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There is a world-wide conflict between capi ta l and labour,
and the poor envy the r ich. If a l l worked for their bread,
distinctions of r ank would be obliterated the rich would still be
there, but ' they would deem themselves only trustees of their
poverty, and would use it mainly i n the public interest .
From Yarvada Mandir, p .p .35-36.
CHAPTER - V I
MANAGEMENT O F VILLAGE INDUSTRIES
Introduction
Functions of the Entrepreneur
Planning
Organising
Staffing
Co-ordination
Controlling
Financing
Marketing
Profile of t h e Entrepreneurs
Profile of t h e Units selected
Management of Village Industr ies - A Gandhian Outlook-
CHAPTER - V I
MANAGEMENT OF VILLAGE INDUSTRIES
6.1. Introduction
The present chapter deals with a n empirical ana lys i s of
khadi and v i l l age indus t r ies i n Thiruvananthapuram and Kottayam
dis t r ic ts , with a view to demonstrate the profi le of khad i and
vil lage industr ies i n Kerala. This i s based entirely on primary
data collected through sample surveys i n the selected dis t r ic ts .
Some economic parameter of these dis t r ic ts a r e given below:
Thiruvananthapuram dis t r ic t is a t the southern most pa r t of
the state. It h a s a n a r e a of 2192 Sq.Kms. A s per 2391 census it
has a population of 29,38,283 with a density of 1341 person per Sq.
~ m . ' The percentage of l i t e racy i n the distr ict i s 78. A t the end
of March 1990 there was 6,92,971 job seekers on the l ine regis ter of
employment exchange i n the dis t r ic t .
Kottayam d i s t r i c t h a s an a r ea of 2203 Sq.Kms. with a
population of 18,19,581. The density of population i n Kottayam
dis t r ic t i s 826 person per Sq.Km. The percentage of l i t e racy i n the
dis t r ic t i s 85.5. The number of unemployed i n the d i s t r i c t i s
1. Ashish Bose (Ed . ) , Demographic Density of Ind ia , 1991 census, B.R. Publishing Corporation, Delhi, p .207.
2,58,568 a s on 31.3.90. It is an industrially backward district in
Kerala. Figure 6.1. shows the district-wise a rea of the 14 districts
i n Kerala.
- The Chapter is concerned with the entrepreneurial factors
tha t help to shape various tools for an effective system of
management and administration of village industries.
Traditionally, the management of enterprises has been i n
the hands of the families of business communities and the
managerial talent was handed down along the family ladder. It
has been accepted tha t people from other communities a re incapable
of taking up these responsibilities, because, i n a t radi t ional
business family, the prospective manager was init iated into the
responsibilities of h i s profession at an ear ly age. However, th i s
traditional practice has not been free from i t s own aberrations.
Managing is essential i n a l l organised w-operation, a s
well a s a t a l l levels of organisation i n enterprise. It is the
function not only of enterpreneur but also of the shop supervisor
and ordinary worker i n the organisation. The task of the
enterpreneur or manager is to establish the environment for group
effort i n such a way tha t individuals w i l l contribute to group
objectives with the leas t amount of such inputs a s money, time,
effort, discomfort and materials. By the very definition of the t a sk
this becomes the goal of managers. Despite the inexactness and
FIGURE 6.1
District-wise Area of 14 Districts in Kerala.
Source : Census of India 1991, Series-12, Kerala, p . 2 4 .
i
relative crudi ty of management theory and science, the development
of thought on management da tes back to the days when people f i r s t
attempted to accomplish goals by working together i n grounds.
The main characterist ics of the managerial job is tha t it
must interact with many k inds of environment. A l l managers must
interface and interact with the many environments within their
department and within the enterprise i n which they operate. A l l
must also constantly respond to and interact with, a complex
environment external to the i r enterprise.
A successful manager is one who anticipates h is problems
and prepares himself to face them securely and i n good time. He
should have foresight, so t h a t he may prepare his organisation to
face the coming events. He gauges the strength or weakness of his
organisation, and appraises the new situation, to meet it, he works
out a s t ra tegy. This s t ra tegy makes demands on h is organisat ion 's
strength i n terms of the resources t h a t a r e at its command, whether
i n man, materials or money, the three ' M ' s of industry.
6.2. Functions of the Entrepreneur
In classifying the functions of the entrepreneur one must
clearly ascertain those entrepreneurial functions such a s planning,
organising , staff ing , co-ordination, controlling, financing and
marketing. These differ from one enterprise to another but the
basic t d ~ s of the entreprenehr, a s a manager a r e common.
