Chapter-VI

PROBLEMS AND PROSPECTS OF MANUFACTURING INDUSTRIES IN HAVERI

DISTRICT 6.1 Introduction

Industries and their development is necessary for several

reasons. The manufacturing industrial and commercial development

in Haveri district appears to be fairly good, although regional

imbalance in development is existing in the district. Haveri and

Ranebennur talukas are more developed than other talukas of the

district. For their development, various programmes are under

implementation and new schemes have been introduced to overcome

the imbalance in the other talukas.

Despite the fact that, there is substantial growth in the

manufacturing sectors in the last two decades, some of the units are

under weak conditions, due to various reasons. These may include

non-availability of raw materials at a cheap price and availability of

good marketing for the products in the district, dispute among

partners, change in the demand patterns, change on taxation policy,

delays in granting and disbursement of loans and subsidies and delay

in clearance from state and central government, delay in payment by

the purchasing units, change of business by the owner, etc.

6.2 Problems of Manufacturing Industries

Industries generally face problems everywhere. The large,

medium and small scale industries in the study region also have one

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or the other problems, with varying and intensity of the problems. The

study reveals that, there are more problems with small scale

industries rather than large and medium scale industries in Haveri

district.

It is however a normal thing that waste products are formed

during the manufacturing process and while it is sometimes possible

to make use of these waste products (which are made to recycle of

products) it is quite often impossible to do this. The problem which

then faces the industry concerned is that of disposing of the waste

products efficiently yet as inexpensively as possible. Some of the

important problems faced by the manufacturing industries in Haveri

district are as mentioned below.

In view of the rising tempo of industrial activity, the storage or

right type of raw materials at standard prices has effected the entire

industrial sectors in the district. The irregular supply of certain raw

materials has already affected the production of materials of several

small and big industrial units.

Though the district is endowed with natural resources, it is not

sufficient for the industries. The raw materials required for the

industries are Iron and Steel, Alluminium, Rubber, Plastic products,

Non-ferrous metals, etc. are produced from outside the district or

state. Most of the units face not only shortage, but also the irregular

supply of raw materials, which are brought from outside the state.

This has led the units to be in low capacity utilization.

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At present power problems are minimized, but voltage

fluctuations, irregular supply, long hours of repairs breakdowns, etc.

still persists in the district, which all led to under utilization of

installed capacity and raise in the cost of production.

Due to lack of funds to purchase modern machineries to tools,

the entire premises are forced to use old and outdated machineries

which affects both the quantity and quality of their production.

Many units such as food products, cotton based, wood based

industries, etc. have low level of technology, due to which they suffer

from substandard quality or products.

The Government of Karnataka has developed industrial estates

areas to house the units here in, there are too many administrative

formalities, which entrepreneurs has to follow and they become

problems for Karnataka State Industrial Areas Development Board

(KSIADB) look after getting the shed or plot, and has to visit large

number of offices to have the connection of water, power, no objection

certificate, well connectivity of roads, etc.

In Indian context, industries are located beyond the industrial

complexes, are facing problems like transportation cost, quality of

roads not upto the mark and scarcity of power, all the problems

naturally affect production of industrial goods particularly small scale

industrial products.

Lack of skilled labours and industrial expertise persons are few

workers in the study region with industrial and managerial skills.

Most of the workers and managers in the most of the units are from

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outside the district. Another peculiar problem is labour absenteeism.

The absence of labours from work is a frequent problem. The absence

of labours is a frequent problem faced by large number of units. In

this regard, the most of the industrial units are facing such problems

in the district.

In the study area the availability of capital is a problem. It is

available only at very high rate of interest; particularly on working

capital though, there are incentives and capital subsidy, but all these

have remained much on the paper of their disbursement is made often

at considerable lapse of time. So the entrepreneurs do not get the

benefits of such facilities.

The small scale industries do not have sufficient funds of their

own for investment. They cannot but and store good quality of raw

materials or stock their finished products, preservation of their

products, it affects on the side transaction, due to the lack of capital

investment.

The successful industry needs a good market for their products,

the productions quality depends on the market demand in this

context in Haveri district, market demand is not very large for small

scale industries. They have to sell outside the district area, but in

medium and large scale industries, the market demand is satisfactory

in order to set maximum demand from outside the district and the

quality should be maintained.

Dispute among partners, change in business by the owner,

inadequate studies, lack of perspective plans and programmes, etc.

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are the other problems of industries particularly of small scale and

above all, growing of slum areas around the industry or zones is

another grave concern.

6.3 SWOT Analysis of Manufacturing Industries

SWOT analysis is a strategic planning method used to evaluate

the strength, weakness, opportunities and threats involved in a

project or in a business venture. It involves specifying the objective of

the business venture or project and identifying the internal and

external factors that are favourable and unfavourable to achieve that

objective. In 1960s and 1970s Albert Humphery is said to have

developed this strategic planning tool using data from 500 companies

in America at the time.

A SWOT analysis must first start with defining a desired end,

state or objective. A SWOT analysis may be incorporated into the

strategic planning model. Strategic planning has been subject of much

research.

Strengths: Characteristics of the business or team that give it an

advantage over others in the industry.

Weaknesses: are characteristics that place the firm at a

disadvantage relative to others.

Opportunities: external chances to make greater sales or profits in

the environment.

Threats: external elements in the environment that could cause

trouble for the business.

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The aim of any SWOT analysis is to identify the key interval and

external factors that are important to achieving the objective. These

come from within the industry’s unique value chain. SWOT analysis

groups key pieces of information into two main categories.

(a) Internal Factors – The strengths and weaknesses internal to the

organization.

(b) External Factors – The opportunities and threats presented by the

external environment to the organization.

The internal factors may be viewed as strengths or weaknesses

depending upon their impact on the organizations objectives. What

may represent strengths with respect to one objective may be

weaknesses for another objective. The factors may include all of the

4P’s as well as personal, financial, manufacturing capabilities and so

on. The external factors may include macro-economic matters,

technological change, legislation and socio-cultural changes, as well

as changes in the market place or competitive position. The results

are often presented in the form of a matrix.

SWOT analysis is just one method of categorization and has its

own weaknesses. For example, it may tend to persuade industries to

compile lists rather than think about what is actually important in

achieving objectives. It also presents the resulting lists uncritically

and without clear prioritization so that, for example, weak

opportunities may appear to balance strong threats.

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6.3.1 Strength Analysis of Manufacturing Industries

1) According to the range of the industries like big, medium and small

scale, the investment is also very high, high and low.

2) Adapting to change is crucial in industries and particularly small

scale industries, not being tied to any bureaucratic inertia, it is

typically easier to respond to the market place quickly.

3) Good customer relations of industries proprietors tend to be

intimate with their customers and clients which results in greater

accountability and maturity. They usually offer a more

personalized approach to interacting with clients. Customers who

are treated like family are more likely to return to that industry in

the future.

4) Independence is another advantage of owning an manufacturing

industry. A survey of manufacturing industries owners showed

that 38 percent (as per 2013 data) of those who left their jobs at

other industries said their main reason for leaving was that they

wanted to be their own bosses. Freedom to operate independently

is a reward for industries owners. In addition, many people desire

to make their own decisions, take their own risks, and reap the

rewards of their efforts.

5) Innovation and Creation: They are able to innovate and create new

products and services more rapidly and creatively than larger

companies that are mired in bureaucracy. Whether reaching to

changes in fashion, demographics or a competitor’s advertising, a

small firm usually can make decisions in days not months or years.

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6) Cater to Customer Needs: Small scale industries are the ability to

modify its products or services in response to unique customer

needs. The average entrepreneur or manager of small scale

industries known his customer base for better than one in a large

industry. If a modification in the products or services is offered – or

even the business’s hours of operation would better serve the

customers, it is possible for small scale industries to make changes

– customers can even have a role in product development.

7) The another strength is that the people involved in the

entrepreneur, any partners, advisors, employees or even family

members have a passionate, almost compulsive desire to succeed.

This makes them work harder and better.

8) Question Period: A small scale unit has less question period, which

means the period after which the returns on investment starts. It is

usually from 2 to 5 years.

Strength Analysis of Manufacturing Industries in Haveri District

a) Agriculture has been the major sector contributing to the economy

of the district. The productivity of crops like chilly, maize has been

substantially increased over the years. The productions of

Horticultural products like vegetables, tomato, mango, guava and

sapota have been on the rise.

b) The district has 79 kms of broad-gauge line and about 103 kms of

national highway and the district has a satisfactory communication

facility through telephone exchanges, post offices, mobile network

and even internet.

