units contributed more to the total net profit. At present, 100 SSI units have the yearly net profits of Rs.1432.78 lakhs. In this, engineering units alone contribute more to the total net profit. It is observed that there is a vast difference between initial net profit and current net profit. This is mainly because of the recent technologies adopted in all kinds of SSI units in the study area. At the inception phase, engineering industries were playing a dominant role for the profit per unit. Lately, the steel fabrication industry is playing a major role when compared to other type of industries due to the continuous demand. . During the initial period, 40 SSI units out of 100 units had reinvested their net profits ranging between 61-80 per cent for further developments. 14 units reinvested their net profits ranging between 81-100 per cent for the fixed capital. At present, 35 SSI units out of 100 units had reinvested their net profits ranging between 41-60 per cent for further developments. 11 units reinvested their net profits ranging between 81- 100 per cent for the fixed capital. . From the study, it is observed that initially finance was the major problem for Engineering units, Steel fabrication units, Rice mills, readymade garments and agro based industries and saw mills in the study area. At the time, the nationalized banks were reluctant to provide loans to these units. So, the entrepreneurs of these units had to depend upon some other sources for their survival. Few Engineering units and steel fabrication units were severely affected by marketing problems due to the hectic competition prevailing in the study area and power problem and labour problem. It was very difficult to get technical labourers in the days. Hence, Engineering units were affected drastically. In auto Garage industries was difficult to face competition. . Currently, less number of SSI units has been affected by financial problem as compared to the previous phase. This is mainly because of the provision of Government loans to these SSI units. Recently, most of the SSI units are affected by different problems. From the survey, it is observed that majority of the SSI units have been affected by hectic competition. This is mainly due to large number of units available in the study area. Engineering units are mostly affected by erratic power supply and lack of skilled laborers. Crusher industries are severely affected stringent Government policies (prohibition of quarrying and environmental protection Act). So, entrepreneurs of Crusher industries find it very difficult to run their industries in the study area. Of late, Engineering units are also affected by poor orders through BHEL because of the huge number of Small Scale Engineering units in the study area. Rice mills, readymade garments, and agro based industries are affected by marketing problem. . It is lucidly understood that most of the entrepreneurs concentrate on their own professions or related professions. Only 10 out of 100 entrepreneurs have engaged in other businesses such as milk business, road contract, building contract and brick making too. . It is clearly observed that most of the SSI units were affected mainly because of the erratic power supply. It hampers the production of SSI units in the study area. 118
Small Scale Industries Management: Issues, Challenges and Opportunities . From the study, it is understood that most of the entrepreneurs do not need technical consultancy because there are more skilled workers in SSI units. So, entrepreneurs are not interested in technical consultancy. . Most of the entrepreneurs of SSI units in the study area are felt that the Government schemes are indeed upholding their business. Out of hundred entrepreneurs, fifteen are not for the Government schemes because it hampers their business drastically for example, Crusher units. From this study fifty five respondents are felt that government schemes are good for entrepreneur. Out of which 19 respondents are not said any idea. 6.3. SUGGESTIONS Under the aegis of the meticulous findings of the study, the following suggestions have been made for enhancing the prospects of SSI units in the study area: . The present study has revealed that the majority of the SSI entrepreneurs did not avail any kind of Government subsidies and incentives due to lack of awareness and knowledge in approaching the Government officials in fulfilling their procedural requirements. Hence, the entrepreneurs can be given education through the Government officials in this regard. . Since there are slew of SSI Engineering units in the study area, the entrepreneurs felt that there would be a poor work order from BHEL comparing up with the previous phase. Hence, uniform system of work order must be followed and there should not be any undue favoritism with regard to the provision of orders to all SSI engineering units. . The women participation in SSI Engineering units is very poor. Hence, the Government must shoulder the responsibility in imparting special entrepreneurial programmes that educate the women entrepreneurs more potential. This leads to the start of new SSI units by women in the study area. . Marketing problem is one of the major obstacles for SSI entrepreneurs. Majority of them are concentrated their marketing activities within the district. Hence, there is a stiff competition among entrepreneurs. This can be overcome through the support of Government. . The Government should collect information about present and prospective markets information it to the units at the earliest possible. Under this method, collect information through department of Industries by Marketing Information system should be strengthened . In order to ensure good quality of products in small scale industrial units they have to introduce brand names for their products. . There must be a proper location for SSI units especially for hazardous industries. So that, the welfare of people can be enhanced. In this regard, pollution control board should have to decide the location for these units. . In the study, it is clearly shown that few entrepreneurs from SC and ST community at the time of data collection. Under the aegis of the Government, vocational education and financial assistance can be given to these people. This leads to involvement and participation of SC/ST people in business ventures. . It is observed that most of the SSI entrepreneurs get loans from the nationalized banks because of the low rate of interest. If these banks can further reduce the rate of interest, the beneficiaries would be more. This results in enhancing the performance of SSI units. . The bank gives clear idea about the loan and repayment facility to each scheme. Therefore, the bank conducts some programme along with DIC. . The banks should charge interest only at prime lending rate as fixed by Reserve Bank of India. . Expenditure is on the increase for crusher industries and saw mill unit because of the Government restrictions on stop quarrying and felling of trees respectively. This leads to increase the cost of raw materials. In this regard, the Government can very well consider these industries for preferential treatment in taxes, rebates and interest deduction scheme for the better performance. 119
Small Scale Industries Management: Issues, Challenges and Opportunities . Since the entire small scale engineering units’ bank on BHEL, the direct export to foreign countries is not possible. So, the government should make arrangements for getting foreign orders for these SSI units in the study area. . It is observed that most of the SSI units in the study area are affected mainly because of the imposition of tax. So the Government can consider these SSI units to reduce the rates of taxation. . The Government can uphold the SSI units through providing continuous power supply to enhance their performance and prospects in the study area. . Government should set some guidelines so that undue delays may avoid in payments of bills of small- scale units by large units and private sector . To create awareness about rural entrepreneurship, and imparting entrepreneurial education in schools, colleges and Universities with practical knowledge. . To promote self employment and help the budding entrepreneurs, colleges should be advised to set up Entrepreneurs Development Cell under the guidance of General Manager, District Industrial centre. . Procedure for grant of industrial connection should be made easier. . SSIs units, the working conditions and other welfare facilities should be improved and extended to a satisfactory level . DIC conduct the re-orientation programme, workshop and seminars should organize at district level to provide latest information to the small entrepreneurs. . Government should encourage the SSIs products and we should avoid imported products from foreign country (Make in India concept). . Legislative measures have to be taken to make the government. purchases compulsory from rural industries 6.4. CONCLUSION Small scale industries are considered as the main indicator for the economic development of populous and developing country. The small-scale industries a progressive and efficient decentralized system which is closely integrated on the one hand with agriculture and on the other with large scale industry. Various factors such as the prevailing scarcity of capital for large scale industries, large supply of labour, provision of subsidiary or alternative occupation, utilization of local entrepreneurship diversification of the structure to get rid of concentration of economic power, creation of more employment opportunities and the possibility of achieving the socialistic pattern of society are considered the main factor for the emphasis on development of small-scale industries in India. It is lucidly observed that after the advent of BHEL, many positive changes viz., generation of employment, number of small scale engineering units, other small scale industries and economic status of the people have been made in the study area. The structural and infrastructural bottlenecks such as lack of finance, defective marketing, shortage of skilled workers and erratic power supply are hampering the hassle free working of SSI units. In order to tide over these problems, the pertinent suggestions have been made by the researcher. If these suggestions are indeed properly implemented in practice, the future of SSI units in the study area will be rosy and promising.
