There is a world-wide conflict between capi ta l and labour,

and the poor envy the r ich. If a l l worked for their bread,

distinctions of r ank would be obliterated the rich would still be

there, but ' they would deem themselves only trustees of their

poverty, and would use it mainly i n the public interest .

From Yarvada Mandir, p .p .35-36.

CHAPTER - V I

MANAGEMENT O F VILLAGE INDUSTRIES

Introduction

Functions of the Entrepreneur

Planning

Organising

Staffing

Co-ordination

Controlling

Financing

Marketing

Profile of t h e Entrepreneurs

Profile of t h e Units selected

Management of Village Industr ies - A Gandhian Outlook-

CHAPTER - V I

MANAGEMENT OF VILLAGE INDUSTRIES

6.1. Introduction

The present chapter deals with a n empirical ana lys i s of

khadi and v i l l age indus t r ies i n Thiruvananthapuram and Kottayam

dis t r ic ts , with a view to demonstrate the profi le of khad i and

vil lage industr ies i n Kerala. This i s based entirely on primary

data collected through sample surveys i n the selected dis t r ic ts .

Some economic parameter of these dis t r ic ts a r e given below:

Thiruvananthapuram dis t r ic t is a t the southern most pa r t of

the state. It h a s a n a r e a of 2192 Sq.Kms. A s per 2391 census it

has a population of 29,38,283 with a density of 1341 person per Sq.

~ m . ' The percentage of l i t e racy i n the distr ict i s 78. A t the end

of March 1990 there was 6,92,971 job seekers on the l ine regis ter of

employment exchange i n the dis t r ic t .

Kottayam d i s t r i c t h a s an a r ea of 2203 Sq.Kms. with a

population of 18,19,581. The density of population i n Kottayam

dis t r ic t i s 826 person per Sq.Km. The percentage of l i t e racy i n the

dis t r ic t i s 85.5. The number of unemployed i n the d i s t r i c t i s

1. Ashish Bose (Ed . ) , Demographic Density of Ind ia , 1991 census, B.R. Publishing Corporation, Delhi, p .207.

2,58,568 a s on 31.3.90. It is an industrially backward district in

Kerala. Figure 6.1. shows the district-wise a rea of the 14 districts

i n Kerala.

- The Chapter is concerned with the entrepreneurial factors

tha t help to shape various tools for an effective system of

management and administration of village industries.

Traditionally, the management of enterprises has been i n

the hands of the families of business communities and the

managerial talent was handed down along the family ladder. It

has been accepted tha t people from other communities a re incapable

of taking up these responsibilities, because, i n a t radi t ional

business family, the prospective manager was init iated into the

responsibilities of h i s profession at an ear ly age. However, th i s

traditional practice has not been free from i t s own aberrations.

Managing is essential i n a l l organised w-operation, a s

well a s a t a l l levels of organisation i n enterprise. It is the

function not only of enterpreneur but also of the shop supervisor

and ordinary worker i n the organisation. The task of the

enterpreneur or manager is to establish the environment for group

effort i n such a way tha t individuals w i l l contribute to group

objectives with the leas t amount of such inputs a s money, time,

effort, discomfort and materials. By the very definition of the t a sk

this becomes the goal of managers. Despite the inexactness and

FIGURE 6.1

District-wise Area of 14 Districts in Kerala.

Source : Census of India 1991, Series-12, Kerala, p . 2 4 .

i

relative crudi ty of management theory and science, the development

of thought on management da tes back to the days when people f i r s t

attempted to accomplish goals by working together i n grounds.

The main characterist ics of the managerial job is tha t it

must interact with many k inds of environment. A l l managers must

interface and interact with the many environments within their

department and within the enterprise i n which they operate. A l l

must also constantly respond to and interact with, a complex

environment external to the i r enterprise.

A successful manager is one who anticipates h is problems

and prepares himself to face them securely and i n good time. He

should have foresight, so t h a t he may prepare his organisation to

face the coming events. He gauges the strength or weakness of his

organisation, and appraises the new situation, to meet it, he works

out a s t ra tegy. This s t ra tegy makes demands on h is organisat ion 's

strength i n terms of the resources t h a t a r e at its command, whether

i n man, materials or money, the three ' M ' s of industry.

6.2. Functions of the Entrepreneur

In classifying the functions of the entrepreneur one must

clearly ascertain those entrepreneurial functions such a s planning,

organising , staff ing , co-ordination, controlling, financing and

marketing. These differ from one enterprise to another but the

basic t d ~ s of the entreprenehr, a s a manager a r e common.

6.2.1 Planninq

Planning involves selecting objectives and strategies.

policies, programmes and procedure for achieving them, either for

the entire enterpr ise or for only organized pa r t thereof. In vi l lage

industries planning is related to decision making, since it involves

selecting from among alternatives. Entrepreneur of any vi l lage

industry h a s to take decision on policies relating to authority.

prices and competition, programmes of production, management.

succession and in te rna l audi t and procedures requiring specific

methods of handling paper , products and people.

Organising of a vi l lage indus t ry is a tedious s task for the

entrepreneur. It involves the establishment of a n intentional

structure of goals through determination of the activit ies required

to achieve the goals of a n enterprise and each pa r t of it, the

grouping of these activit ies, the assignment of such groups of

activities to a manager, the delegation of authority to ca r ry them

out and provision for coordination of authority and informational

relationships horizontally and ver t ical ly of the organisation

structure. The organisation structure of village industr ies is

ofcourse, not a n end i n i tself , but a tool for accomplishing

objectives.

The management of vil lage industr ies is carried out under

different organisational set ups such a s co-operative societies,

charitable societies and proprietorship and direct production centres

under Khadi and Village Industries Board or Khadi and Village

Industries Commission.

i) Co-operative Society

A co-operative society should consist of at least 25 members

inclusive of president and secretary. The members should work in

the same field and belong to different families. The society should

have possessions not less than 10% of the required amount a s asset.

This can either be in the form of share capital loan or land. The ,

share capital loan can be collected by obtaining a fixed amount

from each member of the society as contribution. This amount can

be utilised either for purchase of land or as bank deposit for

security.

ii) Charitable Society

The charitable society consists of atleast seven members

belonging t o different families. The Board insist that a t least the

members in the administrative section of the unit should have

life-long membership in the society. In this case also, the asset

required for financial assistance is 10% of the required amount.

This can be produced either as land or a s bank deposit.

iii) Proprietorship

In the case of units owned by individuals or proprietorship,

the uni t can ava i l of the financial assistance from Khadi and

Village Industries Board on the security of two persons i n addition

to h i s own security. The owner and one of the securities should

possess a n asset not less than 1.5 times of the required amount

from Khadi and Village Industries Board. I n proprietorship

concerns, the entrepreneur himself is the owner of the unit .

The sample units selected for the study constitute 25

co-operative societies, 16 charitable societies and 10 proprietory

ownership. Figure 6.2 shows the organisational distribution of

selected vil lage industr ia l units i n the present study.

6.2.3 Staffing

Staffing involves manning and keeping manned, the

positions provided for by the organisation structure. It thus

necessitates defining manpower requirements for the job to be done,

and it includes inventoring, apprais ing and selecting candidates

for positions, compensating and t ra in ing or otherwise developing

both candidature and incumbents to accomplish the i r task

effectively. I n vil lage industries staffing is an important task for

the entrepreneur, for the success of the industry depends to a

great extent on the organisational structure.

Co-ordination is the essence of managership, for the

achievement of harmony of individual efforts towards the

Charitable Societies

m Proprietorship Units

Co-operative Societies

FIGURE 6.2

Organisational Distribution of Vfflage Industrial Units

accomplishment of group goals is the purpose of management. I n

vFllage industries the best w-ordination occurs when individuals

see how the i r jobs contribute to the dominant goals of the

enterprise. This implies knowledge and understanding of enterprise

objectives, not just on the pa r t of the entrepreneur a t the top, but

by every one throughout the enterprise.

6.2.5 Controllinq

Control is exercised by introducing a system of records at

various stages of production - r ight from the time the stocks a r e

held i n storage, through different stages of manufacture, t i l l the

finished goods a r e dispersed. With proper maintenance of these

records, the handicap a t any s tage can be eas i ly identified and

remedial measures taken i n sufficiently good time well before

matters get out of hand. So the entrepreneurs of vi l lage industries

have added responsibility for exercising s t r ic t control over the

enterprise a s any lapse a t the i r end will ru in the enterprise.

6.2.6 Financinq

The manager works out the amount of capi ta l he needs to

implement a project o r to carry out a production programme. After

he has worked out th i s programme. i t is essent ial for him to ensure

that the inflow and outflow of money takasplace i n accordance wi th

the plan on the budget. Financing is a grea t problem of vil lage

industries a s the entrepreneur ' f inds i t very difficult to ra i se the

required capi ta l . Banks and other financial insti tutions in the

country a r e generally reluctant to advance money for vil lage

industries due to several reasons including the r isk involved in

providing unsecured loans to the entrepreneur, whose employment

capacity is very limited.

A case w a r noticed where the entrepreneur had to confront

with the problem of financial cr is is during the establishment of the

industry. This par t icu lar entrepreneur is a gentleman having 32

years. Though he is a graduate i n science, lack of employment

opportunities i n other sectors motivated him to establish a vil lage . indus t r ia l uni t a s a means of self-employment. Thus he decided to

establish a non-edible oil and soap unit . For tha t he required

Rs.40,000/- . a t the in i t i a l stage. H i s parents a r e agr icu l tura l

labourers and they were not in a position to provide him with

f inancial support. He got Rs.10,000/- by disposing of h i s family

share. From KVIB he received only ~s.15,000/- and for the

remaining Rs.15,000/- h e sought the help of the Bank. But as he

was not able t o provide enough security required by the bank, they

were reluctant to provide him with loan. Therefore h e borrowed

money from a money lender a t high interest and established the

soap unit. However a t present a s informed by the entrepreneur the

profit from th is par t icu lar unit is not sufficient to remit the

interest of the loan he h a s taker. from the money lender and

therefore there is a possibility for the winding up of the unit i n

due course.

The cap i t a l investment of the sample uni ts varied from

18,000 rupees to 2 l akh rupees. Table 6.1. categories the entrepre-

neurs on the b a s i s of cap i ta l invested i n vi l lage industry.

Table - 6.1.

Categorisation of Entrepreneurs on t h e Basis of Capital Invested

Capital invested i n Rupees

--

Number of % entrepreneurs

Less t h a n 50,000

50,000 - 1.00.000 1.00.000 - 1.50.000 1.50.000 - 2,00,000

Total 5 1 100.0

In 36 uni ts sha re capi ta l loan forms the main source of

capi ta l while i n res t of the cases individual investment and

monetory assistance extended by Khadi and Village Industries Board

forms the source of cap i t a l invested.

Marketing is not a n item tha t can be excluded from

planning and control. The market for a product is a n external

element which cannot, i n general , be controlled by an entrepreneur

in vil lage industr ies , who has constantly to study i t and adjust

his production to su i t i t .

A s f a r a s the vi l lage industr ies a r e concerned marketing is

a grave problem. Due to the lack of marketing facil i t ies and

demand, the p i l ing up of finished goods adversely affect the

working of the indus t ry , which ultimately leads to its winding up.

It i s observed t h a t 63 percent of the uni ts a r e depending on local

markets for sel l ing their products. The rest of them have no local

markets. Some of these entrepreneurs find buyers for the ent i re or

par t of their product a t their doorstep. The entrepreneurs of

pottery uni ts , f ibre weaving uni ts , cane and bamboo uni ts ,

curry-powder making units etc. belong to th i s group.

I n some pottery units workers themselves car ry the cooking

pots and flower pots to the neighbouring town and vi l lages to se l l

their products. I n a fibre weaving uni t , managed by a woman,

she herself had to c a r r y the goods produced i n the unit t o the town

to sell them. Her main products a r e tab le mats, fancy bags and

decorative items for the show-case. The poor v i l lagers were not

much interested i n these items. Therefore she h a s to find the

market for her a r t ic les outside the vil lage. Otherwise the pi l ing

up of the produced goods w i l l put a n end to fur ther production

which ultimately will l ead to the winding up of the uni t . Though

a t the in i t i a l s tage she sought the help of a middle man for

marketing, h i s demand for high commission forced her to cut off

this sort of ass is tance in marketing. Thereafter she herself car ry

the goods to the market to se l l them.

17 entrepreneurs informed tha t they a r e avai l ing of the help

of Khadi and Village Industr ies Board for the marketing of their

products. These products comprise khadi , leather goods, soaps,

agarba th i , honey and cer ta in fancy items made up of f ibre and

wood. However, 55 percent of the entrepreneurs informed tha t they

a r e capable of selling a l l the products somehow. While others find

it difficult to sel l their products. It is interesting to note tha t

33% of the units a r e sell ing their products i n other s ta tes l ike

Madras, Bombay, Calcutta, etc. These products a r e fibre-mats,

bags, honey, leather ar t ic les etc.

6.3. Profile of the Entrepreneurs

One of the objectives of the present study is a n analysis of

the entrepreneurship, organisation and programmes concerned with

the promotion and development of vil lage industries i n Kerala.

Therefore, the scope of the study consists of the survey of the

indus t r ia l uni ts i n order t o evaluate the effectiveness and relevance

of Government policies and programmes vis-a-vis the needs of

entrepreneurship i n vil lage industry and to build an entrepreneurs

profile and analyse the characterist ics of vil lage industr ia l uni ts .

The typical entrepreneur of the vil lage industry i n Kerala

is of local origin and his venture into entrepreneurship steps

primarily from a desire for acquisition of monetary benefits. He is

encouraged in this venture by his family and friends. Rising

demand for the product, coupled with high returns and future

prospects a r e the most significant factors for his choice of the

product. To him one of the major considerations for the setting up

of the unit i n a par t icular locali ty is t h e avai labi l i ty of l and and

labour.

The majority of the entrepreneurs under the study a r e in

their middle age. The average age of a n entrepreneur i n vil lage

industry is noticed a s 38.5 years . Table 6.2 shows the age-wise

distribution of entrepreneurs i n vi l lage industries.

Table - 6.2.

Age-wise Distribution of Entrpreneurs in

Village Industr ies .

Age Group Number of % entrepreneurs

Total 51 100.0

A l l the entrepreneurs under the sample uni ts a re l i terate

and the majority (51 %) are having higher educational qualifications.

Six of them a r e degree holders and 3 of them in khadi units

attended 'Karyakartha ' course conducted by Khadi and Village

Industries Board. Table 6.3. categorieses the entrepreneurs on the

basis of their educational level.

Table - 6.3.

Educational Level of Entrepreneurs in Village Industries

Educational level

Number of entrepreneurs

Primary

High School

College

Total

Christians constitute the majority i n the sample population

of entrepreneurs. Though Christians constitute 20.6 percent of

Kerala population, the share of Christian entrepreneurs i n vil lage

industries is 53 percent. Rest of them a r e Hindus. One of the

possible reasons for higher Christian representation is their

settlement pat tern. In Kottayam district the Christians a r e more

concentrated and 96 percent of the entrepreneurs i n Kottayam

district a re Christians. Religion-wise distribution of entrepreneurs

in vil lage industr ies a r e presented i n Table - 6.4.

Table - 6.4.

Religion-wise Distribution of Entrepreneurs in Village Industries

Religion Number of % entrepreneurs

Hindu

Christians

Total 51 100.0

Both male and female entrepreneurs represented the sample,

though the female representation is only 3 3 . 3 percent. Table - 6.5.

presents the gender-wise distribution of entrepreneurs i n village

industries.

Table - 6.5

Gender-wise Distribution of Entrepreneurs in Village Industries

Gender Number of entrepreneurs

Male 34 66.7

Female 17 3 3 . 3

Total 5 1 100 .O

6.4. Profile of the Units Selected

By and l a rge 49 percent of the uni ts came into existence

from 1980 - 90. This is because during th i s period the Government

has implemented several employment programmes to reduce the

problem of unemployment i n the s ta te by absorbing r u r a l masses

into khadi and vi l lage industries sector. Table - 6.6. categories

the vil lage indus t r i a l uni ts on the bas i s of their s ta r t ing period.

Table - 6.6.

Categorisation of Village Industr ia l U n i t s on the Basis of

Starting Period

Starting

period

Number of %

units

Total

Regarding the ownership of land and building of the units,

it is observed t h a t out of 51 units 43 a r e functioning i n the i r own

building. A l l the co-operative societies, 13 chari table societies and

5 proprietorship uni ts have their own building. Rest of the units

a r e functioning in rented buildings. The tab le - 6.7. distributes

the units on the bas i s of ownership of land and bui lding.

Each Symbol Represents 10 percent workers.

FIGURE 6.3

Gender-wise Distribution of Total Workers in the Selected Village Industrial Units

workers under selected vil lage indus t r ia l units. I n ancient times,

women were engaged i n the textile industry, specially i n spinning,

though they lost t h i s occupation l a t e r . However, af ter the rev iva l

of khadi and vi l lage industr ies , women aga in entered i n th i s f ie ld .

Though they a r e working in every field of khadi , it is the spinning

section t h a t they have monopolised. About 90 percent of t h i s

section is i n their hands. Apart from spinning, other vi l lage

industries i n which women a r e largely employed a r e cottage match

industry. f ib re weaving, non-edible oil , seed collection and

processing, hand made paper, pottery, food processing and

preservation etc .

There is a generally held view tha t the productivity in

vil lage industr ies , by and la rge , is not sat isfactory. Therefore,

all over the Five Year Plans and Indus t r ia l Policy Statements have

stressed the need to accentuate the development of vil lage

industries through the upgradation of technology, thereby to

improve the qual i ty of products. But a serious question is, to

what extent machinery can be made uss of i n th i s sector?

According to Gandhiji, machinery has its place, it h a s come to

stay. but it must not be allowed to displace necessary human

labour. H i s opinion on the use of machinery i n v i l lage industr ies

is more clear i n h is statement tha t . "I would welcome every impro-

vement i n the cottage machine. but I know t h a t it is criminal to

displace hand labour by the introduction of power-driven spindles

unless one is, a t the same time, ready to give millions of farmers

some other occupation i n their home". 2

I n contrast to the Gandhian view of mechanisation it is

found tha t low levels of technology, result ing i n poor productivity

and inadequate re turns continue to character ise the vi l lage

industries. I n the present study with a view to find out the i r

views on the use of machinery and the extent to which machinery

a re in use currently, a question w a s asked to both the

entrepreneurs and workers i n village industr ies . It i s noticed t h a t

two types of machinery a r e used i n vi l lage industr ies , viz., hand

driven and power dr iven. It is found t h a t 80 percent of the uni t s

a re using hand driven machines, while 20 percent a r e using power

driven machines i n the i r production process. Nearly 100 percent of

the units use machine power for processing of cereals and pulses.

Other a reas of vi l lage industries where machines a r e employed

include pulp making i n paper industry, mixing of chemicals i n

match industry, grinding and powdering of spices i n vegetable

processing uni ts and aluminium industry.

However the use of machinery depends upon two factors, the

applicability of par t icu lar machinery in a par t icu lar industry and

also on the financial position of the entrepreneur. It is observed

during the field study t h a t the majority of the entrepreneurs prefer

2. M.K. Gandhi, Young India , 5.1.1923.

to use modern machinery i n production, a s they feel t ha t i t would

enrich the quali ty of the products and hence increase the total

turnover and income. But factors l ike f inancial constraints,

non-availability of proper machinery and also taboos and beliefs to

a certain extent res t ra in the t radi t ional workers from the use of

machinery.

What is gathered from the study is t h a t , given a n

opportunity t o mechanise the production process i n vi l lage

industries without losing the employment opportunities, it w i l l

certainly help to improve the present stagnation i n the development . of vi l lage industries. A s Gandhiji h a s r igh t ly remarked

mechanisation should be introduced in such a way tha t "dead

machinery must not be pitted aga ins t the millions of l iv ing

machines represented by the vi l lagers , scattered i n the seven

hundred thousand vil lages of India . Machinery to be well used

h a s to help and ease human effort". 3

Considering the economic conditions in vi l lage industr ies

under the selected sample, i t is observed tha t 50 percent of the

units a r e profit making. It is found t h a t th i s profit is mainly

used for the development of in f ras t ruc tura l facil i t ies and also for

giving welfare facil i t ies to the workers. 39 percent of the uni ts

a r e sick units. Lack of necessary finance, non avai labi l i ty of raw

3. M . K . Gandhi, Harijan, 14.9.1935.

material and marketing constraints a r e the factors which lead to

indus t r ia l sickness of vi l lage industries. Other factors which

adversely affect the development of vi l lage industries a r e lack of

skffled labourers and proper management.

6.5 Management of Village Industries - A Gandhian' Outlook

A s one of the objectives of the present study is to examine

the impact of Gandhian ideas i n the functioning of vil lage

industr ies , it is worthwhile to examine the views of Mahatma

Gandhi on the management of vil lage industries. Gandhian view on

management is based on h i s well-known principle of Trusteeship.

Entrepreneurs a r e the t rustees of the factors of production, l and ,

labour, cap i ta l and organisation. It is their obligation to the

society t h a t the i r wealth, sk i l l and talent a r e utilised for the

betterment of their fellow man. Workers a r e the essential and

useful elements i n production. they should be adequately

compensated for their services. Management of vil lage industr ies

a r e to be organised a s far a s possible on co-operative basis giving

adequate representation to entrepreneurs, workers and a l l others

concerned with the vil lage industry system. Both entrepreneurs and

workers should work together for the success of village industr ies

with a view to increase production and productivity in vi l lage

industries. In its own interest , management will, therefore, have

to be persuaded to share with labour , responsibility and decision

making in both work-related and interest-related issues.

I n short , Gandhiji 's trusteeship a i m s a t the removal of the

conventional c lass distinctions, alienation and other tensions by

introducing the ideal of the common ownership of a l l the par tners

i n a n indus t r ia l undertaking. This means tha t the existing

structure of ownership, and decision making needs to be

changed, so a s to be conducive to the fulfilment of the following

three purposes of work, viz.

a. Production of goods and services.

b. Chance for workers to develop the i r sk i l l , potentiali t ies and to

share responsibil i ty.

c. Ability to overcome class interests when both workers and

capi ta l is ts go aga ins t the interest of the society a s a whole.