Formation of Small Scale Industry Long Answer Type Questions

Formation of Small Scale Industry Long Answer Type Questions

Question 1.
Discuss the various steps involved in starting a business.
OR
Discuss the steps involved in the formation of a small business venture.
Answer:
(1) Identification and evaluation of the opportunity: Consumers and business associates are the best sources of ideas for a new venture. Many entrepreneurs identify business opportunities through discussions with retailers, wholesalers, or manufacturer’s representative. Lastly, technically oriented people often conceptualize business opportunities when working on other projects. Each opportunity must be carefully screened and evaluated. This is the most critical element as it allows the entrepreneurs to assess the profitability of the product or service.

(2) Developing a business plan: A business plan is the description of the future direction of business. A good business plan is not only important in developing the opportunity but also essential in determining the resources required, obtaining those resources, and successfully managing the resulting venture. A business plan is often an integration of functional plans such as marketing, finance, manufacturing, and human resources.

(3) Determining the resources required: The resources needed for starting the venture must also be determined. This process starts with an appraisal of existing resources, if any, with the entrepreneur. Resources that are critical must then be distinguished from those that are just helpful. Alternative suppliers of these resources, along with their needs and desires, must be identified. The entrepreneur should try to structure a deal that enables the resources to be acquired at the lowest possible cost and the least cost control.

(4) Project appraisal and feasibility plan: The exercise of project appraisal is the assessment of a project in terms of its economic, social, and financial viability. This exercise calls for a complete scanning of the project. The appraisal of a project is undertaken by the financial institutions with the twin objective of determining the market potential of a product and selecting an optional strategy.

(5) Managing the venture: If it has been decided to go ahead with the venture, the entrepreneur must employ the acquired resources through the implementation of the business plan. Operational problems of a growing enterprise must also be examined. This involves implementing a management style and structure, as well as determining the key variables for success. A control system must be identified so that any problem area can be carefully monitored.

Question 2.
What factors should be taken into account while selecting a suitable site for a plant? Explain.
OR
Bring out the latest development in plant location.
OR
Discuss the factors determining the plant location.
Answer:
The factors determining the plant location are as follows:
1) Law and order situation: Plant location must be at that place where law and order situation is in control. If a state has bad law and order situation, then the business must not be located within that state.

2) Availability of infrastructure facilities: Plant location which is selected must have proper infrastructure facilities. Without good infrastructure facilities, it will be difficult to do business efficiently.

3) Good industrial relations: Plant location must be at those places where good industrial-relations are maintained. Entrepreneurs do not want to locate their business at places where anti-social elements are rampant.

4) Availability of skilled workforce: Plant location must be convenient and easily accessible to skilled workforce. The entrepreneurs must consider the availability of competent and skillful-workforce at a particular place to locate their business.

5) Social infrastructure: There is a need for social-infrastructure not only for employees but also for the development of their families. The availability of social-infrastructure will increase the employees’ welfare.

6) Investor friendly attitude: Plant location must be in those states whose governments have an investor-friendly attitude. Government must give attractive incentives and concessions to those who start business units in their states.

7) Nearness to market: Plant location must be near a market. Every business unit depends on a market for selling its goods and services. The goods and services must reach the market on time, and it must be available to the consumers at a low price.

8) Nearness to raw-materials’ source: Plant location must be usually near to the source of raw-material. It is important in the business to get the raw materials in time and at a reasonable price.

9) Nearness to supporting industries: Plant location must be near its supporting industries and services. If it purchases spare parts from an outside agency, then these agencies must be located very close to the business.

10) Safety requirements: Plant location must meet all essential safety requirements. Due to air, water and sound pollution, some factories have a bad effect on the health of the people.

Question 3.
Briefly explain the procedure to be followed and the documents to be furnished while starting a small scale unit.
Answer:
Having identified the business opportunity, the entrepreneur has to put the idea into action. The following issues need to be analysed:
I. Location: Selection of a location for establishing a business unit depends on various factors such as availability of raw material, nearness to market, availability of finance, mobilisation of required skilled labour, analysis of social feasibility and technical feasibility, the nature of business and its adaptability to proposed environment etc.

II. Clearances and permits: Different types of clearances and permits have to be obtained from different authorities. Following types of industries have to obtain Provisional Registration from the respective District Industrial Centers (DICs)

SSIs (Investment in plant below Rs. 1 crore)
Ancillary industries whose investment in plant and equipment is below Rs. one crore.
Tiny industries (investment below Rs. 25 lakhs in plant and machinery)
Women entrepreneurs where one or more women entrepreneurs have not less than 51% financial holding.

Other clearances:
(1) Land/Location:

  • Environmental clearances from GOI
  • NOC from Pollution Control Board
  • Change of land use from District Collector / Government in Municipal Administration and Urban Development through Director/Town and Country Planning/ Urban Development Authority.
  • Exemption from Urban Land Ceiling.

(2) Building: Permission for building layout needs to be taken from gram panchayat /Municipality/Town and Country Planning Department /Urban Develop-ment Authority.

(3) Plant & Machinery: Approval of layout needs to be taken from the Department of Factories/Boilers.

(4) Raw material: Permission for scarce raw material like Coal, Molasses, Alcohol, Paraffin, Wax etc. if required, from Industries Department.

(5) Power:

  • Power feasibility from State Electricity Board
  • Agreement with private power producer to purchase power from private generating stations.

(6) Water:

  • Own captive source
  • Public supply
  • Supply from State Government Authority in case of Industrial Parks
  • Supply from State Irrigation Department for bulk consumption.

III. Licensing: This is a part of the clearance activity. It is open to any entrepreneur to set up an industrial unit in the small scale sector. No formal permission from the state or Central Government is necessary for this purpose. Also, industries employing less than 100 workers and having fixed assets of less than Rs. 10 lakhs need not obtain any licence under the Industries Act.

IV. Registration: Registration with appropriate statutory agencies have to be made to clear the deck for operations. In their own interest, all existing small-scale units employing more than 10 workers should get themselves registered with Director of Industries in their State. A copy of this application should be sent to the Director of SSI Institute in the concerned state.

V. Feasibility Analysis: The process of project development in sequential stages are:

Project Assistance Long Answer Type Questions

Project Assistance Long Answer Type Questions

Question 1.
What are the various financial institutions which provide finance to entrepreneurs?
Answer:
The various financial institutions which provide finance to entrepreneurs are:
(i) Industrial Finance Corporation of India (IFCI): The Industrial Finance Corporation of India (IFCI) was established in 1948 under an Act of parliament with the object of providing medium and long-term credit to industrial concerns in India.

(ii) The Industrial Development Bank of India (IDBI): The Industrial Development Bank of India (IDBI) was established on 1st July 1964 under the Industrial Development Bank of India Act, as a wholly owned subsidiary of the Reserve Bank of India. The IDBI has been assigned a special role to play in regard to industrial development.

(iii) ICICI (The Industrial Credit and Investment Corporation of India):
ICICI (The Industrial Credit and Investment Corporation of India) was conceived as a private sector development bank in 1955 with the primary function of providing development finance to the private sector.

(iv) The National Bank for Agriculture and Rural Development: The National Bank for Agriculture and Rural Development provides credit for the promotion of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas.

(v) The Small Industries Development Bank of India (SIDBI): Small Industries Development Bank of India (SIDBI) is an apex-level national institution for promotion, financing and development of industries in the small-scale sector.

(vi) Industrial Investment Bank of India: The Industrial Investment Bank of India (IIBI) was established in 1985 and it extends loans and advanced to industrial concerns, underwrites stocks, shares, bonds, debentures and provides guarantees for loans/deferred payments.

(vii) Life Insurance Corporation of India: The Life Insurance Corporation of India (LIC) was set up under the LIC Act in 1956, as a wholly-owned Corporation of the Government of India, on nationalisation of the life insurance business in the country.

(viii) General Insurance Corporation of India: The General Insurance Corporation of India (GIC) was established in January 1973, GIC has been participating with other financial institutions in extending term loans to industrial undertakings and providing facilities for underwriting/direct subscription to their shares and debentures.

(ix) Export-Import Bank of India: the Export Import Bank of India (Exim Bank) was set up on JANUARY 1, 1982 as the principal financial institution for promotion and financing of India’s international trade.

(x) Khadi’& Village Industries Commission: The Khadi and Village Industries Commission (KVIC), is engaged in the development of khadi and village industries in rural areas.

(xi) National Small Industries Corporation Ltd.: The National Small Industries Corporation Ltd. (NSIc) was set-up by the Government of India in 1955 with the objective of promoting and developing small-scale industries in the country.

(xii) State Industrial Development Corporations: SIDCs provide assistance by way of term loans, underwriting and direct subscription to shares/ debentures and guarantees.

(xiii) State Small Industries Development Corporations: The State Small Industries Development Corporations (SSIDCs) are State Government undertakings, responsible for catering to the needs of the small, tiny and cottage industries in the State/Union Territories under their justification.

(xiv) State Financial Corporations: State Financial Corporations (SFCs), function with the objective of financing and promoting small and medium enterprises for achieving balanced regional socio-economic growth.

Question 2.
Explain the financial assistance provided by SIDBI to SSI’s.
Answer:
The business domain of SIDBI consists of Micro, Small and Medium Enterprises (MSMEs), which contribute significantly to the national economy in terms of production, employment and exports. MSME sector is an important pillar of Indian economy as it contributes greatly to the growth of Indian economy with a vast network of around 5.1 crore units, creating employment of about 11.7 crore, manufacturing more than 6,000 products, contributing about 45% to manufacturing output and about 40% of exports in terms of value, about 37% of GDP.

The business strategy of SIDBI is to address the financial and non-financial gaps- in MSME eco-system. Financial support to MSMEs is provided by way of (a) Indirect / refinance to banks / Financial Institutions for onward lending to MSMEs and (b) direct finance in the niche areas like risk capital, sustainable finance, receivable financing, service sector financing, etc. As on March 31, 2016, SIDBI has made cumulative disbursements of about 4.50 lakh crore benefitting about 350 lakh persons. By this way, SIDBI would be complementing and supplementing efforts of banks/ FIs in meeting diverse credit needs of MSMEs.

The most critical input, however, that has remained is, access to finance both for investment in fixed assets and for working capital. It is now accepted increasingly and universally that there is need for ensuring relatively easier access to credit, timely and adequate, need based at affordable rate of interest.
→ Credit being the most important input in the development process, the need for effective delivery and management of the same is given high priority.

→ It is generally recognized that in developing countries and to some extent in industrialized countries.

→ SSI has limited access to financial sources from banks and other financial institutions.

Even today major financing of SSI is done from sources other than institutional mechanism. Financing from own sources and borrowings. The government at both central and state level established various financial institutions to provide non-financial and financial assistances to small- scale industries. As the small-scale industries are weak financial structure, they require non-financial assistances, so that, they could compete with large scale industries.

The government established various institutions to provide non-financial assistances exclusively to the small-scale industries. In the same way there are institutions in addition to commercial banks which cater to the financial requirements of small scale industries.

Question 3.
Explain the different institutions providing non financial assistance to SSIs OR Explain various assistance for obtaining raw material, machinery land & Building.
Answer:
The success of SSIs depends solely on the well established institutional set-up. The role of various institutions set-up especially to promote the growth of small scale industries is quite unique.

Institutional support can be classified into two categories: Financial and non financial. Non financial institutional assistance is used for obtaining raw material, machinery, land and building.

  • District Industries centre
  • Small Industries Services Institute (SISI)
  • Entrepreneurship Development Institute (EDI)
  • Smalt Industrial Development Organisation (SIDO)
  • Association of Women Entrepreneurs of Karnataka (AWAKE)
  • Technical Consultancy Organisations (TCOs)
  • Technical Consultancy Services Organisation of Karnataka (TECSOK)
  • Khadi and Village Industries Corporation (KVIC)

Question 4.
Discuss the various financial incentives of SSI’s.
Answer:
The various financial incentives of SSIs include concessions, priority and aid.
1. Differential Rate of Interest Scheme: Under this scheme, loans upto Rs. 6,500 as term loans and Rs. 1,500 as working capital are provided by commercial banks to the weaker sections at a concessional rate of interest of 4% p.a.

2. Composite Loan Scheme: This scheme meets the entire financial requirements of artisans, village and cottage industries where the total credit requirements for equipment finance and working capital do not exceed Rs. 50,000.

3. Margin Money Scheme for Tiny Sector: Under this scheme, assistance is provided to the small scale unit whose investment in plant and machinery does not exceed Rs. 2 lakhs and are located in villages and towns with a population of less than Rs. 50,000.

4. Special Capital Scheme of IDBI: The scheme is being operated by IDBI for extending equity type of assistance to such entrepreneurs who possess the necessary skill and experience but do not have adequate financial resources to set-up projects, primarily in the small scale and tiny sectors.

5. Seed Capital Scheme: The scheme was introduced by IDBI with a view to assist the new entrepreneurs who do not have adequate resources of their own to set up industrial project in the small and medium sectors with project cost not exceeding Rs. 3 crores.

6. Equity Fund Scheme: Under this scheme, SBI provides interest free assistance to the small entrepreneurs for meeting the equity gap in the project.

7. Soft Loan Scheme for Modernisation: Under this scheme, IDBI provides financial assistance to the units in selected industries to overcome the backlog of modernisation/renovation/replacement of plant and machinery so as to improve their productivity and competitiveness. There is no minimum or maximum limit for loans under this scheme.

8. Bill Rediscounting scheme: This scheme was introduced by IDBI with the objective of helping the manufacturers of indigenous machinery and equipment. To push the sales of their products by offering deferred payment facilities to the prospective purchaser – user. And to enable the purchaser – user of the machinery to utilise the machinery acquired and repay its cost over a number of years.

9. Margin Money Scheme for Revival of sick Units: The scheme was introduced by GOI with a view to help the State Governments in the revival of sick small scale units.

10. Rehabilitation Scheme for Sick Units: The Small Scale units which have been assisted by SFC/SIDC and are classified as sick are eligible for assistance under the scheme. The extent of relief depends upon the merits of each individual case.

11. Credit Guarantee Scheme: Under the scheme, guarantees are extended to borrowers engaged in small scale industrial activities and also in respect of credit facilities granted to organisations assisting workers, artisans and other self employed persons engaged in industrial activities.

Question 5.
What are the various tax concessions given to small scale units?
Answer:
The various tax concessions given to small scale units are described below:
(i) Tax Holiday: New industrial units are exempted from payment of income tax on their profits upto 6% p.a on their capital employed. This exemption is allowed for a period of five years from the commencement of production.

(ii) Depreciation: A Small Scale unit is entitled to a deduction on depreciation account on buildings, furniture, plant and machinery. The depreciation is allowed subject to a maximum of Rs. 20 lakhs.

(iii) Investment Allowances: Investment allowance is allowed @ 25% of the cost of acquisition of the new plant or machinery installed under Sec- 31 of the I.T. Act.

(iv) Expenditure Allowance: The following deduction in respect of expenditure on scientific research are allowed.

  • Any revenue expenditure incurred on scientific research related to business.
  • Any sum paid to a scientific research association or a university, college, institution or public company which has its object, the undertaking of a scientific research.
  • Any capital expenditure incurred on scientific research related to the business.

(v) Amortisation of Preliminary Expenses: The preliminary expenses incurred in connection with the preparation of feasibility report, engineering expenses and legal charges for drafting agreements for the setting up of a new industrial unit or expansion of existing units are allowed to be written off.

(vi) Tax concessions for Small Scale Industries in Rural Areas: The Small Scale units set up in rural areas are entitled to a deduction of 20% of the profits and gains from their total income. This concession is also allowed for small scale units started in 24 districts declared as backward areas by the planning commission.

(vii) Rehabilitation Allowance: The business units which has been discontinued on account of flood, cyclone, earthquake or other natural calamities is granted rehabilitation allowance which is equivalent to 60 percent of the amount of deduction allowable to the unit.

(viii) Exemption on Excise duty: The exemption on excise duty limit is raised from Rs. 50 lakh to Rs. 1 crore to improve the competitiveness of small scale sector.

Formation of Small Scale Industry Short Answer Type Questions

Formation of Small Scale Industry Short Answer Type Questions

Question 1.
How do you identify a business opportunity? OR Give a brief note on business opportunity. OR Write the factors influencing business opportunities.
Answer:
It is not easy to identify a business opportunity. Following steps should be followed to identify a business opportunity:
(1) Conduct a survey/research: Conduct a survey/research and collect information on the existing condition of the proposed product/service to be manufactured/rendered.

(2) Market behaviour, consumer behaviour, financial support, legal aspects and economic viability: Market behaviour, consumer behaviour, financial support, legal aspects and economic viability have to be examined.

(3) market feasibility: Market behaviour gives information on the market feasibility. It gives information on whether the product has the potential to get sold without any problems.

(4) Consumer behaviour: Consumer behaviour will explain the tastes and preferences of the consumer and throw light on the demand situation.

(5) The study on financial support: The study on financial support will examine the quantum of money required, sources of obtaining finance, subsidies and incentives available, cost of finance and the break even period.

(6) Legal aspects: Legal aspects will determine the type of business opportunity available, the prevailing government policy, ecological constraints and the like.

Question 2.
Discuss the factors influencing “scanning the business environment”.
Answer:
There are interacting and interdependent groups of variables in the business system of an enterprise. One of the important variables is environmental forces. Environmental forces comprise of two types of variables namely

  • Controllable variables and
  • Uncontrollable variables.

As the name suggests, controllable variables are internal factors which can be changed. On the other hand, uncontrollable variables cannot be changed and have a direct impact on business. Science and technology, economic conditions, ecology, legal and political conditions, demography, consumer behaviour, social and cultural climate etc are all uncontrollable factors.

An answer to the following questions will reveal whether there is a business opportunity or not:

  • Whether the environment is conducive to start or not to start the business?
  • Whether the proposed production is needed in that locality or can serve as an ancillary unit to a large industry?
  • Whether production facilities in case of small units are available without much problems?
  • Whether the product can be produced at a cheaper cost?
  • Whether the proposed SSI can easily market its product?
  • Whether the technology to produce is available and at what cost?
  • Can the total project cost be mobilised without any problem?

Based on this, entrepreneur can take the decision whether or not to establish his enterprise?

Question 3.
Explain the errors in selection of location.
Answer:
The errors in selection of location are as follows:

  • Unprepared site selection team.
  • Lack of executive consensus.
  • Incorrect search area.
  • Narrowing the search area too rapidly.
  • Failure to consider all the issues.
  • Incomplete labor market analysis.
  • Failure to consider community trends.
  • Poor or absent technical site review,
  • Breach of confidentiality.
  • Failure to capture negotiable incentives,
  • Acceptance of overvalued incentives.
  • Low culture and educational standards.

Question 4.
Write a note on project feasibility analysis Or Discuss the importance of feasibility report and explain the factors to be considered while preparing feasibility report.
Answer:
A project feasibility analysis includes market analysis, technical analysis, financial analysis and social profitability analysis.
(i) A market analysis is a method of screening project ideas as well as means of evaluating a project’s feasibility in terms of the market.

(ii) The technical analysis of a project feasibility study establishes whether the project is technically feasible or not, and whether it offers basis for the estimation of costs.

(iii) In the financial analysis of this feasibility study, the emphasis is on the preparation of financial statements, so that the project may be evaluated in terms of the different measures of commercial profitability followed by the magnitude of financing which requires the assembly of the market and also technical cost estimated in various proforma statements.

(iv) The social purpose of the investment is to convince a lender that the project is a desirable investment; that it not only possesses the potential for profit but that the proposed management team has the capability to achieve the potential.

Question 5.
Explain financial feasibility of the project.
Answer:
The financial aspects of any business relate to the total amount of capital required, the sources of finance, the cost of capital and its implication on the business. An analysis of these issues will indicate whether a business is financially viable or not.

The project should be evaluated in terms of the different measures of commercial profitability followed by the magnitude of financing which requires the assembly of the market and also technical cost estimated in various proforma statements.

The following statements should be prepared:

  • Statements of total project costs: Statements of total project costs, capital requirements and cashflows need to be prepared.
  • Collection period of sales: Collection period of sales, inventory levels, credit period that can be availed, etc need to be estimated.
  • Projections for future time periods: Projections for future time periods need to be worked out.
  • Returns on investment: Returns on investment, returns on equity, Break even volume and price analysis needs to be studied.
  • Sensitivity analysis: A sensitivity analysis needs to be conducted to know the impact of certain items on profitability.

The financial feasibility report will thus give an idea of an industry’s financial requirements and viability of the proposed business.

Question 6.
Explain technical feasibility of the project.
Answer:
Technical feasibility analysis helps the entrepreneur to possess the required technology for proposed business unit. For small enterprises, high end technology involving huge cost is not feasible. However, the technology to be adopted has to be cost effective in production process. As far as possible tested and proven technology has to be adopted. Some of the important aspects that should be considered are:

  • Already established: The technology should, as far as possible, be already established.
  • Indigenous raw materials and resources: The technology should be based on indigenous raw materials and resources.
  • Workable under local conditions: The technology should be workable under local conditions.
  • Tune with the national goals: The technology should be in tune with the national goals and objectives.
  • Risk of obsolescence: The risk of obsolescence and the scope of continuous updating of technology should be examined.
  • Climate conditions: Climate conditions, nature and quality of the product and also the size of the project should be taken into account.

In order to expedite the examination of technological aspects, the borrower should be fully prepared with explanations for selecting a particular process, technology and its techno-economic advantages over other available processes.

Question 7.
Explain social feasibility OF THE Project.
Answer:
Social feasibility aspect has to be looked into to assess as to how far the proposed business is useful for both the entrepreneur and the society. An activity deterrent to the societal value cannot be pursued. To assess the feasibility, social cost-Benefit analysis has to be made.

Social-Cost-Benefit analysis considers:

  • The estimation of costs and benefits which will accrue to individual members of society as consumers or as suppliers of factor input.
  • Costs and benefits accrue to the community.
  • Costs and benefits accrue to the National Exchequer.
  • Costs and benefits accrue to the entrepreneur.

“Social need” concept considers several societal aspects. It may be environmental protection, stopping the depletion of rainforests, generating employment and the like.

In social feasibility analysis, entrepreneurs have to study the problem of social economy to know as to how their business would help the society in enhancing social values and returns.

B.Com 5th Sem Costing Methods Questions and Answers

B.Com 5th Sem Costing Methods Questions and Answers

B.Com 5th Sem Costing Methods Syllabus

Unit 1: INTRODUCTION TO COSTING METHODS (04 Hrs)
Costing methods. Meaning, Importance, and Categories.

Unit 2: JOB AND BATCH COSTING (12 Hrs)
Job costing: Meaning, prerequisites, job costing procedures, Features, objectives, applications, advantages, and disadvantages of Job costing. Batch costing: Meaning, advantages, disadvantages, determination of economic batch quantity. Comparison between Job and Batch Costing, problems.

Unit 3: PROCESS COSTING (14 Hrs)
Introduction, meaning and definition, Features of Process Costing, applications, comparison between Job costing and Process Costing, advantages and disadvantages, treatment of normal loss, abnormal loss and abnormal gain, rejects and rectification – Joint and by-products costing, problems under the reverse cost method.

Unit 4: CONTRACT COSTING (14 Hrs)
Meaning, features of contract costing, Applications of contract costing, similarities and dissimilarities between job and contract costing, the procedure of contract costing, profit on incomplete contracts, Problems.

Unit 5: Operating Costing (12 Hrs)
Introduction, Meaning and application of Operating Costing, – Power house costing or boiler house costing, canteen or hotel costing, hospital costing (Theory only) and Transport Costing. Problems on Transport costing.

Formation of Small Scale Industry Very Short Answer Type Questions

Formation of Small Scale Industry Very Short Answer Type Questions

Question 1.
What is business opportunity?
Answer:
Business opportunity is a chance for a person to own a business. It is the beginning process of the sale or purchase of a business.

Question 2.
Give the meaning of Scanning of environment.
Answer:
Environmental scanning involves studying and interpreting the sweep of social, political, economic, ecological and technological events in an effort to spot budding trends and conditions that could become driving forces. Environmental scanning involves the scanning of internal and external environments.

Question 3.
What is evaluation of alternatives?
Answer:
Evaluation of alternatives is the stage of the buyer decision process in where a consumer uses the information gathered in the Information Search to evaluate alternative brands in the product category.

Question 4.
Mention various steps involved in the formation of a small business venture.
Answer:
The various steps involved in the formation of a small business venture are:

  • Location
  • Clearances and permits
  • Licensing
  • Registration

Question 5.
What is plant location?
Answer:
Plant location is the function of determining where the plant should be located for maximum operating economy and effectiveness.

Question 6.
What are the steps in determining location of the plant?
Answer:
The steps in determining location of the plant are:

  • Within the country or outside
  • Selection of the region
  • Selection of the locality or community
  • Selection of the exact site.

Question 7.
State any four needs for the selection of the location.
Answer:
The four needs for the selection of the location are:

  • When the business is newly started.
  • The existing business unit has outgrown its original facilities.
  • A lease expires and the landlord does not renew the lease
  • The volume of business or the extent of market necessitates the establishment of branches.

Question 8.
What are the factors which influence the selection of a region?
Answer:

  • Availability of raw materials
  • Nearness to the market
  • Availability of power
  • Transport facilities

Question 9.
What is meant by selection of a community in industrial location?
Answer:
Selection of community in industrial location stands for selection of the locality within the selected region.

Question 10.
What are the factors which influence the selection of a community?
Answer:
The factors which influence the selection of a community are:

  • Availability of labour
  • Civic amenities for workers
  • Finance and research facilities
  • Availability of water and fire-fighting facilities

Question 11.
What are the factors which influence the selection of the site?
Answer:
The factors which influence the selection of the site are:

  • Soil, size and topography
  • Disposal of waste
  • Sites should be well connected by road, rail and water transport.
  • There should be facilities for housing the workers.

Question 12.
What is a project?
Answer:
A project is a productive activity which can be analysed, appraised and monitored independently.

Question 13.
Define project formulation.
Answer:
Project formulation is defined as taking a first took carefully and critically at a project idea by an entrepreneur to build up an all round benefit to project after carefully weighing its various components.

Question 14.
What is project report?
Answer:
A project report gives a complete analysis of the inputs and outputs of the project. It enables the entrepreneur to understand, at the initial stage, whether the project is sound on technical, commercial, financial and economic parameters.

Question 15.
What is a feasibility report?
Answer:
A feasibility report is a project report of a new enterprise or of an expansion which provides, in general, primary economic, information, financial data and technical details. The financial aspects of any business relate to the total amount of capital required, the sources of finance, the cost of capital and its implication on the business.

Question 17.
Give the meaning of technical feasibility of the project.
Answer:
Technical feasibility analysis helps the entrepreneur to possess the required technology for proposed business unit. The technology to be adopted has to be cost effective in production process and as far as possible tested and proven technology has to be adopted.

Question 18.
What is marketing feasibility study?
Answer:
Market Feasibility Studies analyze the economic, demographic and competitive factors that impact the development project. The Market Feasibility Study represents the most complete research on demographic trends and the marketing environment that determine the success of the development.

Question 19.
What is social feasibility of the project?
Answer:
Social feasibility aspect has to be looked into to assess as to how far the proposed business is useful for both the entrepreneur and the society.

Project Assistance Short Answer Type Questions

Project Assistance Short Answer Type Questions

Question 1.
State the name of the institution offering financial assistance.
Answer:
The names of institutions offering financial assistance to SSIs are:

  • State Financial Corporations.
  • Industrial Development Bank of India.
  • Industrial Finance Corporation of India.
  • Industrial Credit and Investment Corporation of India.
  • Industrial Reconstruction Bank of India.
  • Commercial Banks.
  • Life Insurance Corporation.
  • General Insurance Corporations.
  • Unit Trust of India
  • Small Industries Development Bank of India.
  • Mutual funds
  • Leasing Companies
  • Risk Capital Foundation
  • National bank for Agriculture and Rural Development.
  • Khadi and Village Industries Commission
  • Stock Exchange
  • Venture Capital Finance
  • Housing Development Finance Corporation Ltd.
  • The Shipping Credit and Investment Company of India
  • The World Bank
  • Asian Development Bank
  • Infrastructure and Leasing Finance Corporation.

Question 2.
Write a note on different financial institutions connected with small industry.
Answer:
The growing sector of SSIs is supported by various types of financial institutions which are required for expansion of units, providing infrastructure, availing raw material, technical know how etc.
1. State Financial Corporations established by respective states are playing a significant role in providing financial assistance and other types of support to SSIs. State Financial Corporation Act passed in 1951 provides long term finance for certain identified group of items in manufacturing as well as service sectors.

2. KSFC extends financial assistance to set up tiny, small, medium and large scale industrial units in Karnataka. Finances such as long and medium term loans, lease and hire purchase finance are provided by KSFC. It also renders merchant banking services. Fund based activities are also considered.

3. SIDBI was established in 1990. This institution through its five regional offices and about 33 branches, provides varied types of finance to SSIs. The types are (i) Direct finance, (2) Foreign currency loans (3) Venture capital fund (4) Refinancing and (5) Microfinancing.

4. Various commercial banks are also extending financial assistance to SSIs through their schemes such as priority sector leading, institutional arrangement, General Purpose term loans, Entrepreneur Scheme, Equity Fund Scheme, Stree Shakti Package, Margin Money Scheme, Mahila Udyam Nidhi Scheme, Export finance scheme, etc.

5. KSZDC is another institution which extends financial support to SSIs in Karnataka. This organisation of Karnataka has no specific financial programme for adaptation of pollution control etc., but provides medium and long term loans, equipment financing and direct equity participation.

6. IFCI, the first development financial institution in India was established in 1948 as a statutory Corporation. Besides providing project finance, financial services, nonproject specific assistance, corporate advisory services. IFCI has promoted institution such as National Stock Exchange, Management Development Institute. ICRA Ltd., LIC Housing Finance Ltd, and a number of TCOs.

Question 3.
Discuss the objectives of State Financial Corporations (SFC’s).
Answer:
The objectives of state financial corporations (SFC’s) are:

  • To fulfill the financial needs of the small and medium scale industries.
  • Extends loans to industrial units.
  • Development of Infrastructure Facilities.
  • Extending financial assistance to the prospective entrepreneurs,
  • It provides term loan to small and medium scale industries for creation of assets.
  • It provide working capital term loan to the industrial units.
  • It provides non fund based services like merchant banking.
  • To establish uniformity in regional industries.
  • To provide incentive to new industries.
  • To bring efficiency in regional industrial units.
  • To provide finance to small-scale, medium sized and cottage industries in the state.
  • To develop regional financial resources.

Question 4.
What are the objectives of (SIDBI) Small Industries Development Bank of India?
Answer:
Small Industries Development Bank of India (SIDBI) was set up by an Act of Parliament, it commenced operations in April 2, 1990.
The objectives of SIDBI are:

  • Promotion, financing and developing of industry in the small scale sector.
  • Co-ordinating the functions of other institutions engaged in similar activities.
  • Setting up to new projects
  • Expansion, diversification, modernization, technology upgradation, quality improvement rehabilitation of existing units.
  • Strengthening of marketing capabilities of SSI units.
  • Development of infrastructure for SSI units
  • Export promotion.

Question 5.
Discuss the role of SIDBI in promoting small industries in India.
Answer:
The role of SIDBI in promoting small industries in India are:
1. SIDBI directly finances:

  • SSI units for new/expansion/diversification/modernisation projects.
  • Marketing development projects which expand the domestic and international marketability of SSI products.
  • Existing well run SSI units and ancillaries/ subcontracting units/vendor units for modernisation and technology upgradation.
  • Infrastructure development agencies for developing industrial areas.
  • Leasing and hire purchase companies for offering leasing / hire purchase facilities to SSI units.
  • Existing EOUs to enable them acquire ISO 9000 certification.

2. It provides foreign currency loan to:

  • Import equipment by existing export oriented SSIs and new units having definite plans for entering export markets.
  • Execute confirmed export orders by way of pre-shipment credit/letter of credit and provides post shipment facilities.

3. SIDBI’s Venture Capital Fund provides assistance to: Small scale entrepreneurs using innovative indigenous technology and expertise.

4. SIDBI refinances:

  • Loans granted by PLIs for new SSI projects and for expansion, technology, upgradation, modernisation, quality promotion.
  • Loans sanctioned by PLIs to small road transport operators, qualified professionals for self employment, small hospitals and nursing homes, and to promote hotel and tourism related activities.

Question 6.
Briefly explain the role or objectives of KSIDC in the up-liftment of small scale industries.
Answer:
The role of KSIDC in the up-lifting of small scale industries can be summarized as follows:
(i) Amenities like Training institute, P&T office: KSIDC estates are provided with required amenities like Training institute, P&T office, dispensary, community garden banks canteen etc.

(ii) Ready to occupy sheds for immediate starting: KSIDC provides ready to occupy sheds for immediate starting of industries and also provide Gowdown for storage of its materials.

(iii) Transparent: KSIDC being a Government Organization is, transparent and of the prices of land/building. The prices so fixed are accepted by Financial Institutions for quick approval of loans.

(iv) Free from Local Taxes and Octroi: KSIDC estates, once declared : as notified area, are free from Local Taxes and Octroi.

(v) Benefits: KSIDC estates, provides a unique opportunity to entrepreneur cluster benefits related to Raw material, market technology services, linkages etc.,

(vi) Special services in acquiring and allotting land: KSIDC provides special services in acquiring and allotting land to SSI entrepreneurs,

(vii) Needy SC & ST units of Backward areas: KSIDC allots land on top priority basis to start industry by SC/ST/SEDC applicants, further to needy SC & ST units of Backward areas will be paid subsidy amount and also reduced payment of EMD / application / scrutiny fee.

(viii) Provides ISI testing: KSIDC estate provides ISI testing units to help SSI units to process quality products.

(ix) Get easy loans: KSIDC estates where SSI units established will get easy loans from financial institutes and nationalized banks for purchase of machinery and also loans to purchase raw materials.

Question 7.
State various functions of KSSIDC.
Answer:
The various functions of KSSIDC are:
(i) KSSIDC provides ready to occupy sheds for immediate starting of industries and also provide Gowdown for storage of its materials.

(ii) KSSIDC being a Government Organisation is, transparent and of the prices of land/building. The prices so fixed are accepted by Financial Institutions for quick approval of loans.

(iii) KSSIDC estates, once declared as notified area, are free from Local Taxes and Octroi.

(iv) KSSIDC estates, provides a unique opportunity to entrepreneur cluster benefits related to Raw material, market technology services, linkages etc.,

(v) Any upgradation programme undertaken in KSSIDC estate will be advantage to all industries located therein.

(vi) KSSIDC provides special services in acquiring and allotting land to SSI entrepreneurs.

(vii) KSSIDC allots land on top priority basis to start industry by SC/ ST/SEDC applicants, further to needy SC & ST units of Backward areas will be paid subsidy amount and also reduced payment of EMD / application / scrutiny fee.

(viii) KSSIDC divisional offices established in the state will have raw- material depots to distribute raw materials to SSI units.

(x) KSSIDC estate provides ISI testing units to help SSI units to process quality products.

Question 8.
Write a note on IFCI.
Answer:
IFCI, the first development financial institution in India was established in 1948 as a statutory Corporation. Besides providing project finance, financial services, non-project specific assistance, corporate advisory services, IFCI has promoted institutions such as National Stock Exchange, Management Development Institute, ICRA Ltd., LIC Housing Finance Ltd. and number of TCOs. (Technical Consultancy Organisations).

The primary objective of IFCI is to provide medium and long term financial assistance to mainly manufacturing concerns and to fulfill the overall goals of industrial and economic development in India.