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Small Scale Industries Management: Issues, Challenges and Opportunities List of Tables
Table No. Title of the Tables Page. No 1.1 Investment for enterprises to be classified as MSMEs 3 1.2 Taluk-wise classification of SSIs in Tiruchirappalli district 10 1.3 Category wise classification of Sample SSIs units in Tiruchirappalli District 11 2.1 Investment limits for SSIs 33 3.1 Availability of Minerals 38 3.2 Taluk-wise Classification of Population in Tiruchirappali District 38 3.3 Year wise Trend of Units Registered 42 3.4 Industry at a Glance of Tiruchirappali District 42 Details of Existing Micro Small Enterprise and Artisan in Tiruchirappali 3.5 43 District 4.1 Growth of SSIs in India from 1990-91 to 2011-2012 48 4.2 Growth of the SSI (MSME) Sector over the plan periods in Tamil Nadu 51 4.3 Growth of MSMEs in Tamil Nadu for the past 10 years 52 4.4 Performance of SSI units in Tamil Nadu 54 Performance of SSIs on workers per unit and production per worker in 4.5 54 Tamilnadu 4.6 Growth of Small Scale Industries in Tiruchirappalli District 55 4.7 Employment Generation of Small Scale Industries in Tiruchirappalli District 56 4.8 Investment and Employment Generated by SSIs in Tiruchirappalli District 56 4.9 SSIs in Tiruchirappalli District 57 Trend in industrial wise classification of Small Scale Industries in 4.10 59 Tiruchirappalli District Employment Generation of Different Type of Small Scale Industries in 4.11 60 Tiruchirappalli District 5.1 Taluk-wise classification of selected units in Tiruchirapplli Districts 65 5.2 Year wise classification of sample SSIs 66 5.3 Activity wise classification of SSIs 66 5.4 Nature of organization 67 5.5 Form of organization 67 5.6 Ownership of Premises 67 5.7 Type of Business Premises 68 5.8 Region of Location 68 5.9 Original Location and Relocation of Units 69 5.10 Age wise Classification of Entrepreneurs 69 5.11 Education wise classification of Entrepreneurs 70
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Small Scale Industries Management: Issues, Challenges and Opportunities 5.12 Marital Status of Entrepreneurs 70 5.13 Types of Family 70 5.14 Nativity of the Entrepreneurs (Now) 71 5.15 Religious wise classification of Entrepreneurs 71 5.16 Community wise classification of Entrepreneurs 72 5.17 Details of the House 72 5.18 Year of Experience of Entrepreneurs 72 5.19 Previous occupation of the entrepreneur 73 5.20 Use of Modern technology 73 5.21a Source of finance (Then) 74 5.21b Source of finance (Now) 74 5.22a Fixed capital (Then) 75 5.22b Fixed capital (Now) 75 5.23a Fixed capital per unit 76 5.23b Fixed capital per Worker 76 5.23c Variance of fixed capital (Now) 76 5.24a Working capital (Then) 77 5.24b Working capital (Now) 78 5.24c Working capital per unit 78 5.24d Working capital per worker 79 5.24e Variance of working capital (Now) 79 5.25a Year of Borrowing at the first time 80 5.25b Year of Borrowing at time of data collection 80 5.25c Repaid amount and outstanding amount (Then) 81 5.25d Repaid amount and outstanding amount (Now) 81 5.25e Borrowing capital per unit 81 5.26a Partners’ details (Then) 82 5.26b Partners’ details (Now) 83 5.27 Details of workers 84 5.27a Workers per unit 84 5.28 Raw materials used 85 5.29a Tax Expenditure (Then) 87 5.29b Tax Expenditure (Now) 87 5.30a Other Expenditures (Then) 88 5.30b Other Expenditures (Now) 88 5.30c Expenditure per unit 88
