small scale industrial units an...

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CHAPTER III

SMALL SCALE INDUSTRIAL UNITS � AN OVERVIEW

INTRODUCTION

The small scale industrial sector comprising micro and small enterprises (previously

known as tiny and small industrial sector) has been recognized as an engine of growth all over

the world. This sector is characterized by low investment requirement, operational flexibility,

location wise mobility, and import substitutions. They have been the prime mover of industrial

development in many developed economies.

The small scale industrial units are the roots and fruits of economic activities. They

provide way of life to more number of people. With less amount of capital investment, this sector

contributes more towards GDP, provides more employment opportunities, offers unique product

and service offerings, and serves customers with personal attention. Though the large and

medium types of industries make the infrastructure and skeleton of an economy, the blood, flesh

and skin of a flourishing economy is made up of small scale industrial units.

SMALL SCALE INDUSTRIES (SSI) IN INDIA

Small scale industries have made considerable contribution to the socioeconomic

development of almost all the countries including India. In our country, the increasing pressure

of population and unemployment has made this contribution even more significant. In India,

ever since the days of Mahatma Gandhi, the small scale industry movement has been largely

regarded as a vehicle for uplifting the weaker sections of the population whether it is handloom

weavers, handicraft workers, rural women spinning at home, the rural artisans or the urban

craftsmen-all of them look to specific support in being able to compete with the modern

industrial sector. The small scale industry is phenomenal in our country that it has started

thinking global in the wake of liberalization in the nineties.

The SSI sector as an important segment of Indian economy, accounts for 95 per cent of

the industrial units; 40 per cent of output in the manufacturing sector; employment to over 17

million persons; 35 per cent of total exports.1 The SSI sector has been receiving due attention

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47

and importance from the policy makers owing to its special characteristics, namely, low level of

investment required, high potential for creating employment opportunities, least location

constraints, thereby contributing to a balanced regional development and a high utilization of

local resources. This sector covers a wide spectrum of industries categorized under small, tiny

and cottage segments. The sector has also maintained its pace of growth over the years, and has

contributed significantly in supporting the overall economic development of the country.

Definition of Small Scale Industry

Defining small-scale industry is a difficult task because the definition of small-scale

industry varies from country to country and from one time to another in the same country

depending upon the pattern and stage of development, government policy and administrative set

up of the particular country.

Every country has set its own parameters in defining small-scale sector. Generally, small-

scale sector is defined in terms of investment ceilings on the original value of the installed plant

and machinery. But in the earlier times, the definition was based on employment. In the Indian

context, the parameters are as follows.

The Fiscal Commission, Government of India, New Delhi, 1950, for the first time

defined a small-scale industry as, one which is operated mainly with hired labour usually 10 to

50 hands. Fixed capital investment in a unit has also been adopted as the other criteria to make a

distinction between small-scale and large-scale industries. This limit is being continuously raised

upwards by the government. The Small Scale Industries Board in 1955 defined, "Small-scale

industry as a unit employing less than 50 employees if using power and less than 100 employees

if not using power and with a capital asset not exceeding Rs. 5 lakhs".

________________________________

1SIDBI Report on Small Scale Industries,1999,p.18.




48

The initial capital investment of Rs. 5 lakhs has been changed to Rs. 10 lakhs for small

industries and Rs. 15 lakhs for ancillaries in 1975. Again this fixed capital investment limit was

raised to Rs. 15 lakhs for small units and Rs. 20 lakhs for ancillary units in 1980. The

Government of India in 1985, has further increased the investment limit to Rs. 35 lakhs for

small-scale units and Rs.45 lakhs for ancillary units.

Again the New Industrial Policy in 1991, raised the investment ceilings in plant and

machinery to Rs. 60 lakhs for small-scale units and Rs. 75 lakhs for ancillary units. An ancillary

unit is one which is engaged or proposed to be engaged in the manufacture of production of

parts, components, sub-assemblies, tooling or intermediaries or rendering services and the

undertaking supplies or renders or proposes to supply or render not less than 50% of its

production or services, as the case may be, to one or more other industrial undertakings and

whose investment in fixed assets in plant and machinery whether held on ownership terms or

lease or on hire-purchase does not exceed Rs. 75 lakhs. For small-scale industries, the Planning

Commission of India uses terms 'village and small-scale industries'. These include modern small-

scale industry and the traditional cottage and household industry.

REVISION IN THE DEFINITION SMALL SCALE INDUSTRY IN INDIA

In India, the term �small-scale industry� evokes different meanings for different agencies

for a long time. The Planning Commission of the Government of India views the entire village

and small industries (VSI) sector as SSI sector.

