Cl-1§Pf1'iER - _VI%I*

PROBLEMS O§TI§DQ§QBIAL UNIT§

: 199 3

CHAPTER f- V_LI..

PROBLEMS OP INDUSTRIAL UNITS

In this chapter problems of units inindustrial estates of Kerala are analysed in a detailedmanner. The industrial units face several problems.The major among them relate to supply of raw materials,power, marketing, labour, finance, technical and mana­gerial guidance and state policy. All these problemsin one way or other affect the smooth working of unitsin the estates. During the course of the survey entre­preneurs were asked to specify the problems by majorheads. An estate-wise account of problems as revealedby the entrepreneurs are presented in table-7,1,

1-40

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Table_§state-wige

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est HillPalayad

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Note:

: 201 :

Table-7,1 gives an account of the problemsfaced by the units in the estates. Taking an over-view,it can be said that marketing occupies the top mostplace among the problems faced by the units in theestates of Kerala. Of the 118 units surveyed 84 units(7l.l9%) face problems relating to marketing. Nextto marketing, raw materials, power and finance arevexing the entrepreneurs most. Nearly 39 per centof the units (46 out of 118) are facing problems relat­ing to raw materials. The percentage of units affectedby problems like power and finance are 38.13 and 34.75respectively. The number of units facing labour problemsis 31 (26.27%). The number of units having problems onaccount of lack. of managerial guidance is 20 (16.78%).The number of units affected by state policy is only8 (6.78%) .

Only 34 units (28.8l%) are free from majormarketing problems. There is only one estate (Mayilthara)which is free from marketing problems. All the unitsin Ettumanoor, Palluruthy and Vazhakulam estates are

: 202 :

affected by problems relating to marketing. There isno estate where the proportion of units not having somemarketing problems is greater than the proportion ofunits facing marketing problem.

Despite 39 per cent of units facing problemsrelating to raw materials, on the whole, fewer units inKarunagapally, Umayanalloor, Kollakadavu, Changanacherry.

Palluruthy, Vazhakulam, Kalletumkara, Ollur, Olavakode,

Karakkad, Manjeri, west Hill and Palayad reported thisproblem. Only in the estate of Ettumanoor, the units(3 out of 5) facing the problem outnumber those withoutit. In the estates of Pappanamcode and Kasaragode, 50per cent of the units face this problem. In otherwords 4 out of 8 units and 2 out of 4 units respectivelyin the two estates face this problem. The only oneworking unit in Mayilthara estate is also facing theproblem of raw materials.

The proportion of units facing the problemof power is comparatively low in all the estates. Butin the estates of Kalletumkara and Vazhakulam 4 out of

7 units (57.1%) and 2 out of 4 units (50%) respectivelyare facing this problem.

$203:

Though nearly 35 per cent of the unitsencounter problems relating to finance, in majorityof the estates, the proportion of the units facingthis problem is relatively negligible.

Compared with problems of marketing, raw

materials, power and finance, problems relating tolabour and technical and managerial guidance are oflesser magnitude. But in comparison with the problemof technical and managerial guidance, the problem oflabour is of greater importance as 26.27 per cent ofthe units (31 out of 118) face it. The percentage ofunits that felt the need for adequate technical andmanagerial guidance is only 16.95 (20 out of 118).

Except in Mayilthara estate some units inall the estates are affected by labour problems. Fiveunits each from Ollur and west Hill estates, 2 unitseach from Pappanamcode, Ettumanoor, Changancherry,

Kalletumkara, Karakkad, Palayad and Kasaragode estatesare among those troubled by labour issues. One uniteach from other estates are worried on account of thisproblem.

: 204 :

The estates of Karunagapally, Umayanalloor,

Mayilthara, Palluruthy, Vazhakulam, Olavakode, Karakkad.

and Kasaragode are not affected by problems relatingto technical and managerial guidance. Pour units eachfrom Pappanamcode and west Hill estates, 3 units fromChanganacherry estate, 2 units each from Kalletumkaraand Mayilthara estates, one unit each from Kollakadavu,Ettumanoor and Palayad estates felt the need for bettertechnical and managerial guidance,

Among all problems, the problems on accountof state policy is of least magnitude since only 8units (6.78%) spread over 5 estates of Karunagapally,Umayanalloor, Kollakadavu, Ettumanoor and Changanacherry

are reported to have been suffering from adverse statepolicy.

Table-7.2 shows industry-wise analysis ofthe problems.

Of the 84 units facing marketing problem39 units (46.43%) are engineering and metal based units.Nine (1O.7l%) plastic units, 7 (8.3%) chemical units,23 (27.38%) rubber based units, 5 (5.95%) paper and

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Rubber based

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problem (NFP)

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facing

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problem (PP)

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units facing

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Note:

: 206 :

wood products units and one (1.19%) that comes undermiscellaneous unit. In other words 76.47 per cent ofthe engineering and metal based units, 75 per cent ofplastic units, 50 per cent of chemical units, 85.1 percent of rubber based units, 38.46 per cent of the paperand wood based units and 100 per cent of the miscele~laneous unit encounter problems relating to marketing.

Excepting plastic based units and miscellaneousunit all other industrial units are facing problemsrelating to raw materials. Out of the 46 units facingthe problem 22 (47.83%) are engineering and metalbased units, 5 (lO.87%) chemical units, 8 (l7.39%) rubberbased units and 11 (23.9l%) Paper and wood units. Inother words 43.14 per cent the engineering and metalbased units, 35.71 per cent of the chemical based units,29.63 per cent of rubber based units and 84.62 per centof paper and wood based units face this problem.

All industry groups excepting miscellaneousgroup face problems relating to power. Of the 73 unitsnot facing this problem 21 (28.77%) are engineering andmetal based units, 12 (l6.44%) Plastic based units,

: 207 :

11 (15.06%) chemical based units, 20 (27.40%) rubber

based units, 8 (l0.96%) paper and wood based unitsand 1 (1.37%) miscellaneous unit. In other words41.18 per cent of engineering and metal based units,21.43 per cent of chemical based units, 25.93 per centof rubber based units, 38.46 per cent of paper andwood based units face this problem.

There are no industry groups where all unitsare facing the problem of finance excepting the miscel­laneous group. Of the 41 units which are affected byproblems relating to finance, 46.34 per cent are engi­neering and metal based units, 2.44 per cent plastic

based units, 7.32 per cent chemical based units, 17.07per cent rubber based units and 24.39 per cent paperand wood based units. In other words 37.25 per centengineering and metal based units, 8.33 per cent ofplastic based units, 21.43 per cent chemical basedunits, 25.93 per cent of rubber based units, 76.92per cent of paper and wood based units and 100 percent of the miscellaneous unit encounter the problemof finance.

:208:

Ten out of 51 units (l9.61%) are affectedby problems relating to both labour and technical andmanagerial guidance. The percentage of plastic basedunits facing the problem of labour is 25 and that oftechnical and managerial guidance 16.67 per cent.Of these two problems chemical based units and paper

and wood based units face only the problem relatingto labour. In percentage terms it is 14.29 and 76.92respectively. Regarding rubber based units, the pro­blem relating to technical and managerial guidanceis of greater magnitude than labour problem as 8units out of 27 (30%) felt the need for better tech­nical and managerial guidance. But only 6 units(nearly 22.22%) reported labour problems. In contrastto all other industry groups, the miscellaneous groupis free from these two problems.

The 8 units that encounter problems onaccount of state policy are rubber based units.Nearly 30 per cent of the rubber based units areaffected by adverse state policy.

: 209 :

In short no estate or no industry group is freefrom all the problems. All estates and industry groupsare affected by one or the other problem mentioned above..But it is seen that the problems relating to marketinghave much impact on the growth of the units in the estatesThe problems of raw materials, power and finance also havelargely affected the smooth and successful working of theunits in the estates.

In the next few pages the major problems arestudied in detail, starting with the problem of market­ing followed by problems of raw materials, power, financeand ending with other problems.

7.1 §arketingProblem§

The main reason for incurring loss by theunits at the initial period was lack of adequate market.Many entrep?eneUIS with technical know-how and previousexperience in the technical field came forward and startedunits in the estates. But due to non-availability offacilities to market their products, many units incurredlosses. Table-7.3 presents the major problems faced bythe units in the area of marketing.

\F==“=="= --------------- -f M 1T N f E t P t WA 0. 0 n repre- ’ ercen -5

: 210 :

Taibles 7-§NatuI¢i°§~Pf@b1@mSFa¢edtbX,U"it§i@§h§rAfe§

9fMa5k3tin9

i 10-.iiwiliiiiiiiioiiiiiirniiliiiiiill-Qioijiaiijjiiiiiijixno-1-1-1111101-Z1lIlI—-1—-|-vIIQ--l1iqu—11ii—­

ii‘ Difficulty E neurs for Whom it. age M‘ ' l is Difficult J i; '; 2' Q if iT' 1, _ ;’ ,_ L’ __‘* Hi? _ I7%; 1 Q -L_I 717 it I "L, ' L7 :e if -i

l

\ 1.“ Slackness in demandY 39 vi 46.43 1

, 3.» Low quality 15 ii 17.86 §1' “ 5: Tl2.“ Competition 2 23 27.38 *

l 4,; Other problems* p 7 8.33 jii¢_. iY¥iTi*liT"i¥1T’ 77’ f~T“TflSource: Survey Data

high cost of production,*IncludesLtransp0rt bottlenecks, labour problemsand credit sales.

Nearly 47 per cent (39 out of 84 units) of theunits are affected by the slackness in demand. It wasfound that most units carry production on the basis oforders collected. So there is no question of inventoryaccumulation. But any slackening of order results insudden decrease in production.

Twenty seven per cent of the units (23 out of84) are affected by competition from other units. Most

of the units are working as independent units, servinga competitive market. Nearly 18 per cent of the units

:211:

(15 out of 84) face problems of low quality of products.The low quality of the end product is often attributedeither to low quality raw materials or to inadequatemachinery. Other problems include high cost of production,transport bottlenecks, labour problems and credit sales.High cost of production is a general complaint. Entre­preneurs remarked that high cost of labour has adverselyaffected the extent of market, especially for unitshaving market outside the state. Sevenin out of 84units ('.8;.33%) have these types of problems.

Table-7.4 illustrates the specific marketingproblems of different industry groups.

Table-7.4 shows that no industry group isfree from marketing problems. Altogether 34 units (28.8l%)do not face problem of marketing. Of them 12 are engi­neering and metalic units, 3 plastic units, 7 chemicalunits, 4 rubber based units and 8 paper and wood basedunits. The respective proportion are 23.53 per cent(12 out of 51 units) 25 per cent (3 out of 12 units),50 per cent (7 out of 14 units), 14.81 per cent (4 outof 27 units) and 61.54 per cent (8 out of 13 units).Thus compared to other industry groups paper and woodbased units are in an advantageous position.

L_ -;l%_—" ' ’*—;— "'i:_ __ _ , , - ;A—___, _ -_"_i ’;"_r:*_ 7_ —.—_jr

:2l2:

TQPl€ 3 7o§

Ereblems Qf M§rketinQiEe§evnt@§sd at Pre%ent= lnduS§;x­Wise

i-lulu:-i—.-III--unununi1-—q1;:un-A-0-cu-1-cc-uil—-Jmauuclwiiilbinl-Iinv-II'I¥~I-iiI-'i~—~lO1iii€lli'lIPi1%Z}i1QPiI¢i1jAl|IlI~iD-h-I?_i1ijv-0-0QC1iiiiiOqi-innpifli-jiju-In-an-0-ad-tllfiiililluiiii' \ 1‘Sl.+ Name of the¢NOq Industry

‘ Slackness ? COmpeti—H Low Other Pro-v

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I

f ~in Demand Z tion W Qualityi blems i Totalp1 ‘ 2 I 3 v 4 ” 5 I 6 ‘ 7‘; é , I! if ‘@1. wEngineering and = J Z5 \* flmetal b§sed E 15 13 8 i 3 1i2. nPlastic based J 5 2 A 2 ­p § @ 1p3. {Chemical based y 4 2 i - I 1\ \14. tRubber based " ' 5 3 I 2 5

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I | ~ \ l' \ A \l5. Paper and wood =‘ I fi= §baSed 2 ~ 2 1 i1 B p l. \”i6.iiMiscellaneous -- ‘ 1 it - l - ‘

—t__‘l‘

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Far ; =“ are a *o**;* ea‘ i — e*" *=‘ “phyla” or "fie r"H 399

7

23

S

1‘ . __:7_ :f_ _ . ,_ _ ___.i‘Q §;Total ~ 39 u 23 L 15 7 ;I | ; 1Source: Survey Data.

7-2 Breblsms of ¥@n:Av@il§eili§¥ of Ra! fiafierials

Availability of raw materials in time, at areasonable rate, is an important factor which afifects thesmooth running of an industrial unit. Raw materials pro­blems might be due to scarcity of raw materials or its highprices or low quality. Some times there occur transportbottlenecks or some other difficulties. It is to be examinedwhich of these difficulties are worrying the entrepreneursmore. Table-7.5 reveals the problem of raw materials facedby the units at present.

W iii“,

84impac­-1.1

L ill

: 213 :

Table — 705

3£Q§i§@§i9§ Ra" M@t§£i§i§i§Q29HQtered atPresent

—-‘Q.- 1-Qgi_~-4-1--1-n-1-psi11111-j0IQu@0-un_.$0q|00I_ic1IIic¢iiwI-0I—~I—IIlI~_tO.-II-I-1Iiiiillli-_=~_@-‘Q,---_-1-i1.||.i1-mien-unu-0-u-clip.-naIu1nun—.4—iI1II~—IIv0—IIID¢fi-~—"IIII1nIlb1 1 T """""""" ""v1 4 No. of Entrepre- » 1ii’ Difficulty neurs for whom I p:r:ent— p'1 l It is Difficult 1 9 g1 i 2 61 3 “ 4»wiiT_MiW»=iil~_i_~i. —— its ¢a»~.~ 4 he1. =Scarcity I 22 ‘ 47.83 1f2. Low quality é 15 5 32.60I ‘ ; I1‘ 6M3. Yfiigh prices H 5 @ 10.87 1ti

4. iOther problems* 1 4 w 8.70it ___7__ ' _____ _ __ ,__ _ ~-~'I , Wn 1 F f1 fTotal i 46 100.00 *4 1 !

-..*_‘:i‘

Source: Survey Data.

*Includes uncertain prices and transport bottlenecks.

Of the 46 units (nearly 39% of the total) indicatethe difficulty of raw materials, nearly 48 per cent (22 outof 46) of the units complained of scarcity. More than 32per cent (15 out of 46) units are worried on account ofproblems relating to low quality of raw materials. Of the46 units the number of units facing problems of high pricesand other difficulties are 5 and 4 respectively. In percentage terms they constitute 10.87 and 8.70.

:2l4:

Industry-wise analysis of problems of rawmaterials is shown in table-7.6.

.T§bl9eie7:§cProblemsof Raw Materials En

.1311~iQ1i10-pi-jiq|i—lQ—-.—§-itwflci-jjfiigui-ipmiifiujijrfliT’* IName of the Industry;

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try-wise

I.__ __ _ 7 ,,,_ :__ . __;1 I 2 II 3 * 4 I 5

tOunt¢r¢datPressnt=Indus­

iiion-1-11

" Scar- 1 Low I, High I Other Diffi- II city I Qua- I Prices W culties

tie; 2 2 e_._e___-_ee:_1_it 1 eleiliiw6

ii iiiiii 3i jqlliiiiTotal

7

===I

I

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I I

> I

“1.I Engineering and II I;metal based *II =

13

l2.I Plastic based I. I I IY3., Chemical based IT4. Rubber based I

2

1I II, ','fi5.I Paper and wood based Q 6.‘ I‘ i6.i Miscellaneous II I~cI_. i "iii KT cl- "W : "TI -frat T;-r _ "in _* r *_If iir l .;

22I I Total ISource: Survey Data.

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1

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I 7

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L 3I 5

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22

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8

11

46ii.-Q1

Of the 22 units facing the problem of scarcityof raw materials, 13 are engineering and metalic units, 2chemical units, one rubber based unit and 6 paper and wood

based units. Of the 15 units for which low quality of rawmaterials is a major problem, 7 are engineering and metalicunits, 3 rubber based units and 5 paper and wood based units.

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1,

I

I

i‘$II

;2l5:

The problem of high prices affects one engineering andmetalic unit, 2 chemical units and 2 rubber units. Ofthe 4 units which reported other difficulties in theirsmooth working, one is engineering unit, another onechemical unit and 2 rubber based units.

Of the 6 industry groups, only two groups arefree from problems of raw materials. These groups areplastics and miscellaneous. All the remaining 4 groupsof industries are seriously or lightly affected by pro­blems of raw materials in one way or the other.

Table-7.7 presents the sources of raw materialsof different industry groups.

Engineering and metal based industrial unitsmainly depend on government quota for raw materials. Butgovernment supply of raw materials from depot is limitedto the supply of certain iron and mild steel items andcement only. As seen from table—7.7 the source of rawmaterials of most of the industrial units is outside thestate. Sometimes entrepreneurs have to take delivery ofthe quota of raw materials at far off places and what isgained in price of raw materials is lost in transportationcost. When the requirements are not obtained through

Sources

32163

Table_: 732

Pi Rs‘? Msssrri ale

I

U. _ H __ 1;? ._ , _ “ ,7 _ ' —""ii’ Name of the Industry Main Raw Materials

Sources of RawMaterials£1 2|€l__""_ i ___‘l 7' _ ‘W _i__ . . _"" _'

3 4 is ._Ail. Engineering and metalA basedp1

l.‘I

42' Plastic basedi

.3. Chemical based

f4, Rubber based

it s. Paper and woodbased

I

l 6­ Miscellaneous

Mild steel items,sheets and anklespig iron, coke,Aluminium wirerolls

HDP (High DensityPolythene) Plas­tic Scraps

Bakelite powderPetroleum pro­ducts

Natural rubber &Synthetic rubber

Paper and wood

Sugar, Milk andFlour_a—:- 1 1 iii 1 1 j.14-u--1—u—I_-"*1"-1-u-'_.-1-" -I--t¢_-u-.;"-{n-p-q_===:q-"ca=..1=~@.=1" 11.0-an-=‘:IIl .1qp-1"'-11I=Ib1"u-o==1

SIDECO raw materialdepot, SAIL, Banga­lore, Open market,Controller of Alu­minium, IndianAluminium Company.

Bombay, Madrasimported

Local market, Openmarket, IPC (IndianPetroleum Corpo­ration) Bangalore.

Ernakulam, Keralaand Bombay.

Kerala Forest Dept.Paper Mills, Puna­loor, Mysore andLocal market.

Local Market.

S1

M»

|

f

\ \

w

7I

I ,

:217:

normal channels at controlled prices, the entrepreneursare forced to buy raw materials in the black market athigh prices.

Even the industries utilising raw materialsavailable within the -state had to purchase them at ahigh price. The entrepreneur of a unit producing woodenbobbins for textile mills complained that he has to pur­chase the required wood from the forest department at aheavy price. The entrepreneur of a paper product unitsaid that he found it profitable to purchase paper fromthe Paper Mills in Mysore than from Paper Mills in Kerala.

As Eugene Stanley and Richard Morse observed,

two basic conditions make the raw materials problem more

acute to the small firms in the estates in Kerala. Firstlythe business net-work of suppliers and less developed salesagencies. Secondly, the units in the estates, face chronicand heavy shortage of materials and equipments as theystrain to catch up with decades of unfulfilled but evenincreasing wants. These circumstances tend to reinforcethe inherent advantages of large firms in acquiring sup­plies, namely, the economies in bulk purchases, the plan­ning and purchasing abilities of their procurement staff

3218:

and the greater political, social and financial influenceswhich they can bring to bear on the governmental or trad­ing net-work. All on a sudden these problems cannot besolved. Attempts to control the effects of scarcity byan elaborate system of licensing, allocations and importpermits have important repercussions which increase ratherthan decrease the disadvantages of small units. Smallunits have been able to obtain only a smaller share ofthe raw material needs through authorised channels andhave been forced to resort much more heavily to theblack market at premium prices.l

7-3 Povsrrshertaqe

The entrepreneurs in the estates seriouslycomplained about power shortage and power cuts. Its

impact was found to be critical for the industry groupslike engineering and metalic group and rubber basedunits. Engineering items and rubber products have towork continuously and any breakdown in between affects

1Eugene Stanley and Richard Morse, flodern Small IndustryfQrDevelopinq Countries, McGraw-Hill Book Co., NewYork, 1965, p.379.

