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
Category 0.5-1 lakh % 1-1.5 lakh % 1.5-2 lakh % 2-2.5 lakh % Total
Unit 1 23 92.0 2 8.0 0 0.0 0 0.0 25
Unit 2 9 60.0 6 40.0 0 0.0 0 0.0 15
Unit 3 10 100.0 0 0.0 0 0.0 0 0.0 10
Unit 4 2 25.0 2 25.0 2 25.0 2 25.0 8
Unit 5 10 100.0 0 0.0 0 0.0 0 0.0 10
Unit 6 9 90.0 1 10.0 0 0.0 0 0.0 10
Unit 7 4 66.7 2 33.3 0 0.0 0 0.0 6
Unit 8 0 0.0 6 100.0 0 0.0 0 0.0 6
Unit 9 9 60.0 4 26.7 2 13.3 0 0.0 15
Unit 10 7 70.0 3 30.0 0 0.0 0 0.0 10
Unit 11 4 80.0 1 20.0 0 0.0 0 0.0 5
Total 87 72.5 27 22.5 4 3.3 2 1.7 120
Source: Field Survey
72.5
22.5
3.3 1.7
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
% o
f su
bje
cts
0.5-1 lakh 1-1.5 lakh 1.5-2 lakh 2-2.5 lakh
Fig. 4.18 : Distribution of samples according to actual quantity of
raw material (in tons)
128
Loss of Production due to Shortage of Raw Materials
Raw material inadequacy has led to problem of loss of
production and retrenchment of labour in many small scale industrial
units. Chronic shortage of raw material is experienced in certain areas
of manufacturing and the units are forced to curtail their volumes of
production. High incidence of sickness in the small scale industrial
sector has been caused many times by shortage of raw materials. The
field survey covering the 120 SSI units has revealed that the loss of
production due to shortage of raw materials ranged between a
minimum of 1-10% to a maximum of 31-40%.
Maximum of 53 respondent SSI units constituting 44.2% have
indicated loss of production of 1-10% due to shortage of raw
materials. A substantial number of 43 respondent SSI units
accounting for 35.8% mentioned a loss of production of 11-20% due to
shortage of raw materials. A smaller number of 14 SSI units (11.7%)
mentioned higher loss of production at 31-40%, while a lesser number
of 10 SSI units (8.3%) indicated production loss of 21-30% due to
shortage of raw materials.
Productionwise lower loss of production (1-10%) was mentioned
by larger number of units producing fabricated metal products, metal
working service activities, manufacturing of food products,
manufacturing of wearing apparel and manufacturing of basic iron
and steel.
129
Higher level of production loss sue to shortage of raw materials
was indicated by service units and manufacturing of wood products,
cork, straw, etc.
The loss of production due to shortage of raw materials is a
serious problem since it affects the supply position creating shortages
of consumer items and cause reduction of retrenchment of labour and
the extreme possibility of the SSI units becoming sick. Hence the
concerned government agencies should address this issue and ensure
adequate supply of raw materials to this priority sector in the Indian
economy. The following table and graph provides the details.
Table-4.20
Production Loss due to Shortage of Raw Materials
Category 1-10% % 11-20 % % 21-30 % % 31-40 % % Total
Unit 1 12 48.0 5 20.0 4 16.0 4 16.0 25
Unit 2 11 73.3 4 26.7 0 0.0 0 0.0 15
Unit 3 2 20.0 2 20.0 4 40.0 2 20.0 10
Unit 4 4 50.0 4 50.0 0 0.0 0 0.0 8
Unit 5 0 0.0 4 40.0 2 20.0 4 40.0 10
Unit 6 2 20.0 4 40.0 0 0.0 4 40.0 10
Unit 7 4 66.7 2 33.3 0 0.0 0 0.0 6
Unit 8 0 0.0 6 100.0 0 0.0 0 0.0 6
Unit 9 9 60.0 6 40.0 0 0.0 0 0.0 15
Unit 10 8 80.0 2 20.0 0 0.0 0 0.0 10
Unit 11 1 20.0 4 80.0 0 0.0 0 0.0 5
Total 53 44.2 43 35.8 10 8.3 14 11.7 120
Source: Field Survey
130
53.0
43.0
10.014.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0N
o o
f su
bje
cts
1-10% 11-20 % 21-30 % 31-40 %
Fig. 4.19 : Distribution of samples according to production is lost
due to shortage of raw materials
Nature of Production of the SSI Units
SSI study units comprise of those with a seasonal operations
and those having an year round production schedule. SSI units
depending on raw materials whose supply is seasonal like agricultural
raw materials are involved in production activities of a seasonal
nature. Other SSIs whose dependence is on raw materials of a
perennial supply are engaged in continuous and year round production.
The survey has revealed that large majority of 106 SSI study
units constituting 88.3% are engaged in continuous production activities.
All the following type of SSI units are engaged in continuous
production.
Units manufacturing food products.
Units manufacturing non-metallic mineral products.
Units manufacturing wood products, cork, straw and plaiting
materials.
Units manufacturing chemical products.
131
Units involved in transport services.
Units manufacturing basic iron and steel.
Units manufacturing of wearing apparel.
Units manufacturing plastic products.
In addition to the above majority of units involved in the
production of fabricated metal products, metal working service and
units manufacturing of structural metal products, tanks, reservoirs,
etc. are involved in continuous production activities.
Among those involved in seasonal production majority of units
relate to service organizations and some units are involved in
manufacture of structural metal products. The following table and
graph provides the details.
Table-4.21
Nature of Production of the SSI Units
Category Continuous % Seasonal % Total
Unit 1 21 84.0 4 16.0 25
Unit 2 15 100.0 0 0.0 15
Unit 3 6 60.0 4 40.0 10
Unit 4 8 100.0 0 0.0 8
Unit 5 4 40.0 6 60.0 10
Unit 6 10 100.0 0 0.0 10
Unit 7 6 100.0 0 0.0 6
Unit 8 6 100.0 0 0.0 6
Unit 9 15 100.0 0 0.0 15
Unit 10 10 100.0 0 0.0 10
Unit 11 5 100.0 0 0.0 5
Total 106 88.3 14 11.7 120
Source: Field Survey
132
Fig. 4.20 : Distribution of samples according to nature of
production
Seasonal
11.67%
Continuous
88.33%
Change in Production Volume of SSI Units
Production of industrial units is subject to periodical variations.
Major factors causing changes in the quantity of the production relate
to demand variations, supply constraints like raw material shortage,
shortage of power, transport and other infrastructure affecting the
production unit. Government control and regulations, financial
difficulties, labour problems, etc. also affect the changes in the volume
of production of industrial units in general and small scale industries
in particular.
The study has revealed that there has been an increase in the
production of the respondent SSI units during the last five years
according to a majority of 77 SSI units constituting 64.2 percent of the
total. A lesser number of 34 respondent SSI units (28.3%) mentioned
that the production level has remained constant. A small number of 9
SSI respondent units (7.5%) however have experienced a decline in the
production.
133
Among the 77 SSI units affirming an increase in the production
all the following SSI units have been mentioned during the field
survey.
Manufacturing of food products.
Manufacturing of non-metallic mineral products.
Manufacturing of wood products, cork, straw and plaiting
materials.
Transport services.
Further 90% of the units manufacturing metal products, tanks,
reservoirs and steam generators 66.7% of units manufacturing
chemical products, and 60% of SSI units manufacturing wearing
apparel and units manufacturing plastic products have experienced
increase in production.
SSI units which experienced decrease in production include
manufacturers of fabricated metal products, metal working service
and services units.
Some units which experienced constant production during the
last 5 years relate to manufacturers of metal fabricated metal
products, manufacturers of basic iron and steel, some service units,
units manufacturing wearing apparel, units producing chemical
products and manufacturers of plastic products. The following table
provides the details.
134
Table-4.22
Change in Production Volume of SSI Units
Category Increased % Decreased % Constant % Total
Unit 1 9 36.0 5 20.0 11 44.0 25
Unit 2 15 100.0 0 0.0 0 0.0 15
Unit 3 9 90.0 0 0.0 1 10.0 10
Unit 4 8 100.0 0 0.0 0 0.0 8
Unit 5 2 20.0 4 40.0 4 40.0 10
Unit 6 10 100.0 0 0.0 0 0.0 10
Unit 7 4 66.7 0 0.0 2 33.3 6
Unit 8 6 100.0 0 0.0 0 0.0 6
Unit 9 5 33.3 0 0.0 10 66.7 15
Unit 10 6 60.0 0 0.0 4 40.0 10
Unit 11 3 60.0 0 0.0 2 40.0 5
Total 77 64.2 9 7.5 34 28.3 120
Source: Field Survey
64.2
7.5
28.3
-5.0
5.0
15.0
25.0
35.0
45.0
55.0
65.0
% o
f su
bje
cts
Increased Decreased Constant
Fig. 4.21 : Distribution of samples according to last five years of
production
135
Reasons for Decrease in Production
The responses of the 9 small scale industrial units covered by
the study indicate two major reasons for the decrease in production.
They include decline in demand for the products according to 2 SSI
respondent units accounting for 22.22 percent. A general decline in
demand is caused due to development of substitutes and/or the
competitors aggressive sales drives which results in diversion of
demand. Shrinkage in demand is bound to force the producers to
curtail their production. Another reason for decrease in production
has been the shortage of power. Power is an important input in the
production activities. Particularly the power intensive production of
certain products vitally depends on power supply. In areas where
there is chronic power shortage, industries particularly small scale
industries are the worst sufferers. This factor has been mentioned by
7 SSI units constituting 77.78 percent of the total number of 9 SSI
respondent units which have mentioned power shortage. Te study
area is part of the northern part of Karnataka State has been one of
the power deficit states in the country. Hence the shortage of power is
obviously an important reason for certain SSI units to suffer as they
are power intensive units. The responses of the 9 respondent SSI
units are provided in the following table and graph.
136
Table-4.23
Reasons for the Decrease in Production
Reasons No of sample % of samples
Shortage of raw materials 0 0.00
Decline in demand 2 22.22
Severe competition 0 0.00
Labor strikes 0 0.00
Power shortage 7 77.78
Transport difficulty 0 0.00
Financial shortage 0 0.00
Others 0 0.00
Total 9 100.00
Source: Field Survey
Fig. 4.22 : Distribution of samples according to production is
decreased because of following reasons
0.00%22.22%
0.00%0.00%
77.78%
0.00%0.00%0.00%
Shortage of raw materials Decline in demandSevere competition Labor strikesPower shortage Transport difficultyFinancial shortage Others
Utilization of Production capacity in the Last 5 Years
Utilization of production capacity is a crucial determinant of the
success of an industrial unit. Failure to utilize full production capacity
leads to unemployment of resources – physical and manpower. It
137
ultimately results in the earnings of the production unit to shrink and
the unit may become sick. Idle capacity or unutilized capacity of any
unit is caused by shortage of input resources – raw materials, power
and other supplies. Idle capacity may also be caused by labour
problem, recession or faculty fiscal and monetary policies of the state.
Hence both internal and external factors may lead to unutilized
production of industrial units.
The field survey has revealed that capacity utilization in the
respondent small scale industrial units during the last five years
ranged from a minimum of 40 percent to a maximum of 54.20
percent. The average utilization of production capacity of the
respondent small scale industrial units during the last 5 years was
46.53 percent.
Industrywise maximum utilization of 54.20% production
capacity was achieved by units relating to manufacturing of structural
metal products, tanks, reservoirs and steam generators. Units
utilizing 50% or more, included manufacturing of fabricated metal
products, metal working services and transport services. Other
respondent small scale industrial units in the study area utilized 40 to
49% of the installed production capacity. Utilization of production of
the study SSI units is to be considered as unsatisfactory as more than
50% of capacity has remained unutilized during the last 5 years.
There is need for ascertaining the major reasons for causing poor
utilization of production capacity in the small scale industrial units
138
and necessary steps need to be taken to overcome the problem. The
following table and graph provides the details.
Table-4.24
Utilization of Production Capacity during the Last 5 Years
Category Quantity
Means Std.Dev.
Unit 1 50.84 11.28
Unit 2 42.00 6.76
Unit 3 54.20 8.01
Unit 4 36.25 4.43
Unit 5 49.00 9.66
Unit 6 52.00 9.19
Unit 7 43.33 5.16
Unit 8 50.00 10.95
Unit 9 42.33 5.30
Unit 10 40.00 4.08
Unit 11 49.00 10.84
Total 46.53 9.69
Source: Field Survey
Labour and Employee Management
Small scale industries are traditionally labour intensive and
there is high ratio of labour to capital. However the advent of modern
production technology has substantially changed the employment
scenario in small scale industrial units particularly with the advent of
automation and computerization of administration of the units. The
study has revealed some significant tends in this direction.
139
Labour Employment in SSI Units
The study units have employed skilled, unskilled, technical and
non-technical workers in their organizations. The average number
(mean) of skilled workers in the different product groups of SSIs was
4.99. The number of skilled workers varied from a minimum of 1
skilled worker in manufacturing units of non-metallic mineral
products to a maximum of 15.50 skilled workers in units
manufacturing structural metal products, tanks, reservoirs, etc.
The average (mean) unskilled workers in the SSI study units
was 6.94 (mean). The number of unskilled workers varied from a
minimum of 1 unskilled worker in units manufacturing food products
to a maximum of 29.80 unskilled workers in service units.
The average number of technical workers in the SSI study units
was 2.70. The number varied from a minimum of 1.33 in units
manufacturing non-metallic mineral products to a maximum of 8.75
in SSI study units providing services.
The average number of non-technical workers in the SSI study
units was 2.04. The figure varied from a minimum of 1.33 in SSI units
manufacturing non-metallic mineral products and chemical products
to a maximum of 5.60 in SSI study units providing services. The
following table and graph provides the details.
140
Table-4.25
Type of Workers Employed in SSI Study Units
Category Skilled Unskilled Technical Non-Technical
Mean SD Mean SD Mean SD Mean SD
Unit 1 5.16 9.54 4.56 7.41 1.54 0.78 2.14 1.58
Unit 2 1.13 0.35 1.00 0.00 1.58 0.51 1.46 0.52
Unit 3 15.50 26.12 11.00 12.92 3.00 1.12 1.80 0.79
Unit 4 1.00 0.00 1.00 0.00 1.33 0.52 1.33 0.52
Unit 5 14.60 19.07 29.80 47.78 8.75 13.12 5.60 7.62
Unit 6 2.80 2.86 5.60 5.23 2.60 1.07 1.80 0.42
Unit 7 3.00 1.79 2.67 1.37 4.00 0.89 1.33 0.52
Unit 8 5.50 4.93 2.50 1.64 2.00 0.00 1.50 0.55
Unit 9 1.13 0.52 9.80 10.92 2.60 1.24 1.57 0.51
Unit 10 2.60 1.71 3.70 5.01 2.29 0.49 1.60 0.70
Unit 11 4.40 3.97 3.40 2.88 2.00 1.00 1.60 0.55
Total 4.99 11.09 6.94 16.51 2.70 4.01 2.04 2.59
Source: Field Survey
4.99
6.94
2.70
2.04
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Mean v
alu
e
Skilled Unskilled Technical Non-Technical
Fig. 4.23 : Mean values of number of different employees working in
unit
141
Method of Recruitment of Workers in SSI Units
Selection and recruitment of workers in industrial units has to
be properly planned to suit the organizational needs of the units.
Different industries require different type of workers suit the technical
and non-technical positions. Hence the varied needs of the industrial
units relating to skilled, unskilled, technical and non-technical areas
have to be planned and recruitment of the proper personnel has to be
done by the management.
Methods of Recruitment of Workers in SSI Units
Recruitment of workers through personnel interviews has been
done by large majority of 90 SSI study units (75%). Recruitment
through advertisement has been followed by 30 SSI study units (25%).
All the SSI study units involved in the manufacturing of
structural metal products, non-metallic mineral products and
manufacture of wood products, cork, straw and plaiting material have
followed the recruitment of workers through personal interviews.
Majority of units manufacturing food products, service units, plastic
products, wearing apparel, fabricated metal products, chemical
products and manufacturers of basic iron and steel have followed the
method of recruiting workers through personal interview.
All the SSI study units providing transport services have
followed the method of recruiting workers through advertisement.
Good number of units involved in manufacturing fabricated metal
products, basic iron and steel, chemical products and wearing apparel
142
have been following the method of recruiting workers through
advertisement. The following table and graph provides the details.
Table-4.26
Methods of Recruitment of Workers in SSI Units
Category Through advt
% Through P interview
% Through training like IIT
% Total
Unit 1 6 24.0 19 76.0 0 0.0 25
Unit 2 3 20.0 12 80.0 0 0.0 15
Unit 3 0 0.0 10 100.0 0 0.0 10
Unit 4 0 0.0 8 100.0 0 0.0 8
Unit 5 2 20.0 8 80.0 0 0.0 10
Unit 6 0 0.0 10 100.0 0 0.0 10
Unit 7 2 33.3 4 66.7 0 0.0 6
Unit 8 6 100.0 0 0.0 0 0.0 6
Unit 9 7 46.7 8 53.3 0 0.0 15
Unit 10 3 30.0 7 70.0 0 0.0 10
Unit 11 1 20.0 4 80.0 0 0.0 5
Total 30 25.0 90 75.0 0 0.0 120
Source: Field Survey
25.0
75.0
0.0 0.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
% o
f subje
cts
Through advt Through P
interview
Through
training like IIT
Others
Fig. 4.24 : Distribution of samples by procedures used to recruit of
workers
143
Training of Employees of SSI Units
Training of employees enhances their skill and productivity.