The main activities of IFCI are:

  • Project financing
  • Financial services i.e. assistance given to existing concerns through various schemes of acquisition of assets, as part of their expansion, diversification and modernisation programmes.
  • Non project specific assistance in the form of short term loans, working capital, bill discounting.
  • IFCI provides rupee and foreign currency loans to the industrial
    sector.
  • Its financial resources include: Share capital, Bonds and Debentures and other borrowings.

Question 9.
Write a note on District Industries Centre. OR Write a note on non financial assistance from DIC.
Answer:
The Government of Karnataka established the District Industries Center (DIC) in 1913 under the erstwhile Princely State of Mysore to oversee the Industrial Development in the State.

The following are some of the main functions of the DIC:
(i) Registration of MSMEs: It monitors the registration of MSMEs.

(ii) Provides infrastructural assistance: It provides infrastructural assistance to entrepreneurs in form of grievance redressal through the District level clearance committee of Industries and commerce, allotment of KIADB’s land to MSME’s in the District and recommendation for loans from financial institutions.

(iii) It assists in implementation of incentive schemes through sanction and disbursement of Investment Subsidy.

(iv) Monitoring: It is responsible for the implementation and Monitoring of the Prime Minister Employment Generation programme.

(v) Monitoring of the Special Component Plan: It helps in the implementation and monitoring of the Special Component Plan and the Tribal Sub plans that provide assistance to SC & ST artisans in form of training, better toolkits, venture and equity capital etc.

(vi) Conducting various entrepreneurship: DIC is also involved in con-ducting various entrepreneurship and vendor development and awareness programmes at Hobli, Taluk and District levels.

(vii) Buyer – seller meets: DIC helps in arranging buyer – seller meets.

(viii) Cluster Development Programmes: Various other programmes are taken up by DIC such as Cluster Development Programmes and Sensitization Programmes.

(ix) Industrial Exhibitions: DIC conducts various Industrial Exhibitions at District and Taluk levels where young entrepreneurs could showcase their products and services and artisans could showcase their work.

(x) Industrial Approvals: DIC also follows – up the Industrial Approvals.

Question 10.
Explain any six functions of SISI.
Answer:
The main functions of SISI i.e, small industries service institutes involve the following:

  • The small industries service institutes provide consultancy and training to small and prospective entrepreneurs.
  • SISI co-ordinate industrial management training division of the DC, SSI office.
  • To assist existing and prospective entrepreneurs through technical and managerial counselling such as help in selecting the appropriate machinery and equipment, adoption of recognized standards of testing, quality performance etc.
  • SISI perform technological, management and administrative tasks.
  • SISI conduct EDPs all over the country.
  • They advise the Central and State governments on policy matters relating to small industry development.
  • SISI assist in testing of raw materials and products of SSIs, their inspection and quality control.
  • To recommend SSI’s for financial assistance from financial institutions.
  • To enlist entrepreneurs for partition in Government stores purchase programme.
  • SISI conduct economic and technical surveys
  • SISI prepare techno-economic feasible reports for selected areas and industries.

Question 11.
Write a note on Small Industriess Services Institute.
OR
Write a note on non financial assistance from SISI.
Answer:
SISI has been established by GOI to help the SSI sector on different issues. Its main activities include:

  • Assistance/consultancy to prospective entrepreneurs
  • Assistance/consultancy to existing units
  • Publishing information pertaining to economic and industrial activities of the state.
  • Conducting surveys to identify emerging business opportunities.
  • Profiling various projects.
  • Undertaking Entrepreneurship Development (EDP) Programmes.
  • Publishing the data on production index.
  • Quality control and Upgradation.
  • Export Promotion measures
  • Setting up of ancillary industries
  • Creation of common facility workshop
  • Preparation of Directory of specific Industry
  • Intensive Technical Assistance
  • Coordinate with DICs in promoting industrial development.
  • Coordinate with various government functionaries
  • Conducting market surveys on various products/services.

Question 12.
Write a note on Entrepreneurship Development Institute or EDI.
Answer:
EDI is an autonomous and not-for-profit institution. It is sponsored by the IDBI, the IFCI, the ICICI and the SBI.

EDI has set up centre for Research in Entrepreneurship Education and Development (CREED), which serves as an important link between theory and practice in the field of entrepreneurship with special focus on applied research backed by sound theoretical underpinnings.

EDI beliefs in the notion that entrepreneurs need not necessarily be born, but can be developed through training and education.

EDI aims at:

  • Creating a multiplier effect on opportunities for self employment.
  • Increasing the supply of competent entrepreneurs through training.
  • Participating in institution building efforts
  • Promoting micro enterprises at rural level
  • Developing and disseminating new knowledge and insights in entre-preneurial theory and practice.
  • Facilitating corporate excellence through creating intrapreneurs.
  • Improving managerial capabilities of SSIs.
  • Building a support system to facilitate potential and existing entre-preneurs establish and manage their enterprises.

Question 13.
Write a note on Small Scale Development Organisation or SIDO.
Answer:
SIDO functions under the Department of SSI, GOI.

  • Its main functions include:
  • Framing of policies pertaining to SSI sector
  • Coordinating with different agencies in the SSI sector.
  • Monitoring policy implementation
  • Industrial development
  • Extension services.
  • To encourage exporters
  • SIDO provides exhibition space and shipment of exhibits ex-Mumbai free of cost for this purpose.
  • Encourages participation in International Fairs/Exhibitions
  • Conducts training programmes on packaging for exports, with a view to render assistance to SSIs.
  • Technical and Managerial consultancy services are provided to SSIs through a network of field offices so as to ensure higher level of production and generation of higher exports.
  • National Awards for Quality Products are given to outstanding units, who have made a significant contribution for improving quality of their products.
  • SIDO has regional testing centres which are equipped with basic testing facilities for raw materials, semi finished products and end products.
  • It has also set up tool rooms to assist SSI units in their technical upgradation by providing good quality toolings.
  • SIDO also provides extension services in the form of programmes for modernisation and setting up sub contracting exchanges.

Question 14.
Write a note on Technical Consuitanct Organisations. OR State any five functions of TCO.
Answer:
TCOs were established by financial institutions like ICICI, IFCI, IDBI, SFC etc in collaboration with state level financial institutions and commercial banks to cater to the consultancy needs of small and medium enterprises.

Its functions include:

  • Giving advice on technical aspects of business.
  • Preparing project profiles and feasibility reports
  • Technical collaboration and technology transfer
  • Technical consultancy to new entrepreneurs
  • Financial potential survey.
  • Advice on industrial management.
  • Market research and survey for specific product.
  • Conducting survey on behalf of central and state governments on issues like power needs, modernisation of plant, rehabilitation of sick industries etc.
  • Offering merchant banking facilities
  • Opportunity scanning and product selection.
  • Conduct entrepreneurship development programmes.

Question 15.
Explain the objectives of seminars and conventions organised by AWAKE. Dec 2019, Nov 2018
Answer:
AWAKE – Association of Women Entrepreneurs of Karnataka is a not- for-profit, Non-Governmental Organization (NGO) based in Bangalore, India, working towards’Empowerment of women through entrepreneurship development to improve their economic condition’.

AWAKE strives to promote entrepreneurship among women as a means to achieve self-reliance and socio-economic independence. AWAKE provides support and guidance to aspiring women from rural, urban, national and international arenas to be successful entrepreneurs, irrespective of their age, academic, social, economic background. AWAKE’s services are extended to women Self Help Groups (SHGs), NGOs and other development agencies engaged in Income Generation Activities and Entrepreneurship Development.

AWAKE’s process in entrepreneurship development involves awareness programs, business counseling, trainings, skill development, mentoring, business incubation, information sharing and networking, marketing assistance, credit referral and policy advocacy. The organization comprises of women entrepreneurs from various sectors as its members.

Members of AWAKE contribute their time and expertise to support women entrepreneurs, based on the approach ‘Entrepreneur guiding Entrepreneur’. AWAKE has built up a strong support network with Government, non-government, corporate, developmental agencies, funding and finance agencies, working with them to provide the expertise in entrepreneurship development for both rural and urban women.

AWAKE collaborates as a resource organization in institutional competence building, training, policy making and enabling technology transfers for state, national and international agencies. AWAKE fosters an entrepreneurial culture in women such that their contribution to the global economy is recognized.

Question 16.
Write note on (i) AWAKE (ii) TCP (Hi) TECSOK (iv) KVIC.
Answer:
(i) Association of Women Entrepreneurs of Karnataka (AWAKE):
This is one of India’s premier institutions totally devoted to entrepreneurship development among women. It aims to empower women through entrepreneur development to improve their economic condition, enhance their social status and develop a spirit of individuality and creativity. It organises conventions and seminars. The seminars emphasise the imperative need for growth of women owned enterprises in the changing economic scenario.

(ii) Technical Consultancy Organisations (TCOs):
TCOs were established by financial institutions like ICICI, IFCI, IDBI, SFC etc in collaboration with state level financial institutions and commercial banks to cater to the consultancy needs of small and medium enterprises.

Its functions include:

  • Giving advice on technical aspects of business.
  • Preparing project profiles and feasibility reports
  • Technical collaboration and technology transfer
  • Technical consultancy to new entrepreneurs
  • Financial potential survey.
  • Advice on industrial management.
  • Market research and survey for specific product.
  • Conducting survey on behalf of central and state governments on issues like power needs, modernisation of plant, rehabilitation of sick industries etc.
  • Offering merchant banking facilities.
  • Opportunity scanning and product selection.
  • Conduct entrepreneurship development programmes.

(iii) Technical Consultancy Services Organisation of Karnataka (TECSOK):
Technical Consultancy Services Organisation of Karnataka (TECSOK) is a Government of Karnataka Organisation and it provides the following range of services to the entrepreneur:

  • Identification of project ideas and selection of investment opportunities.
  • Selection of suitable locations for setting up industrial units
  • Conducting market surveys
  • Preparation of detailed techno-economic feasibility report.
  • Turnkey assistance
  • Assistance in obtaining necessary licences and clearances.
  • Energy audit and conservation
  • Modernisation studies
  • Dissemination of information on industrial policies and procedures.
  • Co-ordinating and conducting management development programmes.
  • Identification and development of ancillary industries.
  • Assistance to government in providing information about new policies, programmes and schemes.

(iv) Khadi and Village Industries Corporation (KVIC):
The KVIC is engaged in the development of Khadi and Village industries in rural areas.

Its objectives are:

  • To preserve traditional arts and crafts of India.
  • To equip the artisans and craftsmen to take up challenges of modern market.
  • To promote the handicrafts, Khadi, village and cottage industry by facilitating them with the necessary inputs like raw materials, equipment, capital etc.
  • To develop a market for these products.
  • To introduce the products in the international market.

Question 17.
Mention the tax holiday benefit available to SSI.
Answer:
New Industrial undertakings, including SSI are exempted from the payment of income tax. The deduction at the rate of 6 percent from the total income is allowed in the assessment year in which the unit begins to manufacture, provided that the conditions specified in Sec 80J are fulfilled by small scale industries. This concession is for five years from the commencement of production.

Small scale units should satisfy the following conditions before they become eligible for tax benefits:

  • They should not have been formed by the splitting or reconstitution of an existing unit.
  • They should employ 10 or more workers in a manufacturing process with power, or 20 or more persons without power.

Question 18.
Discuss the assistance for obtaining Raw Material of SSI.
Answer:
Various organizations provide different types of raw material assistance to small scale industries. Some of them are as follows:
a. NSIC scheme: Raw Material Assistance Scheme aims at helping Medium and Small scale Enterprises (MSEs) by way of financing the purchase of Raw Material (both indigenous & imported). This gives an opportunity to MSEs to focus better on manufacturing quality products. The following are the benefits of this scheme:

  • Financial Assistance for procurement of Raw Material upto 90 days.
  • MSEs helped to avail Economics of Purchases like bulk purchase; cash discount etc
  • NSIC takes care of all the procedures, documentation & issue of Letter of credit in case of imports.

b. NSIC also helps in organizing supply of raw materials like coal, iron, steel and other materials and even machines needed by small scale private industries by mediating with other government companies like Coal India Limited, Steel Authority of India Limited, Hindustan Copper Limited and many others, who produce this materials to provide same at concessional rates to SSIs.

c. The Central Government has introduced a buffer stock scheme to ensure availability of scarce raw materials to this sector,

d. State Small Industries Development Corporations have set up depots for distribution of raw materials to SSIs.

Question 19.
Explain various Technical Assistances required for SSI.
Answer:
Technology is the key to enhance an organisation’s competitive advantage in today’s dynamic information age. SSIs need to develop and implement a technology strategy in addition to financial, marketing and operational strategies, and adopt the one that helps integrate their operations with their environment, customers and suppliers.

National small Industries Corporation Ltd (NSIC) offers SSI units the following support and services through its Technical Services Centre, Extension Centres, Software Technology Parks and Technology Transfer Centre:

  • Technology audits and benchmarking.
  • Technology needs assessment.
  • Technology sourcing.
  • Application of new techniques.
  • Technology acquisition.
  • Material testing facilities through accredited laboratories.
  • Product design including Computer Aided Designs.
  • Common facility support in machining.
  • Energy and environment services at selected centers.
  • Classroom and practical training for skill upgradation.

Software Technology Parks (STPs) facilitate small industries in setting up 100% export oriented units for software export. They also act as major point to activate software exports directly through NSIC. These STPs extend support in terms of the requisite infrastructure to the SSI units to start business operations with a minimum lead-time. Following facilities are available at NSIC Software Technology Park:
→ Built-up Space: This enables the software industries to commence their operations with minimum gestation period.

→ Instant Power Connection: Instant power connections and Generator facility is also available on site, which will allow software units to work without any interruptions.

→ High Speed Data Link: High-speed data communication facility through satellite connection is available.

→ Business Centre: A business centre comprising of Conference Hall, Photocopier, Fax, Training aids, etc. is available inside the STP complex for the member units.

→ Telephones: Each member units will be provided with one telephone line for business promotion on occupation.

Question 20.
Explain the objectives or role of industrial estates.
Answer:
Industrial estate is defined to indicate the provision of the basic infrastructure for the rapid development of the area. The primary objective of the Industrial Estate is to provide factory accommodation to small scale industries at suitable sites with facilities of water, electricity, steam, transport, banks, post offices, canteens, first aid etc. and thus create a healthy atmosphere for the development of industries.

The objectives underlying the establishment of industrial estates in India as follows:

  • To foster the growth of small scale industries
  • To shift small scale industries from congested areas to estate premises with a view to increase their productivity.
  • To achieve decentralised development in small towns and large villages.
  • To encourage growth of ancillary industries in the townships, surrounding major industrial undertakings.
  • To encourage the development of industry as well as entrepreneurship by providing economies and incentives.

Question 21.
Explain the types of an industrial estates.
Answer:
The term industrial estate is defined to indicate the provision of the basic infrastructure for the rapid development of the area.

Types of industrial estates: The term industrial estate includes all the four variants of the concept i.e. industrial areas, industrial estates, industrial townships and galas. In an industrial area, the infrastructure facilities and services are provided but factory accommodation is constructed by entrepreneurs.

In an industrial estate, both infrastructural facilities and factory accommodation are provided by the sponsoring authority. In an industrial township, besides the infrastructure facilities and factory sheds, accommodation and other civic amenities associated with a town are also provided. In galas, space is provided in a big building to set up SSIs, along with infrastructural facilities.

On the basis of functions, industrial estates are classified into:

  • Conventional
  • Special

On the basis of organisational set up, Industrial estates are classified into:

  • Government
  • Private
  • Co-operative
  • Municipal estates.

There are a number of other variants such as:

  • Ancillary Industrial Estate
  • Functional Industrial Estate
  • The Workshop bay.

Small Scale Industries Long Answer Type Questions

Small Scale Industries Long Answer Type Questions

Question 1.
Explain ownership patterns of small scale enterprises or industries.
Answer:
Ownership patterns of SSE, are represented by the right of an individual or a group of individuals to acquire legal title to assets for the purpose of controlling an industrial operation and enjoying the gains or profits flowing from such activities.

Considering these factors, the form of ownership will be decided for small units. The different forms of ownership are:
1. Sole Trading Concern: Sole proprietorship is a form of business organisation in which an individual invests his own capital, uses his own skill and intelligence in the management of its affairs and is solely responsible for the result of its operation. Important characteristics of a sole trading concern are:

  • Sole Ownership
  • One man control
  • Unlimited risk
  • Undivided risk
  • No separate entity of the firm
  • No Government regulations.

2. Partnership organisation: The Indian Partnership Act defines partnership a “the relation between persons who have agreed to share profits of a business carried on by all or any of them acting for all”. The features of a partnership organisation are:

  • Atleast two persons are required to form a partnership organisation.
  • Partnership is the result of contractual relationship between two or more persons. There must be an agreement between persons who wish to form a partnership.
  • No legal distinction between firm and its partners.
  • Unlimited liability.

3. Co-operative Society: The International Labour Organisation defines a co-operative as “an association of persons, usually of limited means, who voluntarily join together to achieve a common economic end through the formation of a democratically controlled business organisation; making an equitable contribution to the capital required and accepting a fair share of the risks and benefits of the undertaking”

4. Joint Stock company: A joint stock company is a voluntary association of persons who contribute to its capital but their liability remains limited. It carries on business for profit as a legal entity. It possesses the right to own and transfer any property. It can sue and be sued in its own name.

Question 2.
Explain any six merits of partnership.
Answer:
The merits of Partnership:

  • Mobilisation of capital is easier as two or more people contribute capital.
  • Secrecy of business is maintained and formation of partnership is easier.
  • Each and every partners opinions, views are heard by other partners and they are honoured.
  • The risk is reduced as it is shared by two or more persons.
  • When partners come together from diverse fields, they contribute in the form of expert views in decision making.
  • The partnership firm enjoys more stability and continuity of existence compared to the sole proprietorship.
  • Dynamic management can be possible.

Question 3.
Write the steps involved in the formation of small scale industry.
Answer:
Step 1: Product or Service Selection:
This is the most important step in setting up a small scale industries. The main factors to be considered in deciding a suitable project are as follows:

  • Background and experience of entrepreneurs.
  • Availability of the Right Technology & Know
  • Marketability of the product or service.
  • Investment capacity
  • Availability of Plant & Machinery,
  • Availability of Raw Materials.
  • Availability of proper infrastructural facilities such as Land , Electricity, Water, Communication, Transport etc.
  • Availability of Labor like skilled, semi- skilled and unskilled.

Step 2: Location Selection:
After deciding on the project, the next important decision an Entrepreneur has to make is about the Location of the Project. There are some factors to be considered:

  • Nearness to market.
  • Availability of raw materials.
  • Availability of transformation and communication facilities.
  • Availability of Govt incentives and Concessions.
  • Govt Industrial Policy.
  • Availability of suitable Infrastructural facilities.

Step 3: Project Feasibility Study:
The important facts are as follows:

  • Market analysis is carried out to find out the aggregate demand of the proposed product or services.
  • Technical analysis seeks to determine whether the prerequisites.
  • Financial analysis seeks to ascertain whether the proposed project will be financially viable.
  • Economic analysis is concerned judging a project from the larger, social point of view.

Step 4: Preperation a Project Profile:

  • Introduction.
  • Promoter(s) background like education, experience etc.
  • Product(s) or Service(s) description
  • Market and Marketing.
  • Cost of production and profitability.

Step 5: Business Plan Preparation: There are three major alternatives:

  • Proprietary
  • Partnership
  • Company.
  • Specific clearances
  • Land selection
  • Plant & Machinery
  • Infrastructure facilities
  • Project report

Question 4.
What are the stages involved in the preparing promotion plan or action plan?
Answer:
Developing an action plan can help changemakers turn their visions into reality, and increase efficiency and accountability within an organization. An action plan describes the way your organization will meet its objectives through detailed action steps that describe how and when these steps will be taken.

Step 1: Define the Problem(s)
Evaluate the situation. Have all possibilities been considered? In this stage, explore all possibilities, ask all involved or interested individuals for their input into identifying the problem. Is there just one problem or are there more?

Step 2: Collect and Analyze the Data
Now that we have identified the problem, we collect and analyze data to prove or disprove the assumption that our problem is a result of inconsistent ration. We analyze the situations by asking questions.
What ingredient(s) in the computer ration is the likely problem?
What do others (veterinarian, nutritionist, herdsman) see as the reason for the lower bulk tank weights?
What do the feeders see? How much feed is in the alley when new feed is put out?

Step 3: Clarify and Prioritize the Problem(s)
If there is more than one problem, you will need to prioritize the problems so you can focus on the most important problems first. Ask the following questions
to help you sort the problems with the higher priority issues at the top of the list.
Which problem could result in negative consequences in terms of cow or employee health?
Are any of the problems putting the operation in danger of being in noncompliance with regulations?
Which problems have the greatest impact on the long-term economic stability of the operation?
Which problems have short-term impact on the stability of the operation?

Step 4: Write a Goal Statement for Each Solution
The next step in the process is setting S.M.A.R.T. goals, or goals that are:
S – Specific
M – Measurable
A – Achievable
R – Relevant
T – Timely
The team needs to go through the problems that have been identified and evaluate them for each of these items. If all the goals that have been set are S.M.A.R.T. goals, great you are ready to move on to Monitoring Progress. Otherwise, work with the team to make the necessary adjustments to make the goals S.M.A.R.T.

Step 5: Implement Solutions – The Action Plan
Step five is to write an action plan that addresses the problems. An action plan is written so that any employee can do the task successfully alone and is followed much like a recipe. It converts the goal or plan into a people process. It has three essential parts:
Based on the goal the action plans answers five questions – What? When? How? Where? Who?
Lists Resources
Lists Potential Barriers

Step 6: Monitor and Evaluate
The next step in the problem solving process is to design a method for monitoring the outcome. The method we select should assess whether the goal and action plan corrects the problem. In addition, a well-designed monitoring method will help the team to determine when the action plan needs to be improved.

A team of professionals should not spend much time going over numerous data sets. They should have simple spreadsheets or graphs that tell how well the action plan is working and move on to bigger problems.

Step 7: Restart With a New Problem, or Refine the Old Problem The problem solving steps are cyclical. If the first cycle is successful the process starts over with a new problem. If the same problem persists, there must be refinement, so the process starts over with refinement of the original problem as more current data is analyzed.

Question 5.
Explain importance of Cottage Industries.
Answer:
Cottage industries occupy an important place in the economy of India. The importance of cottage industries can be understood as follows:
a. They require less capital. They do not require large premises, huge machines and great investment.

b. They are labour intensive. The greatest advantage of such industries is that even the women and the old in the family can usefully utilise their leisure.

c. They not only increase the income of the family but also reduce unemployment and thus raise the standard of living of the members of the family.

d. Cottage industries can be started in any village or small town. Hence, they help in balanced regional growth.

e. In cottage industries, there is no corruption and no exploitation of the poor by the rich. In cottage Industries there is no fear of a quarrel between the labour and factory owner.

f. Cottage industries provide large scale employment to a huge number of people.

g. Cottage industries also contribute a sizeable amount to the industrial output of the country. Out of the total output of the manufacturing sector, as much as 40% comes from these industries.

h. Many products of the cottage industries like handloom cotton fabrics, silk fabrics, handicrafts, carpets, jewellery, etc. are exported to foreign countries.

i. Cottage industries make use of resources which are available locally which would otherwise have remained unused. These resources are, the hoarded wealth, family-labour, artisan’s skills, native entrepreneurship, etc

j. People of small means can organize these industries. This in turn increases their income-levels and quality of life. As such these industries help in reducing poverty in the country.

k. They help in increasing the production of the industrial output by providing them with raw materials and semi-finished products.

l. The waste of large scale industries like cotton and steel can be used by the cottage industry.

m. Increase in the production of goods on small scale increase the income of the people. The rise in income improves the standard of living.

n. Cottage industry is labour intensive while labour is cheap in subcontinental areas, so the production of cottage industry is cheaper.

o. The development of cottage industry reduces the pressure of population on land and increases the income of the people.

Question 6.
Explain the role played by SSI in the development of Indian Economy.
Answer:
The role played by SSI in the development of Indian economy is as follows:

  • It produces a wide variety of products.
  • Creating employment opportunities in urban and rural areas.
  • Technology up gradation.
  • Quality Enhancement.
  • Supports the growth of large industries.
  • Better industrial relations.
  • Creates economic stability.
  • Creates jobs in rural areas.
  • Provide training ground for local entrepreneur.
  • Enhance demand.
  • Optimum utilization of local resources.
  • To enhance economic growth.
  • Creates economic stability.
  • To enhance people income.
  • To enhance standard of living.
  • Mobilization of resources and entrepreneurial skill.
  • Equitable distribution of income.
  • Regional dispersal of industries.
  • Provides opportunities for development of technology.
  • Promotes exports.

Question 7.
Explain the problems faced by small scale industries in India.
Answer:
The major problems faced by SSIs in India are:
(i) External and Internal problems: External problems results from factors beyond the control of the entrepreneur. These relate to availability of power and other infrastructure facilities, availability of finance, industrial and financial regulations and the like The internal problems are related to feeble structure, faulty planning, poor management, lack of strategies, labour problems and the like.

(ii) Teething problems: An SSI has to face problems right from the day it conceives the idea of starting a unit. A project report needs to be prepared and this calls for collection of various types of data.

(iii) Licence: Obtaining licence from the Government is another major hurdle. Corruption and bureaucracy are rooted in every economy. A small entrepreneur with limited financial resources finds it very difficult to pay hefty bribes.

(iv) Finance: Small scale entrepreneurs do not have sufficient funds of their own for fixed capital investment, nor can they obtain necessary resources from institutional agencies if the latter are doubtful of the former’s ability to repay the loans.

(v) Location: Location for establishing the small business units is also a problem. “Good location is half sold”, but, entrepreneurs may not get a place where there is easy availability of financial resources, raw materials, labour, power, transport system etc.

(vi) Raw material: Continuous supply of raw material at standard price is again a problem for small enterprises. There is a chronicle problem in supplying raw material. Because of this, cost of inventory will be on a higher side which SEs cannot sustain.

(vii) Technology: Availing latest technology for manufacturing purposes is a major problem. One of the major handicaps of the small scale sector has been the absence of the latest technology which alone can ensure quality and high rate of productivity.

(viii) Marketing: Marketing the products of small units is a major disturbing factor. Lack of standardization, poor designing, poor quality, lack of quatity control, poor bargaining power are some of the problems faced by small entrepreneurs. Recoveries will be a problem and many a times the small units cannot sustain.

(ix) High Infant Mortality: Due to indiscriminate sponsoring of small units, infant mortality rate is very high.

(x) Managerial inefficiency: The success of an industry is largely determined by a satisfactory management of finance, inventory, budgeting, marketing, accounting, and manpower. Many units fall sick because of an improper handling of these areas of management.

(xi) Faulty planning: Faulty planning and inadequate appraisal of projects leads to failure of SSIs. No proper viability studies, technical or economic are carried out before units are sponsored.

Question 8.
What are the measures taken by the government for promotion of small scale industries? Do you feel the measures are adequate?
OR
What are the steps taken to solve the problems of SSI?
Answer:
Multidimensional approach has been adapted by the Central and State Government by establishing specialised institutions to promote SSIs and to offer financial support, technical support, marketing support and entrepreneurship development.
I. Institutions offering Financial Support:
Finance is the life blood of any business. In order to provide financial assistance to the entrepreneurs, both the Central and State Governments have set up a number of financial institutions besides commercial banks. Some of these are:

  • Industrial Finance Corporation of India (IFCI)
  • Industrial Credit and Investment Corporation of India (ICICI)
  • Industrial Development Bank of India (IDBI)
  • Industrial Reconstruction Bank of India (IRBI)
  • Small Industries Development Bank of India (SIDBI)

II. Institutions offering Technical Support:
In order to provide technical training to SSIs, the government has established the following institutions:

  • Central Institute of Tool Design (CITD)
  • National Institute of Design (NID)
  • Technology Development and Information Company of India Ltd.
  • Product and Process Development Centres
  • Industrial and Technical Consultancy Organisation
  • SIDO with Regional Testing Centres, Tool Design Institutes, Product and Process development Centres etc.

III. Institutions offering Marketing Support:
(i) Government Stores Purchase Programme: Under this programme, the Director General of Supplies and Disposal arranges the purchase and sale of stores required by the GOI and State governments, public sector organisations and semi government bodies.

(ii) Sub-contracting Exchange: The exchanges invite small scale units to register their spare capacity with them and approach large scale units for seeking orders for the registered units.

(iii) Trade Centres: The trade centres collect and disseminate infor¬mation relating to all types of small scale industries in the region, giving fuli details of products, capacities and prices. They provide a focal point for buyers and sellers of products.

(iv) Internal Marketing: National Small Industries Corporation (NSIC) has undertaken the marketing of certain products such as hand made paper.

(v) Exhibitions and Seminars: SIDO, besides encouraging entrepreneurs to participate in the state purchase programme, organises seminars, exhibitions and training programmes in marketing and publishing of information booklets etc.

The investment opportunities and government policies in promoting SSIs decisions are reflected in various policy decisions. These policy decisions are

  • Industrial Policy Resolution, 1956
  • EXIM policy 1994-97
  • The Pricing Policy
  • The Textile Policy
  • Policy for development of Handloom Industry
  • Policy for Khadi and Village Industries
  • Industrial Estates Programme
  • Promotion of Ancillary Industries.

The thrust areas of the Policy for small enterprises are:
1) Payment mechanism: The policy seeks to improve the payments mechanism and also to introduce legislation to enforce payments on time. This is necessary to ensure that small industries do not get into the grip of the large buyer enterprises which may also control them through equity and technology.

2) Factoring services: Factoring services have recently been introduced by the SBI in Western India in collaboration with the Small Industries Development Bank of India. At present, these factoring services accept only receivables against “first rate large and medium enterprises”.

3) Resources: The most important change is the provision of additional finance by permitting limited liability for new non-active partners and by permitting upto 24 percent equity investment by other industrial undertakings. This could encourage indirect ownership of small units by larger corporate entities.

4) Timely and Adequate credit: Small units require timely credit and financing arrangement rather than cheap credit. The scope of the single window clearance, which has been enlarged to cover project costs upto Rs. 20 lakhs and working capital upto Rs. 10 lakhs, making things easier at the entry point.

5) Nodal Agency: The SIDO has been recognised as the nodal agency to support the SSI in export promotion. An “Export Development Centre” would be set up through a network of field offices to further augment export activities of this sector.

6) Marketing: Marketing, promotion would be undertaken through cooperative, public sector institutions, other professional and marketing agencies backed up by such incentives as deemed necessary.

7) Raw material: Based on the capacity needs, tiny/smaii scale units would be given priority in the allocation of indigenous raw materials.

8) Quality: To improve the quality of goods and services of small scale units industry, associations would be encouraged and supported to establish quality counselling and other testing facilities. Technology information centres, to provide up-to-date knowledge on technology and market, would also be established. Compulsory quality control would be enforced.

Question 10.
Explain the role of commercial banks in development of SSIs.
Answer:
Role of commercial bank in development SSI:
Small businesses reiy on commercial banks for a variety of services that make it easier to develop and grow the SSI.
1. To get a loan from a commercial bank for a small business, will need to have a track record. It must show sales growth, assets and some reasonable sales projections for the company. Small businesses are the fastest-growing part of the economy. Commercial banks will compete for the business by offering a variety of interest rates and loan lengths and by reducing the amount of collateral they require to secure a loan. In short, the role of commercial banks with SSI has become increasingly personal and relationship-oriented.

2. Investment Services: One way to grow a SSI is to invest profits for additional income or growth. Commercial banks typically have an investment department that can guide you in the selection of stocks, bonds, money market accounts and real estate.

3. Corporate Credit Cards: A commercial bank will count a credit card as an unsecured loan, meaning you will not have to put up any collateral. They can issue credit cards to empiyees and instruct them to use them to make all purchases. This places the commercial bank in the role of organizing and tracking the expenses.

4. Bookkeeping: Commercial banks will help SSI with its bookkeeping. This help begins with bank statements that categorize expenses. However, commercial banks will also help a small business create profit-and-loss statements.

Question 11.
What are the remedies to prevent industrial sickness OR What are the provisions for nursing sick units? OR Write a note on preventive .measures to avoid Industrial sickness.
Answer:
(i) Programme of monitoring: A programme of monitoring and nursing during infancy is essential.

(ii) Financial institutions and banks: Financial institutions and banks should initiate necessary corrective action for sick or prone-to-sickness units based on diagnostic studies.

(iii) Restore sick units to financial health: Attempts should be made to restore sick units to financial health.

(iv) Excessive concern over unemployment: Excessive concern over unemployment resulting from the closure of a sick unit is unwarranted.

(v) The proposal visualising that the management of a unit that has lost net worth will not be allowed to manage that unit any more, needs to be reconsidered. All aspects of the case ought to be examined.

(vi) The proposal that management is responsible for mismanagement should not be allowed assistance from financial institutions even for new ventures, too, needs rethinking.

(vii) Aii the stakeholders bear sacrifices: It is important that in any scheme of reconstruction of a sick unit, all the stakeholders bear sacrifices on equitable and just basis.

(viii) Skill, technology and finance: The important criterion for take over of a sick unit by another company should be whether the company taking over the sick unit has skill, technology and finance to save it.

(ix) Debt equity ratio: Debt equity ratio ought to be realistic. Fiscal policy, too, requires rationalisation.

(x) Incentives: Incentives should be provided to professional managers helping in reviving sick units.

(xi) Treatment of capital intensive units: Treatment of capital intensive units prone to sickness has to be on a different footing than tackling of sickness in industry in general.

(xii) Government can accord priority: The government can accord priority in the allocation of scarce raw materials, extend marketing assistance and grant concessions to small units which show better record of performance.

(xiii) Separate division in BIFR: A separate division in BIFR should be set up to deal with sickness in small scale industries as small units are characterised by different sets of problems as compared to medium and large scale industries.

Small Scale Industries Short Answer Type Questions

Small Scale Industries Short Answer Type Questions

Question 1.
Discuss the importance or advantages and disadvantages of small scale industries.
Answer:
The advantages of small scale industries are:

  • Employment generation.
  • Mobilization of resources and entrepreneurial skills.
  • Equitable distribution of income.
  • Regional dispersal of industries.
  • Provides opportunities for development of technology.
  • Promotes exports.
  • Supports the growth of large industries.
  • Better industrial relations.
  • Creates economic stability.
  • Creates jobs in rural areas.
  • Provide training ground for local entrepreneur.
  • Enhance demand.
  • Optimum utilization of local resources.
  • Extensive Promotion and Support by Government

Disadvantages of Small scale industries:
(i) Lack economies of scale: SSI’s produce in small quantities so They do not enjoy economies of scale in purchases, production and marketing.

(ii) Lack of modernizing: Due to their small scale of operations and limited capital resources, SSI’s are not invest in modernization. They do not have access to latest technology and therefore cannot Improve their efficiency of operations.

(iii) Inefficiency: Due to lack of scale economies, low skilled and poorly trained workers and usage of outdated technology, small scale industry suffers from inefficiency of operations.

(iv) Sickness: Due to the ease of setting up and because of the incentives available, many unemployed youth set up SSI’s with very little business knowledge and skills.

(v) Less innovation capacity: SSI’s have limited financial resources, therefore they are not able to invest adequately in research and development or acquire technology.

Question 2.
Explain the features of SSI.
Answer:
The features of SSI are:

  • Labour-intensive: They are fairly labour-intensive.
  • Employment opportunities: Creating employment opportunities in urban and rural areas.
  • Low cost of capital: Low cost of capital investment.
  • Flexible: Flexible in their operation.
  • Individuals: It is mostly set up by individuals.
  • Decision making process: The decision making process is fast.
  • Promote intermediate and capital goods: Use indigenous raw materials and promote intermediate and capital goods.
  • Faster balance economic growth: They contribute to faster balance economic growth.
  • Operation to local areas: Restrict operation to local areas in order to meet the local and regional demands of the people.
  • Lesser development period: Usually have a lesser development period than large industries.
  • The educational level of the employees of small industries is normally low or moderate.

