EXECUTIVE SUMMARY

The definition of small-scale industries has undergone significant changes over time.

Initially, they were classified into two categories- 1) those using power with less than 50

employees and 2) those not using power with the employee strength being more than 50 but less

than 100. However, now the capital resources invested on plant and machinery buildings are the

primary criteria to differentiate between small-scale industries and the large and medium scale

industries. There have been significant improvements in the structure of small scale industries

over the period of time. The conventional small-scale industries differ from their present

counterparts in many respects. The conventional units were highly labour intensive with old

machineries and conventional techniques of production resulting in poor productivity rate

whereas the modern small-scale units are much more productive with less manpower and more

sophisticated equipments.

Sikkim has a good resource base for Non Timber Forest Products (NTFP). The diverse

altitude is idyllic for the cultivation of a variety of herbs which can be used in the manufacture of

medicines, cosmetics and aromatic products. But, the absence of lucrative marketing network

and the lack of appropriate processing facilities for manufacturing quality finished products have

resulted in most of the products being sold at uncompetitive prices to other state as raw material

for processing.

With the above facts in mind, I was encouraged to perform an exploratory study of the

available cottage and small scale industries, in any, in my village of Rungdung, Rhenock. During

my initial observations, I was unable to find any industries which followed the above criteria and

which can be called a Small Scale Industry. By further exploring the village, I came to know

about three industries which were present in my village.

The paper deals with exploring the operations in these identified small scale industries and how

they sustain themselves. Also, it will be focusing on the measures which can be taken up for the

expansion and growth of the sector.

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1. INTRODUCTION - Small Scale Industry and Indian Economy

The Small Scale Industry sector is an important segment of the Indian economy and accounts

for 95% of the industrial units, 40% of output of the manufacturing sector, 35% of the overall

exports and offers jobs to around 18 million people1. Small scale industry sector acts as a major

force in promoting the industrial growth and enhances the overall economic growth. It provides

opportunities for entrepreneurship, self employment and enterprise creation, thus, providing a

solution to the crisis of both unemployment and disguised unemployment. The growth rate

recorded by the Small Scale Industries sector has normally been higher than that of the industrial

sector as a whole. The Government of India has facilitated the small scale sector through

supportive policy measures since adoption of planned economy model. The basic policy support

for SSI sector has its route in the Industrial Policy Resolution of 1956. Further, the Industrial

Policy Statement, 1977, highlighted reservation of products. The reservation of economically

feasible Small Scale Industries began with a list of 47 items which was gradually increased to

numerous products. Currently, 811 items are on the reserved list. Other policy supports which

could be listed are - excise exemptions , traded under priority sector lending from banks and

financial institutions , marketing support through reservation of items for products from Small

Scale Industries sector for government purchases, providing infra structure facilities like sheds,

plots in industrial states, technological support, new management techniques, training and

entrepreneurship developments.SSI Sector plays a major role in India's present export

performance. 45%-50% of the Indian Exports is contributed by SSI Sector. Direct exports from

the SSI Sector account for nearly 35% of total exports. Besides direct exports, it is estimated that

small-scale industrial units contribute around 15% to exports indirectly. This takes place through

merchant exporters, trading houses and export houses. They may also be in the form of export

orders from large units or the production of parts and components for use for finished exportable

goods. 

Non-traditional products account for more than 95% of the Small scale industry exports. 

The small-scale sector has grown rapidly over the years. The growth rates during the various

plan periods have been very impressive. When the performance of this sector is viewed against

1 Annual Report 2008-2009, Ministry of Micro, Small and Medium Enterprises

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the growth in the manufacturing and the industry sector as a whole, it instils assurance in the

resilience of the small-scale industry sector. 

2. OBJECTIVE

The main objectives of my study in exploring the small scale and cottage industries were:

1. To understand the working and process of available small scale industries in the

village.

2. To identify the role of small scale industries in livelihood opportunities for the local

people.

3. To explore the traditional knowledge base of the people and the way they deploy it

in the small scale industry

3. METHODS USED

To investigate the various processes carried out in the cottage industry, I employed both formal

and non-formal techniques. For the primary data collection:

Informal chats with locals

To locate and identify the industries in the area, I had to talk informally to local villagers

over cups of tea. The industries were not located exactly in the village, but a few

minutes’ walk near the village. Not a lot of people were aware of the existence of these

industries. Also, the industries were spaced far apart from each other; hence it was

difficult to find their exact locations.

Structured Interviews with industry owners

After identifying the industries, I conducted structured interviews with the proprietors of

the industries regarding the production, procurement and marketing process. These

interviews were conducted at the industry site for better understanding.

Semi Structured interviews with workers at the industries

To get a better insight of the accurate working of the industry, I conducted few semi

structured interviews with the workers of these industries.

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The secondary data regarding the industries was collected from the website of the Ministry of

Micro, Small and Medium Enterprises, Government of India. Apart from that, various research

papers were referred for data gathering, the list of which is furnished in the References.

4. FINDINGS OF STUDY - AVAILABLE INDUSTRIES AT RUNGDUNG

After initial investigation with the locals, I was able to identify three key industries in and

around Rungdung. These were:

1. Hritu Organic Tea

2. Bhumi Masale

3. NGOs Incense Sticks and Dhoop

Apart from these three major industries, there were three Self Help Groups which carried

out production processes, but not at a significantly commercial level.

4.1 Hritu Organic Tea

4.1.1 Overview

The industry was set up by Mr. Hemant Nirula, a retired policeman from Gangtok. He

was helped by his nephew Mr. Thakur Katera in the business. Mr. Nirula started the factory at

Rhenock Bazaar in the year 2009. Mr. Nirula owns 2 acre tea estate in Kalimpong, in the

Darjeeling district of West Bengal. As the tea industry in Darjeeling is very competitive and

getting license to produce tea is difficult to obtain, Mr. Nirula thought of two solutions which

curbed both his problems:

1. Shifting to Organic tea production, the market of which is still naïve and amateur

2. Producing tea in Sikkim as there are no licenses required in Sikkim.

But he is still unable to sell the in the market due to the lack of the license. He is eligible to sell

the tea only after –

a. Tea has been tested in the laboratory for the authenticity check of it being organic, and

b. The company receives a license from the Tea Board of India.

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What exactly is organic tea?

Organic variety of tea is tea produced by plants which are grown without the use of

chemical pesticides or fertilizers. The soil is enriched with natural compost and a layer of mulch

retains the moisture while providing extra nutrients as it breaks down. This growing method is

more labour-intensive but produces superior quality tea. It has a strong flavour and taste.

The advantages of Organic Tea are:

The organic tea contains antioxidants that provide many of the health benefits. Scientific

studies have shown that the antioxidants called polyphenols and catechins are found in

higher concentrations in good quality tea.

Organic tea is also better for the tea farmer. Tea plants can live more than 100 years, and

organic farming methods allow the tea plants to remain healthy for the duration of their

lifespan. This means that the farmer has less expense in replacing tea plants.

Antioxidants protect the cells from a natural process called “oxidative stress”. Although

oxygen is vital for life, oxidation produces free radicals that damage human cells. This

damaging, physiological process works against the immune system and is also

responsible for ageing Antioxidants help our body eliminate these harmful free radicals.

In fact a decrease in the level of antioxidants is proportional to the increased risk from

cancer, heart attacks and umpteen other health disorders. In fact a new research shows

that antioxidants in tea may actually help fight cataract – one of the primary causes of

blindness globally.

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4.1.2 Flowchart of Tea Production

Figure 1: Flowchart of Tea Production

4.1.3 Inputs before Production

The raw material to be used for making the tea is grown in the tea estate owned by Mr.

Nirula himself. It has to be made sure that no artificial or chemical fertilizers and pesticides are

used during the process of growing of the plants. To increase the productivity and still maintain

the organic status of the tea, two major processes have to be performed:

Growth and development of the tea sapling into a mature plant takes nearly 5-6 years.

The tea leaves which are being used presently to make the tea are picked off the plants

which had been put in 2000.

For increasing the fertility of the soil, natural fertilizers made out of cow dung and tea

ash are used.

To protect the plants from any pest attacks, a natural pesticide is produced using two

plants – Haathibaug and Angeri. Both these plants are put into water and pressed until

the juice from them comes out and mixes with water. This mixture of water and plant

juice then acts like a natural pesticide and is sprayed in the fields.

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There have been times when the pests have been immune to the natural fertilizers used.

In that case, to maintain the organic status of the tea, tongs are used to pick the pests

from individual tea leaves. These pests are then burnt.

4.1.4 Procurement of Raw Materials

The raw materials required for the production is tea leaves. This method requires the

Picking and transport of the leaves from Kalimpong to Rhenock. The tea leaves are picked once

a week. Due to the low capacity of production, the leaves are brought to the factory in a

consignment of 15 kg each time. For transporting the raw materials, Mr. Nirula uses his private

vehicle.

Apart from tea leaves, the only form of raw material which is left and required is the packing

materials.

4.1.5 Processing

The processing phase consists of five processes:

Withering Rolling Fermenting Drying Grading

Each process is explained below:

4.1.5.1 Withering

Withering is the process in which the tea leaves are placed in a large container and blow

drying the tea leaves to make them dehydrate. The leaves lose water and become flat and

flaccid. The water content is lost and leaves contain 50 % moisture only. This process

takes about 7-8 hours.