Trained workers would contribute towards the organizational
productivity too. Hence training of employees is an important function
of the management of the industrial organizations.
Majority of 78 SSI study units constituting 65% of the total
affirmed that they provided training for their employees. However a
substantial number of 42 SSI study units accounting for 35% of the
total mentioned that they had arranged the training for their
employees.
All the SSI study units involved in manufacturing fabricated
metal products, wood products, cork, straw and plaiting materials,
and service units and transport units indicated that they arranged for
training of their employees.
Majority of units manufacturing structural metal products,
plastic products, chemical products and basic iron and steel also
provided training to their employees.
The SSI study units (100%) manufacturing non-metallic mineral
products and wearing apparel did not provide training to their
employees. Majority of units producing food products also did not
provide training to their employees.
144
Table-4.27
Training of Employees of SSI Units
Category Yes % No % Total
Unit 1 25 100.0 0 0.0 25
Unit 2 4 26.7 11 73.3 15
Unit 3 8 80.0 2 20.0 10
Unit 4 0 0.0 8 100.0 8
Unit 5 10 100.0 0 0.0 10
Unit 6 10 100.0 0 0.0 10
Unit 7 4 66.7 2 33.3 6
Unit 8 6 100.0 0 0.0 6
Unit 9 7 46.7 8 53.3 15
Unit 10 0 0.0 10 100.0 10
Unit 11 4 80.0 1 20.0 5
Total 78 65.0 42 35.0 120
Source: Field Survey
Incentives to Employees of SSI Units
Incentives have motivational impact on employees of an
organization. They increase morale of the employees and raise their
productivity and the productivity of the organization.
A majority of 77 SSI units (64.2%) asserted to have given
incentives to the employees. Among them majority of the following
product units have been given incentives.
Units manufacturing fabricated metal products, food products,
structural metal products, non-metallic mineral products, service
units, products of wood, cork, etc. chemical products, transport and
units manufacturing basic iron and steel and plastic products.
145
Majority of units manufacturing wearing apparel did not provide
incentives to employees. The following table and graph provides the
details.
Table-4.28
Incentives to Employees of SSI Units
Category Yes % No % Total
Unit 1 18 72.0 7 28.0 25
Unit 2 11 73.3 4 26.7 15
Unit 3 8 80.0 2 20.0 10
Unit 4 4 50.0 4 50.0 8
Unit 5 8 80.0 2 20.0 10
Unit 6 6 60.0 4 40.0 10
Unit 7 4 66.7 2 33.3 6
Unit 8 3 50.0 3 50.0 6
Unit 9 9 60.0 6 40.0 15
Unit 10 2 20.0 8 80.0 10
Unit 11 4 80.0 1 20.0 5
Total 77 64.2 43 35.8 120
Source: Field Survey
Frequent Labour Turnover in SSI Units
Labour turnover is a problem faced by many industrial units
including small scale industrial units. Labour turnover may be caused
by salary differences, lack of job satisfaction, better incentives
elsewhere, etc.
146
The study has revealed that maximum of 100 SSI study units
(83.3%) faced the problem of labour turnover while a small number of
20 SSI study units (16.7%) did not face the problem.
Of the 11 groups of SSI units 100% of 5 groups of SSI units
have faced the problem of labour turnover while majority of 4 groups
of SSI units manufacturing different type of products faced the
problem of labour turnover. The following table provides the details.
Table-4.29
Frequent Labour Turnover in SSI Units
Category Yes % No % Total
Unit 1 22 88.0 3 12.0 25
Unit 2 15 100.0 0 0.0 15
Unit 3 8 80.0 2 20.0 10
Unit 4 8 100.0 0 0.0 8
Unit 5 4 40.0 6 60.0 10
Unit 6 8 80.0 2 20.0 10
Unit 7 4 66.7 2 33.3 6
Unit 8 6 100.0 0 0.0 6
Unit 9 15 100.0 0 0.0 15
Unit 10 5 50.0 5 50.0 10
Unit 11 5 100.0 0 0.0 5
Total 100 83.3 20 16.7 120
Source: Field Survey
Reasons for Frequent Labour Turnover in SSI Units
The study has revealed that large majority of 86 SSI units (86%)
faced the problem of frequent labour turnover for better salary
147
elsewhere. Lack of job satisfaction was the reason for frequent labour
turnover according to 7 SSI units (7%) and better incentives elsewhere
led to frequent labour turnover according to 6 SSI units (6%). Other
reasons led to frequent labour turnover in case of 1 SSI unit.
Better salary elsewhere leading to frequent labour turnover was
indicated by a minimum of 50% of units of the SSI group providing
transport to a maximum of 100% of units manufacturing of various
products covered by the study. A negligible number of SSI units
manufacturing different products covered by the study referred to lack
of job satisfaction, better incentives, etc. for the frequent labour
turnover. The following table provides the details.
Table-4.30
Reasons for Frequent Labour Turnover in SSI Units
Category Better salary
% Lack of job satisfaction
% Better incentives
% Others % Total
Unit 1 20 90.9 1 4.5 0 0.0 1 4.5 22
Unit 2 15 100.0 0 0.0 0 0.0 0 0.0 15
Unit 3 7 87.5 1 12.5 0 0.0 0 0.0 8
Unit 4 8 100.0 0 0.0 0 0.0 0 0.0 8
Unit 5 0 0.0 2 50.0 2 50.0 0 0.0 4
Unit 6 6 75.0 2 25.0 0 0.0 0 0.0 8
Unit 7 4 100.0 0 0.0 0 0.0 0 0.0 4
Unit 8 3 50.0 0 0.0 3 50.0 0 0.0 6
Unit 9 15 100.0 0 0.0 0 0.0 0 0.0 15
Unit 10 5 100.0 0 0.0 0 0.0 0 0.0 5
Unit 11 3 60.0 1 20.0 1 20.0 0 0.0 5
Total 86 86.0 7 7.0 6 6.0 1 1.0 100
Source: Field Survey
148
Labour Strikes Experienced by SSI Units
Frequent labour strikes has been experienced by a lone SSI unit
involved in manufacturing of fabricated metal products and metal
working service unit. It constituted 0.8% of the total SSI study units
accounting for 99.2% did not experience frequent labour strikes. The
responses indicate a great deal of industrial peace and absence of
labour unrest. The following table provides the details.
Table-4.31
Labour Strikes Experienced by SSI Units
Category Yes % No % Total
Unit 1 1 4.0 24 96.0 25
Unit 2 0 0.0 15 100.0 15
Unit 3 0 0.0 10 100.0 10
Unit 4 0 0.0 8 100.0 8
Unit 5 0 0.0 10 100.0 10
Unit 6 0 0.0 10 100.0 10
Unit 7 0 0.0 6 100.0 6
Unit 8 0 0.0 6 100.0 6
Unit 9 0 0.0 15 100.0 15
Unit 10 0 0.0 10 100.0 10
Unit 11 0 0.0 5 100.0 5
Total 1 0.8 119 99.2 120
Source: Field Survey
Affiliation of Employees to Labour Union
Trade union movement has not attracted employees of the SSI
study units to any considerable extent. The study has revealed that
only 14 SSI study units accounting for 11.7% affirmed that employees
had affiliated to labour union. A large majority of 106 SSI units
constituting 88.3% of the total mentioned that their employees had
not affiliated to labour union.
149
There has been no affiliation of employees to labour union from
the following categories of respondent SSI product groups.
Units manufacturing food products
o Structural metal products, non-metallic mineral products,
chemical products and wearing apparel.
o Affiliation of employees to labour unions has been indicated
by a small number of units in the following product groups.
Units manufacturing fabricated metal products, units providing
services, units manufacturing wood products, units involved in
transport services, one unit manufacturing basic iron and steel
and one unit manufacturing plastic products.
The following table provides the details.
Table-4.32
Affiliation of Employees to Labour Union
Category Yes % No % Total
Unit 1 6 24.0 19 76.0 25
Unit 2 0 0.0 15 100.0 15
Unit 3 0 0.0 10 100.0 10
Unit 4 0 0.0 8 100.0 8
Unit 5 2 20.0 8 80.0 10
Unit 6 1 10.0 9 90.0 10
Unit 7 0 0.0 6 100.0 6
Unit 8 3 50.0 3 50.0 6
Unit 9 1 6.7 14 93.3 15
Unit 10 0 0.0 10 100.0 10
Unit 11 1 20.0 4 80.0 5
Total 14 11.7 106 88.3 120
Source: Field Survey
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