Question 3.
What are the basic objectives of promoting SSI?
Answer:
The basic objectives of promoting SSI are:

  • Creating employment opportunities in urban and rural areas.
  • Technology up gradation.
  • Quality Enhancement.
  • Enterprise promotion with emphasis on rural industrialization
  • Human Resource Development of the SSI sector
  • Infrastructure development.
  • Technology Transfer.
  • Optimum utilization of local resources.
  • To enhance economic growth.
  • Creates economic stability.
  • To enhance people income.
  • To enhance standard of living.

Question 4.
Explain the product range in small scale industries.
Answer:
1. Modern small scale Industries: Modern small scale industries, including tiny units and powerlooms;

2. Traditional industries: Traditional industries like cottage industries, khadi and village industries handicrafts and handlooms etc.

Both the segments differ from each other in their own ways in terms of capital/labour intensity, locational orientation, manufacturing process and skill requirements.
1. Manufactures more than 7000 items: The SSI sector manufactures more than 7000 items involving very simple to highly sophisticated technologies and offers scope for the utilisation of local resources and skills.

2. Major supplier of a variety of products: It is a major supplier of a variety of products meant for mass consumption as well as parts and components to the large industry sector.

3. Manufacture some of the high-value added: Besides handicrafts and items of traditional nature, SSIs also manufacture some of the high-value added and sophisticated products such as electronic typewriters, TV sets, security and alarm systems and other consumer durables.

4. Highly flexible: This sector is highly flexible and can respond to the varied needs of the economy.

Question 5.
Discuss the requirement for capital investment in SSI’s.
Answer:
Capital Investment of SSI is discussed under two dimensions:

  • General Investment Decision
  • Capital Investment in SSIs.

(1) General Investment Decision – An investment decision is concerned with allocation of funds. This is based on the following principles:

  • Availability of funds
  • Capital structure
  • Taxation Policy
  • Government policy
  • Lending policy of FIs
  • Immediate need of the project
  • Earnings
  • Capital return
  • Economic value of the project
  • Working capital
  • Accounting practice
  • Earning trends.

(2) Capital investment in SSI – Capital investment plan in SSI will be well within in the framework of General Investment Principles and focus on:

  • Ensuring a fair return on investment
  • Generate and build up surpluses and reserves for growth and expansion
  • Attaining efficiency in financial operating and
  • Coordination with various departments to ensure discipline in the use of financial resources.

Question 6.
What are the internal and external causes of Industrial sickness? Discuss
OR
Explain the various causes for industrial sickness.
Answer:
Industrial sickness can be defined as a condition wherein an industrial unit fails to generate surplus on a continuous basis and depends on frequent infusion of external funds for its survival.
There are a number of causes that can be attributed to the sickness of small scale industries. These causes are divided into:

  • Internal causes and
  • External causes.

I. Internal Causes: Internal causes which affects the industry relate to organisation structure, production channels, distribution channels, technology etc. Some, of the internal causes are:

  • Poor handling of labour
  • Poor management of strategies
  • Choosing wrong idea or industry
  • Departmental structure of industry
  • Poor management prevailing in industry
  • Unsatisfactory organisation
  • Bad quality maintenance
  • Unsatisfactory marketing abilities
  • Poor utilisation of capacity
  • Poor planning in various functions of departments
  • Lack of project implementation
  • Unsatisfactory training programs
  • Absence of horizontal and vertical integration
  • Unsatisfactory implementation of projects

II. External causes: The external causes are beyond the control of the industry and usually affect the industry as a whole. Some of the important external causes are as follows:
(a) Infrastructural bottlenecks:

  • Inadequate availability of inputs like raw materials due to poor agricultural output, change in import conditions etc.
  • Chronic power shortage
  • Transport bottlenecks.

(b) Financial bottlenecks:

  • Non availability of adequate finance
  • Credit squeeze by banks

(c) Government Controls and Policies etc.:

  • Government price controls
  • Fiscal duties
  • Changes in government policy

(d) Market Constraints:

  • Market saturation
  • Revolutionary technological advances rendering one’s product obsolete.

(e) Extraneous factors:

  • Natural Calamities
  • Political situation
  • War
  • Sympathetic strikes
  • Multiplicity of labour unions.

Question 7.
Explain the revival plan for sick units.
Answer:
The seven steps for the Revival Plan for the sick units are:
(i) Finalise the goals/objectives/targets for performance at all levels to meet the organisation’s mission.

(ii) Issue policy guidelines on major aspects that affect the image of the company in public and the work culture inside the organisation.

(iii) Initiate the preparation of detailed systems manuals for the maintenance budgets, costs, distribution, transportation, purchase, marketing inventory, personnel etc.

(iv) Analyse past reports on production, quality, costs, performance, accounts receivables etc. and the connected financial and audit reports – to get an overall idea of the present working systems and results

(v) Meet senior executives from marketing/finance/personnel/materials. Secretarial/legal departments and (if possible) with competitors – to assess the external situations (Govt, policies competitor’s activities, raw materials position, union-political social factors.)

(vi) Brain storm with a select group – to get creative ideas for improvement.

(vii) Appraise the Board about the diagnosis and request them to spell out a clear “Mission” of the Company.

Question 8.
Explain the various measures taken by the Government for rehabilitation of industrial sick units in small scale sector.
Answer:
The Government of India in co-ordination with RBI has taken several measures to rehabilitate sick units. Some of these are:
1) Industrial Reconstruction Bank of India (IRBI): IRBI was established in 1985 with the objective of industrial revival by undertaking modernisation/ expansion/reorganisation/diversification/rationalisation of industrial units.

2) Special cell at IDBI: A special cell at IDBI has been assigned the task of conducting diagnostic study of industrial units referred by other agencies and formulate appropriate remedial measures.

3) Sick Industrial Undertakings cell: RBI has established a special cell to act as a coordinating agency and clearing house with respect to the sick units. This cell coordinates with commercial banks in monitoring and rehabilitating sick units.

Question 9.
Explain briefly consequences of industrial sickness.
Answer:
The consequences of industrial sickness are:

  • Set back to a employment prospects: It involves lack of opportunity, lack labour intensive, high unsatisfaction rate, etc.
  • Fear of industrial unrest: Here high unemployment rate, low productivity and unfavour of trade union
  • Wastage of resources: It includes lack of infrastructure facilities and block of capital equipment.
  • Adverse impact on related: Channel breakdown between industries.
  • Adverse effect on investor and employment: It has low satisfaction of investor, negative effect on the same line new, effect on the growth rate of industry.
  • Losses to banks: Here low recovery rate of banks and institution, loss image in the market, lack of financial support for new industries.
  • Loss of revenue to government: This is loss of income to government, loss of government benefit, etc.

Small Scale Industries Very Short Answer Type Questions

Small Scale Industries Very Short Answer Type Questions

Question 1.
Define Small Scale Industry.
Answer:
In India, the Ministry of Commerce and Industries defined a small scale industry as a ‘unit with a capital investment of not more than Rs. 5 lakhs irrespective of the number of persons employed’.

Question 2.
State any 4 objectives of small scale industries.
Answer:
The four objectives of small scale industries are:

  • To generate more employment in rural areas.
  • To rise income and standard of living.
  • To provide subsidiary or alternate occupations.
  • To utilize of local raw materials and talents.

Question 3.
Mention any three functions of SSI.
Answer:
The three functions of SSI are:

  • To achieve a wide dispersal of industries.
  • To bring forth indigenous entrepreneurship.
  • The function of providing employment.

Question 4.
Mention any three advantages of small scale industry compared to large scale industry.
Answer:
The three advantages of small scale industry compared to large scale industry are:

  • Small scale industries do not require a high level of technology.
  • Small scale industries are generally labour intensive and do not require a large amount of capital.
  • Small scale industries are the training ground for local entrepreneurs on decision making.

Question 5.
What is Product Range?
Answer:
Product range refers to the variety of products made or produced by the same company. For example, Hyundai produces Xing, ilO, i20 etc. which will all fall under its product range.

Question 6.
Give the meaning of capital Investment.
Answer:
It refers to money invested in a business with the understanding that the money will be used to purchase fixed assets, rather than used to cover the business’ day-to-day operating expenses.

Question 7.
Give the meaning of Venture Capital.
Answer:
Venture capital is equity support to fund new concepts that involve a higher risk and at the same time, have a high growth and profit. It is also broadly implies an investment of long term, equity finance in high risk projects with high rewards possibilities.

Question 8.
Define “Ownership Patterns”.
Answer:
Ownership patterns implies the right of an individual or a group of individuals to acquire legal title to assets for the purpose of controlling an industrial operation and enjoying the gains or profits flowing from such activities.

Question 9.
What is a “tiny industry”? OR What is tiny enterprise.
Answer:
A tiny industrial unit is one with an investment limit of Rs. 2.5 million in plant and machinery irrespective of location of the unit.

Question 10.
What is an ancillary unit or industry?
Answer:
An ancillary industry is a subsidiary industry or supplementary industry to a main industry.

Question 11.
What is cottage industry?
Answer:
A cottage industry is a traditional industry, catering mainly to the local population and dependent upon local raw materials. They are located usually at the homes of the producers, hence the name cottage industry.

Question 12.
Write any four objectives of Khadi and village industries corporation.
Answer:
The four objectives of Khadi and village industries corporation are:

  • Social objective: Providing employment.
  • Economic objective: Producing saleable articles.
  • To create self-reiiance amongst the poor and
  • Building up of a strong rural community spirit.

Question 13.
State any two roles played by SSI in the development of Indian Economy.
Answer:
The two roles played by SSI in the development of Indian economy are:

  • Enhanced employment.
  • It helps to remove regional disparities.

Question 14.
Mention any two problems faced by SSI’s.
Answer:
The two problems faced by SSI’s are:

  • Poor management.
  • Poor planning.

Question 15.
What do you mean by sick industrial unit?
Answer:
A sick industrial unit may be defined as one when it fails to generate surplus on a continuous basis and depends on frequent infusion of external funds for its survival.

Question 16.
What is an. Industrial Sickness?
Answer:
Industrial sickness can be defined as a condition wherein an industrial unit fails to generate surplus on a continuous basis and depends on frequent infusion of external funds for its survival.

Question 17.
What are the symptoms of Industrial sickness?
Answer:
The symptoms of industrial sickness are:

  • Irregular or unsatisfactory turnover in the account.
  • Slow and unsatisfactory movement of stocks
  • Decline in production, sales and profitability
  • Frequent violation of terms and condition
  • Asking for additional grants.

Question 18.
Mention various steps taken to solve the problems faced by SSI’s.
Answer:
The various steps taken to solve the problems faced by SSI’s are:

  • Institutions offering Financial Support
  • Institutions offering Technical Support
  • Institutions offering Marketing Support

Question 19.
State any four policies governing SSI.
Answer:
The four policies governing SSI are:

  • Payment mechanism
  • Factoring services
  • Resources
  • Timely and Adequate credit

Question 20.
What is industrial policy?
Answer:
Industrial policy is a statement which defines the role of government in industrial development. The place of the public and private sectors in industrialisation of the country. The relative role of large and small industries.

Project Assistance Very Short Answer Type Questions

Project Assistance Very Short Answer Type Questions

Question 1.
Give the meaning of financial assistance?
Answer:
Financial assistance, also known as financial aid, refers to loans, loan guaranties, subsidies, tax allowances, cost sharing arrangements, or outright grants provided by third-parties.

Question 2.
What is SIDBI?
Answer:
Small Industries Development Bank of India (SIDBI) is an apex-level national institution for promotion, financing and development of industries in the small- scale sector.

Question 3.
Expand SFC and SIDBI.
Answer:

  • SFC stands for State Financial Corporation
  • SIDBI stands for Small Industries Development Bank of India.

Question 4.
What is meant by commercial bank?
Answer:
Commercial Banks are joint Stock Companies dealing in money and credit. It is a financial institution which accepts deposits and uses the money with it for lending to the businessmen and others who need them.

Question 5.
What are the objectives of KSIDC?
Answer:
KSIDC was established with the objective of promoting industrial growth in the state of Karnataka, especially in the medium and large sector.

Question 6.
What is IFCI?
Answer:
IFCI, the first development financial institution in India was established in 1948 as a statutory Corporation. Besides providing project finance, financial services, nonproject specific assistance, corporate advisory services.

Question 7.
What are Non-financial assistances?
Answer:
Non-financial assistance refers to any type of assistance that is not financial. This includes help in getting and securing a premise, training of the staff, assistance in forming a business plan etc.

Question 8.
State the name of non-financial institutions?
Answer:
The names of institutions offering non financial aid are:

  • District Industries Centre (DIC)
  • Small Industries Services Institute (SISIs)
  • Entrepreneurship Development Institute (EDI)
  • Small Industries Development Organisation (SIDO)

Question 9.
Expand KSIDC and KSSIDC.
Answer:

  • KSIDC: Karnataka State Industrial Development Corporation.
  • KSSIDC: Karnataka State Small Industries Development Corporation Ltd.

Question 10.
Expand DIC, SISI, EDI and SIDO.
Answer:

  • DIC: District Industries Centre
  • SISI: Small Industries Services Institute
  • EDI: Entrepreneurship Development Institute
  • SIDO: Small Industries Development Organisation

Question 11.
Expand TCO, TECSOK, KVIC and KFSC.
Answer:

  • TCO: Technical Consultancy Organisation
  • TECSOK: Technical Consultancy Services Organisation of Karnataka
  • KVIC: Khadi and Village Industries Corporation
  • KSFC: Karnataka State Financial Corporation

Question 12.
Expand AWAKE and SEWA.
Answer:
AWAKE: Association of Women Entrepreneurs of Karnataka SEWA: Self Employed Women’s Association

Question 13.
State any two financial incentives for SSI.
Answer:
The two financial incentives for SSI are:

  • Differential Rate of Interest Scheme
  • Composite Loan Scheme

Question 14.
Name any four institutions offering financial assistance to SSI’s?
Answer:
The four institutions offering financial assistance to SSI’s are:

  • Small Industries Development Bank of India (SIDBI)
  • Industrial Finance Corporation of India Limited (IFCI)
  • Industrial Investment Bank of India (IIBI)
  • State Financial Corporations (SFCs)

Question 15.
What is tax holding?
Answer:
Tax holding is the amount withheld by the party making a payment to another (payee) and paid to the taxation authorities. The amount the payer deducts may vary, depending on the nature of the product or service being paid for. The payee is assessed on the gross amount and the tax to be withheld is computed in that assessment.

Question 16.
What is Tax concessions?
Answer:
Tax concession means a concession in the tax rate. Infact, special tax concessions to small scale industries are desirable for the accumulation of capital and for directing it into the right channels.

Question 17.
What are the tax concession given to SSI?
Answer:
The tax concession given to SSI are:

  • Concession in excise duties and sales tax primarily aim at marketing support.
  • Concession in profit tax/dividend tax etc. offer investment support whereas.
  • Concessions in custom duty offer raw material support.

Question 18.
What is Tax Holiday?
Answer:
Tax Holiday refers to a government incentive program that offers a tax reduction or tax elimination to businesses. Tax holidays are often used to reduce sales taxes by local governments, but they are also commonly used by governments in developing countries to help stimulate foreign investment.

The various technical assistance includes:

  • TCO – Technical Consultancy Organisation
  • TECSOK – Technical Consultancy Services Organisation of Karnataka

Question 20.
Define industrial estate.
Answer:
The United Nations, has defined an Industrial Estate as “a planned clustering of enterprises, offering standard factory buildings erected in advance of demand and variety of services and facilities to the occupants.”

Question 21.
Mention various types of industrial estates.
Answer:
On the basis of organisational set up, industrial estates are classified into:

  • Government
  • Private
  • Co-operative and
  • Municipal estates.

Two important roles of industrial estates are as follows:

  • It helps in economic development.
  • It helps in development of small scale industries.

Question 23.
Mention any two types of Industrial Estate.
Answer:
The two types of Industrial Estates are as follows:

  • Hooghly Industrial Estate
  • Bombay-Pune Industrial Estate

Entrepreneurship Long Answer Type Questions

Entrepreneurship Long Answer Type Questions

Question 1.
The different phases of entrepreneurship are as follows:
Answer:
1. Idea Generation: Every new venture begins with an idea. An idea can be a description of a need or problem of some constituency coupled with a concept of a possible solution. The idea can be identified by using input from consumers, business associates, channel members or technical people.

2. Opportunity Evaluation: This is the step where the entrepreneur needs to ask the question of whether there is an opportunity worth investing in. Investment is principally capital, whether from individuals in the company or from outside investors and the time and energy of a set of people. Each idea must be carefully screened and evaluated. It allows the entrepreneur to assess whether the specific product or service has the returns needed compared to the resources required.

3. Planning: Once entrepreneur have decided that an opportunity is feasible. The entrepreneur needs to plan for how to capitalize on that opportunity. A plan begins as a fairly simple set of ideas and then becomes more complex as the business takes shape. In the planning phase entrepreneur needs to create two things: strategy and operating plan.

4. Company formation: Once there is a sufficiently compelling opportunity and a plan, the entrepreneurial team will go through the process of choosing the right form of corporate entity and actually creating the venture as a legal entity.

5. Growth: After launch, the company works toward creating its product or service, generating revenue and moving toward sustainable performance. The emphasis shifts from planning to execution. At this point, you continue to ask questions but spend more of your time carrying out your plans.

Question 2.
Discuss various factors influencing Entrepreneurship.
Answer:
The various factors influencing entrepreneurship are as follows:
1) Economic factors – The economic factors include:

  • Lack of adequate basic facility.
  • Non availability of capital.
  • Non availability of raw materials.
  • Instability in domestic and foreign policies.
  • Instability in the market.

2) Social factors – The social factors include:

  • Customs and tradition.
  • Rationality of the society.
  • Social system prevailing in a locality.
  • Social set up in countries.

3) Cultural factors – The cultural factors include:

  • Economical motivation.
  • Attaching value to business talent.
  • Proper motives.
  • Encouraging entrepreneurship.
  • Providing opportunities to women entrepreneur.

4) Personality factors – The personality factors include:

  • Suspect personality.
  • Emergence of planning.

5) Political Environments – The political environment includes:

  • Unstable political conditions.
  • Government support to economic development.
  • High taxes that cut into the returns usually discourage entrepreneurs.
  • The availability of infrastructure.
  • Economic freedom in the form of favorable legislation.
  • Safeguard of labor rights.

6) Availability of Resources – The availability of resources includes:

  • Capital.
  • Human assets
  • Raw materials
  • Infrastructure

Question 3.
Discuss pros and cons or advantages and disadvantages of being an entrepreneur.
Answer:
The advantage and disadvantages of being an entrepreneur are:
Advantages:
1) Bridge the gap between knowledge and application: An entrepreneur is in a position to put his knowledge to practical use. He can bridge the gap between knowledge and application. An entrepreneur can convert his knowledge into an economic activity and gain out of it.

2) Complete Freedom: An entrepreneur is his own boss and has the complete freedom to venture into new business and to take risks.

3) Face competition: An entrepreneur enables the organisation to face competition by producing quality products at a low cost through his innovative ideas.

4) Entrepreneurial ability: People with entrepreneurial ability can make use of various opportunities and have personal gain. They can also make use of resources for improving the standard of society at large.

5) Original ideas: An entrepreneur commands a tremendous amount of respect in the society for his original ideas.

6) Benefit of the society: The creative skill and knowledge of an entrepreneur can be used for the benefit of the society which otherwise would have been a waste.

Disadvantages:
1) Bear risks: An entrepreneur has to bear and assume risks. The reward for risk bearing may be positive or negative.

2) Initial teething problems: Any business has to face the initial teething problems. This delays the process of reaping the benefits of entrepreneurship. Even in the long run, benefits are not extraordinary and the entrepreneurs earn only normal profits. Moreover, there is a constant threat of competition.

3) Time management: Time management is a critical factor for an entrepreneur. As the entrepreneur has invested his own funds, he has to be very cautions about how he utilises his time.

4) Decision making: Decision making is another critical factor. An entrepreneur has to be decisive, he cannot post pone decision making.

5) Inexperience: An entrepreneur needs to have core competence in the accepted line of business. An inexperienced person without entrepreneurial ability cannot manage business.

Question 4.
Explain types of entrepreneurs.
Answer:
The types of entrepreneurs are:
(i) Innovating entrepreneur; Innovating Entrepreneur is a person who habitually creates and innovates to build something of recognized value around perceived opportunities.

(ii) Fabian entrepreneur: A fabian entrepreneur is the one who adopts a great caution and scepticism in introducing any change in the business. He doesn’t take any risk at all and imitates only when it is clear that failure to do so would result in heavy loss for him.

(iii) Technocrat entrepreneur: A technocrat entrepreneur develops new and improved quality of goods as a result of his craftsmanship. He is highly skilled in production techniques.

(iv) Technical entrepreneur: A technical entrepreneur demonstrates his innovative capabilities in matter of production of goods and rendering of services. He concentrates more on production than marketing.

(v) Agricultural entrepreneur: Agricultural entrepreneurs refer to those entrepreneurs who invest in agriculture sectors and help to provide education and employment opportunities to people especially those located in struggling regions.

(vi) Women entrepreneur: Women entrepreneurs are the women or group of women who initiate, organise and operate a business enterprise. The GOI has defined women entrepreneur as “an enterprise owned and controlled by a woman having a minimum financial interest of 51% of capital and giving atleast 51% of the employment generated in the enterprise to women.”

Question 5.
Explain the characteristics of a successful entrepreneur.
Answer:
The characteristics of a successful entrepreneur are:
1. Disciplined: The individuals are focused on making their businesses work and eliminate any hindrances and distractions towards achieving their goals. They have overarching strategies and outline the tactics to accomplish them. Successful entrepreneurs are disciplined enough to take steps every day toward the achievement of their objectives.

2. Confidence: The entrepreneur do not ask questions about whether they can succeed or whether they are worthy of success. They are confident with the knowledge that they will make their businesses succeed. They exude that confidence in everything they do.

3. Open Minded: Entrepreneurs realize that every event and situation is a business opportunity. Ideas are constantly being generated about workflows and efficiency, people skills and potential new businesses. They have the ability to look at everything around them and focus it toward their goals.

4. Self-Starter: Entrepreneurs know that if something needs to be done, they should start it themselves. They set the parameters and make sure that projects follow that path. They are proactive, not waiting for someone to give them permission or to motivate them to achieve.

5. Competitive: Many companies are formed because an entrepreneur knows that they can do a job better than another. They need to win at the sports they play and need to win at ,the businesses that they create. An entrepreneur will highlight their own company’s track record of success.

6. Creativity: One facet of creativity is being able to make connections between seemingly unrelated events and situations. Entrepreneurs often come up with solutions which are the synthesis of other items. They will re-purpose products to market them to new industries.

7. Determination: Entrepreneurs are not thwarted by their defeats. They look at defeat as an opportunity for success. They are determined to make all of their endeavours succeed, try and try again until it does is the success mantra. Successful entrepreneurs do not believe that something cannot be done.

8. Strong people skills: The entrepreneur has strong communication skills to sell the product and motivate employees. Most successful entrepreneurs know how to motivate their employees so the business grows overall. They are very good at highlighting the benefits of any situation and coaching others to their success.

9. Strong work ethic: The successful entrepreneur will often be the first person to arrive at the office and the last one to leave. They will come in on their days off to make sure that an outcome meets their expectations. Their mind is constantly on their work, whether they are in or out of the workplace.

10. Passion: Passion is the most important trait of the successful entrepreneur. They genuinely love their work. They are willing to put in those extra hours to make the business succeed because there is a joy their business gives which goes beyond the money. The successful entrepreneur will always be reading and researching ways to make the business better.

Successful entrepreneurs want to see what the view is like at the top of the business mountain. Once they see it, they want to go further. They know how to talk to their employees and their businesses soar as a result.