: 219 :

badly the quality of products. All units in the estatesdepend on electric power. Table-7.8 illustrates thenature of problems connected with power supply and the

number of units affected by these problems.

"' *_?,_v_§§Qb1@m$_9f Pewer Suaply §P¢°uR£ePe@ at

Present

fig‘ Difficulty p No. of Units 2 Percentage f, Li g » __ _g g@_ g ____ _fi""_'_‘ l 2 _. . _ l 2!P 1 T 2 3 h 4 Tp ti i _ i, e_ H ii. or ;l‘T_ ,w 3 Q

tr __

1. High C0511 E 15 33,33 *ii E5; 2. 1Scarcity ¢ 10 22.22 ym § WJ 3.;Uncertainty 1 5 5 11.11 §5 '3 ~ Other problems l 15 l 33.33 *

vbO

IIll pI! 3ll 31| a +llll ‘ll pll ‘llIS

ll

IIilllllllll1',llll1|

H

llllllllllH

llllll— -7

f 5 Total 3 45 100.00i \‘ I——in—- {Z-@|Aj1iji—I--n$<1|-11-In;-iniqln-pi-‘Q-i-Q j—--Q-01--1-Oinnlhii-&n1¢-trii-lllii

Source: Survey Data.

Of the 45 units affected by the problem ofpower, 15 units (33.33%) have complained of high cost.

Scarcity and uncertainty are other two problems facedby units with regard to power supply, 10 units (22.22%)

3220:

are affected by the former and 5 units (11.1l%) fromthe latter. Fifteen units (33.33%) have complained ofother problems. Problems connected with power supply

especially power breakdowns or power—cuts are common

in all the industrial estates of Kerala.

7 - 4 1?;_Qb_l as <2_f_ rFai§1anee

Compared to enterprises outside the industrialestate, the problems of finance are limited in case ofenterprises inside the estate. The facility of ready­to-occupy factorysheds/plots at subsidised rent is thefactor contributing for that ease. Where only developedplots are provided instead of constructed sheds, normallyentrepreneurs construct sheds by raising the necessaryfinance from financial institutions. They require financenot only for the construction of sheds but also to meetthe daily expenditure of various types. Applicationsfrom the occupants of industrial estates are given moreencouragement from the financial institutions and theseapplications are processed with much ease and speed

since the problems that may normally come up pertaining

to the title of plot do not arise in case of industrial

:221:

estates. So also about the permission required fromthe local bodies or town planning authorities. But theentrepreneurs inspite of the advantages have their owncomplaints with regard to rent. The entrepreneurs feelthat the economic rent charged by the estates is toohigh because even the subsidised rental arrears couldnot be cleared promptly. The terms of outright saleor hire purchase of sheds/plots are reported to be notvery much favourable to the entrepreneur.

Table-7.9 shows the nature of financial problemsencountered at present by the entrepreneurs in estates ofKerala.

Table-7.9 shows the magnitude of the type

of financial problem faced by the units. Of the 41 unitsfor which the problem of finance is a head—ache, 27 units(nearly 66%) are facing the problem of shortage of work­ing capital. Since the units could save investment inland, building and other basic infrastructure, the majorfinancial problem is concerned with working capital.Bank loans were not adequate to meet the growing needs

of the units because of high input prices and credit sales.Borrowing from non-institutional agencies is very costly.

: 222 :

1TsL>;e_c_ ‘:1 7-.9

§@EQ§§_9§.§€9Pl§@$.Qf-Fifl§Q¢§_§P§92Q§§r¢¢_€EPresent

igij iiiiiilijiijqiiiliiijjiiiiniiji-iiijii-iiijiilltfiifiliniqli-Oljijjliiiiiiiii{Q-ii jjiljulliiduliiiniijijnqii-iiiiwiiiiiwxriiiiiiwwii-1-iii?ll ijniyhiiijiiijb1' ‘|‘lSl.J Difficult M No. of Entre— l Percent— s1NO.J Y » preneurs § age ‘Us _.__.A : _._ 1- ~,_ _7__"’_ e: :_ e 1 e ;_ ;f c=J:.__<_ 1.1 77,1? A. -_. _j _, iiA 4ill ‘ 3 P 4 r

r ii

l\.)

4_ in 4 A‘\

ill. ‘Shortage of working capital T 27 ~ 65.85 i. l \ \ \ \1 l '2. LShortage of fixed capital i 2 \ 4.88\

4‘iv

?i3. §High rate of interest ' 2 \ 4.88% 4. "Red-tape in government “< lagencies M 1 2.44 M

1*.i5. “Meagre assistance from M" Wfl flgovernment agencies A 2.44

Q) I-*

sir _ __ _

A l’l \ls. ]Other difficulties* ll i 19.51+~s-s—»:1 ~-1.s-—<1..»>»-~~:~—< <—< s.<%1s<~< ~<-—~.>—= ~-~——-~~1--was ss­A Total l 41 }~ 100.00 ‘l

I. \ ‘-u—Q_ii-in-Q-&-mi-11-|1i—$—-o_—<nn~¢_inI—-—luiIh-13--i-an-It--i—unaIIQI—iuij iijiiibiiwli-iiciiiflixfltlfl iiiiuillikliiigui

Source: Survey Data.*Includes credit sales, delayed settlement of accounts, etc.

The shortage of working capital was stated tobe severe during the initial period as many units were run­ning at loss at that time. Only after some period suchunits could earn internal reinvestible surplus. It is

3223:

found that the financial position of most of the old unitshas improved considerably. Special attention with regardto financial assistance is needed for certain new units.

Two units each face problems of shortage of

fixed capital and high rate of interest. One unit eachhas complained of red-tape on government agencies and

meagre assistance from government agencies. Next in import­ance to the problem of shortage of working capital is otherdifficulties. It includes difficulties in connection withcredit sales and delay in the settlement of accounts.There are 8 units which face these problems, In percentageterms it comes to 19.51. Thus table-7.9 throws light tothe fact that the acute financial problems faced by theunits are shortage of working capital and other difficulties

like credit sales¢?gglay in settlement of accounts. Allother problems are lesser in magnitude since these affectaltogether only 14.63 per cent of the units (6 out of 41).

Table-7.10 shows industry-wise analysis ofproblems of finance encountered at present.

: 224 :

T69}? * 7@lQ

groblemsgof Finance Engountered atgPresent: 1n§ustry­wise

é § q Short- ; Short­lSl. § Name of the age Qf = age OfyNO_ f Industry working Fixed$ g Capital CapitalE e 1 sf as ~s—~- sss*»ee see- ease­

§====_==' =========:===:=:l:======.=:::Q===:.'::::===$===:===::f=====:::=== =2I I ‘ ' I :===:::=?5High §Red- iMeagre wOther vTota;iRate tape TAssist-;Diffi­ilof In-; in ‘lance Joul­?*terest Govt. from ities

AgenciesiGovt.1|, ___1_ ___ __ _* t __ , ._._p

iii-jii“

1 i 2 i 3 § 4 ! i SM; W

ii _,___.‘I W51 6 7 F 8 9

i 1.y§Engineering and m iVmetal based ; ‘13 ¥ ­1 2. §Plastic based 1 —T 3. ]Chemical based " 3 —L 4. hRubber based § 3 M ­; ‘ a@ 5.1 Paper and wood i =H §based 7 6 1 21 1 H Q‘ ' A I; 6.i Miscellaneous H 1

Iiii‘I

\1 1 '

2

@ 1

i

1

H

li

l

I

_;_ . L_.-_ _,

1

M

_ ?_____

4

4

I

\l9

1

Source: Survey Data

No industry group is

_ §‘Total 1 27 y 2 2

free

All industry groups are affected by

1- I\§ 1 1 8

iii-M

from financial problems.

one or the other type of

jiilmiiiififiiiii

igincial problems. To all industry groups the problem of

i-IQ

shortage of working capital is causing many inconveniences.

Usually the financial problems are largely confined to theproblem of working capital shortage and this problem is almost

_—..J;

"41

:225:

universal. Of the 27 units having the problem of short­age of working capital 13 are engineering and metal basedunits (48.l5%) and 6 paper and wood product units (22.22%).

Comparing with other groups of industries, the engineeringand metal based units and paper and wood product units areacutely affected by the problem of shortage of workingcapital. Three units each are affected with this problemin chemical and rubber based industry groups. Plasticsand miscellaneous groups are least affected with the pro­blem of working capital shortage as only one unit each inthese two industry groups are adversely affected with theproblem.

All industry groups excepting paper and wood

products are free from problems of shortage of fixedcapital and high rate of interest. Two units are affectedwith the problem of fixed capital shortage and another twounits with the problem of high rate of interest. Onlyengineering and metal based units have complained of red­tape in government agencies and meagre assistance from

government. Of the 19 engineering and metal based unitsonly one unit each has complained of these problems. Otherdifficulties like credit sales and delay in the settlement

: 226 :

of accounts are faced only by two industry groups. Theyare engineeriag and metal based and rubber based industrialgroups. Both in these groups 4 units each are affectedby these difficulties. In percentage terms it is 21.05(4 out of 19 units) and 57.14 (4 out of 7 units) respectively

7.5 Seed Qapital Requirements

Seed capital is the venture or risk capitalrequired for the establishment of the enterprise initiallyIncome from trade and agriculture are the two importantsources of initial capital. Table-7.11 shows the majorsources of seed capital.

.__;:_7_.9Th<=-@_I:1aiQ§,-§t2v1§t¢@_Qf S sue Qani ta!

F==ap==========================#=l.SlJ M . S No. of Units“ Percentage?

1L_ 1 tt_-t-__t___t ____ -t1 1 2 3 4 *

iu M "33- H“ u *8 7‘'\ 1E 1.‘ Income from trade 5i 1 ‘

2. Income from agriculture 17 1 HU 3. Borrowings from friends Wu land relatives ;

1L \ I '1 4.7 Savings fro salary75. Other sources 5

38

32

18

15

10

33.63

28.32

15.93

13.27

8.85

1

, Total Y#======================::======¥=

lumbar. t t -_ - 1r“ N" r~cr " * isSource: Survey Data.

115-“iiiiijiiiiiii_:___ _ _

====d!==100.00

==Q

: 227 z

For 38 units (33.63%) the major source of

seed capital is income from trade. Of the 113 units, 32(28.32%) acquired the initial capital from agriculture.Eighteen units (nearly 16%) got the needed sum from bor­rowings from friends and relatives and another 15 units(13.27%) from savings from salary. Other sources likeborrowings from wife, sale proceeds of agricultural land,etc. are used by owners of 10 units (nearly 9%) for rais­ing the initial capital.

Raising adequate initial capital is a majorproblem for entrepreneurs especially for the educated,unemployed youth. Many of the graduates and diploma

certificate holders raise finance from borrowings fromfriends and relatives and from other sources. The rigidattitudes of parents and other important family membersvery often create difficulties of many types to the entre­preneurs in getting finance for starting units in theestates. In these circumstances they are forced to dependon institutional finance. They use these finances eitherto meet the requirement of constructing factory sheds oracquisition of machinery or both. Mostly the term of

: 228 :

loan ranged from 5 to 10 years. Thinking about the economiesof borrowing many entrepreneurs started to take loans fromfinancial institutions. But later fed up with high interestrates many of them changed their attitudes. At this juncturethey have decided to take loans from the unorganised sector.

Of the 118 units, 74 units (62.7l%) depend onnationalised and non-nationalised banks for working capital.Only 44 units (37.29%) use own finance.

Table—7.12 gives an idea of the various finan­cial institutions which render financial help to the smallentrepreneurs in the estates of Kerala.

It is clear from table-7.12 that a largenumber of entrepreneurs try to solve their problems ofshortage of working capital with the help of nationalisedbanks. In concrete terms 54 units (nearly 73%) are usingsuch help from these banks. Ten units use commercial banks

in the private sector. In percentage terms it constitute13.51. Another 10 units use financial help from othersources. One unit engaged in engineering and metalicindustry in Pappanamcode estate depends on Punjab Bank to

meet its need for working capital. Another unit engagedin tyre resoling in Kasaragode estate depends on Karnataka

: 229 :

Tablei-.7-12Pinanciallnatiéuriena €r°vidinq_Pin@n¢¢ fie

Fhervnéta!y i= §1 iii Name of Financial Inetitution 4 N0. of Units 4F3:=23:==H==:HE:===E:==$:===£:==H:==3==mfl=:=H:=T3S===HE:=:£fi:=:H:==H$==

\

usvii-15-n-ii .1-ii1--Qli

Percentageg

I, 4 5 5 5 “T1 W @ »4 ;_L= Q%;i’Zf_’”T'n_j’;'_’If_ 1» _. tm’ ,@rJ

kl fill?

—+4

ma

W 4

4

lfhn

4 :‘L1.» State Bank of Travancore 1 24 5' ‘i |: 3 \I \' ­V I2.3 State Bank of India J 11E 3.j Canara Bank ‘ 7 wJ |Q 4.§ Syndicate Bank I 5 .3 5.T Union Bank f 3Y; 4 Q E, 6.? Indian Bank 3 3 \

Af 7.Y Indian Overseas Bank 1 :\I ' ­1 ; \

\M 8.] Punjab Bank i 1 l1 l I 'i%9., Karnataka Bank 4 1J ,b0. Kerala Financial Corporation ' 5

5113-75 :5‘ '13;L») IQ 1»-*0 0 0

Co-operative 3H § Catholic Syrian Bank 2 8

\\ South Indian Bank 1 lz4.§ Nedungadi Bank 4 1 yW \ .

32.43

14.86

9.46

6.76

4.05

4.05

1.35

1.35

1.35

6.75

4.05

10,81

1.35

1.35

A

n

fl

\

\

I

\

‘V

I

IrIx

I

i

M

I \

Qttvjm ~~~=*e- 1-===__1e » ‘,— S i i <a=~;_e we ”;" re.+‘ p4 Total i 74 “Source: Survey Data.

100,00====i

?+

: 230 :

Bank to meet its working capital. Kerala FinancialCorporation helps 5 units (6.76%) and co-operativesector helps 3 units (4.05%). Of the 3 banks purelyin the private sector, Catholic Syrian Bank is pro­viding finance towards working capital to more numberof units. Of the total 10 units depending on privatebanks 8 units (80%) are receiving help from CatholicSyrian Bank.

Table-7.13 reveals the proportion of workingcapital raised from commercial banks.