6.2.1 Planninq
Planning involves selecting objectives and strategies.
policies, programmes and procedure for achieving them, either for
the entire enterpr ise or for only organized pa r t thereof. In vi l lage
industries planning is related to decision making, since it involves
selecting from among alternatives. Entrepreneur of any vi l lage
industry h a s to take decision on policies relating to authority.
prices and competition, programmes of production, management.
succession and in te rna l audi t and procedures requiring specific
methods of handling paper , products and people.
Organising of a vi l lage indus t ry is a tedious s task for the
entrepreneur. It involves the establishment of a n intentional
structure of goals through determination of the activit ies required
to achieve the goals of a n enterprise and each pa r t of it, the
grouping of these activit ies, the assignment of such groups of
activities to a manager, the delegation of authority to ca r ry them
out and provision for coordination of authority and informational
relationships horizontally and ver t ical ly of the organisation
structure. The organisation structure of village industr ies is
ofcourse, not a n end i n i tself , but a tool for accomplishing
objectives.
The management of vil lage industr ies is carried out under
different organisational set ups such a s co-operative societies,
charitable societies and proprietorship and direct production centres
under Khadi and Village Industries Board or Khadi and Village
Industries Commission.
i) Co-operative Society
A co-operative society should consist of at least 25 members
inclusive of president and secretary. The members should work in
the same field and belong to different families. The society should
have possessions not less than 10% of the required amount a s asset.
This can either be in the form of share capital loan or land. The ,
share capital loan can be collected by obtaining a fixed amount
from each member of the society as contribution. This amount can
be utilised either for purchase of land or as bank deposit for
security.
ii) Charitable Society
The charitable society consists of atleast seven members
belonging t o different families. The Board insist that a t least the
members in the administrative section of the unit should have
life-long membership in the society. In this case also, the asset
required for financial assistance is 10% of the required amount.
This can be produced either as land or a s bank deposit.
iii) Proprietorship
In the case of units owned by individuals or proprietorship,
the uni t can ava i l of the financial assistance from Khadi and
Village Industries Board on the security of two persons i n addition
to h i s own security. The owner and one of the securities should
possess a n asset not less than 1.5 times of the required amount
from Khadi and Village Industries Board. I n proprietorship
concerns, the entrepreneur himself is the owner of the unit .
The sample units selected for the study constitute 25
co-operative societies, 16 charitable societies and 10 proprietory
ownership. Figure 6.2 shows the organisational distribution of
selected vil lage industr ia l units i n the present study.
6.2.3 Staffing
Staffing involves manning and keeping manned, the
positions provided for by the organisation structure. It thus
necessitates defining manpower requirements for the job to be done,
and it includes inventoring, apprais ing and selecting candidates
for positions, compensating and t ra in ing or otherwise developing
both candidature and incumbents to accomplish the i r task
effectively. I n vil lage industries staffing is an important task for
the entrepreneur, for the success of the industry depends to a
great extent on the organisational structure.
Co-ordination is the essence of managership, for the
achievement of harmony of individual efforts towards the
Charitable Societies
m Proprietorship Units
Co-operative Societies
FIGURE 6.2
Organisational Distribution of Vfflage Industrial Units
accomplishment of group goals is the purpose of management. I n
vFllage industries the best w-ordination occurs when individuals
see how the i r jobs contribute to the dominant goals of the
enterprise. This implies knowledge and understanding of enterprise
objectives, not just on the pa r t of the entrepreneur a t the top, but
by every one throughout the enterprise.
6.2.5 Controllinq
Control is exercised by introducing a system of records at
various stages of production - r ight from the time the stocks a r e
held i n storage, through different stages of manufacture, t i l l the
finished goods a r e dispersed. With proper maintenance of these
records, the handicap a t any s tage can be eas i ly identified and
remedial measures taken i n sufficiently good time well before
matters get out of hand. So the entrepreneurs of vi l lage industries
have added responsibility for exercising s t r ic t control over the
enterprise a s any lapse a t the i r end will ru in the enterprise.
6.2.6 Financinq
The manager works out the amount of capi ta l he needs to
implement a project o r to carry out a production programme. After
he has worked out th i s programme. i t is essent ial for him to ensure
that the inflow and outflow of money takasplace i n accordance wi th
the plan on the budget. Financing is a grea t problem of vil lage
industries a s the entrepreneur ' f inds i t very difficult to ra i se the
required capi ta l . Banks and other financial insti tutions in the
country a r e generally reluctant to advance money for vil lage
industries due to several reasons including the r isk involved in
providing unsecured loans to the entrepreneur, whose employment
capacity is very limited.
A case w a r noticed where the entrepreneur had to confront
with the problem of financial cr is is during the establishment of the
industry. This par t icu lar entrepreneur is a gentleman having 32
years. Though he is a graduate i n science, lack of employment
opportunities i n other sectors motivated him to establish a vil lage . indus t r ia l uni t a s a means of self-employment. Thus he decided to
establish a non-edible oil and soap unit . For tha t he required
Rs.40,000/- . a t the in i t i a l stage. H i s parents a r e agr icu l tura l
labourers and they were not in a position to provide him with
f inancial support. He got Rs.10,000/- by disposing of h i s family
share. From KVIB he received only ~s.15,000/- and for the
remaining Rs.15,000/- h e sought the help of the Bank. But as he
was not able t o provide enough security required by the bank, they
were reluctant to provide him with loan. Therefore h e borrowed
money from a money lender a t high interest and established the
soap unit. However a t present a s informed by the entrepreneur the
profit from th is par t icu lar unit is not sufficient to remit the
interest of the loan he h a s taker. from the money lender and
therefore there is a possibility for the winding up of the unit i n
due course.
The cap i t a l investment of the sample uni ts varied from
18,000 rupees to 2 l akh rupees. Table 6.1. categories the entrepre-
neurs on the b a s i s of cap i ta l invested i n vi l lage industry.
Table - 6.1.
Categorisation of Entrepreneurs on t h e Basis of Capital Invested
Capital invested i n Rupees
--
Number of % entrepreneurs
Less t h a n 50,000
50,000 - 1.00.000 1.00.000 - 1.50.000 1.50.000 - 2,00,000
Total 5 1 100.0
In 36 uni ts sha re capi ta l loan forms the main source of
capi ta l while i n res t of the cases individual investment and
monetory assistance extended by Khadi and Village Industries Board
forms the source of cap i t a l invested.
Marketing is not a n item tha t can be excluded from
planning and control. The market for a product is a n external
element which cannot, i n general , be controlled by an entrepreneur
in vil lage industr ies , who has constantly to study i t and adjust
his production to su i t i t .
A s f a r a s the vi l lage industr ies a r e concerned marketing is
a grave problem. Due to the lack of marketing facil i t ies and
demand, the p i l ing up of finished goods adversely affect the
working of the indus t ry , which ultimately leads to its winding up.
It i s observed t h a t 63 percent of the uni ts a r e depending on local
markets for sel l ing their products. The rest of them have no local
markets. Some of these entrepreneurs find buyers for the ent i re or
par t of their product a t their doorstep. The entrepreneurs of
pottery uni ts , f ibre weaving uni ts , cane and bamboo uni ts ,
curry-powder making units etc. belong to th i s group.
I n some pottery units workers themselves car ry the cooking
pots and flower pots to the neighbouring town and vi l lages to se l l
their products. I n a fibre weaving uni t , managed by a woman,
she herself had to c a r r y the goods produced i n the unit t o the town
to sell them. Her main products a r e tab le mats, fancy bags and
decorative items for the show-case. The poor v i l lagers were not
much interested i n these items. Therefore she h a s to find the
market for her a r t ic les outside the vil lage. Otherwise the pi l ing
up of the produced goods w i l l put a n end to fur ther production
which ultimately will l ead to the winding up of the uni t . Though
a t the in i t i a l s tage she sought the help of a middle man for
marketing, h i s demand for high commission forced her to cut off
this sort of ass is tance in marketing. Thereafter she herself car ry
the goods to the market to se l l them.
17 entrepreneurs informed tha t they a r e avai l ing of the help
of Khadi and Village Industr ies Board for the marketing of their
products. These products comprise khadi , leather goods, soaps,
agarba th i , honey and cer ta in fancy items made up of f ibre and
wood. However, 55 percent of the entrepreneurs informed tha t they
a r e capable of selling a l l the products somehow. While others find
it difficult to sel l their products. It is interesting to note tha t
33% of the units a r e sell ing their products i n other s ta tes l ike
Madras, Bombay, Calcutta, etc. These products a r e fibre-mats,
bags, honey, leather ar t ic les etc.
6.3. Profile of the Entrepreneurs
One of the objectives of the present study is a n analysis of
the entrepreneurship, organisation and programmes concerned with
the promotion and development of vil lage industries i n Kerala.
Therefore, the scope of the study consists of the survey of the
indus t r ia l uni ts i n order t o evaluate the effectiveness and relevance
of Government policies and programmes vis-a-vis the needs of
entrepreneurship i n vil lage industry and to build an entrepreneurs
profile and analyse the characterist ics of vil lage industr ia l uni ts .
The typical entrepreneur of the vil lage industry i n Kerala
is of local origin and his venture into entrepreneurship steps
primarily from a desire for acquisition of monetary benefits. He is
encouraged in this venture by his family and friends. Rising
demand for the product, coupled with high returns and future
prospects a r e the most significant factors for his choice of the
product. To him one of the major considerations for the setting up
of the unit i n a par t icular locali ty is t h e avai labi l i ty of l and and
labour.
The majority of the entrepreneurs under the study a r e in
their middle age. The average age of a n entrepreneur i n vil lage
industry is noticed a s 38.5 years . Table 6.2 shows the age-wise
distribution of entrepreneurs i n vi l lage industries.
Table - 6.2.
Age-wise Distribution of Entrpreneurs in
Village Industr ies .
Age Group Number of % entrepreneurs
Total 51 100.0
A l l the entrepreneurs under the sample uni ts a re l i terate
and the majority (51 %) are having higher educational qualifications.
Six of them a r e degree holders and 3 of them in khadi units
attended 'Karyakartha ' course conducted by Khadi and Village
Industries Board. Table 6.3. categorieses the entrepreneurs on the
basis of their educational level.
Table - 6.3.
Educational Level of Entrepreneurs in Village Industries
Educational level
Number of entrepreneurs
Primary
High School
College
Total
Christians constitute the majority i n the sample population
of entrepreneurs. Though Christians constitute 20.6 percent of
Kerala population, the share of Christian entrepreneurs i n vil lage
industries is 53 percent. Rest of them a r e Hindus. One of the
possible reasons for higher Christian representation is their
settlement pat tern. In Kottayam district the Christians a r e more
concentrated and 96 percent of the entrepreneurs i n Kottayam
district a re Christians. Religion-wise distribution of entrepreneurs
in vil lage industr ies a r e presented i n Table - 6.4.
Table - 6.4.
Religion-wise Distribution of Entrepreneurs in Village Industries
Religion Number of % entrepreneurs
Hindu
Christians
Total 51 100.0
Both male and female entrepreneurs represented the sample,
though the female representation is only 3 3 . 3 percent. Table - 6.5.
presents the gender-wise distribution of entrepreneurs i n village
industries.
Table - 6.5
Gender-wise Distribution of Entrepreneurs in Village Industries
Gender Number of entrepreneurs
Male 34 66.7
Female 17 3 3 . 3
Total 5 1 100 .O
6.4. Profile of the Units Selected
By and l a rge 49 percent of the uni ts came into existence
from 1980 - 90. This is because during th i s period the Government
has implemented several employment programmes to reduce the
problem of unemployment i n the s ta te by absorbing r u r a l masses
into khadi and vi l lage industries sector. Table - 6.6. categories
the vil lage indus t r i a l uni ts on the bas i s of their s ta r t ing period.
Table - 6.6.
Categorisation of Village Industr ia l U n i t s on the Basis of
Starting Period
Starting
period
Number of %
units
Total
Regarding the ownership of land and building of the units,
it is observed t h a t out of 51 units 43 a r e functioning i n the i r own
building. A l l the co-operative societies, 13 chari table societies and
5 proprietorship uni ts have their own building. Rest of the units
a r e functioning in rented buildings. The tab le - 6.7. distributes
the units on the bas i s of ownership of land and bui lding.
Each Symbol Represents 10 percent workers.
FIGURE 6.3
Gender-wise Distribution of Total Workers in the Selected Village Industrial Units
workers under selected vil lage indus t r ia l units. I n ancient times,
women were engaged i n the textile industry, specially i n spinning,
though they lost t h i s occupation l a t e r . However, af ter the rev iva l
of khadi and vi l lage industr ies , women aga in entered i n th i s f ie ld .
Though they a r e working in every field of khadi , it is the spinning
section t h a t they have monopolised. About 90 percent of t h i s
section is i n their hands. Apart from spinning, other vi l lage
industries i n which women a r e largely employed a r e cottage match
industry. f ib re weaving, non-edible oil , seed collection and
processing, hand made paper, pottery, food processing and
preservation etc .
There is a generally held view tha t the productivity in
vil lage industr ies , by and la rge , is not sat isfactory. Therefore,
all over the Five Year Plans and Indus t r ia l Policy Statements have
stressed the need to accentuate the development of vil lage
industries through the upgradation of technology, thereby to
improve the qual i ty of products. But a serious question is, to
what extent machinery can be made uss of i n th i s sector?
