MICRO AND SMALL ENTERPRISE IN GENERAL ENGINEERING
(An analytical study of selected light engineering units from North Malabar)
Premavalli Panakkata Veetil Dr. T. Asokan
(Research Scholar)) (Supervisor & Guide)
Department of Management Studies
Kannur University
Introduction
Worldwide, MSMEs have been recognized as engines of economic growth. This sector is an important component of our national economy as well. The MSME sector is reckoned as the backbone of the Indian economy as it contributes significantly to the GDP growth of the country. The current contribution of MSME sector to GDP is 8 %. They employ 80 % of the total labour force contributing around 40 % of the total manufactured output. India has a strong engineering and capital goods base and is a major exporter of light engineering goods. The presence of well-developed and sound light engineering sector is the basis of almost all productive and business activities in the country. The demand for engineering applications among the Small and Medium Enterprises is increasing rapidly. The leading companies are providing a portfolio of the industry specific readymade templates, pre-configured and easy-to-deploy design, manufacturing and data management solutions, specifically designed for the needs of SMEs. Light engineering industry is one of the largest segments of the overall industrial sector of a nation. Being labour intensive, the light engineering sector generates a lot of employment opportunities in the economy, especially in the areas where there is an abundant supply of skilled and semi-skilled labour. Another important factor to be considered is the symbiotic relationship between MSMEs and large scale units. To boost the smooth functioning of these large units, several MSMEs will have its own contribution by way of supplying key parts, sub assemblies, spares etc. to such large units. MSMEs benefit by way of getting continuous orders from large units and large units get steady supply from MSMEs situated in its periphery. The changing demographic profile of the Indian consumer, viz. Increasing income levels and greater propensity to spend, lifestyle changes like nuclear families and working women, exposure to global trends etc are generating opportunities for growth of light engineering industries. These changes have been driving consumption in end-user sectors such as consumer durables, building accessories, household utensils kitchenware, and home exercise equipments.
Scope and significance of the Study
Although industrial development holds the key to the economic progress, Kerala has been quite slow considering the potentialities as well as requirements of the state. Of the different micro and small scale enterprises functioning throughout Kerala, engineering units occupy major position. In all the fourteen districts of the state, engineering industries occupy a prominent status. Though infrastructure facilities like developed land and buildings, transport and communication, utilities like power and water, distribution and other facilities etc are more or less available throughout the state, industries in the light engineering sector, especially spares and sub assemblies needed for the automobiles, machinery and construction sectors have not prospered in Kerala. Likewise, lots of building materials and utensils for the household are coming from the neighbouring states and other industrially developed stated like Maharashtra, Gujarat, Punjab, Haryana etc. There must be some bottlenecks for such industries not concentrated in Kerala and it is learnt that no serious study has been conducted from this angle. The researcher, therefore, believe that there is scope for conducting a detailed study in this area.
North Malabar has been selected as the study area because:
v Kozhikode is considered as the commercial capital of North Malabar. Kannur, and Kozhikode districts accommodate large number of tile, brick, timber and textile industries. To cater to the needs of the above referred traditional industries, General Engineering industry assumes importance as suppliers of equipments and service providers.
v Moreover, Kannur district is going to be a major business hub of the country especially, textiles on the following grounds. Textile related Central and State organizations like Textile committee, Weaver’s Service Centre, Power loom Service Centre, National Handloom Development Corporation, HEPC Design studio, Apparel Park(TCID), NIFT, IHTT, proposed container freight station, Azhikkal sea port and air port – all are in Kannur district. These institutions will definitely fuel the growth of engineering industries, especially in textile related industries.
Objectives of the study
The study aims to analyse the role of light engineering units in employment generation and the extent of industrialization of the state. The major objectives of the study are:
1. To examine the growth pattern of light engineering units in the four districts (Kozhikode, Waynad, Kannur, and Kasargod) of Kerala state in the context of the operation of the industrial estates.
2. To analyse the economics of light engineering units operating in North Malabar in terms of cost, price and profit per product/service.
3. To explore the product mix, design and demand profile of light engineering industries in North Malabar.
4. To enquire into and ascertain whether there is any production linkage between light engineering units in North Malabar and the group of engineering or other industries within or outside the state of Kerala.
5. To examine the financial support availed by units and to assess the sector-wise repayment position as on date, and
6. To make suggestions for further growth of light engineering units in North Malabar.
Research Methodology
This is an explorative cum descriptive research based on both primary and secondary data. Primary data are required for verifying the objectives set for the study while secondary data are relevant for the overall analysis of the industry. Primary data is collected through a sample survey by means of pre tested interview schedule while secondary data are collected from the records of District Industries Centres and different Government publications.
Population and Sample size
The total number of light engineering units in the North Malabar area constitutes the population. The registered light engineering units in micro/small-scale sector in Kerala approximately numbers to 18,114 in 2007. Of this, around 3,310 are in the study area. Considering 75 % as the survival rate, approximately 15 % of the units (370) are identified for the study on a multi-stage random sampling basis, giving due importance for different types of products and services, rural and urban units. Final selection of the units from the sample is based on working status.
Period of the study
The study is undertaken by collecting data for a period of 10 years from 2000 to 2009.
Data Analysis Techniques
Data analysis involves converting a series of recorded observations into descriptive statement and /or inferences about relationships. For the statistical analysis of data, major tools used include: Chi-Square test, Pie-Charts, Averages, %s graphs, Bar diagrams, tests of significance and software packages SPSS and Micro Soft Excel.
