INVESTMENT, PRODUCTION AND EMPLOYMENT DIMENSIONS OF SMALL SCALE …shodhganga.inflibnet.ac.in/bitstream/10603/8476/11/11... · 2015-12-04 · INVESTMENT, PRODUCTION AND EMPLOYMENT

Chapter-IV

INVESTMENT, PRODUCTION AND EMPLOYMENT DIMENSIONS OF SMALL SCALE INDUSTRIES –

AN ECONOMIC ANALYSIS

The discussion in this core chapter of the thesis is focused on

the analysis of the investment, production and employment

dimensions of the small scale industrial units covered by the study.

The major areas of analysis in this chapter relate to;

Capital investment in different product groups of SSIs.

Nature of acquisition of the plant and machinery by the SSI study

units.

Sources of finance for the investment of funds in fixed assets.

Problems faced by the SSI units in obtaining finance.

Incentives and subsidy facilities for SSI units.

Working capital and its adequacy for SSI units.

Production dimensions and the problem of raw materials.

Utilization of production capacity.

Labour and employee management.

The analysis of the above aspects of investment, production and

employment dimensions is based on the data obtained from the

respondent SSI units as per a well structured questionnaire. The

responses of the SSI units have led to some significant conclusions

based on which some useful suggestions have been offered. The

findings in this chapter have a direct link with the analysis and

findings in the next chapter.

92

Capital Investment in Plant and Machinery

Investment of capital in plant and machinery is dependent upon

the nature of the industry and scale of operations envisaged. The

magnitude of investment will be high in industries with high capital

intensity and low labour intensity and vice-versa. Small scale

industries in general are labour intensive involving more labour and

less capital. However capital intensity may be more in some SSI units

if the technology involved is more sophisticated necessitating the

installation of plant and machinery which are capital intensive.

The investment of capital in plant and machinery in product

unit No. 10 is the minimum average of Rs. 100000. Here the product

unit relates to manufacturing of wearing apparel which by its very

nature is labour intensive requiring more labour and less capital.

However the product unit No. 3 had the maximum average investment

of Rs. 6115623. This product unit related to high capital intensive

plant and machinery in the manufacturing of structural metal

products, etc. The average investment of capital is relatively high in

relation to product unit No. 6 and 7 too compared to other product

units where the capital investment is moderate or low. The following

table provides the details.

93

Table-4.1

Capital Investment in Plant and Machinery

Category of Product Mean capital investment

SD capital investment

Unit 1 661600 847323

Unit 2 142000 57595

Unit 3 6115623 10750259

Unit 4 225000 59761

Unit 5 945000 867692

Unit 6 1905000 1963621

Unit 7 1616667 1852746

Unit 8 200000 0

Unit 9 180000 25355

Unit 10 100000 33333

Unit 11 370000 352846

Total 1054802 3467899

Source: Field Survey

Nature and Acquisition of Plant and Machinery

The information obtained from the 120 respondent SSI units

indicate that majority of study units (82) constituting 68.3% had made

outright purchases of their plant and machinery. However 38

respondent units (31.7%) had obtained the plant and machinery on

lease.

Productwise maximum number of 20 product units relating to

manufacturing of fabricated metal products have made outright

purchase of the plant and machinery. All the units (10 each) relating

94

to service activities, wood, cork, straw and plaiting, manufacturing

structural metal products and one unit manufacturing chemicals have

purchased the plant and machinery. Maximum number of units

manufacturing of basic iron and steel have obtained the plant and

machinery on lease. Similarly majority of units manufacturing wearing

apparels etc. have also obtained plant and machinery on lease. The

small size of the SSI units and relatively more labour intensity of

production has led to more number of SSI study units making

purchases of plant and machinery rather than go in for lease

acquisitions. The following table and graph provide the details.

Table-4.2

Nature and Acquisition of Plant and Machinery

Category Purchased % Leased % Total

Unit 1 20 80.0 5 20.0 25

Unit 2 8 53.3 7 46.7 15

Unit 3 10 100.0 0 0.0 10

Unit 4 4 50.0 4 50.0 8

Unit 5 10 100.0 0 0.0 10

Unit 6 10 100.0 0 0.0 10

Unit 7 6 100.0 0 0.0 6

Unit 8 3 50.0 3 50.0 6

Unit 9 3 20.0 12 80.0 15

Unit 10 4 40.0 6 60.0 10

Unit 11 4 80.0 1 20.0 5

Total 82 68.3 38 31.7 120


95

Fig. 4.1 : Distribution of samples according to nature of acquisition

Purchased

68.30%

Leased

31.70%

Sources of Finance for SSI Units

Financial requirements of SSI units are met largely by banks

particularly for short term and working capital needs. Large majority

of 109 SSI respondent units constituting 90.8% obtained finance from

banks while a small number of 11 SSI units accounting for 9.2%

obtained finances from the Karnatak State Financial Corporation. All

the SSI units mentioned earlier under unit No. 2, 4, 5 and 7 to 11

manufacturing different products and providing services have availed

of bank finances for their organizations. Of the 11 SSI units who

obtained finance from KSFC 5 SSI units manufacturing products

under unit No. 3 and 4 SSI units manufacturing products listed under

unit No. 1 and 2 SSIs under unit No. 6, obtained finances from the

KSFC. The information obtained through the survey reveals that SSIs

are largely dependent on the commercial banks for their financial

needs as the study units ranging between a minimum of 50% to a

maximum of 100% have obtained finance from banks, while KSFC

96

finance was arranged for only 16% to 50% of the SSI study units. The

following table and graph provides the details.

Table-4.3

Sources of Finance for SSI Units

Category Banks % KSFC % Total

Unit 1 21 84.0 4 16.0 25

Unit 2 15 100.0 0 0.0 15

Unit 3 5 50.0 5 50.0 10

Unit 4 8 100.0 0 0.0 8

Unit 5 10 100.0 0 0.0 10

Unit 6 8 80.0 2 20.0 10

Unit 7 6 100.0 0 0.0 6

Unit 8 6 100.0 0 0.0 6

Unit 9 15 100.0 0 0.0 15

Unit 10 10 100.0 0 0.0 10

Unit 11 5 100.0 0 0.0 5

Total 109 90.8 11 9.2 120


Fig. 4.2 : Distribution of samples according to sources of finance

Banks

90.80%

KSFC

9.20%

97

Problems Faced in Obtaining Finance

The major problem encountered by the small scale industries in

obtaining finance related to high interest rate. This problem has been

mentioned by maximum number of 109 SSI respondent units

constituting 90.8 percent. Rigid repayment conditions as a problem

has been mentioned by two respondent SSI units accounting for 1.7

percent. The other problem relating to inadequate amount of loan

finance given by the financial institutions has been referred to by 6

respondent SSI units representing 5 percent of the total number of

sample units in the study area.

From categorywise respondent SSI units it is significant to note

that the problem of high interest is mentioned by all the respondent

production unit No. 2, 6, 7, 8, 9, 10 and 11 representing different

manufacturing organizations. Majority of 80% of unit-1 products of

SSI organization and unit-3 product of SSI group and 60% of unit-5

products group have mentioned the problem of high interest rates.

It is significant to note that none of the 120 sample SSI units

has referred to the problem of inconvenient installment of repayment.

Inadequate amount of loan finance is mentioned by 16% of the

respondent SSI units involved in manufacturing products under unit-

1 category by 20% of the SSI units involved in producing unit-3 type

of products.

High interest rate of loan finance and inadequate finance are the

major problems mentioned by the respondent SSI units in the study

area. The following table provides the details.

98

Table-4.4

Problem Faced in Obtaining Finance

Category High interest

% Inconvenience installments

% Rigid % Inadequate amount

% Others % Total

Unit 1 20 80.0 0 0.0 1 4.0 4 16.0 0 0.0 25

Unit 2 15 100.0 0 0.0 0 0.0 0 0.0 0 0.0 15

Unit 3 8 80.0 0 0.0 0 0.0 0 0.0 2 20.0 10

Unit 4 8 100.0 0 0.0 0 0.0 0 0.0 0 0.0 8

Unit 5 6 60.0 0 0.0 1 10.0 2 20.0 1 10.0 10

Unit 6 10 100.0 0 0.0 0 0.0 0 0.0 0 0.0 10

Unit 7 6 100.0 0 0.0 0 0.0 0 0.0 0 0.0 6

Unit 8 6 100.0 0 0.0 0 0.0 0 0.0 0 0.0 6

Unit 9 15 100.0 0 0.0 0 0.0 0 0.0 0 0.0 15

Unit 10 10 100.0 0 0.0 0 0.0 0 0.0 0 0.0 10

Unit 11 5 100.0 0 0.0 0 0.0 0 0.0 0 0.0 5

Total 109 90.8 0 0.0 2 1.7 6 5.0 3 2.5 120


Fig. 4.3 : Distribution of samples according to family profession

High interest

90.83%

Others

2.50%Inconvenience

installments

0.00%

Rigid

1.67%Inadequate

amount

5.00%

99

Getting Subsidy on Loan

Specified small scale industrial units are eligible for government

subsidy on the loan amount for financing the investment in plant and

machinery. The policy of subsidy is adopted to encourage the potential

entrepreneurs to take up the small scale enterprise which would be

useful in creating self employment for the unemployed educated

people. The spread of SSIs would also help the national economy in

increasing the supply of consumer goods and in tackling the regional

backwardness in the country. Hence the government has been

providing the monetary incentives to encourage entrepreneurship in

the small scale sector. Government agencies like the state department

and small scale industries, the district industries centres, etc. help

the SSI units in these directions.

The study has revealed that majority of 64 SSI units in the

study area have availed of the subsidy benefits. However a substantial

number of 56 SSI study units have not been able to get the benefit of

subsidy. The SSI units getting the subsidy and those not getting the

benefit of subsidy belong to all the 11 categories of product groups

from group unit 1 to 11. Higher number of units getting the subsidy

benefit belonged to product group unit No. 1, 2, 3, 6. Majority of group

of products of SSIs under unit No. 5, 7, 9 and unit No. 11 were not

benefited by the subsidy incentives. The following table and graph

provides the details.

100

Table-4.5

Getting Subsidy on Loan

Category Yes % No % Total

Unit 1 13 52.0 12 48.0 25

Unit 2 12 80.0 3 20.0 15

Unit 3 6 60.0 4 40.0 10

Unit 4 4 50.0 4 50.0 8

Unit 5 2 20.0 8 80.0 10

Unit 6 6 60.0 4 40.0 10

Unit 7 2 33.3 4 66.7 6

Unit 8 3 50.0 3 50.0 6

Unit 9 7 46.7 8 53.3 15

Unit 10 7 70.0 3 30.0 10

Unit 11 2 40.0 3 60.0 5

Total 64 53.3 56 46.7 120


64.0

56.0

52.0

54.0

56.0

58.0

60.0

62.0

64.0

No

of

su

bje

cts

Yes No

Fig. 4.4 : Distribution of samples according to subsidy on loan

101

Amount of Subsidy Obtained by SSI Units

The subsidy amount on the capital investment has varied

depending upon the nature of the area of investment and the rate of

subsidy fixed by the government from time to time.

A majority of 46 respondent SSI units accounting for 71.9

percent of those who obtained subsidy (64) availed subsidy in the

range of 5-9%. In this range majority of SSI units manufacturing the

products listed earlier in product unit 1, 2, 5, 6, 9 and 10 have

obtained the subsidy.

A small number of 16 SSI units constituting 25 percent

obtained subsidy in the range of 10-14%. Further 2 SSI units covered

by the study obtained subsidy of 20%. The following table and graph


Table-4.6

Amount of Subsidy Obtained by the SSI Units

Category 5-9% % 10-14% % 15-19% % >20% % Total

Unit 1 9 69.2 4 30.8 0 0.0 0 0.0 13

Unit 2 10 83.3 2 16.7 0 0.0 0 0.0 12

Unit 3 6 100.0 0 0.0 0 0.0 0 0.0 6

Unit 4 2 50.0 2 50.0 0 0.0 0 0.0 4

Unit 5 2 100.0 0 0.0 0 0.0 0 0.0 2

Unit 6 4 66.7 0 0.0 0 0.0 2 33.3 6

Unit 7 0 0.0 2 100.0 0 0.0 0 0.0 2

Unit 8 0 0.0 3 100.0 0 0.0 0 0.0 3

Unit 9 7 100.0 0 0.0 0 0.0 0 0.0 7

Unit 10 6 85.7 1 14.3 0 0.0 0 0.0 7

Unit 11 0 0.0 2 100.0 0 0.0 0 0.0 2

Total 46 71.9 16 25.0 0 0.0 2 3.1 64


102

Fig. 4.5 : Distribution of samples according to amount of subsidy

5-9%

71.88%

15-19%

0.00%10-14%

25.00%

>20%

3.13%

Agency Giving Subsidy to Small Scale Industry

Subsidy is given by the government through agencies like KSFC,

Banks, etc. The respondents are largely unaware of the main source of

subsidy i.e. government as could be found from their responses.

Awareness about Incentives and Subsidy Schemes for Small Scale

Industries

State and Central Governments have been extending various

type of incentives – fiscal, monetary and marketing, etc. to small scale

industries with a view to enhance their production competitiveness

and sales promotions. The entrepreneurs are provided the information

on such incentives by the officials concerned and institutions at State

and Central levels. Trade and industrial associations too are expected

to build up awareness about these incentives among the

entrepreneurs involved in the small scale industries.

The study has revealed that majority of 68 respondent small

scale entrepreneurs constituting 56.7 percent of the total were aware

103

of the incentives and subsidies made available to them by the

government. However a substantial number of 58 small scale

entrepreneurs expressed their unawareness in this context. The

awareness about incentives to SSI units was hundred percent among

the units manufacturing products under the category of unit 8 and

unit 2 who are involved in transport and manufacturing of food

products. They represented 100% and 93.3% of the total in those

categories. Further unit No. 10 manufacturing of wearing apparel

(70%) and unit No. 6 manufacturing wood cork, straw and plaiting

materials (60%) also expressed awareness about the incentives to

SSIs. More than 50% of respondent SSI units manufacturing metal

products, metal working services also expressed their awareness

about the incentives and subsidy provided to SSI units. Rest of the

units (No. 3, 5, 7, 9 and 11) involved in the SSI enterprises covered by

the study accounting for less than 50% of the respective groups

expressed their awareness about the incentives and subsidy to SSIs

given by the government. It is clear that a substantial number of SSI

units are still unaware of the incentives and subsidy provided by the

government to SSIs. There is therefore need for the officials and

institutions involved in the promotion of SSI sector to build

unawareness about these incentives and subsidy among these SSI

units. The following table and graph provides the details.

104

Table-4.7

Awareness about Incentives and Subsidy Schemes for Small Scale Industries


Unit 1 14 56.0 11 44.0 25

Unit 2 14 93.3 1 6.7 15

Unit 3 4 40.0 6 60.0 10

Unit 4 4 50.0 4 50.0 8

Unit 5 2 20.0 8 80.0 10

Unit 6 6 60.0 4 40.0 10

Unit 7 2 33.3 4 66.7 6

Unit 8 6 100.0 0 0.0 6

Unit 9 7 46.7 8 53.3 15

Unit 10 7 70.0 3 30.0 10

Unit 11 2 40.0 3 60.0 5

Total 68 56.7 52 43.3 120


56.7

43.3

0.0

10.0

20.0

30.0

40.0

50.0

60.0

% o

f su

bje

cts

Yes No

Fig. 4.6 : Distribution of samples according to inconvenience on

subsidy

105

Taking Full Use of Incentives and Subsidy

The study has revealed that full utilization of the incentives and

subsidy has not been made by a substantial number of respondent

small scale industrial units in the study area. a majority of 64 small

scale industrial units accounting for 53.3 percent have fully utilized

the available incentives and subsidy. Here all the units categorized

under unit No. 8 have made full utilization of incentives and subsidy.

These units relate to transport services. Units categorized under unit

No. 2 constituting 80 percent have utilized fully the incentives and

subsidy. They include units manufacturing food products. SSI units

(7) categorized under units No. 10 constituting 70% have utilized fully

the incentives and subsidy. They include units manufacturing wearing

apparel. Units manufacturing products of wood cork, straw and

plaiting materials constituting 60% of the units in the category have

used fully the incentives and subsidy. Other units accounting for 50%

and more utilizing incentives and subsidy fully relate units No. 4

(50%) and No. 1 (52%). They manufacture metal products metal

working service and manufacturing of non-metallic mineral products,

etc. Other SSI units constituting less than 50% of the respective

category have utilized the incentives and subsidy. There is need for

enlightening the SSI units about the importance of full utilization of

incentives and subsidy. The institutional network developed for the

promotion of SSI sector should be proactive in this direction. The

following table and graph provide the details.

106

Table-4.8

Full Utilization of Incentives and Subsidy by SSI Units


Unit 1 13 52.0 12 48.0 25

Unit 2 12 80.0 3 20.0 15

Unit 3 3 30.0 7 70.0 10

Unit 4 4 50.0 4 50.0 8

Unit 5 2 20.0 8 80.0 10

Unit 6 6 60.0 4 40.0 10

Unit 7 2 33.3 4 66.7 6

Unit 8 6 100.0 0 0.0 6

Unit 9 7 46.7 8 53.3 15

Unit 10 7 70.0 3 30.0 10

Unit 11 2 40.0 3 60.0 5

Total 64 53.3 56 46.7 120


64.0

56.0

52.0

54.0

56.0

58.0

60.0

62.0

64.0

No

of

su

bje

cts

Yes No

Fig. 4.7 : Distribution of samples according to full use of incentives

and subsidy

107

Working Capital for Small Scale Industries

Working capital refers to excess of current assets over current

liabilities. The objective of working capital management is to maintain

sufficient cash to meet the claims of creditors. Efficiency in the

management of working capital is vital in small or big business units.

Inefficient management of working capital may lead to the flow of

money getting choked, raw materials supplies getting interrupted and

wage payment getting delayed. All these may lead to virtual stoppage

of operations.

Management of working capital is important particularly to

small scale industries in India as these units have weak financial

position and limited access to financial institutions to support their

limited resources.

Inadequate working capital may lead to low liquidity, low

profitability higher interest charge and under capitalization of

production capacity.

SSIs and the Working Capital Requirements

The working capital requirements of small scale industries vary

from one unit to another and from one type of unit to another type.

SSI units located in rented premises and are engaged in processing

works need larger amount of working capital than other units.

Important factors determine the amount of working capital relate to (i)

size of the small scale unit, (ii) process of production, (iii) proportion of

raw materials to total cost, (iv) terms of purchase and sales, (v)

108

turnover of inventories, (vi) intensity of labour, (vii) cash requirements,

(viii) seasonal nature of SSI products.

Planning and control of working capital centres round sound

cash planning which includes setting of cash policies and procedures

and the control over cash and credit. Cash is of course the very

sensitive component of working capital. The working capital has

therefore to be managed properly especially by the small scale

industries because over or under circulation may create volatile

problems (Vasant Desai, 2002).

Adequacy of Working Capital

It is found from the field survey that working capital available

from different sources was found adequate by majority of 95

respondent SSI units accounting for 79.2 percent of the total. However

25 respondent SSI units constituting 20.8 percent could not find the

working capital adequate in relation to their requirement.

Adequacy of working capital was found by 100 percent of the

respondent SSI units in the category of unit groups 8, 10 and 11.

They are involved in transport services, manufacturing of wearing

apparel and manufacturing of plastic products.

Further 90 to 93 percent of the respondents involved in

manufacturing of structural metal products, tanks, reservoirs,

manufacturing of food products and manufacturers of basic iron and

steel also found the working capital adequate. A substantial number

of SSI units accounting for 60 to 75 percent in their product groups

also found the available working capital adequate. They are involved

109

in manufacturing of products of wood, cork, straw and plaiting

materials manufacturers of chemical products, manufacturers of non-

metallic mineral products and manufacturers of metal products.

It is significant to note that 80 percent of “other services” units

found the working capital inadequate. The overall position emerging

from the responses indicates that more than 20 percent of the SSI

respondent units did not find the available working capital adequate.

There is therefore need to ensure adequate working capital to all the

small scale industrial units in order to enable them to work smoothly.

The following table and graph provides the details.

Table-4.9

Adequacy of Working Capital for SSI Units


Unit 1 19 76.0 6 24.0 25

Unit 2 14 93.3 1 6.7 15

Unit 3 9 90.0 1 10.0 10

Unit 4 6 75.0 2 25.0 8

Unit 5 2 20.0 8 80.0 10

Unit 6 6 60.0 4 40.0 10

Unit 7 4 66.7 2 33.3 6

Unit 8 6 100.0 0 0.0 6

Unit 9 14 93.3 1 6.7 15

Unit 10 10 100.0 0 0.0 10

Unit 11 5 100.0 0 0.0 5

Total 95 79.2 25 20.8 120


110

95.0

25.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

No

of

su

bje

cts

Yes No

Fig. 4.8 : Distribution of samples according to adequate working

capital

Sources of Working Capital for Different Group of SSI Units

The major sources of working capital for the respondent small

scale industrial units are (i) own funds, (ii) banks, (iii) finance

companies and (iv) others. Own funds have been used for working

capital requirements by majority of 80 respondent SSI units

constituting 66.7% of the total respondents. It is obvious that large

majority of respondent SSI units being proprietary concerns the use of

own funds for working capital is largely practiced by them. Moreover

the working capital needs of these units is limited as many of the SSI

units are small. Banks are the next major source of working capital. A

substantial number of 26 SSI respondent units accounting for 21.7%

of the total have been relying on banks for their working capital needs.

The SSI units are entitled for concessional rates of interest on bank

loans. Hence this source of working capital is widely used by the SSI

units. Small number of 10 SSI respondent units accounting for 8.3%

111

have been resorting to obtain working capital loan from private

finance companies. Such compulsions arise due o inconvenient

procedures followed by banks in providing adequate working capital

loans to SSI units. Private finance companies charge high interest

rates hence the cost of working capital will be high. Hence banks

should provide adequate working capital to SSI units. A very small

number of 4 SSI units (3.3%) have obtained working capital from

other sources. The analysis leads to the conclusion that inadequate

provision of working capital at concessional rates by the banks leads

SSI units to borrow from high cost sources thus resulting in their

increased loan liabilities. Inadequacy and high cost of working capital

may cause some SSI units to become sick. The following table and

graph provides the details.

Table-4.10

Sources of Working Capital for SSI Units

Category Own fund

% Banks % Finance co.

% Others % Total

Unit 1 14 56.0 5 20.0 4 16.0 2 8.0 25

Unit 2 15 100.0 0 0.0 0 0.0 0 0.0 15

Unit 3 2 20.0 6 60.0 2 20.0 0 0.0 10

Unit 4 8 100.0 0 0.0 0 0.0 0 0.0 8

Unit 5 0 0.0 6 60.0 2 20.0 2 20.0 10

Unit 6 6 60.0 2 20.0 2 20.0 0 0.0 10

Unit 7 2 33.3 4 66.7 0 0.0 0 0.0 6

Unit 8 6 100.0 0 0.0 0 0.0 0 0.0 6

Unit 9 15 100.0 0 0.0 0 0.0 0 0.0 15

Unit 10 8 80.0 2 20.0 0 0.0 0 0.0 10

Unit 11 4 80.0 1 20.0 0 0.0 0 0.0 5

Total 80 66.7 26 21.7 10 8.3 4 3.3 120


112

Fig. 4.9 : Distribution of samples according to sources of working

capital

Own fund

66.67%

Finance co.

8.33%Banks

21.67%

Others

3.33%

Problems Faced by SSI Units in Getting Adequate Working Capital

Major problems faced by SSI units covered by the study related

to high interest rates, stringent credit conditions of banks, banks

policies and inconvenient repayment conditions, etc.

High interest on the borrowings for working capital has been

mentioned by maximum number of 105 respondent SSI units

accounting for 87.5 percent. All the respondent SSI units

manufacturing 8 groups of products referred to high interest rate as

the problem is getting adequate working capital. Among the other SSI

units 60% to 80% of them also mentioned the high interest rate on the

borrowing for working capital.

Stringent credit rules of the banks have posed a problem to a

lone SSI unit in obtaining adequate working capital problem.

Changing bank policies have been a problem for 2 SSI respondent

units in obtaining working capital. Further inconvenient repayment

rules of the banks have posed a problem in obtaining adequate

113

working capital according to 9 SSI units. The study has revealed that

there is need for a more liberal and pragmatic approach by the

banking institutions towards meeting the working capital needs of the

SSI units. The following table provides the details.

Table-4.11

Problems Faced by SSI Units in Obtaining Adequate Working Capital

Category High

interest rates

% Stringent

credit %

Policy of

banks %

Inconvenient repayment

% Others % Total

Unit 1 16 64.0 1 4.0 0 0.0 7 28.0 1 4.00 25

Unit 2 15 100.0 0 0.0 0 0.0 0 0.0 0 0.00 15

Unit 3 8 80.0 0 0.0 0 0.0 0 0.0 2 20.00 10

Unit 4 8 100.0 0 0.0 0 0.0 0 0.0 0 0.00 8

Unit 5 6 60.0 0 0.0 2 20.0 2 20.0 0 0.00 10

Unit 6 10 100.0 0 0.0 0 0.0 0 0.0 0 0.00 10

Unit 7 6 100.0 0 0.0 0 0.0 0 0.0 0 0.00 6

Unit 8 6 100.0 0 0.0 0 0.0 0 0.0 0 0.00 6

Unit 9 15 100.0 0 0.0 0 0.0 0 0.0 0 0.00 15

Unit 10 10 100.0 0 0.0 0 0.0 0 0.0 0 0.00 10

Unit 11 5 100.0 0 0.0 0 0.0 0 0.0 0 0.00 5

Total 105 87.5 1 0.8 2 1.7 9 7.5 3 2.50 120


87.5

0.8 1.77.5

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

% o

f subje

cts

High interest

rates

Stringent credit Policy of banks Inconvenient

repayment

Fig. 4.10 : Distribution of samples according to problems face in

getting working capital requirements

114

Inadequate Working Capital Affecting the SSI Units

It is significant to find from the field survey that despite

inadequacy of working capital large majority of SSI units are not

handicapped in their economic functioning. The responses of majority

of 101 respondent SSI units constituting of 84.2 percent indicate that

they are not handicapped by the inadequacy of working capital.

However a small number of 19 SSI study units accounting for 15.8

percent affirmed that they were handicapped by the inadequacy of

working capital. The following table and graph provides the details.

Table-4.12

Inadequate Working Capital Affecting the SSI Units


Unit 1 4 16.0 21 84.0 25

Unit 2 1 6.7 14 93.3 15

Unit 3 2 20.0 8 80.0 10

Unit 4 0 0.0 8 100.0 8

Unit 5 2 20.0 8 80.0 10

Unit 6 2 20.0 8 80.0 10

Unit 7 0 0.0 6 100.0 6

Unit 8 0 0.0 6 100.0 6

Unit 9 5 33.3 10 66.7 15

Unit 10 3 30.0 7 70.0 10

Unit 11 0 0.0 5 100.0 5

Total 19 15.8 101 84.2 120


115

15.8

84.2

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0%

of subje

cts

Yes No

Fig. 4.11 : Distribution of samples according to inadequate

working capital

Production

Production is the conversion of raw materials into finished

products. It needs an organized orderly functioning of the plant in the

best manner at low cost. Production planning and control involves

generally the organization and planning of manufacturing process,

specifically it consists of planning of routing, scheduling, dispatching

and inspection, co-ordination and control of materials, methods,

machines, tooling and operating times. The ultimate objectives is the

organization of the supply and movement of materials and labour,

machine utilization and related activities in order to bring about the

desired manufacturing results in terms of quality, time and place.

Raw Material Location

Raw material which constitutes the main input in the

production process is obtained by the SSI units from three main areas

– local, outside the city and outside the state. Majority of 53

116

respondent SSI units obtained their raw materials from the local

sources. They accounted for 44.2 percent of the total respondents. The

major type of these units are involved in

Manufacturing of fabricated metal products and metal working

service activities.

Manufacturing of basic iron and steel.

Manufacture of food products.

A substantial number of 40 SSI units accounting for 33.3% of

the total respondents obtained their raw materials from outside the

city. Major units in this category include

Manufacture of structural metal products, tanks, reservoirs, etc.

Manufacture of wood products cork, straw and plaiting materials.

Manufacturing of wearing apparels.

Manufacture of non-metallic mineral products, etc.

A lesser number of 27 SSI study units constituting 22.5% of the

total obtained their raw materials from outside the state. Major SSI

units in this category include

Service activities

Manufacture of fabricated metals

Transport services

Manufacture of structural metal products.


117

Table-4.13

Raw Material Source – Location

Category Locally % Outside

the

city

% Outside

the

state

% Total

Unit 1 16 64.0 3 12.0 6 24.0 25

Unit 2 11 73.3 4 26.7 0 0.0 15

Unit 3 0 0.0 7 70.0 3 30.0 10

Unit 4 4 50.0 4 50.0 0 0.0 8

Unit 5 0 0.0 0 0.0 10 100.0 10

Unit 6 3 30.0 5 50.0 2 20.0 10

Unit 7 0 0.0 4 66.7 2 33.3 6

Unit 8 0 0.0 3 50.0 3 50.0 6

Unit 9 12 80.0 3 20.0 0 0.0 15

Unit 10 5 50.0 5 50.0 0 0.0 10

Unit 11 2 40.0 2 40.0 1 20.0 5

Total 53 44.2 40 33.3 27 22.5 120


Fig. 4.12 : Distribution of samples according to where do get raw

materials

Outside the state

22.50%Locally

44.17%

Outside the city

33.33%

Availability of Adequate Raw Materials

The study has revealed that large majority of 105 respondent

SSI units constituting 87.5 percent of the total respondents affirmed

118

that they could get adequate raw materials for their production units.

However a small number of 15 respondents accounting for 12.5

percent of the total mentioned that they did not get adequate quantity

of raw materials for their production units.

All the units (100%) involved in the production of the following

products asserted that they could get adequate quantity of raw materials.

Manufacture of food products

Manufacture of non-metallic minerals products

Manufacture of chemical products

Transport services

Manufacture of wearing apparel


Table-4.14

Getting Adequate Raw Materials


Unit 1 21 84.0 4 16.0 25

Unit 2 15 100.0 0 0.0 15

Unit 3 6 60.0 4 40.0 10

Unit 4 8 100.0 0 0.0 8

Unit 5 8 80.0 2 20.0 10

Unit 6 8 80.0 2 20.0 10

Unit 7 6 100.0 0 0.0 6

Unit 8 6 100.0 0 0.0 6

Unit 9 13 86.7 2 13.3 15

Unit 10 10 100.0 0 0.0 10

Unit 11 4 80.0 1 20.0 5

Total 105 87.5 15 12.5 120


119

87.5

12.5

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

% o

f subje

cts

Yes No

Fig. 4.13 : Distribution of samples according to adequate raw

materials

Obtaining Help from Governmental Agencies in Getting Raw

Materials

Inadequacy of raw materials indicated by 15 respondent SSI

units has led to seeking help from the governmental agencies in

getting raw materials as indicated by 7 respondent SSI units

accounting for 5.8%. However the other 8 SSI units did not seek such

help from the governmental agencies. Hence the total number of the

SSI units who did not seek government help in getting raw materials

has gone upto 113 constituting 94.2%. The 7 SSI units which sought

government help in getting raw material belonged to the following

production areas.

Manufacturing of metal products and metal working service

activities.

Manufacturing of structural metal products, tanks, reservoirs and

steam generators.

120

Manufacturers of basic iron and steel.

Manufacturers of wearing apparel.

The 8 SSI units who did not seek government help in getting

raw materials appear to be ignorant of the government help. Hence

there is need for enlightening such units about the government help

in providing raw materials. Trade associations and government

agencies like DIC have to play a role in this direction. The following

table and graph provides the details.

Table-4.15

Seeking Help of Government Agency in Getting Raw Materials


Unit 1 1 4.0 24 96.0 25

Unit 2 0 0.0 15 100.0 15

Unit 3 3 30.0 7 70.0 10

Unit 4 0 0.0 8 100.0 8

Unit 5 0 0.0 10 100.0 10

Unit 6 0 0.0 10 100.0 10

Unit 7 0 0.0 6 100.0 6

Unit 8 0 0.0 6 100.0 6

Unit 9 2 13.3 13 86.7 15

Unit 10 1 10.0 9 90.0 10

Unit 11 0 0.0 5 100.0 5

Total 7 5.8 113 94.2 120


121

Fig. 4.14 : Distribution of samples according to any help from

government

Yes

5.80%

No

94.20%

Agencies Helping SSIs in Getting Raw Materials

The 7 SSI units who sought help of government agencies in

getting raw materials approached KSFC and other government

agencies. Major government agencies like DIC and KSSIDC do not

seem to have involved in such context and do not seem to play a

proactive role in this vital area of getting raw material for the needy

SSI units. The following table and graph provides the details.

Table-4.16

Government Agencies Helping the SSI in Getting Raw Materials

Agencies No of sample % of samples

KSFC 5 71.43

DIC 0 0.00

KSSIDC 0 0.00

Others 2 28.57


122

71.4

0.0 0.0

29.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0%

of

su

bje

cts

KSFC DIC KSSIDC Others

Fig. 4.15 : Distribution of samples according to names of agencies

taken help

Adequacy of Government Help in Getting Raw Materials

A majority of 75 respondent SSI units accounting for 62.5

percent of the total found the government help adequate in getting raw

materials. However a lesser number of 45 respondent SSI units

(37.5%) found the government help inadequate. All the SSI units

involved in the following production activities found the government

help adequate.

Manufacture of food products

Transport services

Manufacture of basic iron and steel

Manufacture of wearing apparel

A few more units manufacturing other products also found the

government help in getting raw materials adequate. The following

table and graph provides the details.

123

Table-4.17

Adequacy of Government Help in Getting Raw Materials


Unit 1 12 48.0 13 52.0 25

Unit 2 15 100.0 0 0.0 15

Unit 3 4 40.0 6 60.0 10

Unit 4 4 50.0 4 50.0 8

Unit 5 0 0.0 10 100.0 10

Unit 6 4 40.0 6 60.0 10

Unit 7 2 33.3 4 66.7 6

Unit 8 6 100.0 0 0.0 6

Unit 9 15 100.0 0 0.0 15

Unit 10 10 100.0 0 0.0 10

Unit 11 3 60.0 2 40.0 5

Total 75 62.5 45 37.5 120


Fig. 4.16 : Distribution of samples according to help is adequate

No

38%Yes

62%

124

Average Requirement of Raw Material Per Year

The study has revealed that the average requirement of raw

materials for the SSI units was estimated at 11-20 tons per year

according to majority of 58 respondents accounting for 48.3% of the

total. A substantial number of 44 respondents (37.7%) indicated that

the average requirement of raw materials per year varied between 1 to

11 tons. A lesser number of 16 SSI study units (13.3%) needed more

than 31 tons of raw materials while 2 study units (1.7%) needed 21-30

tons of raw materials per year.

Maximum of more than 31 tons of raw materials was needed by

units involved in ‘services’ and manufacture of products of wood cork,

straw and plaiting materials.

Minimum of 1-10 tons of raw materials was needed by SSI units

involved in manufacture of metal products and metal working service

units and those manufacturing basic iron and steel and those involved

in other production activities.

A good number of 12 SSI units manufacturing food products

needed 11-20 tons of raw materials per year. The following table


125

Table-4.18

Average Requirements of Raw Materials per Year

Category 1-10 % 11-20 % 21-30 % 31+ % Total

Unit 1 14 56.0 5 20.0 0 0.0 6 24.0 25

Unit 2 3 20.0 12 80.0 0 0.0 0 0.0 15

Unit 3 2 20.0 2 20.0 2 20.0 4 40.0 10

Unit 4 2 25.0 6 75.0 0 0.0 0 0.0 8

Unit 5 4 40.0 2 20.0 0 0.0 4 40.0 10

Unit 6 2 20.0 6 60.0 0 0.0 2 20.0 10

Unit 7 4 66.7 2 33.3 0 0.0 0 0.0 6

Unit 8 0 0.0 6 100.0 0 0.0 0 0.0 6

Unit 9 9 60.0 6 40.0 0 0.0 0 0.0 15

Unit 10 2 20.0 8 80.0 0 0.0 0 0.0 10

Unit 11 2 40.0 3 60.0 0 0.0 0 0.0 5

Total 44 36.7 58 48.3 2 1.7 16 13.3 120


44.0

58.0

2.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

No

of

su

bje

cts

1-10 tones 11-20 tones 21-30 tones

Fig. 4.17 : Distribution of samples according to requirement of raw

materials (in tons)

126

Actual Quantity of Raw Material Obtained by the SSI Units

The study has revealed that the respondent SSI units have

obtained varying amount of raw materials during a year. The quantity

of raw material obtained by SSI units varied from a minimum of 0.5-1

lakh tons to a maximum of 2 to 2.5 lakh tons. Large majority of 87

respondent SSI units constituting 72.5 percent of the total obtained a

minimum amount of 0.50 to 1 lakh ton of raw material.

All the manufacturers of structural metal products, tanks and

all the providers of services obtained the minimum of 0.50 to 1 lakh

tons of raw material. Further 92 percent of manufacturers of

fabricated metal products, 90% of manufacturers of products of wood,

cork, straw, 80% of manufacturers of plastics products, 70% of

manufacturers of wearing apparel, 66.7% of manufacturers of

chemical products obtained raw material of 0.50 to 1 lakh tons.

Manufacturers of non-metallic mineral products obtained

maximum of 2 to 2.5 lakh ton of raw materials in a year. The details of

the SSI units obtaining varying quantity of raw materials are provided

in the following table.

127

Table-4.19

Actual Quantity of Raw Material Obtained by SSI Units

Category 0.5-1 lakh % 1-1.5 lakh % 1.5-2 lakh % 2-2.5 lakh % Total

Unit 1 23 92.0 2 8.0 0 0.0 0 0.0 25

Unit 2 9 60.0 6 40.0 0 0.0 0 0.0 15

Unit 3 10 100.0 0 0.0 0 0.0 0 0.0 10

Unit 4 2 25.0 2 25.0 2 25.0 2 25.0 8

Unit 5 10 100.0 0 0.0 0 0.0 0 0.0 10

Unit 6 9 90.0 1 10.0 0 0.0 0 0.0 10

Unit 7 4 66.7 2 33.3 0 0.0 0 0.0 6

Unit 8 0 0.0 6 100.0 0 0.0 0 0.0 6

Unit 9 9 60.0 4 26.7 2 13.3 0 0.0 15

Unit 10 7 70.0 3 30.0 0 0.0 0 0.0 10

Unit 11 4 80.0 1 20.0 0 0.0 0 0.0 5

Total 87 72.5 27 22.5 4 3.3 2 1.7 120


72.5

22.5

3.3 1.7

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

% o

f su

bje

cts

0.5-1 lakh 1-1.5 lakh 1.5-2 lakh 2-2.5 lakh

Fig. 4.18 : Distribution of samples according to actual quantity of

raw material (in tons)

128

Loss of Production due to Shortage of Raw Materials

Raw material inadequacy has led to problem of loss of

production and retrenchment of labour in many small scale industrial

units. Chronic shortage of raw material is experienced in certain areas

of manufacturing and the units are forced to curtail their volumes of

production. High incidence of sickness in the small scale industrial

sector has been caused many times by shortage of raw materials. The

field survey covering the 120 SSI units has revealed that the loss of

production due to shortage of raw materials ranged between a

minimum of 1-10% to a maximum of 31-40%.

Maximum of 53 respondent SSI units constituting 44.2% have

indicated loss of production of 1-10% due to shortage of raw

materials. A substantial number of 43 respondent SSI units

accounting for 35.8% mentioned a loss of production of 11-20% due to

shortage of raw materials. A smaller number of 14 SSI units (11.7%)

mentioned higher loss of production at 31-40%, while a lesser number

of 10 SSI units (8.3%) indicated production loss of 21-30% due to

shortage of raw materials.

Productionwise lower loss of production (1-10%) was mentioned

by larger number of units producing fabricated metal products, metal

working service activities, manufacturing of food products,

manufacturing of wearing apparel and manufacturing of basic iron

and steel.

129

Higher level of production loss sue to shortage of raw materials

was indicated by service units and manufacturing of wood products,

cork, straw, etc.

The loss of production due to shortage of raw materials is a

serious problem since it affects the supply position creating shortages

of consumer items and cause reduction of retrenchment of labour and

the extreme possibility of the SSI units becoming sick. Hence the

concerned government agencies should address this issue and ensure

adequate supply of raw materials to this priority sector in the Indian

economy. The following table and graph provides the details.

Table-4.20

Production Loss due to Shortage of Raw Materials

Category 1-10% % 11-20 % % 21-30 % % 31-40 % % Total

Unit 1 12 48.0 5 20.0 4 16.0 4 16.0 25

Unit 2 11 73.3 4 26.7 0 0.0 0 0.0 15

Unit 3 2 20.0 2 20.0 4 40.0 2 20.0 10

Unit 4 4 50.0 4 50.0 0 0.0 0 0.0 8

Unit 5 0 0.0 4 40.0 2 20.0 4 40.0 10

Unit 6 2 20.0 4 40.0 0 0.0 4 40.0 10

Unit 7 4 66.7 2 33.3 0 0.0 0 0.0 6

Unit 8 0 0.0 6 100.0 0 0.0 0 0.0 6

Unit 9 9 60.0 6 40.0 0 0.0 0 0.0 15

Unit 10 8 80.0 2 20.0 0 0.0 0 0.0 10

Unit 11 1 20.0 4 80.0 0 0.0 0 0.0 5

Total 53 44.2 43 35.8 10 8.3 14 11.7 120


130

53.0

43.0

10.014.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0N

o o

f su

bje

cts

1-10% 11-20 % 21-30 % 31-40 %

Fig. 4.19 : Distribution of samples according to production is lost

due to shortage of raw materials

Nature of Production of the SSI Units

SSI study units comprise of those with a seasonal operations

and those having an year round production schedule. SSI units

depending on raw materials whose supply is seasonal like agricultural

raw materials are involved in production activities of a seasonal

nature. Other SSIs whose dependence is on raw materials of a

perennial supply are engaged in continuous and year round production.

The survey has revealed that large majority of 106 SSI study

units constituting 88.3% are engaged in continuous production activities.

All the following type of SSI units are engaged in continuous

production.

Units manufacturing food products.

Units manufacturing non-metallic mineral products.

Units manufacturing wood products, cork, straw and plaiting

materials.

Units manufacturing chemical products.

131

Units involved in transport services.

Units manufacturing basic iron and steel.

Units manufacturing of wearing apparel.

Units manufacturing plastic products.

In addition to the above majority of units involved in the

production of fabricated metal products, metal working service and

units manufacturing of structural metal products, tanks, reservoirs,

etc. are involved in continuous production activities.

Among those involved in seasonal production majority of units

relate to service organizations and some units are involved in

manufacture of structural metal products. The following table and

graph provides the details.

Table-4.21

Nature of Production of the SSI Units

Category Continuous % Seasonal % Total

Unit 1 21 84.0 4 16.0 25

Unit 2 15 100.0 0 0.0 15

Unit 3 6 60.0 4 40.0 10

Unit 4 8 100.0 0 0.0 8

Unit 5 4 40.0 6 60.0 10

Unit 6 10 100.0 0 0.0 10

Unit 7 6 100.0 0 0.0 6

Unit 8 6 100.0 0 0.0 6

Unit 9 15 100.0 0 0.0 15

Unit 10 10 100.0 0 0.0 10

Unit 11 5 100.0 0 0.0 5

Total 106 88.3 14 11.7 120


132

Fig. 4.20 : Distribution of samples according to nature of

production

Seasonal

11.67%

Continuous

88.33%

Change in Production Volume of SSI Units

Production of industrial units is subject to periodical variations.

Major factors causing changes in the quantity of the production relate

to demand variations, supply constraints like raw material shortage,

shortage of power, transport and other infrastructure affecting the

production unit. Government control and regulations, financial

difficulties, labour problems, etc. also affect the changes in the volume

of production of industrial units in general and small scale industries

in particular.

The study has revealed that there has been an increase in the

production of the respondent SSI units during the last five years

according to a majority of 77 SSI units constituting 64.2 percent of the

total. A lesser number of 34 respondent SSI units (28.3%) mentioned

that the production level has remained constant. A small number of 9

SSI respondent units (7.5%) however have experienced a decline in the

production.

133

Among the 77 SSI units affirming an increase in the production

all the following SSI units have been mentioned during the field

survey.

Manufacturing of food products.

Manufacturing of non-metallic mineral products.

Manufacturing of wood products, cork, straw and plaiting

materials.

Transport services.

Further 90% of the units manufacturing metal products, tanks,

reservoirs and steam generators 66.7% of units manufacturing

chemical products, and 60% of SSI units manufacturing wearing

apparel and units manufacturing plastic products have experienced

increase in production.

SSI units which experienced decrease in production include

manufacturers of fabricated metal products, metal working service

and services units.

Some units which experienced constant production during the

last 5 years relate to manufacturers of metal fabricated metal

products, manufacturers of basic iron and steel, some service units,

units manufacturing wearing apparel, units producing chemical

products and manufacturers of plastic products. The following table


134

Table-4.22

Change in Production Volume of SSI Units

Category Increased % Decreased % Constant % Total

Unit 1 9 36.0 5 20.0 11 44.0 25

Unit 2 15 100.0 0 0.0 0 0.0 15

Unit 3 9 90.0 0 0.0 1 10.0 10

Unit 4 8 100.0 0 0.0 0 0.0 8

Unit 5 2 20.0 4 40.0 4 40.0 10

Unit 6 10 100.0 0 0.0 0 0.0 10

Unit 7 4 66.7 0 0.0 2 33.3 6

Unit 8 6 100.0 0 0.0 0 0.0 6

Unit 9 5 33.3 0 0.0 10 66.7 15

Unit 10 6 60.0 0 0.0 4 40.0 10

Unit 11 3 60.0 0 0.0 2 40.0 5

Total 77 64.2 9 7.5 34 28.3 120


64.2

7.5

28.3

-5.0

5.0

15.0

25.0

35.0

45.0

55.0

65.0

% o

f su

bje

cts

Increased Decreased Constant

Fig. 4.21 : Distribution of samples according to last five years of

production

135

Reasons for Decrease in Production

The responses of the 9 small scale industrial units covered by

the study indicate two major reasons for the decrease in production.

They include decline in demand for the products according to 2 SSI

respondent units accounting for 22.22 percent. A general decline in

demand is caused due to development of substitutes and/or the

competitors aggressive sales drives which results in diversion of

demand. Shrinkage in demand is bound to force the producers to

curtail their production. Another reason for decrease in production

has been the shortage of power. Power is an important input in the

production activities. Particularly the power intensive production of

certain products vitally depends on power supply. In areas where

there is chronic power shortage, industries particularly small scale

industries are the worst sufferers. This factor has been mentioned by

7 SSI units constituting 77.78 percent of the total number of 9 SSI

respondent units which have mentioned power shortage. Te study

area is part of the northern part of Karnataka State has been one of

the power deficit states in the country. Hence the shortage of power is

obviously an important reason for certain SSI units to suffer as they

are power intensive units. The responses of the 9 respondent SSI

units are provided in the following table and graph.

136

Table-4.23

Reasons for the Decrease in Production

Reasons No of sample % of samples

Shortage of raw materials 0 0.00

Decline in demand 2 22.22

Severe competition 0 0.00

Labor strikes 0 0.00

Power shortage 7 77.78

Transport difficulty 0 0.00

Financial shortage 0 0.00

Others 0 0.00

Total 9 100.00


Fig. 4.22 : Distribution of samples according to production is

decreased because of following reasons

0.00%22.22%

0.00%0.00%

77.78%

0.00%0.00%0.00%

Shortage of raw materials Decline in demandSevere competition Labor strikesPower shortage Transport difficultyFinancial shortage Others

Utilization of Production capacity in the Last 5 Years

Utilization of production capacity is a crucial determinant of the

success of an industrial unit. Failure to utilize full production capacity

leads to unemployment of resources – physical and manpower. It

137

ultimately results in the earnings of the production unit to shrink and

the unit may become sick. Idle capacity or unutilized capacity of any

unit is caused by shortage of input resources – raw materials, power

and other supplies. Idle capacity may also be caused by labour

problem, recession or faculty fiscal and monetary policies of the state.

Hence both internal and external factors may lead to unutilized

production of industrial units.

The field survey has revealed that capacity utilization in the

respondent small scale industrial units during the last five years

ranged from a minimum of 40 percent to a maximum of 54.20

percent. The average utilization of production capacity of the

respondent small scale industrial units during the last 5 years was

46.53 percent.

Industrywise maximum utilization of 54.20% production

capacity was achieved by units relating to manufacturing of structural

metal products, tanks, reservoirs and steam generators. Units

utilizing 50% or more, included manufacturing of fabricated metal

products, metal working services and transport services. Other

respondent small scale industrial units in the study area utilized 40 to

49% of the installed production capacity. Utilization of production of

the study SSI units is to be considered as unsatisfactory as more than

50% of capacity has remained unutilized during the last 5 years.

There is need for ascertaining the major reasons for causing poor

utilization of production capacity in the small scale industrial units

138

and necessary steps need to be taken to overcome the problem. The


Table-4.24

Utilization of Production Capacity during the Last 5 Years

Category Quantity

Means Std.Dev.

Unit 1 50.84 11.28

Unit 2 42.00 6.76

Unit 3 54.20 8.01

Unit 4 36.25 4.43

Unit 5 49.00 9.66

Unit 6 52.00 9.19

Unit 7 43.33 5.16

Unit 8 50.00 10.95

Unit 9 42.33 5.30

Unit 10 40.00 4.08

Unit 11 49.00 10.84

Total 46.53 9.69


Labour and Employee Management

Small scale industries are traditionally labour intensive and

there is high ratio of labour to capital. However the advent of modern

production technology has substantially changed the employment

scenario in small scale industrial units particularly with the advent of

automation and computerization of administration of the units. The

study has revealed some significant tends in this direction.

139

Labour Employment in SSI Units

The study units have employed skilled, unskilled, technical and

non-technical workers in their organizations. The average number

(mean) of skilled workers in the different product groups of SSIs was

4.99. The number of skilled workers varied from a minimum of 1

skilled worker in manufacturing units of non-metallic mineral

products to a maximum of 15.50 skilled workers in units

manufacturing structural metal products, tanks, reservoirs, etc.

The average (mean) unskilled workers in the SSI study units

was 6.94 (mean). The number of unskilled workers varied from a

minimum of 1 unskilled worker in units manufacturing food products

to a maximum of 29.80 unskilled workers in service units.

The average number of technical workers in the SSI study units

was 2.70. The number varied from a minimum of 1.33 in units

manufacturing non-metallic mineral products to a maximum of 8.75

in SSI study units providing services.

The average number of non-technical workers in the SSI study

units was 2.04. The figure varied from a minimum of 1.33 in SSI units

manufacturing non-metallic mineral products and chemical products

to a maximum of 5.60 in SSI study units providing services. The


140

Table-4.25

Type of Workers Employed in SSI Study Units

Category Skilled Unskilled Technical Non-Technical

Mean SD Mean SD Mean SD Mean SD

Unit 1 5.16 9.54 4.56 7.41 1.54 0.78 2.14 1.58

Unit 2 1.13 0.35 1.00 0.00 1.58 0.51 1.46 0.52

Unit 3 15.50 26.12 11.00 12.92 3.00 1.12 1.80 0.79

Unit 4 1.00 0.00 1.00 0.00 1.33 0.52 1.33 0.52

Unit 5 14.60 19.07 29.80 47.78 8.75 13.12 5.60 7.62

Unit 6 2.80 2.86 5.60 5.23 2.60 1.07 1.80 0.42

Unit 7 3.00 1.79 2.67 1.37 4.00 0.89 1.33 0.52

Unit 8 5.50 4.93 2.50 1.64 2.00 0.00 1.50 0.55

Unit 9 1.13 0.52 9.80 10.92 2.60 1.24 1.57 0.51

Unit 10 2.60 1.71 3.70 5.01 2.29 0.49 1.60 0.70

Unit 11 4.40 3.97 3.40 2.88 2.00 1.00 1.60 0.55

Total 4.99 11.09 6.94 16.51 2.70 4.01 2.04 2.59


4.99

6.94

2.70

2.04

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Mean v

alu

e

Skilled Unskilled Technical Non-Technical

Fig. 4.23 : Mean values of number of different employees working in

unit

141

Method of Recruitment of Workers in SSI Units

Selection and recruitment of workers in industrial units has to

be properly planned to suit the organizational needs of the units.

Different industries require different type of workers suit the technical

and non-technical positions. Hence the varied needs of the industrial

units relating to skilled, unskilled, technical and non-technical areas

have to be planned and recruitment of the proper personnel has to be

done by the management.

Methods of Recruitment of Workers in SSI Units

Recruitment of workers through personnel interviews has been

done by large majority of 90 SSI study units (75%). Recruitment

through advertisement has been followed by 30 SSI study units (25%).

All the SSI study units involved in the manufacturing of

structural metal products, non-metallic mineral products and

manufacture of wood products, cork, straw and plaiting material have

followed the recruitment of workers through personal interviews.

Majority of units manufacturing food products, service units, plastic

products, wearing apparel, fabricated metal products, chemical

products and manufacturers of basic iron and steel have followed the

method of recruiting workers through personal interview.

All the SSI study units providing transport services have

followed the method of recruiting workers through advertisement.

Good number of units involved in manufacturing fabricated metal

products, basic iron and steel, chemical products and wearing apparel

142

have been following the method of recruiting workers through

advertisement. The following table and graph provides the details.

Table-4.26

Methods of Recruitment of Workers in SSI Units

Category Through advt

% Through P interview

% Through training like IIT

% Total

Unit 1 6 24.0 19 76.0 0 0.0 25

Unit 2 3 20.0 12 80.0 0 0.0 15

Unit 3 0 0.0 10 100.0 0 0.0 10

Unit 4 0 0.0 8 100.0 0 0.0 8

Unit 5 2 20.0 8 80.0 0 0.0 10

Unit 6 0 0.0 10 100.0 0 0.0 10

Unit 7 2 33.3 4 66.7 0 0.0 6

Unit 8 6 100.0 0 0.0 0 0.0 6

Unit 9 7 46.7 8 53.3 0 0.0 15

Unit 10 3 30.0 7 70.0 0 0.0 10

Unit 11 1 20.0 4 80.0 0 0.0 5

Total 30 25.0 90 75.0 0 0.0 120


25.0

75.0

0.0 0.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

% o

f subje

cts

Through advt Through P

interview

Through

training like IIT

Others

Fig. 4.24 : Distribution of samples by procedures used to recruit of

workers

143

Training of Employees of SSI Units

Training of employees enhances their skill and productivity.

Trained workers would contribute towards the organizational

productivity too. Hence training of employees is an important function

of the management of the industrial organizations.

Majority of 78 SSI study units constituting 65% of the total

affirmed that they provided training for their employees. However a

substantial number of 42 SSI study units accounting for 35% of the

total mentioned that they had arranged the training for their

employees.

All the SSI study units involved in manufacturing fabricated

metal products, wood products, cork, straw and plaiting materials,

and service units and transport units indicated that they arranged for

training of their employees.

Majority of units manufacturing structural metal products,

plastic products, chemical products and basic iron and steel also

provided training to their employees.

The SSI study units (100%) manufacturing non-metallic mineral

products and wearing apparel did not provide training to their

employees. Majority of units producing food products also did not

provide training to their employees.

144

Table-4.27

Training of Employees of SSI Units


Unit 1 25 100.0 0 0.0 25

Unit 2 4 26.7 11 73.3 15

Unit 3 8 80.0 2 20.0 10

Unit 4 0 0.0 8 100.0 8

Unit 5 10 100.0 0 0.0 10

Unit 6 10 100.0 0 0.0 10

Unit 7 4 66.7 2 33.3 6

Unit 8 6 100.0 0 0.0 6

Unit 9 7 46.7 8 53.3 15

Unit 10 0 0.0 10 100.0 10

Unit 11 4 80.0 1 20.0 5

Total 78 65.0 42 35.0 120


Incentives to Employees of SSI Units

Incentives have motivational impact on employees of an

organization. They increase morale of the employees and raise their

productivity and the productivity of the organization.

A majority of 77 SSI units (64.2%) asserted to have given

incentives to the employees. Among them majority of the following

product units have been given incentives.

Units manufacturing fabricated metal products, food products,

structural metal products, non-metallic mineral products, service

units, products of wood, cork, etc. chemical products, transport and

units manufacturing basic iron and steel and plastic products.

145

Majority of units manufacturing wearing apparel did not provide

incentives to employees. The following table and graph provides the

details.

Table-4.28

Incentives to Employees of SSI Units


Unit 1 18 72.0 7 28.0 25

Unit 2 11 73.3 4 26.7 15

Unit 3 8 80.0 2 20.0 10

Unit 4 4 50.0 4 50.0 8

Unit 5 8 80.0 2 20.0 10

Unit 6 6 60.0 4 40.0 10

Unit 7 4 66.7 2 33.3 6

Unit 8 3 50.0 3 50.0 6

Unit 9 9 60.0 6 40.0 15

Unit 10 2 20.0 8 80.0 10

Unit 11 4 80.0 1 20.0 5

Total 77 64.2 43 35.8 120


Frequent Labour Turnover in SSI Units

Labour turnover is a problem faced by many industrial units

including small scale industrial units. Labour turnover may be caused

by salary differences, lack of job satisfaction, better incentives

elsewhere, etc.

146

The study has revealed that maximum of 100 SSI study units

(83.3%) faced the problem of labour turnover while a small number of

20 SSI study units (16.7%) did not face the problem.

Of the 11 groups of SSI units 100% of 5 groups of SSI units

have faced the problem of labour turnover while majority of 4 groups

of SSI units manufacturing different type of products faced the

problem of labour turnover. The following table provides the details.

Table-4.29

Frequent Labour Turnover in SSI Units


Unit 1 22 88.0 3 12.0 25

Unit 2 15 100.0 0 0.0 15

Unit 3 8 80.0 2 20.0 10

Unit 4 8 100.0 0 0.0 8

Unit 5 4 40.0 6 60.0 10

Unit 6 8 80.0 2 20.0 10

Unit 7 4 66.7 2 33.3 6

Unit 8 6 100.0 0 0.0 6

Unit 9 15 100.0 0 0.0 15

Unit 10 5 50.0 5 50.0 10

Unit 11 5 100.0 0 0.0 5

Total 100 83.3 20 16.7 120


Reasons for Frequent Labour Turnover in SSI Units

The study has revealed that large majority of 86 SSI units (86%)

faced the problem of frequent labour turnover for better salary

147

elsewhere. Lack of job satisfaction was the reason for frequent labour

turnover according to 7 SSI units (7%) and better incentives elsewhere

led to frequent labour turnover according to 6 SSI units (6%). Other

reasons led to frequent labour turnover in case of 1 SSI unit.

Better salary elsewhere leading to frequent labour turnover was

indicated by a minimum of 50% of units of the SSI group providing

transport to a maximum of 100% of units manufacturing of various

products covered by the study. A negligible number of SSI units

manufacturing different products covered by the study referred to lack

of job satisfaction, better incentives, etc. for the frequent labour

turnover. The following table provides the details.

Table-4.30

Reasons for Frequent Labour Turnover in SSI Units

Category Better salary

% Lack of job satisfaction

% Better incentives

% Others % Total

Unit 1 20 90.9 1 4.5 0 0.0 1 4.5 22

Unit 2 15 100.0 0 0.0 0 0.0 0 0.0 15

Unit 3 7 87.5 1 12.5 0 0.0 0 0.0 8

Unit 4 8 100.0 0 0.0 0 0.0 0 0.0 8

Unit 5 0 0.0 2 50.0 2 50.0 0 0.0 4

Unit 6 6 75.0 2 25.0 0 0.0 0 0.0 8

Unit 7 4 100.0 0 0.0 0 0.0 0 0.0 4

Unit 8 3 50.0 0 0.0 3 50.0 0 0.0 6

Unit 9 15 100.0 0 0.0 0 0.0 0 0.0 15

Unit 10 5 100.0 0 0.0 0 0.0 0 0.0 5

Unit 11 3 60.0 1 20.0 1 20.0 0 0.0 5

Total 86 86.0 7 7.0 6 6.0 1 1.0 100


148

Labour Strikes Experienced by SSI Units

Frequent labour strikes has been experienced by a lone SSI unit

involved in manufacturing of fabricated metal products and metal

working service unit. It constituted 0.8% of the total SSI study units

accounting for 99.2% did not experience frequent labour strikes. The

responses indicate a great deal of industrial peace and absence of

labour unrest. The following table provides the details.

Table-4.31

Labour Strikes Experienced by SSI Units


Unit 1 1 4.0 24 96.0 25

Unit 2 0 0.0 15 100.0 15

Unit 3 0 0.0 10 100.0 10

Unit 4 0 0.0 8 100.0 8

Unit 5 0 0.0 10 100.0 10

Unit 6 0 0.0 10 100.0 10

Unit 7 0 0.0 6 100.0 6

Unit 8 0 0.0 6 100.0 6

Unit 9 0 0.0 15 100.0 15

Unit 10 0 0.0 10 100.0 10

Unit 11 0 0.0 5 100.0 5

Total 1 0.8 119 99.2 120


Affiliation of Employees to Labour Union

Trade union movement has not attracted employees of the SSI

study units to any considerable extent. The study has revealed that

only 14 SSI study units accounting for 11.7% affirmed that employees

had affiliated to labour union. A large majority of 106 SSI units

constituting 88.3% of the total mentioned that their employees had

not affiliated to labour union.

149

There has been no affiliation of employees to labour union from

the following categories of respondent SSI product groups.

Units manufacturing food products

o Structural metal products, non-metallic mineral products,

chemical products and wearing apparel.

o Affiliation of employees to labour unions has been indicated

by a small number of units in the following product groups.

Units manufacturing fabricated metal products, units providing

services, units manufacturing wood products, units involved in

transport services, one unit manufacturing basic iron and steel

and one unit manufacturing plastic products.

The following table provides the details.

Table-4.32

Affiliation of Employees to Labour Union


Unit 1 6 24.0 19 76.0 25

Unit 2 0 0.0 15 100.0 15

Unit 3 0 0.0 10 100.0 10

Unit 4 0 0.0 8 100.0 8

Unit 5 2 20.0 8 80.0 10

Unit 6 1 10.0 9 90.0 10

Unit 7 0 0.0 6 100.0 6

Unit 8 3 50.0 3 50.0 6

Unit 9 1 6.7 14 93.3 15

Unit 10 0 0.0 10 100.0 10

Unit 11 1 20.0 4 80.0 5

Total 14 11.7 106 88.3 120


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INVESTMENT, PRODUCTION AND EMPLOYMENT DIMENSIONS OF SMALL SCALE …shodhganga.inflibnet.ac.in/bitstream/10603/8476/11/11... · 2015-12-04 · INVESTMENT, PRODUCTION AND EMPLOYMENT