M & E UNIT 6
Unit -6 Small
Scale Industry and Institutional Support.
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1.
Discuss
steps to start a small scale industry (SSI).
A.
Steps
to start SSI
·
Selection
of the product
·
Location
of the enterprise
·
Preparation
of the project report
·
Registration
with authorities
·
Arranging
finance
·
Statuary
license
·
Obtaining
land and building
·
Procurement
of machinery
·
Arranging working capital
·
Recruitment
of staff
·
Installation
of machinery
·
Procurement
of raw material
·
Power
connection / power supply
·
Production
·
Marketing
·
Repayment
of loans
·
Profit
generation
·
Avoiding
sickness
·
Modernization
and upgradation of technology
2.
Discuss
the contribution of Small scale Industries in Indian economy.
A.
In a developing country like India, the role and importance of small-scale industries is very significant towards poverty eradication, employment generation, rural development and creating regional balance in promotion and growth of various development activities.
It is estimated that this sector has been contributing about 40% of the gross value of output produced in the manufacturing sector and the generation of employment by the small-scale sector is more than five times to that of the large-scale sector.
This clearly shows the importance of small-scale industries in the economic development of the country. The small-scale industry have been playing an important role in the growth process of Indian economy since independence in spite of stiff competition from the large sector and not very encouraging support from the government.
The following are some of the important role played by small- scale industries in India.
1. Employment generation:
The basic problem that is confronting the Indian economy is increasing pressure of population on the land and the need to create massive employment opportunities. This problem is solved to larger extent by small-scale industries because small- scale industries are labour intensive in character. They generate huge number of employment opportunities. Employment generation by this sector has shown a phenomenal growth. It is a powerful tool of job creation.
2. Mobilisation of resources and entrepreneurial skill:
Small-scale industries can mobilize a good amount of savings and entrepreneurial skill from rural and semi-urban areas remain untouched from the clutches of large industries and put them into productive use by investing in small-scale units. Small entrepreneurs also improve social welfare of a country by harnessing dormant, previously overlooked talent.
Thus, a huge amount of latent resources ;re being mobilised by the small-scale sector for the development of the economy.
3. Equitable distribution of income:
Small entrepreneurs stimulate a redistribution of wealth, income and political power within societies in ways that are economically positive and without being politically disruptive.
Thus small-scale industries ensures equitable distribution of income and wealth in the Indian society which is largely characterised by more concentration of income and wealth in the organised section keeping unorganised sector undeveloped. This is mainly due to the fact that small industries are widespread as compared to large industries and are having large employment potential.
4. Regional dispersal of industries:
There has been massive concentration of industries m a few large cities of different states of Indian union. People migrate from rural and semi urban areas to these highly developed centres in search of employment and sometimes to earn a better living which ultimately leads to many evil consequences of over-crowding, pollution, creation of slums, etc. This problem of Indian economy is better solved by small- scale industries which utilise local resources and brings about dispersion of industries in the various parts of the country thus promotes balanced regional development.
5. Provides opportunities for development of technology:
Small-scale industries have tremendous capacity to generate or absorb innovations. They provide ample opportunities for the development of technology and technology in return, creates an environment conducive to the development of small units. The entrepreneurs of small units play a strategic role in commercialising new inventions and products. It also facilitates the transfer of technology from one to the other. As a result, the economy reaps the benefit of improved technology.
6. Indigenisation:
Small-scale industries make better use of indigenous organisational and management capabilities by drawing on a pool of entrepreneurial talent that is limited in the early stages of economic development. They provide productive outlets for the enterprising independent people. They also provide a seed bed for entrepreneurial talent and a testing round for new ventures.
7. Promotes exports:
Small-scale industries have registered a phenomenal growth in export over the years. The value of exports of products of small-scale industries has increased to Rs. 393 crores in 1973-74 to Rs. 71, 244 crores in 2002-03. This contributes about 35% India's total export. Thus they help in increasing the country's foreign exchange reserves thereby reduces the pressure on country's balance of payment.
8. Supports the growth of large industries:
The small-scale industries play an important role in assisting bigger industries and projects so that the planned activity of development work is timely attended. They support the growth of large industries by providing, components, accessories and semi finished goods required by them. In fact, small industries can breath vitality into the life of large industries.
9. Better industrial relations:
Better industrial relations between the employer and employees helps in increasing the efficiency of employees and reducing the frequency of industrial disputes. The loss of production and man-days are comparatively less in small- scale industries. There is hardly any strikes and lock out in these industries due to good employee-employer relationship.
Of course, increase in number of units, production, employment and exports of small- scale industries over the years are considered essential for the economic growth and development of the country. It is encouraging to mention that the small-scale enterprises accounts for 35% of the gross value of the output in the manufacturing sector, about 80% of the total industrial employment and about 40% of total export of the country.
3.
Explain
objectives of small scale industries.
A.
The
significance contribution in the economic and social development of a country
1.
To
utilize locally available raw material
2.
To
meet local demands
3.
To
utilize locally available skills and technologies
4.
To
create employment opportunities by making use of locally available
traditional technologies
5.
To
contribute to balanced regional development
6.
To
promote production
7.
To
contribute to exports SSI must help the economy by contributing to the
exports basket in large measures
8.
To
adopt modern technologies
4.
Discuss
the sources of finance for small scale Industries.
A.
The
government has always accorded significance to the small scale sector as a
means of self – employment and ensuring balance economic development of
various regions.
Investment in small scale in successive five years
plans:
Public sector investment in small scale increased
from Rs. 5.2 crore in 1st five year plan (1951-1956) and Rs. 616
crore in stock (1985-90)
A new products and processes capable of being
manufactured in the small scale sector are identified, they are added to the
reserved list.
National equity fund:
To help entrepreneurs to set up more small units,
the government set up the national equity fund in 1987, by Industrial
Development Bank of India (IDBI) SSI. In Feb 1988 government established
separated open bank called the Small Industries Development Bank of India
(SIDBI) as a subsidiary of the IDBI under national equity fund.
Reserve bank policy for credit to SSI:
In 1993 the RBI directed the commercial banks to
meet the working capital needs of small units by working out the normative
requirement at 20% of the annual output subject to a limit of Rs.1 crore. RBI
also suggested the banks to set up specialized branches in 85 specific
districts where small unit had sizeable concentration.
Banks and financial institutions:
A network of state financial corporations, National
small industries corporation, state small industries corporations, commercial
banks, co-operative banks, regional rural bank provide financial assistance
to small scale units. SIDBI provides refinance to the industrial loans
advanced by these institutions to the small scale sector.
5.
Explain
concept and characteristics of small scale Industries.
A.
The
definition of small scale industry varies from one country to another
country. The first official criterion for small scale industry dates back to
the second five year plan when it was in terms of gross investments in land,
building plant and machinery and the strength of the labour force.
Characteristics of small scale industries:
·
Organized
proprietary units in India -70% SSG proprietary.
·
Operate
in localized area -catering to local requirement
·
Required
limited capital
·
Using
simple technologies –extensive use of individual skill
·
Individual
tastes and fashions, personalized services to their customers.
·
High
degree of flexibility – their survival and growth in changing business
environment
·
Started
easily without much legal formalities
·
Benefits
of the state protection, concession and facilities from government
·
System
is owner managed so decisions are
quicker and automatically co ordinate
·
Personal
touch with labours and consumers
6.
Discuss
scope of small scale industries in India.
A.
Suitable
for the Indian economy which is shorted of capital and labour intensive.
In India small scale enterprise provided 140 lakh
new jobs with the establishment of 23 lakh small unite in 1993-94 alone.
They contribute as much as 35 to 40% of direct
exports
Higher per unit output of capital invested and per
unit of energy used
They reinvest
a major portion of their profits out of necessity and thus help in increasing
national production
They are more flexible and innovative than large
firms.
They may be loss damaging to the environment
They help in harnessing youth
7.
Identify
the sickness signals among small scale industries.
A.
·
Persisting
irregular in cash credit account
·
Slow
turnover in the account
·
Bill/cheques
returned unpaid
·
Routing
transactions with the other bank
·
Large
cash drawing
·
Irregularity
of submission of stock statements
·
Heavy
rejection of goods dispatched
·
Heavy
dependence on external fund
·
Continuous
increase in losses
·
Undepreciated
fixed assets
·
Unsatisfactory
market report
·
Recession among partners
·
Labour
unrest
8.
Discuss
causes of sickness in small scale industries.
A.
Causes
of sickness in small scale industries
Some of the common causes discussed as follows:-
Problem in production:
Problem in production may arise due to,
-
Machine
breakdowns, poor maintenance
-
Poor
quality of raw materials use
-
Poor
labour productivity
-
Power
shortage
-
Lack
of production planning and control
-
Delayed
supplies from sub contractors
-
Poor
industrial relations
Lack of orders:
A unit may suffer as it does
not get enough order to match its production target. The lack of order could be due to,
-
Competition
-
Recession
-
Irregular deliveries
-
Poor
marketing efforts
Lack of raw materials:
Poor supply of raw material
could be due to,
-
National
or regional shortage
-
High
cost
-
Lack
of planning
-
Poor
quality
-
Uncertain
suppliers
Cash crunch:
This arises due to diversions
of fund, poor collections, unplanned payments to creditors, high inventory
Increased cost of raw
material:
Increased overhead cost:
9.
Identify
and explain preventions group of Sickness units.
A.
Four
group can play a dominate role in preventing units from sickness. There are
term lending institutions, commercial banks, entrepreneurs, and the
government.
Term lending institutions:
( organization such as bank, credit union or finance
company that makes loans)
If the term
lending institutions take the following step, sickness can be prevented.
-
Proper
appraisal of management of the project
-
Extra
care in assessing the suitability, technical feasibility of plant and machinery
-
Ensuring
the timely implementation of the project
Commercial banks:
The commercial banks are the one
providing resources for serving successfully they have to take following
steps to prevent sickness.
