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.
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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
Source: Field Survey
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
Source: Field Survey
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
Source: Field Survey
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
Source: Field Survey
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
provides the details.
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
Source: Field Survey
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
Category Yes % No % Total
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
Source: Field Survey
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
Category Yes % No % Total
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
Source: Field Survey
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
Category Yes % No % Total
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
Source: Field Survey
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
Source: Field Survey
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
Source: Field Survey
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
Category Yes % No % Total
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
Source: Field Survey
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.
The following table and graph provides the details.
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
Source: Field Survey
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
The following table and graph provides the details.
Table-4.14
Getting Adequate Raw Materials
Category Yes % No % 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 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
Source: Field Survey
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
Category Yes % No % Total
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
Source: Field Survey
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
Source: Field Survey
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
Category Yes % No % Total
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
Source: Field Survey
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
provides the details.
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
Source: Field Survey
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