The National Sample Survey Organization under the Central Statistical Organization

(CSO) Government of India defines the entire industrial sector in terms of organized and

unorganized segments and also in terms of industrial enterprises run by the households and non-

households. The Central Excise Department, on the other hand, distinguishes SSI on the basis of

the annual turnover of the respective unit. However, with a view to determining the types of

industrial units requiring special support, a more clear cut definition was felt necessary.

Accordingly, from the industrial policy perspective the size of gross investments in plant and

machinery, land and buildings as well as the strength of the work-force in the respective units

were the criteria to demarcate a unit as SSI. These rules have undergone periodical changes over




49

the years. Shift from work-force criterion to investment criterion was made in the later period.

Further, a new concept of ancillary and tiny units was introduced with a view to bringing more

units under SSI concept. The SSI has been currently defined in terms of investment ceilings on

the original value of installed plant and machinery. This classification on the basis of investment

in plant and machinery also covers residual units not included under the assistance programme of

any of the Statutory Boards. In 1998, the Government of India fixed the ceiling as Rs. one crore

in plant and machinery for small-scale industries and ancillary industries. The ceiling was Rs.25

lakhs in plant and machinery for tiny industry.

With a view to building a sound industrial base and a strong village and small industrial

sector, the first step taken by the Government in the post-independence era was the

announcement of the Industrial Policy of 1948. It spelt out the framework of the basic and

strategic industries to be established by the states.

The enactment of the Constitution which guarantees fundamental rights for the citizens of

India, the launching of the First Five Year Plan, and the adoption of socialistic pattern of society

by the Parliament paved the way for the Industrial Policy Resolution, 1956. It recognized the

role of SSI sector in providing employment opportunities, mobilizing local skills and capital

resources and in the process, integrating with large-scale industrial sector. The global economy

witnessed several structural changes in the 1990s. Markets have become more open and

competitive, economies have become more independent and developments in the sphere of

international trade and finance have altered the pace and pattern of international flow of

commodities and investment.2

CURRENT DEFINITION OF MICRO AND SMALL ENTERPRISES

Now in India, the small enterprises in the manufacturing sector are defined in terms of

investment in plant and machinery (excluding land and buildings), and further classified into

micro, small and medium enterprises.

____________

2B. Erram Raju, �Fortifying Small Sector: The Challenges�, Indian Management, Vol.39, No.8, August 2000, p.43.




50

In accordance with the provisions of Micro, Small & Medium Enterprises Development

(MSMED) Act, 2006, the Micro, Small and Medium Enterprises (MSME) are classified into two

groups

(a) Manufacturing Enterprises

(b) Service Enterprises

The limit for investment in plant and machinery / equipment for manufacturing / service

enterprises, as notified, vide S.O. 1642(E) dtd.29-09-2006 is as under:

MICRO ENTERPRISE:

A micro-enterprise is one where the investment in plant and machinery (the original cost

excluding land, building and items specified by the Ministry of MSME in its notification

No.S.O.1722 (E) dated october 5, 2006) does not exceed Rs.25 lakh.

SMALL ENTERPRISE:

A small enterprise is one where the investment in plant and machinery (see above) is

more than Rs.25 lakh but does not exceed Rs.5 crore.

MEDIUM ENTERPRISE:

A medium enterprise is one when the investment in plant and machinery (see above) is

more than Rs.5 crore but does not exceed Rs.10 crore.

The definition of MSMEs in the service sector is:

Micro-enterprise: investment in equipment does not exceed Rs.10 lakh.

Small enterprise: investment in equipment is more than Rs.10 lakh but does not

exceed Rs.2 crore

Medium enterprise: investment in equipment is more than Rs.2 crore but does not

exceed Rs.5 crore.




51

(a) MANUFACTURING ENTERPRISES

The enterprises engaged in the manufacture or production of goods pertaining to any

industry specified in the first schedule to the Industries Development and Regulation Act, 1951)

or employing plant and machinery in the process of value addition to the final product having a

distinct name or character or use. The manufacturing enterprises are defined in terms of

investment in plant & machinery.

(b) SERVICE ENTERPRISES The enterprises engaged in providing or rendering of services

and are defined in terms of investment in equipment.

Manufacturing Sector

Enterprises Investment in plant & machinery

Micro Enterprises Does not exceed twenty five lakh rupees

Small Enterprises More than twenty five lakh rupees but does not exceedfive crore rupees

Medium Enterprises More than five crore rupees but does not exceed ten crore rupees

Service Sector

Enterprises Investment in equipments

Micro Enterprises Does not exceed ten lakh rupees:

Small Enterprises More than ten lakh rupees but does not exceed two crore rupees

Medium Enterprises

More than two crore rupees but does not exceed five crorerupees

Source: Ministry of Micro, Small and Medium Enterprises, Government of India, New

Delhi.