I§bl3*»7;i§Brsesfiien -<>t&':*<>§1<i.r1.s.-§<"aP_i¢<'=\l Rs %.$e¢Lf,rQm_ El sans ial

I__Y1'=**_‘T-__iE~1_‘?.ic€? F1§

TC UllllllllllllII

llllllIillllilllllH

llllllllllllllII

llllllllllllllllII

llII

llllll

_-—~‘_-_—- ‘nllllllIillllllllllllllll

,Vfi:_.M

ipProportion (Per Cent) ) No. of Units T Percentage?--1 _e_,~_,~ if _*_-_*_.~_ *_*‘l _*,_e;e_*_~__<,_¢,e_=;*__~_= ;* —_..r ~_._—,_ 1.: -isE _ _l _____ iL___2_ __ __ ___3_ _Y Nil J 44

1 |

\

I Upto 50 15' 48A so - 75 g‘ 75 - 90 w e

;; 90 - 100 “ 3

L ilf‘

ear

\

H

H

1

\

\

- i

\

I

~ a37.20

12,71

40.68

6.78

2.54

I

r—7"&’—7—~3*i’—-7— ~'—‘7' l-7—l*—'7——7' —7 ii» "—"7—J‘J§’—T—r7-—r"7' _i"l i __i3’—*l.- 1' T 7*-~'+*— i—-17 —_7—-7L Total ; 118 N 100.00Source: Survey Data.

llll1L__ _ r'L_1c_ __

: 231 :

Of the 74 units using bank finance, thenumber of units drawing more than 50 per cent of theirneeded working capital from banking institutions is 59In percentage terms it comes to 50. Fifteen units(12.7l%) limited their borrowing to 50 per cent oftheir needs.

Most of the entrepreneurs in the estates ofKerala mix the finances of their enterprises with thatof their families. This problem is severe and seriouswith that type of entrepreneurs who have to make aliving out of the earnings of their enterprises. Ofthe total 118 units under study, 109 units were askedthe question of whether they mainly depend upon theunits for their income. Of the 109 units, S5 units(50.4S%) make a living out of the earnings of theirenterprises. It implies that nearly half of the totalentrepreneurs depend upon the income generated fromthe estates for their families. The number of unitsploughing back the whole profit is very few. Of thetotal 95 units making profit only 20 units (21.0S%)ploughed back the profit to meet their various family

2 232 :

needs. This tendency of the entrepreneurs to mix upthe finances of the enterprises with that of the familyaggravates the problem.

7-6 9Ph§§ Problems

1 Labour

Nearly one fourth of the units under studycomplained of labour problem as is shown in table-7.14.want of skilled labour, uionisation, turnover, absen­teeism, etc. are the important labour problems whichare encountered by the units in the estates of Kerala.Table-7.14 shows the important problems of labourencountered at present.

?sele,:tZ»14P§Qb;seSr@fLab9srEns9PnPsred_at_EreSs@t

====3-”=====-'=========2-'=======7-=F==='Z============='n-*:=====Z=|r‘ ' ‘Ily la _ ‘é31. Difficulty U No. of Entre t Percen HLO l i preneurs “kw tagef ~Lil? _ji:- i ?_fI;_‘.l§:$:li ti 1_.§diQ-3,,, t, Q5 ab '8~ want of skilled labour h 11 I 35.48“\

l \

i-'0

es ;¢ 1-:

~ es

atoll

[2, iUnionisation “ 9 ‘ 29.031n3. ~Turnover A 8 l 25.82%V

\\ . I \‘ \l \

VW4. dAbsenteeism T 3 q 9.67i ?iTotal l 31 q 100.00lE===E===============:========Source: Survey Data.

¢=;#<nnuunuunnnnnnnn“f tnnnnuunls

$233:

Of the 31 units which are suffering fromvarious labour problems ll units (35.4%) are mainlysuffering from the problem of want of skilled labour.Of the remaining 20 units, 9 units (29.03%) are affectedby unionisation, 8 units (25.8l%) by high labour turn­over and 3 units (9.67%) by absenteeism. Certain unitssecured the services of skilled labour from distantplaces like Madras and Bombay. In such cases the unitshad to suffer very high wages. Not only that, the con~tinued stay of such labourers is not assured. Thisaggravates the situation. Due to unionisation, theunits very often offer when they load and unload rawmaterials and finished products. Very often the labourersorganised under various unions bargained high wages evenwithout considering the financial viability of the unitsthey are working in. Labour turnover was due to theconcern for higher wages. Sometimes labourers do notturn up for work without giving any advance notice tothe employer. The units facing the problem of absen­teeism are very few. Such units are only 3.

: 234 :

2- ?s¢§nisalrsQdcMans9sris1Guidance

The need for better technical and managerialguidance is felt by 20 units (nearly 17%). Some of theentrepreneurs had already attended some short durationmanagement development programmes. Of the total 20

units having this complaint, 11 entrepreneurs wanted totake part in the management development programmes but

they could not do so mainly because these programmes arevery expensive. Another 5 units felt it to be inconve­nient to attend the course and the remaining 4 unitsfelt the programme as useless.

3- §tafi¢P@lis2

Altogether 8 units (nearly 7%) felt theneed for favourable state policy. All these units areengaged in rubber based units. Four units in Changana­cherry estate and one unit each in the estates ofKarunagapally, Umayanalloor, Kollakadavu and Ettumanoorhave felt it. Their demand is that the government shouldtake a sympathetic attitude towards the small units in

3235:

the estates. They complained that the governmentfollowed irrational norms in fixing rent for varioustypes of sheds and very often the rent charged is veryexcessive. They demanded the provision of sales taxconcession and effective preferential treatment inrespect of purchase by government and other publicinstitutions.

C}-iAPT_ER?_ 7 iV_II I

Q Pi E9 {QJQZEI ___Q 31