LOCATION OF AN ENTERPRISE AND STEPS IN SETTING SSI

LOCATION OF AN ENTERPRISE AND STEPS IN SETTING SSI

“The Choice of the place (location) where an industrial undertaking (unit) started has a very great influence on productivity, efficiency and profitability of the enterprise”.

INTRODUCTION

The study of industrial locations forms an important branch of economic geography which has engaged the attention of both economists and geographers. Economists judge from the point of view of profit, productivity and growth.

NEED FOR ENTERPRISE LOCATION

1. When a new enterprise is to be established.

2. In the case of established enterprise, the need for enterprise location arises when expansion, decentralization and diversification is undertaken to meet the increased demand for its products.

3. When a new branch or branches are to be opened for increasing the volume of productions or distribution or both.

4. When an undesirable location is to be abandoned.

5. Whenever the existing factory is not in a position to obtain renewal of lease.

6. When the tendency of shifting the market , depletion of raw materials, changes in transportation facilities, new processes requiring a different location are observed in a factory.

IMPORTANCE OF ENTERPRISE LOCATION

• The selection of an enterprise location enables the enterprise to operate smoothly, efficiently, and with the minimum cost.

• The location of an enterprise has a great effect on the success or failure of that plant.

• While selecting a site, the owner must consider technical, commercial, and financial aspects.

• Location is also an important factor determining the ultimate success or failure.

STEPS IN ENTERPRISE LOCATION

1. Selection of the region.2. Selection of the locality or

community.3. Selection of the exact site.4. Selection of the optimum

site.

WEBER’S THEORY OF INDUSTRIAL LOCATION

The Weber’s theory of industrial location is based on the following basic assumptions:

The materials can be Ubiquitous(being or seeming to be everywhere at the same time) localized materials weight – losing or gross materials pure materials

The situation and size of places of consumption are given ,with the market comprising a number of separate points.

Fixed labour locations ,labour is immobile

Weber’s theory divides the factors influencing industrial location

into the following two:

i. Transport and labour cost-affecting industrial location.

ii. Agglomerative(gathering together) or deglomerative

(away from the areas of concentration) forces-

responsible for redistribution for industries.

The limitations of the Weber's theory:1. The theory is based on the three wrong assumption about labour supply.

2. Transport cost depend on the mode of transport,nature of goods etc.

3. Location and size of markets may vary with change in economy.

4. Non economic factors also exert important influence on industrial

location.

5. The theory ignores the role of capital and entrepreneurship in

industrialization.

6. The classification of materials not proper.

SELECTING GENERAL AREA

The important factors consider in the selection of a site:

• availability of raw materials

• Availability of skilled and unskilled labour

• Nearness to the source of motive power

• Nearness to market

• Availability of transport facilities

• Nuisance problems

• Suitability of climate

The other important features to be considered are:

• Topography –flat ,cheap or marshy land ,sea ,lake or river

location ,vegetation ,sea level

• Soil conditions –corrosion to underground pipes drianage

requirement, quality and cost of fill required.

• Water supply –quality of water is important.

• Waste disposal-treatment of effluents prior to discharge to the

main stream.

• Position of plant to local transport facilities-nearness to railway

or highway.

• Availability of homes for workers

• Local legislations and municipal laws including sanitation

air& steam pollution and others.

• Living conditions for labour and management –

climate ,recreational facilities ,quality of schools etc.

• Community directives ,attitude towards manufacturing

activities and outside investors.

• Tax concessions and other incentives applicable to

area/site.

Factors taken into consideration in the selection of site:

o Soil test indicating type and load bearing capacity of the soil

at various depths ,water table ,terrain ,etc.

o Extent of site development required;

o Climatic

conditions ,namely ,temperature ,rainfall ,humidity ,etc.;

o Presence of mineral deposits;

o Proneness to natural &structural disturbances;

o Leasehold or freehold nature of land

,price/compensation ,mode of acquisition ,etc.

ECONOMIC SIZE

Each project , there exists a certain minimum

economic size below which the project will not be a

viable .

It may so happen that in the case of some acute

scarcity products ,a project even below the

economic size may appear to be viable in the

immediate future ,

• If a long-term view is taken if may not be so,

•

• This size various from industry to industry , depending

upon the nature of product to be manufactured ,

complexity of the manufacturing process, factory of

production , particularly capital & labor .

• This concept is also linked with inflationary pressure

on the unit cost of investment and technology

adopting .

PROCESSING UNIT

In a continuous processing unit , minimum size of of a plants determined by technology

1. size of the plant 2. Available in a jobbing unit3. Product mix 4. Project size5. availability of skilled labor6. Cost of infrastructural inputs 7. Quantum of bought-out finished

semi-finished components .

• The scale of a project is,

• Examined keeping in view technological efficiency,

• Cost of production ,

• Size of the targeted market &capital cost .

• these factors may, however, be conflicting

and .:. While deciding on the scale of operation,

certain compromises may have to be made .

• When the excepted demand for the

adequate

to justify the size of the project.

• it would be necessary to compromise on

the technology efficient criteria and choose

a lower scale of operation sacrificing

thereby part of technological efficient .

PROJECT PHASING

Various alternatives are often evaluated for

project phasing in team of either the size of

the plant or the extent of instigation .

When eventually the market develops, the

project size can be increased appropriately

by either backward or forward integration .

Factors witch have an important bearing on

the economic size of the project are:

• the cost structure and availability of infrastructure

facilities .

Cont…

• With this ,it might often be necessary to

compromise with project smaller, with this

shorter gestation period vis-à-vis large capacity

plants involving huge investment and long

gestation periods.

• All economic size case’s are analyzed carefully

by the appraising financial institution and its

ensured neither the project is too smaller nor

too ambitious .

Cont. . .

• If a project is found to uneconomic size, the

barrower advised at the initial stage to modify

his scheme and make it economic viable and

acceptable proposition.

• It may be mentioned here that the institutions

also ensure that the licensed capacity of a

plant expressed in terms of physical quantities

and not in terms of the central government .

SELECTION OF MOST ECONOMIC SITE

According to Kimball and Kimball ,

“most advantageous location is that at which the

cost of gathering material and fabrication it plus

the cost of distributing the finished product to the

customer will be a minimum .”

EX :- SELECTION OF MOST ECONOMIC SITE

A,B- SOURDE OF SUPPLT OF MATERIAL

C-MARKET PLACE D-SITE

SELECTION OF ACTUAL SITE

SITE A SITE B SITE C

FACTORS INFLUENCING THE LOCATION OF PROJECT

Two types of measures that may be advocated or

adopted to influence the location of project .

1. The first set of measures refers to the

various inducements extended to the industrialists

to set up their projects in certain specified areas.

2. The second set measures imposes

restrictions on the location of project in certain

congested areas.

Cont. . .

• The resources available for industrial projects , for instance ,

were limited .

• If more resource are invested in projects in one region , less

resources will be available for investigation of resource in

projects in some regions of the country .

• If a policy of industrial location with a view to achieving

decentralization and a dispersal is accepted on economic,

social, political& environmental grounds, there is a strong

case for setting up a machinery for the administration of the

policy.

• The machinery should exist at central ,regional and local level

to deal with the problem of regional or local industrial

development

Cont…

• The objective of state incentive to provide

assistance and facilities to allure and motivate

techno-entrepreneurs, intrapreneurs and first

generation entrepreneurs to locate their venture

in their region .

• The nature of assistance ,however, varies from

state to state .

STATE INCENTIVESIncentives offered Small-scale industries Medium & large scale

industries

1) Feasibility study

subsidy

Subsidy to a ceiling of

75% of the cost of

operating the report up

to a maximum of Rs

5,000

Loan of 75% of the cost

of preparing feasibility

report upto a maximum

of Rs50,000

2) Investment subsidy 10% of value of fixed

assets, subject to a

ceiling of Rs5,00,000

10% of the value of fixed

assets subject to a

ceiling of Rs 10,00,000

3) Development loan Overall ceiling of 25% of

the value of fixed assets

For zone II,10% of the

value fixed assets to a

maximum of

Rs50,00,000 & III &

IV,15% of the value of

fixed assets, subject to a

maximum of

Rs50,00,000

Cont…

4) Working capital loan

Interest-free loan offered

, subject to a ceiling of

25% of the value of fixed

assets or t he

development loan taken

which ever is less

Interest-free

loan ,subject to a

maximum of Rs50,00,000,

5) Procurement of

know- how

It shall be reimbursed in

full, subject to maximum

of Rs 25,000

50% of fee paid by new

units for procurement of

know-how shall be

subsidized upto a ceiling

ofRs1,00,000

6) Stamp duty

exemption and reduction

in registration fee

Exemption on a stamp

duty for execution

agreement with KSFC.

There is also reduction

fee of Re.1 per Rs1,00 for

registering the

agreement deeds .

Same as in the case of

small –scale industry

LOCATION POLICY

• Location policy has been significantly amended .

• in location other than cities of more than one

million population, there is no requirement of

obligation industrial licensing .

• In respect of cities with population greater than

one million ,industries other printing , may be

located outside25Kms .

• Of periphery of urban areas, except if they are

located in designated industrial area, prior

to25.7.1991.

• Zoning and land use regulation and environmental

legislation continuous to regulate industrial

location.

STEPS FOR STARTING A SSI

INTRODUCTION

• The development of small-scale industries has been one of the most significant and characteristics features of industrial development in India.

• To create broader employment opportunity

• Assist entrepreneur skill and technology

• And ensure to better use of scares financial resources and appropriate technology.

BASIC OBJECTIVES

The basic objectives underlying the development of small and medium scale industries are the increase in the supply of manufactured goods. The promotion of capital formation, the development indigenous entrepreneurial talents and skills and the creation of broader employment opportunities.

STEPS TO SET A SSI

1. Analyze yourself and your objectives2. Date with yourself for newer ideas3. Consult publication and agencies 4. Discuss with all around you and with SISI &DI

office5. Date with yourself for a decision 6. Choose a line 7. Decide on form of

ownership[sole-property/partnership/company(private/public)/co-operative].

8. Decide whether to purchase a going concern or to start a new one

9. Obtain the project report from SISI or elsewhere or prepare it yourself

10. Decide on location and site 11. Arrange the work shed with facilities(preferably on

rent)12. Make sure what laws will particularly affect you 13. Obtain clearance from central state & local

authorities and SSI REGN.no .14. Plan finance15. Plan source of machinery16. Place order of machinery(on hire purchase)17. Apply for materials(if imported or controlled)18. Plan buying19. Install machinery 20. Procure materials21. Recruit personnel22. Trial run

23. Decide on pricing policy24. Organize marketing 25. Plan out record –keeping 26. Produce27. Sell28. Keep up-to-date29. Plough back profits30. Diversification31. Modernization32. Compete with others33. Grow bigger34. Ancillary development.

FORMALITIES FOR SETTING UP OF A SMALL BUSINESS ENTERPRISE

04/08/23

38

K.SENTHILKUMAR

MBA ASS

T PROF

PACET

1.Selection of a projecta.Product or service selectionb.Location Selectionc.Project feasibility studyd.Business plan preparatione.Project Profile

3. Obtain SSI registration

4. Obtain Clearances from departments as

applicable

2.Decide on the constitution

04/0

8/2

33

9

5.Arrange for Land

6.Arrange for plant &

machinery

7.Arrange for Infrastructure

8.Prepare project Report

9.Apply and obtain finance

10. a. Proceed to implement b. Obtain the final clearance

SELECTION OF A SMALL SCALE INDUSTRY Various stages for setting up small-scale unit (1) Decision to be self-employment (2) Identification of opportunities (a) Idea generation (b) Screening product/service idea (c) Concept testing (3) Selection of the line of business

PROCESS OF SETTING UP A SMALL-SCALE INDUSTRY

For Chart refer Vasant Desai P.No: 665

Business analysis Technical analysis

STARTING A SMALL SCALE INDUSTRY

Project objectives P.No: 668 (Vasant Desai) Process of starting a small enterprise P.No:

668

NOTES:

Vasant Desai P.No: P.No: (650-682)