52

The last revision was with the enactment of the MSME Act, 2006 and the definition is a

part of the Act. The Act defined the MSME sectors overwriting the earlier concept of small-scale

industries of India.

The current classification marks enterprises in manufacturing sector with an investment

in plant and machinery of up to Rs 25 lakh as micro, up to Rs 5 crore as small and up to Rs 10

crore as medium enterprises. Similarly, the limits for enterprises providing services are set at Rs

10 lakh, Rs 2 crore and Rs 5 crore for micro, small and medium enterprises, respectively.

MSMEs IN INDIA AT PRESENT

(i) MANUFACTURING ENTERPRISES

The manufacturing enterprise are defined in terms of investment in plant &

machinery. The enterprises engaged in the manufacture or production of goods pertaining to any

industry specified in the first schedule to the Industries Development and Regulation Act, 1951)

or employing plant and machinery in the process of value addition to the final product having a

distinct name or character or use.

(b) SERVICE ENTERPRISES The enterprises engaged in providing or rendering of services

and are defined in terms of investment in equipment.

The promotion of small-scale industrial (SSI) sector becomes inevitable to countries like

India due to its inherent strength such as low capital intensity, short gestation period, the high

employment potential, capacity to induce dispersal of industrial activities and widening of the

entrepreneurial base. Advancements in social, economic and cultural life of human beings in the

previous and current centuries brought a significant improvement in the way people think and

live. The dawn of information age brought a notable change in the way goods, service and ideas

are created, delivered and consumed by the people. In the industrial world at present, more and

more manufactures try to communicate and convince more and more consumers. The complexity

and peculiarities of the industrial, commercial, economic and government activities reach new

peaks the manufacturers and consumers are found in all parts of the world, stretching beyond the

national boundaries. This warrants more innovative way of doing business in the 21st century.




53

MINISTRY OF SMALL SCALE INDUSTRIES

The Ministry of Small Scale Industries (SSI) is a defunct Indian government ministry. It

was merged with the Ministry of Agro and Rural Industries to form the Ministry of Micro, Small

and Medium Enterprises. The ministry was tasked with the promotion of micro and small

enterprises (MSEs). The Ministry of Small Scale Industries and Agro and Rural Industries

(SSI&ARI) was created in October 1999. In September 2001, the ministry was split into the

Ministry of Small Scale Industries (SSI) and the Ministry of Agro and Rural Industries (ARI).

The Ministry of Small Scale Industries merged with the Ministry of Agro and Rural

Industries to form the Ministry of Micro, Small and Medium Enterprises in 2007. The Small

Industries Development Organization (SIDO) was under the control of the ministry, as was the

public sector undertaking National Small Industries Corporation Limited (NSIC).

The small scale industrial units though seem to be small, when considered individually,

have emerged as a dominant force that directs the growth of the economy of a country. The

contributions of the small scale industry in different economies, in terms of share to total

establishment, share of output, share of employment and share of export are given in Table 3.13

__________________________

3A.P. Pandey and Shivesh �Indian SMEs and their uniqueness in the Country, Munich Personal REPEC Archive, 06. December 2007.




54

TABLE 3.1

CONTRIBUTION OF SSI

S.No Country Share of total

establishment

Share

of

output

Share of

employment

Share

of

exports

Criteria for

recognition

1. India 95% 40% 45% 35% Fixed assets

2. U.S.A 98% N.A 53% N.A Employment

3. Japan 99% 52% 72% 13% Employment

4. Taiwan 97% 81% 79% 13% Paid up capital

Assets & Sales

5. Singapore 97% 32% 58% 16% Fixed assets &

employment

6. Korea 90% 33% 51% 40% Employment

7. Malaysia 92% 13% 17% 15%

Shareholders

funds &

Employment

8. Indonesia 99% 36% 45% 11% Employments

Source: Dr. Pandey and A.P. Shivesh �Indian SMEs and their uniqueness in the Country,

Munich Personal REPEC Archive, 06. December 2007.

The above table makes it clear that the SSI sector in India is contributing better than

Singapore, Korea, Malaysia and Indonesia in terms of share of output. Further in terms of share

of exports, the small scale industries in India outperformed the countries like Japan, Taiwan,

Singapore, Malaysia and Indonesia.