-
Give
notice to unit if their withdrawals in the account is exceed to the
permissible drawing power
-
Frequent
interaction with the entrepreneur
The entrepreneur:
The success of the unit surely
depends on the ability and sustainable efforts of the entrepreneur. They can
prevent sickness by,
-
Selecting
the appropriate supplier
-
Doing
the homework properly
-
Paying
adequate attention to the deficiencies in the unit
-
Careful
selection of the partners
The government:
The government can help in
controlling sickness by not making sudden changes in the industrial policy.
-
Several
changes related to existing unit
-
Policy
to discourage new investment
-
Withdrawal
of suboidies
-
Opening
up of reserved items for big industries
10. Write notes on –National Small Industries
Corporation (NSIC).
A.
In
context of liberalization NSIC has been reorienting its strategies for
developing competition ability in small scale units. NSIC offers an
integrated package of financial services of long range interest to the small
scale. NSIC is planned to highlight the innovative approaches to strengthen
the small scale units at technological upgradation, adoption of new processes
and technologies, diversification and improvement of R&D capability apart
from export orientation.
NSIC was established by the union ministry of
industry in 1955 to promote, aid and foster the growth of small scale
industry in the country. NSIC continues to remain in the forefront of
industrial development throughout the country with its multifaceted program
and projects for SSI. On 19th April 1995 NSIC celebrated 40th
anniversary.
NSIC and the government stores purchase scheme:
The NISC was set up with the objective of supplying
machinery and equipment to small enterprise on a hire purchase basis and
assisting them in procuring government orders for various items of stores.
It is mainly concerned with central government
stores purchases, consortia ( a
combination of financial institutions ) marketing, marketing development
centers etc.
The main objective of marketing program of NSIC are
as follows :-
-
To
ensure fair margin to production of goods
-
To
ensure standardization and quality control and make provision for testing
facilities
-
To
introduce a common brand name
-
To
give publicity to small industries’ product
-
To
upgrade technology by supplying modern sophisticated machinery and equipment
-
To
make available to the customers quality goods at fair price
11. Write notes on –District Industries
Center (DIC).
A.
In
each district one agency to deal with all requirements of small and village
industries. This is called “DIC”.
DIC have undertaken various program for investment
promotion at the grass root level such as organizing seminars, workshops,
extending support for trade fairs and exhibitations organized by various
industries associations.
The center has
separated wing to look after the special needs of cottage and house
hold industries as district from small industries.
Functions of DICs:-
-
Registration
-
Recommendation
-
Seminars
-
Other
activities
-
Self
employment scheme
-
Co
–operative package scheme
12. Write notes on –Small Industries
Development Bank of India (SIDBI).
A.
For
ensuring layer flow of financial and non-financial assistance to the small
scale units, the government of India set up the SIDBI and the special act of
parliament in 1989 as a owned subsidiary of the IDBI.
The important function of IDBI are as follows:
-
To
initiate steps for technological upgradation and modernization of existing
units
-
To
expand the channels for marketing the products of SSI
-
To
promote employment oriented industries especially in semi-urban areas
In 1992-93 it has introduced
two new schemes:
The first is equipment finance
scheme for providing direct finance to existing well run small scale units
taking up technology upgradation.
The other scheme was venture
capital and exclusively for small scale units, with an initial croups of RS.
10 crore. SIDBI also providing leasing, hire purchase and marketing support
to the industrial units in the small scale sector.
13. Write notes on –Small Scale Industries
Board (SSIB).
A.
The
government of India constituted a board SSIB in 1954 to advice on development
of small scale industries in the country. The SSIB is also kwon as central
small industries board. It is an apex advisory body constituted to render
advice to the government on all issues pertaining to the development of small
scale industries.
The industries minister of the government of India
is the chairman of the SSIB. The SSIB comprises of 50 members of parliament
and secretaries of various department of government of India, financial
institutions, public sector undertakings, industry associations and eminent
experts in the field.
14. Write notes on –Industrial Development
Bank of India (IDBI).
A.
Refer
question no. 12
15. Write notes on –Small Industries
Development Organization (SIDO).
A.
SIDO
is the subordinate office of department of SSI and ARI. It is a nodal agency
for identifying the needs of SSI units coordinating and monitoring the
polices and program of training, consultancy, evaluation for needs of SSI and
development of industrial estates. All these functions are taken care with 27
offices, 31 SSI extension centers, 7 center related to production and process
development.
The activities of SIDO are divided into three
categories.
1.
Coordination
activities of SIDO:
To maintain relation with central industry ministry,
planning commission, state level industries ministry and financial
institutions.
Implement and coordinate in the development of the
industrial estates.
2.
Industrial
development activities of SIDO:
Develop import substitutions for components and products
based on the data available for various volume wise and value wise imports.
To give support and guideline for the development of
ancillary units.
To provide guideline to SSI units in term of costing
market competitions and to encourage them to participate in the government
stores and purchase tenders.
To recommend the central government for reserving
certain items to produce at SSI level only.
3.
Management
activities of SIDO:
To provide training, development and consultancy
services to SSI to develop their competitive strength.
To provide marketing assistance to various SSI
units.
To assist SSI units in selection of plant and
machinery, location, layout, design and appropriate process.
To help them get updated in various information
related to the small scale industries activities.
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