According to Gandhiji, machinery has its place, it h a s come to
stay. but it must not be allowed to displace necessary human
labour. H i s opinion on the use of machinery i n v i l lage industr ies
is more clear i n h is statement tha t . "I would welcome every impro-
vement i n the cottage machine. but I know t h a t it is criminal to
displace hand labour by the introduction of power-driven spindles
unless one is, a t the same time, ready to give millions of farmers
some other occupation i n their home". 2
I n contrast to the Gandhian view of mechanisation it is
found tha t low levels of technology, result ing i n poor productivity
and inadequate re turns continue to character ise the vi l lage
industries. I n the present study with a view to find out the i r
views on the use of machinery and the extent to which machinery
a re in use currently, a question w a s asked to both the
entrepreneurs and workers i n village industr ies . It i s noticed t h a t
two types of machinery a r e used i n vi l lage industr ies , viz., hand
driven and power dr iven. It is found t h a t 80 percent of the uni t s
a re using hand driven machines, while 20 percent a r e using power
driven machines i n the i r production process. Nearly 100 percent of
the units use machine power for processing of cereals and pulses.
Other a reas of vi l lage industries where machines a r e employed
include pulp making i n paper industry, mixing of chemicals i n
match industry, grinding and powdering of spices i n vegetable
processing uni ts and aluminium industry.
However the use of machinery depends upon two factors, the
applicability of par t icu lar machinery in a par t icu lar industry and
also on the financial position of the entrepreneur. It is observed
during the field study t h a t the majority of the entrepreneurs prefer
2. M.K. Gandhi, Young India , 5.1.1923.
to use modern machinery i n production, a s they feel t ha t i t would
enrich the quali ty of the products and hence increase the total
turnover and income. But factors l ike f inancial constraints,
non-availability of proper machinery and also taboos and beliefs to
a certain extent res t ra in the t radi t ional workers from the use of
machinery.
What is gathered from the study is t h a t , given a n
opportunity t o mechanise the production process i n vi l lage
industries without losing the employment opportunities, it w i l l
certainly help to improve the present stagnation i n the development . of vi l lage industries. A s Gandhiji h a s r igh t ly remarked
mechanisation should be introduced in such a way tha t "dead
machinery must not be pitted aga ins t the millions of l iv ing
machines represented by the vi l lagers , scattered i n the seven
hundred thousand vil lages of India . Machinery to be well used
h a s to help and ease human effort". 3
Considering the economic conditions in vi l lage industr ies
under the selected sample, i t is observed tha t 50 percent of the
units a r e profit making. It is found t h a t th i s profit is mainly
used for the development of in f ras t ruc tura l facil i t ies and also for
giving welfare facil i t ies to the workers. 39 percent of the uni ts
a r e sick units. Lack of necessary finance, non avai labi l i ty of raw
3. M . K . Gandhi, Harijan, 14.9.1935.
material and marketing constraints a r e the factors which lead to
indus t r ia l sickness of vi l lage industries. Other factors which
adversely affect the development of vi l lage industries a r e lack of
skffled labourers and proper management.
6.5 Management of Village Industries - A Gandhian' Outlook
A s one of the objectives of the present study is to examine
the impact of Gandhian ideas i n the functioning of vil lage
industr ies , it is worthwhile to examine the views of Mahatma
Gandhi on the management of vil lage industries. Gandhian view on
management is based on h i s well-known principle of Trusteeship.
Entrepreneurs a r e the t rustees of the factors of production, l and ,
labour, cap i ta l and organisation. It is their obligation to the
society t h a t the i r wealth, sk i l l and talent a r e utilised for the
betterment of their fellow man. Workers a r e the essential and
useful elements i n production. they should be adequately
compensated for their services. Management of vil lage industr ies
a r e to be organised a s far a s possible on co-operative basis giving
adequate representation to entrepreneurs, workers and a l l others
concerned with the vil lage industry system. Both entrepreneurs and
workers should work together for the success of village industr ies
with a view to increase production and productivity in vi l lage
industries. In its own interest , management will, therefore, have
to be persuaded to share with labour , responsibility and decision
making in both work-related and interest-related issues.
I n short , Gandhiji 's trusteeship a i m s a t the removal of the
conventional c lass distinctions, alienation and other tensions by
introducing the ideal of the common ownership of a l l the par tners
i n a n indus t r ia l undertaking. This means tha t the existing
structure of ownership, and decision making needs to be
changed, so a s to be conducive to the fulfilment of the following
three purposes of work, viz.
a. Production of goods and services.
b. Chance for workers to develop the i r sk i l l , potentiali t ies and to
share responsibil i ty.
c. Ability to overcome class interests when both workers and
capi ta l is ts go aga ins t the interest of the society a s a whole.