4.1.5.2 Rolling

The withered tea leaves are put on a flat platform and rolled. The principal objective of

rolling is to undertake cell rupture so that progressive breakdown of cellular organelles

takes place. The process results in contact of cell sap leading to intermixing of chemical

constituents and enzymes in the presence of atmospheric oxygen to form the important

chemical constituents responsible for characteristics of tea. This is the advent of the

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fermentation process where oxidation begins. The Rolling is carried out on a table. The

process of rolling applies pressure and twist between leaves as well as between leaf and

surface of the equipment used for rolling. Resulting friction causes heat, which in excess

will hasten the chemical reactions to result in the formation of undesirable constituents

detrimental to the quality. The cell rupture in the small and tender shoots is completed

faster and chemical reactions set in earlier while the coarser leaves require a little more

time. Also the leaf, which has already undergone size reduction and twisting after some

amount of rolling, impedes twisting of larger leaf, which may extend the period of

rolling.

4.1.5.3 Fermenting

The rolled tea leaves are put in a plastic bag and left for fermentation. The process takes

around hours, but depends on the climatic conditions. In summers it takes 4 hours,

whereas in winters it can take up to 7 hours. The relative humidity also plays an

important role in this process. During this process, the leaves turn from green to

yellowish black.

4.1.5.4 Drying

The fermented leaves are then put in a hot dryer, which is a closed compartment with a

heater inside blowing out hot air. The leaves are placed on a sieve so that the smaller

particles get filtered immediately. The main objectives of drying are:

To arrest enzyme reaction as well as oxidation,

To remove moisture from the leaf particles and to produce a stable product with

good keeping quality.

The outcome of the process is black collared leaves of tea which is the finished product

for the process.

4.1.5.5 Grading

In this process, the output of drying is placed on sieves of various size holes. Tea ranges

in size from that of a speck of dust to a leaf approximately 4 cm long and 1cm wide. Each

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sieve has a grading involved with it. The finest sieve is supposed to be of the lowest

grade. Whole Leaf Grades are the largest sizes produced and depending on the actual

grade within the section may range from a long and wiry stem, 1 cm to 2 cm in length, to

a round and knobby twisted leaf similar in size and shape to that of a small garden pea.

The dust falling through the finest sieve is used again as manure in the farms.

4.1.6 Packaging

The tea is packaged in an airtight polythene bag and placed in a cardboard box. The quantity of

each box is 100 Gms. The box is procured from Siliguri at the cost of Rs 3.6 per box. The box

contains the name, registration number and the contact of the producers. Packing is done

manually using adhesives.

4.1.7 Input Output Analysis

Inputs include-

Labour cost

Employed 7 workers - 3 at the factory and 4 at the tea estate. The salaries paid are Rs

1500 per month for the factory workers and Rs 1200 per month + shelter for the workers

at the field. The sum total comes out to be Rs 9,300 per month on labour.

Raw Material

The cost of raw material can be calculated as the sum of the cost of manure and natural

pesticide. As cow dung is freely available, it has no significant cost. Also, the

Haathibaug and Angeri plants are grown wildly, therefore, again they can be obtained for

free.

Transport Cost

The transport cost comes out to be approximately Rs 600 per round trip.

Production Cost

Apart for the labour, the production cost would include the electricity and maintenance

cost.

Packaging Cost

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The packet cost is Rs 3.6 for every 100 gm box, accounting to Rs 36 per kg of tea. Apart

from that, the polythene covers would also cost a minimal amount. We can assume the

packing expenditure with Polythene bags to be Rs 40 per kilogram.

Table 1: Input details

Sr No. Input Quantity Monetary Value

1. Tea leaves 225 kg Rs 1,000

2. Labour 7 Rs 9,300

3. Approximate cost of fertilizer 100 kg Rs 1000

Output produces:

For every 4.5 kg of tea leaves, 1 kg of tea is produced. In one cycle, a total of 1.5 kg of tea leaves

are processed, hence producing 0.3 kg of tea. In one month, the amount of tea produced is 50

kgs. The cost of tea in the market is Rs 1000 per kg. Hence, analyzing the input – output

expenditure and revenue per month, we will get:

Table 2: Output Details

Sr No. Output Quantity Monetary Value

1. Processed Tea 50 kg Rs 50,000

2. Tea Ash 5 Rs 100

4.1.7 Marketing

As described earlier, presently the company is not able to sell its produce commercially due to

the unavailability of license to sell. Therefore, for the time being they cater to only order based

production. They have applied for a license and will soon be receiving one. They have sent a few

samples to contacts which they have formed over an exporter’s website called

www.exportersindia.com. But the unawareness about the products and the utility of organic yield

is acting as an inhibitor for their business. People prefer buying the inorganic alternative of tea,

which would cost Rs 150 per kg, as compared to the Hritu Organic tea at Rs 1,000 per kg. The

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company does not have a local market, but has customers from Gangtok who get the product on

order basis. They have also sent samples to tea traders in New Delhi and Gujarat.

Due to this factor, the production has been kept to a low level. If there will be an increased

demand in the market, the production can increase. A SWOT Analysis of the company:

Table 3: SWOT Analysis of Hritu Organic Tea

Strength Weakness

• High demand in international markets

• Low competition in the specific product

• Low Awareness about Organic foods

• High cost and competition by Inorganic

produce

• Lack of technical knowhow

• Low local market demand

• Air tight packing

Opportunities Threats

• Tea plantations in Sikkim

• Export Markets

• Competition by inorganic products

• Pest attacks

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4.1.8 Approximated Financial Statements

Profit and Loss Account

Table 4: Approximate Profit and Loss Account for Hritu Organic Tea

Particulars Amount (in Rs) Particulars Amount (in Rs)

Wages and Salaries 1,11,600 Gross Profit 5,76,000

Electricity Expenses 5,400

Transport Cost 30,000

Packaging Cost 24,000

Depreciation 6,000

Net Profit 3,99,000

TOTAL 5,76,000 TOTAL 5,76,000

The balance sheet could be created due to lack of accounting data with the organization.

4.1.9 Reflections

This industry has a good scope of becoming a major organic tea producing company in the near

future. Some of the main observations and reflections which I had were:

They were not too keen on the getting the license and were constantly procrastinating the

process, even though they could’ve got the license by now. This is in fact due to the low

sale which they have in the local markets.

The company has a good scope in the international market due to the increased demand

of organic food stuff and edibles.

They can diversify their industry by also venturing into the commercial production of the

natural pesticides which they use in their own fields.

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4.2 Bhumi Masale

4.2.1 Overview

This industry was started in the year 2000 as a production venture by a SHG called Nari Jagruti

Manch, a group of 10 Lepcha ladies. The SHG was helped by the Sikkim Rural Development

Agency (SRDA) to set up a small mill for the production of Masale by taking the local produce

from the farmers. The members of the SHG were very enthused by the idea, but no one had

thought about the other expenditures which were due in the course of action, the major

expenditure being setting up a 3-Phase electricity line for the working of the mill. Apart from

this, the SHG had to keep a worker for the physical work. They saw that most of their savings of

the kitty were going into financing the industry and none was left for giving out loans. Apart

from this, there were some issues with the SHG, because of which the SHG members decided to

split. The mill provided by SRDA was acquired by Mrs. Roma Lepcha, one of the members of

the SHG and a small individual unit was setup in her homestead.

4.2.2 Products

The factory produces majorly 5 kinds of Masale, all for consumption. These include:

i. Chilli Powder

ii. Haldi (Turmeric) Powder

iii. Meat Masala

iv. Ginger Powder

v. Mix Vegetable Masala

The Masale are sold in packets of 50 gms each, with their cost varying from Rs 15 to Rs 27 per

packet, depending upon the kind of masala.

4.2.3 Capital Investment

The major capital which was invested in the factory was under the following heads:

3-Phase line : Rs 42,000

Fitting and Fixtures : Rs 2,000

Furniture of the factory: Rs 2,000

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Weight Balance: Rs 1,000

As the factory is at the homestead, there was no expenditure on land or building. The factory

functions in the basement of the house.

4.2.4 Raw Material

For the various masale which are produced in the factory, the raw material requirement differs

for each. The specifications of the raw materials for each masala are listed below:

Table 5: Ingredient Details of Products

Sr No. Masala Ingredients

1 Chilli Powder Dried red chillies

2 Haldi Powder Dried Haldi pieces

3 Meat Masala Dried Chilli, Coriander, Cumin Seeds, Pepper, Mustard,

Turmeric, Cinnamon, Clove, Cardamom

4 Mix Vegetable

Masala

Cumin, Coriander, Mustard seeds, Fenugreek, Dried Ginger,

Dried Garlic, Asafoetida, Turmeric and black peppercorns

5 Ginger Powder Dried Ginger

4.2.5 Procurement and Processing

The various raw materials are bought from the local market at Rhenock Bazaar for the

processing. Some materials are also directly purchased from the local producers of the village.

After procuring the materials from the market, the processing of these materials takes place. The

processing can be depicted into the following flowchart:

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Figure 2: Process Flowchart for Masala Production

The details of the processes are as follows:

Drying

The materials procured from the market or the local producers are dried in the sun to

remove any moisture present in them. This is done by placing the materials on top of the

roof of the household. After drying, the products lose weight due to removal of water

content. This drying should be ideally done at a temperature of 70 degree Celsius, but

such temperatures are not possible in natural sun drying. Hence, leaving the materials in

the sun for a longer duration also serves the purpose.

Milling or Grinding

After the materials are dried, they are churned in a mill to produce pulverized powder of

the spice. Care has to be taken to avoid mixing of dust particles. Also, it is necessary to

clean the mill after every use so that there are no traces of previous spice left in the

machine. The Mill is kept in a separate location in the house.

Mixing

After the production of powdered spices, the relevant spices are mixed in appropriate

quantity to produce the desired output. This is only done for the Meat Masala and the

Vegetable masala, by mixing the above mentioned spices in designated quantities.

Packaging

The packaging involves two steps – 1.measurement and 2.packing into cartons.

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Drying

Milling / Grinding

Mixing

Packing

Measurement is done using a mechanical weighing balance. Each masala is packaged in a

pack of 50 Gms in a polythene case. The polythene bag is then kept in a cardboard box

with the specification of the company and ingredient details on it.

4.2.6 Marketing of Products

Due to lack of good marketing channels and high competition by the nationalized

products like – Everest Masale, MDH Masale and Catch masale, the target market is limited to

local and Sikkim market. The industry has all the licenses from the Spices Board.

The marketing strategy used by the industry is Door – to – Door of the product in the

local areas and Gangtok. Every two weeks, the masala packs are taken to Gangtok on a mass

scale and given to the identified local grocery shops there. But due to low consumption by the

locals, these vendors are moving away from the small industry products. The USP of the product

is the relatively low cost of the product as compared to other brands. Also, it has an additional

sentiment of being a local Sikkimese brand of masala. Another method for marketing the product

is to provide the end product to Sikkim State Cooperative Supply and Marketing Federation or

SIMFED. Sikkim State Co-operative Supply and Marketing Federation Ltd. (SIMFED) was

established in the 1983. SIMFED was established as an Apex Marketing association for the state

of Sikkim with the main motive of undertaking wholesale supply of consumer products to the

Multi Purpose Cooperative Societies (MPCS) and Consumer Cooperative Societies (CCS) and to

organize for mass marketing of the surplus agricultural produce together with the chief cash

crops of the State. SIMFED has its stores all over Sikkim, where is retails products from cottage

and small scale industries of Sikkim. This way, the products get a good market for sale. If we

compare the price of the products produced by Bhumi Masale with the other brands:

Table 6: Comparitive Analysis of Bhumi Masale prices with other brands

Sr No. Masala Quantity Bhumi MDH Everest

1. Chilli Powder 50 gms Rs 15 Rs 20 Rs 17

2. Haldi Powder 50 gms Rs 15 Rs 17 Rs 16

3. Meat Masala 50 gms Rs 20 Rs 22 Rs 23

4. Mix Vegetable Masala 50 gms Rs 18 Rs 19 Rs 21

5. Ginger Powder 50 gms Rs 15 Rs 18 Rs 20

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By looking at the comparative prices of the masala, we find that the price of the masala

produces by Bhumi Masale is cheaper than the price of the other famous brands. This difference

in the price of above Rs 3 per 50 Gms is due to the availability of raw material locally, as in the

case of Ginger powder and Chilli powder. For everything else, material has to be purchased from

the market.

4.2.7 Input- Output Analysis

Input

Table 7: Input Details

Sr No. Input Quantity Monetary Value

1. Ginger 1 kg Rs 35- 40

2. Turmeric 1 kg Rs 37

3. Cumin (Zeera) 1 kg Rs 168

4. Whole Red Chillies 1 kg Rs 34

5. Miscellaneous Masale 1 kg Rs 200 (approx)

6. Packing Material 1 box Rs 2.80 per 50 gm box

Output:

Table 8: Gross Profit details per product

Sr No. Masala Quantity Cost Gross Profit per 50 gms

1. Chilli Powder 50 gms Rs 15 Rs 1.7

2. Haldi Powder 50 gms Rs 15 Rs 1.85

3. Meat Masala 50 gms Rs 20 Rs 8 (approx)

4. Mix Vegetable Masala 50 gms Rs 18 Rs 8 (approx)

5. Ginger Powder 50 gms Rs 15 Rs 1.75 to Rs 2.0

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4.2.8 Analysis

If we perform a SWOT analysis of the industry, we get a picture like this:

Table 9: SWOT Analysis for Bhumi Masale

Strength Weakness

• Local relations within the community

• Proximity to market

• No advertisement

• Lack of financial institutions

• Low local market demand

• No industrial relations

Opportunities Threats

• Organic farming of masala

• Procurement from local producers

• National brands – MDH, Catch and

Everest

• Growing mortality of small scale

enterprises

4.2.9 Reflections

This is a model cottage industry which can be found anywhere across the country. Similar

problems are faced by cottage industries all over the country and this is one good example to

understand them. Apart from that, some of the major observations worth mentioning are:

Very clean premises and hygienic milling and packing areas. Even though being a small

industry, every initiative was taken to maintain the standards. The workers had to wear

caps during their working hours.

There is a lack of financial aid for the industry. The proprietor has plans to grow the

industry but is not able to receive the loan from the local bank due to poor reputation of

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the SHG. There is a scope for interventions of the microfinance organizations to venture

into funding such small scale industries in Sikkim.

My personal anecdote:

During my visit to Mrs. Goma, I was accompanied by Mr. Manoj Chhetri, who was a member of

a small NGO, Suryaudai, which made paper and leather bags. We somehow tried to collaborate

the two industries in such a way that both can benefit from each other’s work without the

intervention of an external agency. I would like to mention here that due to this meeting, a small

step was taken towards building sustaining bond between the small industries of the area. This

might profit both the organizations in the near future.

4.3NGO Incense Sticks – Gagan Beli Gram Vikas Sangh

4.3.1 Overview

This particular facility present in Rungdung is essentially a production plant for an NGO

headquartered at Gangtok. The NGO – Gagan Beli Gram Vikas Sangh is a Non profit

organization working in the field on vocational education and rural livelihood promotion. The

president of the NGO is Mr. Akash Lama, who is also the resource person for this production

facility present in Rungdung. Mr. Lama is a resident of Gangtok, but is presently residing in

Rungdung to supervise the working of the production plant.

4.3.2 Products

The facility majorly produces two forms of products, which again have their categories. The

products produced are:

1. NGO’s Incense Stick

i. NGO Incense Dhoop

ii. Organic Incense Dhoop

iii. Rhododendron Dhoop

2. NGO’s Havan Saamagri

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The dhoop is sold in two sizes packets, where the packet sizes various according to the

number of sticks in the packet. The Havan Saamagri is sold in two sizes again, with the sizes

varying by the quantity of saamagri contained in it.

4.3.3 Capital Investment

The facility is basically a large hall built on the land of Mr. Akash Lama. This facility was

planned to be placed here strategically because- a) The land belonged to Mr. Lama and b) It is

well connected by road with Gangtok and other major cities of Sikkim. Also, another factor in

locating the industry in this part might be the proximity to Siliguri, which is a major market of

North East India. The investment put into the setting up of the facility includes:

Building cost : Rs 55,000

Land: Owned by Mr Lama. The price of land in this part of Sikkim (as per the Panchayat

officials) is somewhere around Rs 8 lakh per acre. This facility was built on a land of

1500 feet2 . Thus, the approximate value of the land is Rs 25,000 to Rs 30,000.

Three Phase Line: This was provided free of charge by the Government of Sikkim as a

subsidy to the NGO.

Milling Machine: This machine was provided to the NGO as a subsidy by the Department

of Commerce and Industries, Sikkim.

There has been a lump sum investment in the raw materials required for the industry to

produce. The investment is worth Rs 7 lakh.

The mechanical tools and apparatus within the facility are worth Rs 8,000.

4.3.4 Raw Materials

The major raw materials required for the production of the dhoop and havan saamagri are as

follows:

Malagiri Tree bark

The malagiri tree has a scented bark which is used as the base material for the

production of dhoop sticks. It is widely found in the hills of North Sikkim where the

climatic conditions are more drastic and temperatures are quite low.

Juniper leaves

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Juniper is an upright spreading shrub with red-brown, papery bark and juvenile foliage

only, consisting of whorls of three sharply pointed, dark green to blue-green leaves that

have a single white stripe on the inner surface. Juniper is a bitter, aromatic herb that has

antiseptic and diuretic properties, improving digestion, stimulating the uterus and

reducing inflammation. This is used to enhance the aromatic property of the dhoop. The

smaller pieces of juniper and malagiri bark are also used to form the havan saamagri.

Phampak or Phamsey

This is a yellow coloured fruit which is commonly found in the forest areas of Sikkim.

This fruit is a double layered fruit with yellow shell and a white coloured seed. The

outside of the fruit is dried and used for consumption. The inner seed of the fruit is used

for making the glue which is the bonding agent of the dhoop stick.

Rhododendron flower

A wide variety of rhododendron species are used o produce the desired fragrance of

dhoop sticks. But this is limited to only a few months of production and that too in a

smaller quantity. This is not the main stay of the business.

Artifical Chemical Scents

These scents are used as substitutes for the original materials. They are chemicals which

can be used in smaller quantities to have a better fragrance. But, they are volatile and

need to be kept in closed containers.

Miscellaneous materials

There are other materials which are used in smaller but proportionate quantities in a

measure of 10 kgs of malagiri to produce the desired aroma. Some of the major ones are

listed below:

o Kesar or Saffron

o Camphor (to increase the flammability)

o Jatte (or Sikkim Sandalwood)

o White Sandalwood

o Gokul stone powder

o Red Sandalwood

o Rudak- creeper plant

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These raw materials also have some or the other property which makes them an

indispensible part of the composition. For instance, Jatte is supposed to be a cleaner of polluted

air. Also, the rudak is believed to attract the tiger in the jungles. Hence, other insects, such as

mosquitoes repel the scent of this creeper.

4.3.5 Procurement

The base materials of the dhoop, i.e. Malagiri tree bark and Juniper are brought in trucks

from the forests of North Sikkim near Lachen. They are found in abundance and hence can easily

be availed within the state. Phampak or Phamsey grows wildly in the forests. It can procured

from there. Other materials such as artificial scents are bought from traders in Siliguri. The

minor scent powders - Gokul and Rudak are procured from Himachal Pradesh and the

Sandalwood from Karnataka.

The Sikkim Government has provided the license of procuring the Malagiri and Juniper

from North Sikkim. Hence, as an inventory, they have purchased raw material worth 7 lakh. The

material is kept in the facility.

4.3.6 Production

The production of the dhoop is a four phase process:

Figure 3: Production Process Flowchart

Grinding

This process involved the preparation of the base material for making the dhoop sticks.

The base material or Malagiri tree bark is broken into smaller pieces, mixed with Juniper

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Grinding Mixing and Kneading Shaping Drying

leaves and put into a mill. The mill outputs the powdered form of the Malagiri and

juniper mixture.

Mixing and Kneading

The powder of Malagiri and juniper is then mixed with a variety of materials in specified

proportions to create particular flavours. Also, camphor is mixed with the mixture to

increase the burning capacity of the mixture. This creates the final mixture which forms

the masala to be put on the stick.

After the mixture is created, it is kneaded into together into thick paste using water and

Phamphak juice. The phampak juice has bonding properties and makes the materials stay

together in the form of a hard semi solid paste.

Shaping

After the kneading is done and a semi solid paste structure is produces, the paste is

converted into very thin rope like structures, which are the wet forms of the dhoop sticks.

Unlike the agarbatti which we get in the markets, this dhoop is not pasted on a bamboo

stick, rather it is placed on a long tray to dry.

Drying

The drying process takes around 3 days for the dhoop sticks to dry and harden into the

desired shape and size. But, they are very fragile and break into pieces if pressure is

applied.

After drying, the products are wrapped in gelatine sheets and placed in cartons in packs of 20

sticks and 40 sticks each. The waste products of the milling process and broken pieces of dhoop

sticks are used as inputs for the havan saamagri.

4.3.7 Marketing

As this facility is only a production plant, it does not market the output itself. It acts as a

resource for the NGO which performs the functions of marketing and selling the products.

Usually, the NGO provides these dhoop sticks to all the major shops in the tourist areas, as

tourists are attracted towards local products. You can easily find the green boxes of these dhoop

sticks in shops near the tourist areas in Gangtok.

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The USP of the product is that it can be used by any community and for any purpose.

Also, they have diversified the market to various specialized products, such as- Organic Dhoop,

Buddhist Dhoop or Rhododendron Dhoop. Some of their major buyers are the monasteries of

Gompas of Sikkim. The Rhododendron dhoop is extensively purchased by the Gompas during its

blooming seasons. The additional motivating factor for a customer is the fact that the

organization is an NGO and gives 2 % of the profits in charity. This is clearly stated on the

cartons of the dhoop.

4.3.8 Input Output Analysis

We can break up the input cost into the following heads per packet of dhoop:

Table 10: Input Value chain analysis for Incense Sticks

Sr No. Input Quantity Monetary Value

1. Malagiri 50 gms Rs 1.5

2. Juniper 10 gms Rs 0.5

3. Other materials 100 gms Rs 4

4. Packing cost 1 Rs 1

TOTAL 1 box Rs 7

Apart from the various material costs given in the table above, the facility employees 11

labourers for the production work at a wage rate of:

o Male : Rs 103 per day

o Female : Rs 80 per day

Also, the facility has a three phase electricity supply for running of the mill. But the cost

for the electricity is paid by the Department of Commerce and Industries, Government of

Sikkim.

4.3.9 Financial Statements

Profit and Loss Account

As we do not have data of the amount of sales for the past fiscal year, it is not possible to

calculate the gross profit for the whole year. Also, as it was only the production unit, there was

no record of the forecasted figures for the remaining year. They only worked on supply and

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demand figures. Therefore, we will assume the sale of 1 box and calculate the gross profit for the

sale of one box.

Table 11: Income Statement for one box

Particulars Amount (in Rs)

Sale of box Rs 20

Less: Cost of Goods Sold (Rs 7)

Gross Profit Rs 13

Transport Cost* Rs 2

Cost of Labour per box* Rs 3

Net Profit Rs 82

It is not possible to draw the balance sheet as we do not have any details about the

financial data of the company. The available data has been tried and put into analytical format.

4.3.10 Analysis

Table 12: SWOT Analysis for NGO Incense Sticks

Strength Weakness

• High demand in national and

international markets

• Rhododendron

• Proximity to major consumers

• Diverse products

• Help from the Government

• Unavailability of raw materials locally

• Expensive raw materials

• Transport

• Use of weighing balance

Opportunities Threats

2 This information was provided by the supervisor at the production plant. This information could not be falsified as there was lack of proper recording of sales figures.*The information has been assumed based on the information received from the industry.

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• Export Markets

• Target consumers- tourists

• No insurance

• Cost

• Natural Calamity

4.3.11 Reflections

The first impression of the industry was more of a storage unit than a processing one due to the

amount of raw material kept in just one room. Some of the key reflections and observations

which need mention are:

The industry does not have insurance policy. The amount of raw material kept in the

factory is enormous amount of inventory to be maintained without a backup plan. Also,

the inventory is highly flammable and can cause damage of man and material.

Another noticeable point was that the female workers were paid lesser wages than the

male workers. This was new from the point of view of Sikkimese society where there is

hardly any discrimination on the basis of sex.

The processing was efficient and almost 40 packets were produced in one day, which is a

profit of Rs 320 on one single day.

Recommendations

There is a wide scope of incorporating a social model into this structure. Such models can be

utilized for employment generation for the handicapped people. As the work does not require

much labour and can be set up with a small amount of investment, it looks like a feasible option

for a sustainable source of livelihood. On similar lines, we can work on other industries where

such models can be incorporated.

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3. CONCLUSION

Cottage and Small scale industries provide an alternative opportunity than agriculture for the

people of the village to take part in the main scale economy of the country as a whole. My

personal reflections of all the industries as a whole can be summarized in the following points:

There is a high capacity of untapped resources in the village which can be utilized in a

much better way than left idle. These resources can be used in a productive way to

generate revenue for individuals, or the community as a whole.

What are lacking is the marketing facilities and mechanisms in the region. If there can be

a common society initiated in the village, which can take up the responsibility to ensure

proper rates of supply to the market and linkages to the various market entry points, the

condition of the poor marketing systems can also be improved. The main problems

which can be notices are:

Poor infrastructure facilities

Lack of technological up gradation, hence the competition kills the market of the

traditionally produced goods.

Lack of institutional credit facilities

There is a strong need of research and development in the various fields in which the

small scale industries operate. The expert analysis of the processes followed should be

considered before production.

The lack of skilled personnel also poses a question of optimum production of available

natural resources by not so efficient human resources, leading to sub-quality produce.

The cottage industries provide a good source of sustainable livelihoods for the villagers.

There is not a lot of investment in setting up a small unit and the returns can be

maximized by application of the above two points.

There is a good scope for the application of the P4 approach – People, Public, Private

Partnership3. There is a scope for formation of similar industry clusters in the area giving

it more visibility and a proper market channel.

3 Jenner V.G, “Agarbattis: A sustainable Bamboo Cluster Based Rural Enterprise Development in North Eastern region of India through P4 Approach”

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There is a strong necessity of better financing organizations in this area. There is good

scope for the interventions of microfinance institutions as there is a lack of money

supply. People are ready to spend, but there are no institutions to get to.

REFERENCES

Jenner V.G, “Agarbattis: A sustainable Bamboo Cluster Based Rural Enterprise

Development in North Eastern region of India through P4 Approach”

Economic Survey 2004-2005, URL: http://indiabudget.nic.in

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Gupta S., “Marketing problems of Small scale industries in North East India”.

Basant R. (2006), “Small Scale Industries in the age of Liberalization”.

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