55

The fast growth of production, transport and communication technologies paved the way

for the development of various industries at different levels of operation. Increase in population

and industrial activities in different countries lead to the formation of industrial units of all sizes,

namely, large, medium, small and micro.

Primarily, depending on the level of operation, the industrial units are classified under

three sectors, namely, large scale, medium scale and small scale sector. For the purpose of such

classification different countries follow different yardsticks. In Indian context, a small scale

enterprise is broadly defined in terms of the value of investment in fixed assets in plant and

machinery, whether held on ownership terms, on lease, or in hire purchase, is Rs. 25 Lakhs to

Rs. 5 Crore in case of manufacturing units and Rs. 10 Lakhs to Rs. 2 Crore in case of service

units.

According to United Nations Industrial Development Organization, UNIDO, SME

contribute to over 55% of GDP and over 65% of total employment in high income countries.

SMEs account for over 60% of GDP and over 70% of total employment in low income countries.

They contribute about 70% of GDP and 95% of total employment in middle income countries.4

In the last decade of 20th century, SSI sector contributed 7% to India�s GDP.

In marketing the products and services, the small scale industrial units face many

difficulties like, lack of customer awareness, adoption of latest marketing techniques, availability

of adequate finance to support marketing, dissemination of information on product offerings to

customers, higher price due to increased cost of products due to small scale production.

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.

__________________________

4http://www.thefreelibrary.com/The Importance of Small and medium Enterprises in Economic Development.


http://www.thefreelibrary.com/The



56

The small scale industries have been playing an important role in the growth process of Indian

economy since independence inspite of stiff competition from the large sector and not very

encouraging support from the government.

Based on the data compiled by the Ministry of MSME (Micro, Small and Medium

Enterprises), the number of small scale enterprises in India, employment, percentage share in

total GDP and exports for the periods from 2000 - 01 to 2010 � 11 are given in table 3.2.5

TABLE 3.2

CONTRIBUTION BY MICRO SMALL AND MEDIUM ENTERPRISES

Year No. of Units

(in Lakhs)*

Production

(Rs. in

Crores)*

Employment

(in Lakhs)*

Exports

(Rs. in

Crores)# 2001 � 02 105.21 2,82,270 249.33 71244

2002 � 03 109.49 3,14,850 260.21 86013

2003 � 04 113.95 3,64,547 271.42 97644

2004 � 05 118.59 4,29,796 282.57 124417

2005 � 06 123.42 4,97,842 299.85 150242

2006 � 07 261.01 7,09,398 594.61 182538

2007 � 08 272.79 7,90,759 626.34 202017

2008 - 09 285.16 8,80,805 659.35 NA

2009-10 298.08 9,82,919 695.38 NA

2010-11 311.52 10,95,758 732.17 NA

Sources: Annual Report, 2011-12, Ministry of Micro, Small and Medium Enterprises, www.msme.gov.in Hand book of Statistics on Indian Economy (2011), Reserve Bank of India.

___________________

5Shambhu Ghatak, Micro, Small and Medium Enterprises in India: An Appraisal,

[email protected]


http://www.msme.gov.in

mailto:[email protected]



57

From the above Table, it is observed that the total number of Small Scale Industries in

India has increased from 118.59 lakhs in 2004-05 to 311.52 lakhs in 2010-11. Coming to the

production and employment front also, there has been a steady increase in the over all

performance from Rs. 429796 crores and 282.57 lakh persons in the year 2004-05 to Rs.

10,95,758 crore and 659.38 lakh persons in 2010-11 respectively. The export front from SSI

Sector was Rs. 124417 crore in 2004-05, which increased to Rs. 202017 crore in 2007-08. From

the above data it is to be found that the percentage increases in number of SSIs i.e., 140.46 per

cent which results more or less the same in the percentage of employment i.e., 133.34 per cent.

This indicates the standard of living of the people some what extent can be raised by the increase

in number of SSI units by proving employment which in turn result the increase in national

economy.

The Report of Prime Minister�s Task Force on Micro, Small and Medium Enterprises,

Government of India, January 2010 states SSI units contribute 8 per cent of the country�s GDP,

45 per cent of the manufactured output and 40 per cent of our exports.6 The total number of

working enterprises, including unregistered units, during the year 2006-07 was 2,61,00,797. It

provided employment to 6,03,22,199 Units. Of them, 15,52,490 units were registered and made

a gross output of Rs.7,09,397,613 Crores.7

In the liberalized economy, the small scale industrial units need to strive hard to compete

and succeed as against large enterprises. They face a series of challenges from production,

marketing, financing, administration and growth point of view. A business has two and only two

basic functions: Marketing and Innovation. Marketing and Innovation produce results, all the rest

are costs.8 Marketing is the core business activity that makes a business unique among the

various activities of human beings.

___________________

6T.K.A. Nair, Report of Prime Minister�s Task Force on Micro, Small and Medium Entrprises,

Government of India, January 2010,p.1.

7 Ibid.,pp.169-171.

8Philip Kotler: �Marketing Insights from A to Z �, Wiley & Sons, 2003, p.37.




58

Marketing is the crucial area where small scale industrial units face many problems relating to

supply to the government departments, procurement of raw materials at right cost, storage,

display accessing international market.9

The industrial sector in Tamil Nadu consists of 5,57,761 micro, small and medium

enterprises in 2007-08. These units provide employment to 39,46,263 persons with a capital

investment of Rs.1,96,36,6406 lakhs. The production by these enterprises was Rs.1,14,71,946.10

Various studies were made by academicians and researchers relating to the different aspects of

small scale industries such as growth, role of promotion and government bodies, policy aspect,

finance, personnel management, marketing and administration.

The micro, small and medium enterprises (MSMEs) play a pivotal role in the economic

and social development of the country, often acting as a nursery of entrepreneurship. They also

play a key role in the development of the economy with their effective, efficient, flexible and

innovative entrepreneurial spirit. The MSME sector contributes significantly to the country�s

manufacturing output, employment and exports and is credited with generating the highest

employment growth as well as accounting for a major share of industrial production and exports.

MSMEs have been globally considered as an engine of economic growth and as key

instruments for promoting equitable development. The major advantage of the sector is its

employment potential at low capital cost. The labour intensity of the MSME sector is much

higher than that of the large enterprises. MSMEs constitute more than 90% of total enterprises in

most of the economies and are credited with generating the highest rates of employment growth

and account for a major share of industrial production and exports. In India too, MSMEs play an

essential role in the overall industrial economy of the country.

___________________

9Ibid., p.67.

10Tamil Nadu Statistical Handbook, 2011.p.6.




59

In recent years, the MSME sector has consistently registered higher growth rate compared with

the overall industrial sector. With its agility and dynamism, the sector has shown admirable

innovativeness and adaptability to survive the recent economic downturn and recession.

The MSME sector in India is highly heterogeneous in terms of the size of the enterprises,

variety of products and services, and levels of technology. The sector not only plays a critical

role in providing employment opportunities at comparatively lower capital cost than large

industries but also helps in industrialization of rural and backward areas, reducing regional

imbalances and assuring more equitable distribution of national income and wealth. MSMEs

complement large industries as ancillary units and contribute enormously to the socio-economic

development of the country.

GROWTH AND PERFORMANCE OF MICRO, SMALL AND MEDIUM

ENTERPRISES (MSMEs)

The micro, small and medium enterprises (MSMEs) sector contributes significantly to the

manufacturing output, employment and exports of the country. It is estimated that in terms of

value, the sector accounts for about 45 per cent of the manufacturing output and 40 per cent of

the total exports of the country. The sector is estimated to employ about 595 lakh persons in over




60

261 lakh enterprises throughout the country. Further, this sector has consistently registered a

higher growth rate than the rest of the industrial sector.

There are over 6000 products ranging from traditional to high-tech items, which are being

manufactured by the MSMEs in India. It is well known that the MSMEs provide good

opportunities for both self-employment and wage employment.

Source: - Final Report of the Fourth All India Census of Micro, Small & Medium Enterprises 2006-07: Registered Sector.

COMPARISON OF THE MICRO AND SMALL ENTERPRISES (MSEs) SECTOR WITH THE OVERALL INDUSTRIAL SECTOR

The MSE sector has maintained a higher rate of growth vis-à-vis the overall industrial sector.

Comparative growth rates of production for both the sectors are given in the Table below




61

TABLE 3.3 COMPARATIVE DATA ON GROWTH RATES OF MSE SECTOR GROWTH RATES (%)

Year Growth rates of SSI Sector

[2004-05 base IIP(%)]

Over all Industrial Sector

2004-2005 10.88 8.40

2005-2006 12.32 8.00

2006-2007 12.60 11.90

2007-2008 13.00* 8.70

2008-2009 **

3.20

2009-2010 **

10.50

2010-2011 **

7.80

* : Projected, IIP � Index of Industrial Production.