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Small Scale Industries Management: Issues, Challenges and Opportunities 5.31 Area of Marketing 90 5.32 Value of Production 91 5.32a Production per unit 91 5.32b Production per worker 92 5.33a Actual capacity of production (Then) 92 5.33b Actual capacity of production (Now) 93 5.34a Capacity utilization (Then) 94 5.34b Capacity utilization (Now) 94 5.35a Actual sales (Then) 95 5.35b Actual sales (Now) 95 5.36 Actual stock (Now) 96 5.37a Profit before and after taxation (Then) 96 5.37b Profit before and after taxation (Now) 97 5.37c Profit on Fixed Capital (Then) 97 5.37d Profit on Fixed Capital (Now) 98 5.37e Profit on Working Capital (Then) 98 5.37f Profit on Working Capital (Now) 99 5.37g Profit per unit 99 5.38a Net Profit Re-Investment (Then) 100 5.38b Net Profit Re-Investment (Now) 100 5.39a Tax Expenditure (Then) 102 5.39b Tax Expenditure (Now) 102 5.40a Other Expenditure (Then) 103 5.40b Other Expenditure (Now) 103 5.40c Expenditure per unit 104 5.41a General Problems (I Rank only) (Then) 105 5.41b General Problems (I Rank only) (Now) 106 5.42 Entrepreneurs’ Expectations from the Government 107 5.43 Need for Technical Consultancy 107 5.44 Opinion of the Entrepreneurs on Government Schemes 108
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Small Scale Industries Management: Issues, Challenges and Opportunities List of Figures
Figure No. Title of Figures Page No. 4.1 No. of Registered units and Employment of SSIs in India From 1990 to 2012 49 4.2 Production and Exports of SSIs in India From 1991 to 2012 50 4.3 Growth of the SSI (MSME) sector over the plan periods in Tamil Nadu 52 4.4 No. of Units Registered in the past 10 years in Tamil Nadu (MSME) 53 4.5 Investment and Production in the Past 10 Years in Tamil Nadu (MSME) 53 4.6 Growth of SSI in Truchirappalli District 55 4.7 Employment Generation of small scale Industries in Tiruchirrappalli District 56 4.8 Investment and Employment Generated by SSIs in Tiruchirappalli District 57 4.9 SSIs in Tiruchirappalli District 58 4.10 Trend in Industrial wise classification No. of units Registrations From 2007 and 60 2012 (SSIs), Tiruchirrappalli District 4.11 Employment Generation in Different types of SSIs from 2007 to 62 2012,Tiruchirrappalli District
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Small Scale Industries Management: Issues, Challenges and Opportunities List of Abbreviations
BHEL : Bharat Heavy Electricals Limited DIC : District Industries Centre IPAs : Industrial Promotional Agencies ITI : Industrial Training Institute KVIC : Khadi and Village Industries Commission MSMES : Micro small Medium Enterprises MNCs : Multi National Corporations MUDRA : Micro Units Development and Refinance Agency NACOSI : The National Confederation of Small Scale Industry PG : Post Graduation PMRY : Prime Minister’s Rozgar Yojana PMMY : Pradhan Mantri Mudra Yojana PWD : Public Works Department QRs : Quantitative Restrictions R & D : Research and Development SC : Schedule Caste SIDBI : Small Industries Development Bank of India SIDCO : Small Industries Development Corporation SSIs : Small Scale Industries SSSBE : Small Scale Service and Business Enterprises ST : Schedule Tribes TALCO : Tata Engineering and Locomotive Company TANSIDCO : Tamil Nadu Small Industries Development Corporation Ltd. UG : Under Graduation VAT : Value Added Tax VRS : Voluntary Retirement Scheme
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ABOUT THE AUTHOR Dr. B. Augustine Arockiaraj is at present Head and Assistant Professor of Business Administration department belong to School of Management Studies, St. Joseph’s College (Autonomous), Tiruchirappalli, Tamil Nadu, India He has been in service for the past 15 years. He has presented many research papers at National and International conferences.
His research works have been published in various reputed journals and he has completed two minor research projects. He has organized several seminars, conferences, and workshop and entrepreneurship awareness camp. He has served as a resource person, academic members, Board of studies members in various college and universities. He has a Industrial member, consultant, advisor of small scale industries and trainer of budding entrepreneur. He has helped to organize many entrepreneurship awareness camps in the self help group in rural and urban areas. He got a best teacher and best researcher award in same college.