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c) About 300 engineers are completing their graduation in the district

every year, half of whom are from IT related branches. In addition

there are other qualified persons coming out every year from

general educational institutions, allopathic college.

d) Handicraft artisans are producing garlands, etc. which are very

famous throughout the state.

e) Flowers like Marigold and Kanakambari are cultivated in the

district.

f) Betel leaf trade in the district is encouraging.

6.3.2 Weakness Analysis of Manufacturing Industries

1) It can be difficult to reach enough potential customers to establish

a successful base of customers. Potential customers might be less

likely to do business with a small business that doe not offer a well

known brand of products or services. Some clients will give their

business top the bigger gut with the name they recognize.

2) One of the largest weakness for the industrial owners is to raise

finance. Many industrial owners invest their own money at the

start of the industry or if the industry fells upon hard times

because institutional lenders like banks and government financial

corporations are generally reluctant to advance money to the

industrial units.

3) The small scale industrial owners has to bear high cost of

production, which acts as one of the weakness for the small scale

industries.

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4) Another weakness is ‘Entrepreneurial Myth’ or E-Myth. The mythic

assumption is that an expert in a given technical field will also be

expert at running that kind of business. Additional business

management skills are needed to keep a business running

smoothly.

5) Absence of skilled personnel in most of the industries does not

have skilled personnel. due to which these industries lack in –

Identification of industrial projects for development.

Consultancy and counseling services.

Industrial training and skill formation.

6) As far as the small scale industries are concerned they do not use

information technology and its applications such as the designing

of prototype machines for product identified according to the

country resources and requirement.

7) Other weakness is to obtain the permission and licence of the

industrial development board, of the state, local bodies, etc. But

despite the policy of government, petty officials are often unhelpful.

A lot of time and energy is wasted in persuading these officials to

perform their duties.

8) Marketing is one of the weakness for the industries. They face

many problems in marketing like –

Lack of standardization

Poor designing

Poor quality

Lack of quality control

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Lack of precision

Poor finish

Poor bargaining power

Lack of service after sales

Scale of production

Brand preferences

Distribution contacts

Lack of knowledge of marketing

Competition

Ignorance of potential market.

Weaknesses Analysis of Manufacturing Industries in Haveri District

a) As the infrastructural facilities are not adequate and uniform in all

talukas of the district it is seen that growth and concentration of

the industries is likely to be limited to Ranebennur and Haveri.

b) Water shortage is a common phenomenon in the majority of the

locations in the district.

c) Lack of entrepreneurship.

d) Resources are mainly restricted to agricultural and horticulture.

e) Non-availability of adequate quality and quantity of power.

f) Absence of adequate cold storage and marketing facilities.

6.3.3 Opportunities Analysis of Manufacturing Industries

1) Government is providing many opportunities for industries.

Government has formed many policies and financial institutions for

helping industries like -

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Industrial policy resolution

Import export policy 1994-97

The pricing policy

The textile policy

Policy for development of handloom industry

Policy for khadi and village industry

Industrial estates programme

Promotion of ancillary industries.

2) An export committee (Abid Hussain) with eleven members and

handed by Abid Hussain was constituted on December 1995 by the

Government to study the status of small scale enterprises and to

suggest measures by which these units could grow and remain

competitive in the changing economic environment. Major

recommendations include -

Abolition of the policy of reservation for SSI’s

Transitional package of 2500 crores (by setting up of Corpus of

500 crores on annual basis) to provide confessional funding for

the SSI’s affected by the reservation.

Specialized commercial bank branches for SSI’s for easy credit

facilities.

Reduction of credit cost of SSI’s

Setting up of SSI clusters with modern infrastructure facilities.

Restoration of excise exemption on branded goods.

Excise incentives for grading tiny and small scale units.

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Credit rating for industries to enable them to avail funds at

lower cost.

3) Micro Small and Medium Enterprise Development Act 2006 was

implemented on 2nd October 2006.

4) There is de-reservation and reservation of products for small scale

industrial (SSI) units.

a) Food and Allied Industries

Pickles and chutney

Bread

Mustard oil

Groundnut oil

b) Wood and Wood Products

Wooden furniture and fixtures

Paper prospects

Exercise book and registers

c) Other Chemical Products

Wax candles

Fire works

Safety matches

Agarbatti

d) Glass and Ceramics

Glass bangles

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e) Mechanical Engineering and Excluding Transport Equipment

Steel furniture

Elmira

Chairs

Tables

f) Domestic Utensils

Stainless steel

Alluminium

5) Prime ministers task force of MSME’s was made who presented a

report on 20th January 2010. This task force was formed on 2nd

September 2009 under leadership of T.K.A. Nair who was secretary

to P.M. This task force focused on 6 areas, which are –

a) Credit

b) Marketing

c) Labour

d) Infrastructure

e) Rehabilitation and Exit Policy

f) Skill Development

g) Taxation

6) There are many Government and Non-Government financial

institutions who provide financial assistance to MSME’s like –

a) SIDBI – Small Industrial Development Bank of India

b) SIDO – Small Industries Development Organisation

c) SISI’s – Small Industries Service Institutes

d) NSIC – National Small Industries Corporation

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e) NIESBUD – The National Institute for Entrepreneurship and

Small Business Development

f) NABARD – National Bank for Agriculture and Rural Development

g) SFC’s State Financial Corporations

Opportunities Analysis of Manufacturing Industries in Haveri

District

a) Agriculture and Horticulture producers can be properly used for

conversion into value added products.

b) Livestock population of the district with better veterinary aid and

nutrition levels could bring about speedy economy and social

transformation among rural areas.

c) As there is great demand for milk products, there is good scope for

increasing of cattle.

d) The district has good access to the flower, trading places nearly

and hence there is scope for floriculture in the taluk.

e) Human Resource: The educated and skilled manpower is

abundantly available, which needs to be effectively utilized with the

available material resources in the industrial development.

6.3.4 Threat Analysis of Manufacturing Industries

1) Slow Payment – While large corporations and banks have been

fortified with ample low-cost cash to but small industries products

and services, they continue to pay slowly, bargain harder and

demand more concession from powerless small business who are

selling their souls ‘where the money is’.

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2) New costs, taxes and compliances – As social causes like

sustainability, diversity, healthcare and fair taxation are being

legislated by governments and lobbied into favourable terms for

corporations, industries are getting choked. The industries are

used to lament about proper work. Now, the new costs, taxes and

compliances rules are sapping the will of owners to believe that

they should risk, invest and remain confident in their business.

3) Approval vendor programmes force buying solely on price – to shift

responsibility and absolute outsource their liability, corporations

and governments are hiring third party sourcing companies whose

objective is to reduce industrial vendor power and commoditize

their products and services. And the more owners have to comply

with RFP’s and join “approved vendor programmes”, the less they

can add value through their creativity. ISO 9002 and ISO 14000,

along the countless ‘vendor-aggregators’ are following purchasing

agents to buy solely on price and penalizing industries who invest

in innovation and branding to differentiate their offers and earn

increased gross margins.

Threat Analysis of Manufacturing Industries in Haveri District

a) Digging for more bore wells may lead to decline in ground water

level year by year. Many of the bore wells have gone dry which is

also threat for industrialization.

b) Fast industrialization in the district may cause environmental

problems.

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c) Farmers are loosing interest in their occupation due to uncertainty

in rainfall, etc. This may lead to decrease in agricultural and

horticultural production.

d) Artisans who are preparing the traditional products need to

upgrade their skills so that their products are competitive and in

demand. In the long run, it is feared that their products may loose

their prominence in the market due to quality and competitiveness.

e) In many locations, the road conditions are not satisfactory and

hence there is likely to be increase in transportation costs and

delay in transportation of materials. This factor may create

problems to local industries in the competitive market.

f) The existing traditional industries are in problems due to

technology obsolescence.

g) Increased competition for all goods and services from Bangalore

and other places.

SWOT analysis helps in assessment of the internal and external

factors which is very important for all the organizations of all large,

medium and small scale industries. But as small scale industries are

facing many problems due to globalization and are suffering from

undue losses as compared to large scale units in this regard, SWOT

analysis has been done for all the small businesses at large, to make

them understand their weakness in a better way and to make they use

their strengths to stand in market and to make normal profits.

Today’s dynamic business environment is bringing many

opportunities for business enterprises but with that it has introduced

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business’s with greater threats, in the present work it has been tried

to give every aspect related to small scale industries, medium and

large scale industries about their strengths, weaknesses, opportunities

and threats so that they can use it with greater benefits and can know

their environment in better way.

6.4 Impact of Manufacturing Industries on General Economy

The small and medium enterprises today constitute a very

important segment of the Indian economy. The development of this

sector came about primarily due to the vision of our late prime

minister Jawaharlal Nehru who sought top develop core industry and

have a supporting sector in the form of small scale enterprises. The

small and medium scale units have emerged as a dynamic and vibrant

sector of the economy. The Indian economy is expected to grow by

over 8 percent per annum until 2020 and can become the second

largest in the world ahead of the United States by 2050, and the third

largest after China and the United States by 2032. The turn around in

manufacturing and other sectors, which has occurred in the face of

increased global competitions, is due to improved efficiency following

various policy reforms in recent years. The manufacturing industries

constitute 6 percent of GDP, 34 percent of national exports and

account for the employment of more than 30 million people.

The small and medium scale industries can be rightly called as

the backbone of the GDP of India. This sector in India is growing at an

exceptionally fast rate due to which it is providing to be beneficial to

the Indian economy.

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Following are the some of the current figures – related to small

and medium scale sectors in Haveri district.

The contribution of the small and medium scale sector to the entire

output of the country is 40 percent.

Currently, there are over 11 million small and medium scale units

in India that produces more than 8000 products.

90 percent of the Industrial Units in India belongs to the small and

medium scale sectors.

These small and medium scale units contribute 35 percent to the

Indian Industrial Export.

Following are some of the factors that have contributed to the

growth of small and medium scale sector in India.

These units in India are being funded by foreign and local fund

providers.

The advancement in technology has also contributed highly to this

sector. There are numerous business directories and trade portals

available online that contains a rich database of manufacturers,

sellers and buyers.

To start and maintain these units minimal investment is required.

These units are now being funded by many government and private

banks.

The small and medium sector is one of the greatest contributors of

domestic production as well as the export earnings. Many major

mergers have taken place recently.

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Though the small and medium scale industrial sector is

flourishing and expected to grow further in the near future, there are

however certain challenges that the small and medium scale

industrial sector will have to face.

The economy of Haveri district is predominantly agrarian. All

the segments of the economy, viz. agriculture, industry and services

have to improve their contribution to the economy. The growth of

manufacturing industries is a sine qua non for the growth of industry,

exports and other segments of the economy. Furthermore, promotion

of entrepreneurship is also vital for sustenance and upward movement

of the current growth trajectory of the economy. The manufacturing

sector acts as a catalytic in upholding and encouraging the creation of

the innovative spirit and entrepreneurship in the economy, thereby

helping in laying the foundation for rapid industrial development.

Moreover, the sector also serves the vital objectives of employment

generation and balanced regional development. Globalization and

liberalization of the district economy have also brought a host of

opportunities for the industrial sector, particularly the manufacturing

segment. While manufacturing industries have responded to

competition reasonably satisfactory, there is scope for increasing their

export potential, domestic market share and developing them as

serious players in the global value chain. It represents the largest

proportion of the manufacturing sector in every country.

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6.5 Prospects of Manufacturing Industries

There are number of factors that are to be considered for

identifying industries suitable for development in an area. Resources,

both men and material constitutes and important factor. Infrastructure

facilities like industrial accommodation, power, banking, railway,

roadway also play an important role in the development of industries,

realizing the importance of these factors in the promotion of

industries, an indepth factual analysis of data pertaining to the above

said aspects have been done. The details have been given in the

previous chapters.

Another important factor that had merited consideration in this

context has been the existing demand in the district for various goods

and services. Besides, the existing industrial structure of the district

is also been gone into in detail with a view to avoid duplication of

items suggested and to know the problems that confronted the local

entrepreneurs. Apart from these, certain other aspects like availability

of skilled labour, capital, locational advantages and aptitude of the

people in the study area have also been taken into consideration,

while identifying industrial opportunities. The criterions adopted for

identifying about industries are:

a) The availability of resources and the investable surplus of the

people.

b) The demand for the various products.

c) Availability of raw materials.

d) Adequate power supply.

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e) Incentives and concessions from the government.

f) Marketing support.

g) Transportation facilities.

h) Financial assistance.

i) Land availability.

j) Water resources.

k) Waste management.

However, for the survival of Haveri district and its mass, the

industrial sector will have to improve and provide resources top the

district and employment opportunity for the better living of its people.

The government and public have to adopt helpful and friendly

attitudes towards prospective industrial entrepreneurs.

There is a vast scope for industrial activities in Haveri district.

The need is right people, right movement in the right direction to

industrialize the district.