# : Source- M/o Statistics and PI website- http://www.mospi.nic.in

** : Due to revised definition of MSMEs Sector, methodological revisions are under progress.

Number of Enterprises in MSMEs Sector

The number of micro, small and medium enterprises in the year 2006-2007 was 267.12,

2007-08 was 285.16 and 2010-11 was 311.52. The following figure explains the increased

number of micro, small and medium enterprises from the year 2006-07 to 2010-11.


http://www.mospi.nic.in



62

* Projected data for the year 2009-10 to 2010-11.

The above chart shows that in the year 2010-11 the number of micro, small and medium

enterprises increased to 311.52 lakhs.

Employment in MSMEs Sector

The employment in MSME sector is presented in the following figure.




63


The above figure shows that the number of employment in MSME sector has

increased from 2006 as 595.66 to 732.24 lakh in 2010-11.

Production in terms of Gross Output in MSMEs Sector

The following figure explains the production details of MSME sector from the year 2006-

07 to 2010-11.




64


The above figure shows that the production of MSME sector has increased from

Rs.709398 in the year 2006-07 to Rs.1095758 in 2010-11.

ESTIMATES OBTAINED FROM REGISTERED MSMES

SIZE OF THE REGISTERED MSMES SECTOR

The size of the registered MSMEs sector is estimated to be 15.64 lakh. Of the total

working enterprises, the proportion of micro, small and medium enterprises were 94.94%, 4.89%

and 0.17% respectively. This comprises 67.10% manufacturing enterprises and 32.90% services

enterprises. About 45.23% of the enterprises were located in rural areas.




65

Small industries sector (MSEs) is undoubtedly the engine of employment and income

generation. They help to empower the masses who have relatively less access to resources. The

interest in development of SSI was aroused only when it was realized that the development of

large scale industries in India was considered a difficult task. The constraints of capital, skilled

manpower and raw materials aided and abetted such difficulty. In a developing and

predominantly agricultural economy like India, small industries can exercise a stabilizing

influence on the vagaries and uncertainties of a rural economy, besides contributing to its

prosperity.12

________________________________

12Valsamma Antony, �The Prospects and Growth of SSI in India � An Overview�, Southern

Economist, Vol.41, No.1, May 1, 2002, p.23.




66

The SSI sector enjoys the status of priority sector for seeking financial and non-financial

assistance from the Central Government, State Governments and other non-Government

organizations.

Various parameters have been laid down in different countries to describe the small-scale

industries. These parameters have changed continually from time to time mainly due to

operational consideration and partly to the changing needs of economic and social conditions. In

most of the countries of the world, the criterion for defining a small industry is based on the size

of employment.13 In present world all these players, due to liberalization policies adopted by

many countries, connect with each other freely to meet, convince, sell and satisfy consumers.

Every one of them focuses on their strength in influencing their prospective consumers.

PROFILE OF VIRUDHUNAGAR DISTRICT �THE STUDY AREA

In this section, an attempt is made to describe the profile of the study area, Virudhunagar

District, in terms of Origin, Location, Physical Features, Administrative set up, Area

Classification on the basis of Industrial Backwardness, Human Resources, Agricultural

Resources, Forest Resources, Trade and Commerce, Industries and other Infrastructure Facilities.

Tamil Nadu is situated in southern part of the Indian sub-continent. It is bound on the

north by Andhra Pradesh and Karnataka States, on the south by the Indian Ocean, on the west by

the State of Kerala and the Western Ghats and on the east by the Bay of Bengal. Tamil Nadu

covers a little over 1,30,000 sq.km., representing about four per cent of India�s geographical

area. In terms of area, Tamil Nadu ranks eleventh in the country.

________________________________

13S.M.Pattanaik, Development Strategy for Small Industries, Himalaya Publishing House,

Mumbai, 1988, p.1.




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68

people of this community migrated to improve their business status and settled in Virudunagar

during 19th century A.D. Virudhunagar exports all kinds of oil to Dubai and Srilanka and also

exports cotton, chilli, spices, cardamom to USA and Singapore. Virudhunagar is a famous

business centre without markets. The business people of Virudhunagar play an important role in

price fixation of consumer products. Hence, there is a popular saying, "Virudunagar produces

nothing but controls everything".

Industrial Glance An analysis of the growth of small scale sector reveals that the significant change in

structure and pattern of the industrial development have taken place within the small scale sector

in Virudhunagar district. Promising changes in structure and pattern of industries have made a

noticeable impact on the production front. Virudhunagar District has the total geographical area

of 4,245 sq. km. The district has got 2 revenue divisions, 6 municipalities, 11 blocks and 7

taluks.

BLOCKWISE INVESTMENT CLASSIFICATION OF SSI AS ON 31-12-2009

The particulars regarding the investment classification of small scale industrial units on

31.12.2009 in Virudhunagar district are given in the following table.




69

TABLE 3.4

CLASSIFICATION OF SSI UNITS BLOCKWISE

Block Name

Investment in

lakh

% to total

Aruppukottai

Kariapatti

Narikudi

Rajapalayam

Satur

Sivakasi

Srivilliputhur

Tiruchuli

Vembakottai

Virudhunagar

Watrap

354

-

-

3,158

930

5,800

179

-

177

568

-

3.2

-

-

28.3

8.3

52

16

-

1.6

5.1

-

Total 11,166 100

Source: District Industries Centre, Virudhunagar.

Out of 11 blocks in Virudhunagar District only 7 blocks have made their investment in

small scale industries. Out of 7 blocks, investment in Sivakasi amounts to 5,800 lakh rupees,

Aruppukottai amounts to 354 lakh rupees, and Virudhunagar amounts to 568 lakh rupees. From

this table it is inferred that the investment in Sivakasi block is high which amounts to 5,800 lakh.




70

PRODUCTWISE MICRO AND SMALL ENTERPRISES IN VIRUDHUNAGAR DISTRICT UPTO 28.03.2009

The industry group activities are classified into food, textiles, jute, woolen products,

chemical products, mineral products etc. The details about the small enterprises registered in the

year 2008-09 based on the industry group are listed in the Table 3.5.

TABLE 3.5

SSI UNITS REGISTERED UPTO 2009

Sl.No Classification No. of

Units

1. Food Products 785

2. Beverages, Tobacco and Tobacco Products 31

3. Cotton Textiles 1,057

4. Wool, Silk, Synthertic fibres 137

5. Jute, Hemp, Mest Textiles 16

6. Hosiery Garments 2,500

7. Wood products 1,601

8. Paper and paper products 2,497

9. Leather Products 76

10. Rubber Products 638

11. Chemical and chemical products 4,171

12. Metallic Mineral Products 319

13. Basic Metal Products 123

14. Metal product 450

15. Machinery and parts 227

16. Electrical Products 149

17. Transports and Equipments 269

18. Miscellaneous Manufacturing 1,145

Total 16,191

Source: District Industries Centre, Virudhunagar.




71

Out of the total 16,191 industries registered under the DIC upto the year 2009, 785 food

industrial units, 1057 cotton textile units, 2,500 hosiery mills, 1,601 wood industrial units, 2,497

paper industrial units, and 4,171 chemical industrial units are the total number of small scale

industrial units registered with the DIC upto the year 2009. It is clear from this table that more

number of chemical product units are registered with the DIC upto the year 2009.

BLOCKWISE INVESTMENT AND EMPLOYMENT OF SSI UNITS AS ON 31.3.2010

Blockwise investment and employment in SSI units of Virudhunagar District are

presented in table 3.6. Out of 11 blocks in Virudhunagar District small scale industries are

operated only in 7 blocks. The investment and employment opportunities provided by these 7

blocks are listed in the table 3.6

TABLE 3.6

BLOCKWISE INVESTMENT AND EMPLOYMENT ON 31.3.2010

Sl.No Block Name

Small

No. Investment

Rs. In lakhs

Employment

No. 1. Aruppukottai 2 3030.75 474

2. Kariapatti -- 54.65 54

3. Narikudi 233 -- --

4. Rajapalayam 137 5,970.7 894

5. Sattur 384 3,460.8 1,551

6. Sivakasi 113 9,676.5 2,757

7. Srivilliputhur 2 2,854.5 315

8. Thiruchuli 2 54.14 26

9. Vembakottai 16 60.17 24

10. Virudhunagar 6 417.65 6411. Watrap -- --- --

Total 1,016 25,579.98 6,159

Source: District Industries Centre, Virudhunagar




72

Out of 6,159 employees employed in small scale industries in the 9 blocks, more

number of employees are employed in the order of Sivakasi 2757 employees, followed by Sattur

1551 employees and Rajapalayam 894 employees.Out of 9 blocks, investment in Sivakasi

amounts to Rs.9,676 lakh rupees, Aruppukottai amounts to 3030 lakh rupees, Sattur amounts to

3,460 lakh rupees, Srivilliputhur amounts to 2854 and Virudhunagar amounts to 417.65 lakh

rupees. From this table it is inferred that the more employment opportunities is created by

Sivakasi block and the investment in Sivakasi is high which amounts to Rs.9,676 lakh.

INDUSTIRES REGISTERED UPTO THE YEAR 2010

The industry group activities are classified into food, textiles, jute, woolen products,

chemical products, mineral products etc. The details about the enterprise registered in the year

2009-10 based on the industry group are shown in the Table 3.7




73

TABLE 3.7

SSI UNITS REGISTERED UPTO 2010

Sl.No Classification No. of

Units

1. Food Products 883

2. Beverages, Tobacco and Tobacco Products 31

3. Cotton Textiles 1,054

4. Wool, Silk, Synthertic fibres 137

5. Jute, Hemp, Mest Textiles 21

6. Hoisery Gaments 2,451

7. Wood products 1,558

8. Paper and paper products 3,648

9. Leather Products 73

10. Rubber Products 700

11. Chemical and chemical products 3,743

12. Metallic Mineral Products 333

13. Basic Metal Products 101

14. Metal product 642

15. Machinery and parts 222

16. Electrical Products 141

17. Transports and Equipments 394

18. Miscellaneous Manufacturing 707

Total 16,839





74

It could been seen that out of the total 16,839 industries registered with the DIC upto the

year 2010, more number of SSI units are registered under the industry group, in the order of

chemicals, paper products, hosiery garments, wood products and cotton textiles. It is inferred

from the above table that more number of chemical product industries are registered in the DIC

upto the year 2010.

TWO DIGIT CODE FOR INDUSTIRAL GROUP

There are a number of industries registered with the District Industries Centre for the

purpose of receiving subsidy to their business. Those industries need not manufacture same type

of product. Each enterprise is involved in producing different type of product. The District

Industries Centre differentiates the various productivity functions of the SSI units with two digit

code number like 12, 13,29,31,41, and 42.

From that some of the product details and code wise information are presented in the

following table.

TABLE 3.8

TWO DIGIT CODE DETAILS

S.No Two digit code

Product

1 12 Fruits, Vegetables, Cerals& Pulses and other vegetables

2 13 Sugar, Molasses, Khandsari, Chocolate, cocoa etc.

3 15 Beverages, Tobacco & Pan Masala, vinegar, Soft drinks, Mineral water etc.

4 29 Mineral Products.

5 31 Chemical Products

6 41 Leather products

7 42 Rubber products

8 54 Pulp of wood & other Fibroses Materials

9 61 Textile and Textile articles, silk and silk products




75

SSI UNITS REGISTERED DURING THE YEAR 2009-2010

A large number of enterprises is registered with the District Industries Centre year by

year. The following table shows the number of SSI units registered during the year 2009-2010

along with the details about industry group. The industry group activities are classified into

food, textiles, jute, woolen products, chemical products and mineral products. The details about

the enterprises registered in the year 2009-10 based on the industry group are listed in the Table

3.9.

TABLE 3.9

SSI UNITS REGISTERED IN THE YEAR 2009-2010

Industry group No. of units %

Food 49 6.8

Textiles 50 6.9

Jute, Hermp, Mest, Textiles 2 0.3

Hosiery Garments 32 4.4

Woolen products 9 1.3

Paper products & painting 241 33.5

Leather products 3 0.4

Rubber products 28 3.9

Chemical products 72 10

Mineral products 23 3.2

Metal products 141 19.6

Machinery parts 2 0.3

Electrical machinery parts 7 0.9

Transport and Equipment 5 0.7

Miscellaneous Industries 56 7.8

TOTAL 720 100 Source: District Industries Centre, Virudhunagar




76

It is inferred from the table that more number of paper products and printing units (241)

were registered with the DIC during the year 2009-2010.

WORKERS EMPLOYED IN SSI UNITS DURING 2009-2010

Workers employed in the SSI units industrywise are presented in the following table.

TABLE 3.10

WORKERS EMPLOYED IN SSI UNITS

Industry group No. of workers

% to total

Food 4,292 6.6

Textiles 4,852 7.4

Jute, Hemp, Mest, Textiles 93 0.1

Hosiery Garments 3,843 5.8

Woolen products 2,884 4.4

Paper products & painting 13,739 21

Leather products 301 0.5

Rubber products 1,742 2.7

Chemical products 26,740 40.8

Mineral products 1,147 1.8

Metal products 1,249 1.9

Machinery parts 494 0.8

Electrical machinery parts 333 0.5

Transport and Equipment 1,085 1.7




77

TABLE 3.10 (Contd..,)

Basic metal product 176 0.3

Beverage & Tobacco 82 0.1

Synthetic fiber wool silk 297 0.5

Miscellaneous Industries 2,016 3.1

TOTAL 65,365 100


It is clear from the above table that, more number of workers are employed in the

chemical products units (26,740), followed by paper products and cotton textiles.




small scale industrial units an...

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