Major Findings
The major findings and observations arrived at by the researcher are summarized below.
Ø The rate of growth in light engineering units indicates that majority (51.1 %) of the units were started after 1994.
Ø In Kannur district, 83.93 %; in Kasargod district, 88.24 %; in Kozhikode district, 83.57 %; and in Waynad district, 92 % are carried on by single owners.
Ø Majority of the sample units in Kannur (44.64) and Kasargod (30.88) districts, are run by blacksmiths. But in Kozhikode and Waynad districts, thiyya caste dominated the blacksmiths by having a share of 36.43 % and 26 % respectively in the ownership of light engineering units.
Ø All of the unit owners are literate. Majority of the owners are below Pre Degree 70.54 %. Out of the sample, 57.30 % of the owners started their enterprise after gaining practical experience from light engineering units.
Ø Additions to the machinery are made by 74 % of the sample units. It means that these units introduced better technologies to cope with the changing needs, to improve quality and productivity.
Ø In Kannur, Kasargod and Kozhikode districts, around 50% of the enterprises work in own buildings, where as it is only 33 % in Waynad district.
Ø The average investment in machinery is highest for machines and engineering products (5.45 lakhs) followed by 3.59 lakhs for engine work, 3.56 lakhs for steel furniture, 0.86 lakh for Structural Fabrication and 0.83 lakh for automobile repairing and servicing.
Ø The average amount of working capital required is highest for steel furniture (1.82 lakhs), followed by machines and engineering products (1.60 lakhs), 0.39 lakh for engine work, and 0.37 lakh for structural fabrication.
Ø In steel furniture and machines and engineering units, 18 to 20 % of production is for stocking. Hundred % of the work of automobile repairing, engine work and structural fabrication, 81.82 % of machines and engineering units, 79.69 % of steel furniture units are done on job order.
Ø Majority of the sample units - 63 %; had taken short term loans in the form of cash credits or overdrafts for meeting working capital needs. Only 37 % obtained term loans.
Ø Loan availed of by majority of the units (81.25 %) are from banks. The share of KFC is meager with 8.11%.
Ø 42.14 % of the units in Kozhikode district depend on loans, followed by Kasargod with 39.71 %, Kannur 30.36 % and Waynad 22%.
Ø Majority of the units are (81.25 %) are regular in repayment of loans. Out of the units which have availed themselves of loans, only (18.75 %) are irregular in the repayment.
Ø In general, the district wise default in loan repayment remains in the range of 16 to 19 % except for Waynad district where the default rate is around 24 %.
Ø More than 97 % of the units get the raw materials supplied locally whether it is steel furniture/structural fabrication/engineering products.
Ø 52 to 65 % of the workers in different light engineering units under study are skilled workers.
Ø Average employment per light engineering unit under study is 5 persons. In Steel furniture unit, average employment per unit is 7. On an average, 5 persons are employed in a structural fabrication unit and in an automobile unit. Employment generation capacity of machines and engineering products as well as engine works are same, with 4 persons per unit.
Ø To employ one person in machine and engineering products, an investment of Rs. 1.7 lakhs is required. The investment required for employing one person in steel furniture unit is only 0 .77 lakh and in Engine work it is 0.99 lakh. For structural fabrication it is 0.25 lakh and in automobile repairing and servicing units, 0.20 lakh only is needed.
Ø In nearly half of the units of automobile workshops, engine works and structural fabrication units, the number of employment has come down considerably over the last 6 years, while in steel furniture; the decrease is only 16 %. The number of light engineering units which are able to reap the benefit of the emerging opportunities is only 12.43 %. In all the different sectors of light engineering, in nearly 50 % of the units, there is no change in the number of workers, though there is sufficient scope for increased production/service and proportionate increase in employment.
Ø Local employment is more in automobile repairing and servicing (89 %). Engine work units accommodate 83 % local people. 78 % of the workers in steel furniture are from Kerala state. It is 87 % in Structural Fabrication units. In machines & engineering products, local employment is the lowest (64 %) Rest of the workers are from Tamil Nadu, Karnataka and other states.
Ø All units pay bonus to the workers, usually once in a year. 81 % of the unit owners contribute towards the Welfare Fund of the workers. ESI contribution is made in 22 % of the units. PF and ESI coverage is given only in 5 % of the units.
Ø 54.55 % of the production of the machines & engineering units is according to trend design, it is 37.5 % in steel furniture and 100 % in structural fabrications.
Ø The average sales made by the units from 2000 to 2009 show an upward trend, though it is little for engine work and auto repairing units.
Ø The average rate of profit earned by the micro and small light engineering units in Kozhikode and Kannur districts, increased approximately from 25 % in the year 2000 to 34 % 2009. It increased from 26 % to 32 % in Waynad district and from 24 to 32 % in Kasargod district. Rate of profit showed an upward trend for all the years in all the districts.
Ø The average rate of profit earned by the structural fabrication and automobile repairing and servicing, increased approximately from 25 % in the year 2000 to 34 % in 2009. It increased from 25 % to 32 % in steel furniture, 27 to 33 % in machines and engineering products and from 24 to 32 % in engine work units.
Ø Presently, there is not much problem to find market for the products or services. For products like steel furniture and engineering products, there exists certain amount of competition from other states. For engine work, competition within the state as well as from other states is almost the same. (7 % and 9 % respectively) Competition for machines & engineering products is comparatively high with 23 % of the units facing competition from other states, while the competition from within the state is only 14 %.