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: