Capacity Utilisation in Small Scale Industries A Study
Capacity Utilisation in Small Scale Industries A Study
Capacity Utilisation in Small Scale Industries A Study
STUDY
(30.10.2008-19.11.2008)
IN
TO THE
DIRECTOR
BHARATHIYAR UNIVERSITY
SUBMITTED BY
Dr.V.BALAJI,PhD.,
LECTURER(SS) IN COMMERCE
Introduction:
The small scale industries have a pride in our economy. They have a high potential
among others, for generating employment, dispersal to semi urban and rural areas,
promoting entrepreneurship and earning foreign exchange. Aware of this, the SSIs have
been accorded a strategic position in the successive five year plans towards fulfillment of
The Central and State Governments have been encouraging the small scale industries
financial assistance, technical consultancy, training marketing, support legal advice and
etc. It was hoped that such encouragement would result in healthy development and
progress of the small scale industries leading to increased production in various sector ,
consumer satisfaction. Even almost all political parties have been supporting expansion of
small scale industries. Thus, there were high expectation that there would be an increase
in turnover, production, profit margin, capacity utilization and exports. But the hopes have
drugs, electronics, and miscellaneous products. Their numbers have been increasing .
Nationalized banks, financial corporation and other agencies, both under public and
private sectors have been financing the small scale industries. But most of the small scale
units have not been able to achieve capacity utilization greater than 80% , as revealed by
surveys. Thus many of them do not plan to undertake a fresh infusion of capital. Thus,
there is a large number of sick units, on hand they are suffering from under capacity
utilization and on other, low profit margin. Perhaps one defect has led to another
handicap and vice versa. Therefore, they failed to secure adequate order for their
products and covering the operational costs and incur losses. Disturbed labour relations
Karnataka have indicated that more than 80%of the industrial units in the various
industrial estates of the two districts are either closed or sick and facing closure.
This is true not only in the case of small scale industries but even in the case of
the medium and large scale industrial units though they are very few in numbers.
The fact the same scenario prevails throughout the country and difference, if any,
is only in degree can not be a consoling factor. Under utilization maybe the root cause
of small scale units’ ill health. There are different causes for underutilization of capacity in
the small scale units. These include power cut, lack of demand, lack of working capital
which appears to be the most serious problems hindering the full utilization of the
installed capacity, which decides the quantum of production and its consequent profits.
Other causes include lack of timely supply of required raw material, concentration of
many same line of unit in one area, labour scarcity, inadequate infrastructure facilities ,
credit sales etc. Underutilization of the capacity is the result of several influencing factor
Central and State Government as well as their agencies for industrial developments have
been launching a number of programmes, schemes and training facilities for the
establishment development and growth of small scale industries. They are also carrying
out many studies and have held numerous symposia, conferences, workshops etc and
development have undergone sweeping changes in the recent past particularly in the
post liberalization era. The allocations made in the five year plans, the policy measures
taken in industrial statements and setting up of various national and state level
institutions show the interest of the government in supporting the development of small
scale units. In spite of various measures taken by the government the small scale units in
the country have been suffering due to various problems because various reasons.
In this study emphasis will be given to the capacity utilization of selected small scale
industries particularly the extent and root causes for the underutilization of installed
capacity in the small scale units and to suggest feasible ways and mean to surmount
To examine and project the existing performance level of industrial units in the study
area
To investigate into the reasons for underutilization of capacity in the Small Scale Units.
To examine and study the impact of underutilization on the various stakeholders of the
units.
To examine the implications of various programmers of the government and other
agencies
Literature Review:
According to the information collected from small scale industrial centre ,Government
agencies for small scale industries and some of the associations of the small scale
industries no in-depth studies have been made till now on the capacity may be
considered as one of the problems, but neither the entrepreneurs nor the concerned
preliminary analysis of responses from 352 small and medium members reveals a dull
in the business situation in the coming years and expects an increase in turnover
The CII survey covers a broad spectrum of industry groups and activities of the small
and medium industry members all over the country. The survey relates to the actual
performance of industry. From the survey report, on can understand that any of the
David H.Hort explains in one of the books on entrepreneurship that during the period of
depression capacity under utilization is found in almost all industries. Market trend is
Haphzibah conduct one of the studies. The researchers took sample units at Hyderabad
and Secundrabad. The study revealed that 50% of small scale units were not in a
position to utilize more than 50% of the installed capacity. In the study prominent reasons
indicated by the entrepreneurs are inadequate market demand and inadequate working
capital. Other reasons are irregular and inadequate supply of power etc.
Kumar and Dr.Himachalam at selected small scale units of Tirupathi Industrial Estate
discloses that 50% were utilizing 25% to 50% capacity and the remaining 50% were
utilizing 50 to 75 percent. And no unit was utilizing more than 75% of plant capacity.
Further it revealed that age of the unit alone is not accountable for the extent of capacity
utilization. Entrepreneurial talents and problems, which confronted the unit, also
influenced the level of capacity utilization in the small-scale units under study.
Justification:
1.This study is intended to take up the responsibility of making a case for small scale
industries participation in the economic development that may help us to know better
Research Methodology:
The study will be descriptive and analytical in nature. The research will be
mainly based on the primary data. However the necessary information and data will also
The research strategy used will be sample survey where a representative part
of the target study population will be taken and sampling elements(respondents) will be
directly contacted to obtain the relevant data using a structured questionnaire. This will
also be supplemented by using interviews to collect the same. Besides the content
analysis will be a combination on unit variant and multi variant analysis including many
General Conclusion:
The present study aims at examining the capacity utilization of small scale industries
and the reason for not utilizing it to the full extent. Capacity utilization will be examined taking into
account the location of the unit. The industry group to which it belonged, year of establishment, form
of organization, investment in plant and machinery, the entrepreneur’s background and reasons
Now in this era of socio-economic transformation and favourable condition it is the turn
if small scale industries to rise to the occasion and tell the society that they are capable of producing
results.
Bibliography: