Small Scale Industries- Problems & Remedial Measures
Problems of Small Scale Industries
The small scale industries have vast potentialities in India. However, they face a large number of problems; hence, they could not progress satisfactorily. Due to these problems SSIs turn sick and enviable. They eventually close down. Let us now consider the main problems that the small scale units have to face :
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Poor project Planning:
Due to the low level of education and experience, small entrepreneurs often depend upon consultants and hired experts for project formulation. They do not fully understand project details. Thus, poor planning of project increase the cost and expenses. Due to dependence on others, project and programmes tend to over run which leads to further difficulties.
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Unsuitable Location:
Selection of proper location of workshops and plant is also a major problem before the SSIs. The choice of location depends on various factors like availability of infrastructural facility cost of location, availability of skilled labour, markets and raw materials. But small entrepreneurs are governed by different considerations such as cheap land, their traditional workplace, family business, measures of local markets, sentimental attachment to their traditional ancestral property or business-place etc. Thus, small entrepreneurs are properly skilled in deciding about suitable location.
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Power and Water Problems :
Related to the under-utilisation of capacity are power and water problems faced by small scale units. Power supply is not always available in rural areas: Besides, small entrepreneurs cannot afford to go in for power alternatives. Water supply is also not regular in villages. This affects their productivity adversely.
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Inadequate Infrastructure :
In a survey of 1,063 small units, Keshav Das and Morris found that 716 units faced significant infrastructural problems. SSIs are being constrained by inadequate physical facilities like electricity, water, roads, transportation, communication, banks, and other basic services particularly in backward areas. This results in under-utilisation of capacity and wastages.
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Problems of Marketing :
One of the problems faced by SSIs is in the field of mar These units do not have any marketing organization”. They lack transport, storage and warehousing facilities. They do not have sales organization. They do not make use of advertising and publicity methods. Therefore, these units suffer from a competitive disadvantage vis-à-vis large scale units. These units also lack ‘bargaining skill‘ and ‘staying capacity’ in the market. Thus, these are forced to sell their products at very low prices. To save small scale units from competition with large scale units, the government has reserved certain items for the small scale sector.
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Outdated Technology:
Most of the small scale units depend upon old techniques of production. They use outdated machinery and equipment. Many are using second-hand tools and machines. Due to limited capital, they find it difficult to modernize their workshop and machinery. Thus, the quality of their products and productivity tend to be low and cost of production per unit remains high.
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Finance and Credit:
The scarcity of finance and credit is the main obstacle in the development of small scale units. The artisans and craftsmen have little capital. They take credit from Mahajans who charge a very high exploitative rate of interest. Due to their weak creditworthiness and poor economic base, they find it difficult to take loans from the commercial banks. Also, it is partly due to scarcity of capital in the country as a whole. Besides, SSIs are also unable to generate resources as they lack knowledge to communicate their work to the capital markets. Due to poor financial image, small entrepreneurs fail to get credit facility at reasonable casts.
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Problem of Raw Materials:
SSIs are facing the problem of short supply of raw materials. They cannot utilize the services of middlemen to get raw materials due to their weak financial position. In some areas, there is an absolute scarcity of raw materials or it has a poor quality and high cost. For instance, the handloom industry depends for its requirement of cotton on local traders. These traders often supply cotton on the condition that the weavers will sell the cloth only to them when it is ready. Thus, the weavers are subjected to double exploitation. Thus, small units fail to utilize their full production capacity. It also increases their cost of production which adversely affect their competitive strength in the market.
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Problem of Under-utilised Capacity:
Many studies have made it clear that there is the gross under-utilisation of installed capacities in small scale industries. After looking at findings of various surveys, it can be inferred that on an average 50 to 40 percent of capacity is not utilized in small scale units.
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Unskilled Labour :
Labour has an active part in small scale units. But workers lack training facilities in small scale sector. Most of the workers are unskilled, inefficient, untrained and having low level of education. Hence, they fail to cope up with the challenges of modern production system. Professionals and trained technicians also not to join small scale units. Due to this constraint of labour force, SSIs face difficulty in improving their productivity.
Remedial Measures for problems of SSI
Small sector holds a very important place in national economy and in industrial system of the country. Thus, it requires to solve above-mentioned problems of this sector in the optimum working and results of SSIs. These remedial measures can be adopted to improve the situation:
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Provision of Latest Machines, and Tools:
The various Government institutions should provide suitable tools and updated machines to SSIs at reasonable rates.
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Adequate Credit Arrangement:
SSIs are using traditional sources of financing. For their expansion, alternative means like venture capital, development finance, etc. must be made available. The SSIs mostly depend on their own funds which remain insufficient for their working and new projects. The government and financial institutions must provide finance to small units at the cheaper rates of interest.
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Provision of Infrastructural Facilities:
SSIs need a sound case of infrastructural facilities to improve their productivity. They need the facilities of finance, electricity, water supply, transport, communication, technical consultancy, research, quality testing, and various other support systems. The Government should develop big industrial estates, and commercial complexes to provide all these facilities there. Small industries must be accommodated in industrial areas on priority basis.
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Improvement in Production System and Technology:
SSIs should try to modernize their techniques of production by adopting latest technology. Help can be obtained from government consultancy organizations and laboratories. They should base their production on product and quality research. They should innovate the designs, texture, product form, tools, and processes of manufacturing. They should adopt the latest technological developments in their business.
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Effective Marketing Arrangements :
Small scale units must also improve their marketing methods. They should focus on creating new brands, designs, better quality products and market development. They should start quality improvement programme. They should use promotional methods to advertise their goods. They should pay more attention on creating new markets and on establishing brand identity. They should design a complete marketing strategy. New distribution channels must be established for SSIs. Proper transport, storage and warehousing facilities should also be provided to small units at the cheaper rates.
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Regular Supply of Raw Materials:
National Small Industries Corporation, SIDO and other canalizing agencies should take necessary steps to supply raw materials to SSLs on a regular basis. Bogus firms must be checked and excluded from this type of help. Government should also make proper arrangements to import raw materials and supply to SSIs at reasonable rates.
Important links
- Venture Capital- Meaning, Stages, Sources & Guidelines
- Specialised Venture Capital Fund/Companies in India
- Need for Funds & Fixed Capital
- Working Capital- Definition, Factors determining Working Capital
- New Venture (Enterprise)- Stages of Establishment | Promotion of Venture
- Financial management- Meaning, Characteristics and Objectives
- Project Management- Meaning, Characteristics, Functions
- Opportunity Analysis- Meaning & Types
- Emergence of New Class of Entrepreneurs & Women Entrepreneurs
- Social responsibility of Business- Meaning, Argument in favour and against
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