how to increase prowess of micro,small traditional industry?

7/31/2019 How to increase prowess of micro,small Traditional industry?

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Modernization

Of

Micro, Small

Coir EnterprisesScheme conceptualized for implementation in

the XII Plan (2012-17)

Base Plan

(A V Ramanathan)[email protected]
mailto:[email protected]:[email protected]


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Modernization of micro and Small Coir EnterprisesThe Present State of the Coir Industry:

The 2012 Readiness Profile

Country Factors Manufacturing Capacity MediumCommunications infrastructure LowGovernment Support LowCountry brand positioning Low

Product Factors Product mix LowFibre availability MediumQuality Constitency Low

Service Factors Lead Time LowMinimum Order Quantity HighInformation Exchange Ease Medium

Cost Factors Labour Cost Mediumto highRaw Material Cost vacillatingProductivity Low toMedium

INTRODUCTION

Coir is considered as a ubiquitous product. Coir isversatile. Coir fibre is lignocellulose. Products of Coir fibreare utilized globally and face a challenge from syntheticfibres. There is considerable scope of broadening andimposing the product base of Coir fibre by injectingnecessary inputs in the respective agriculture and industrialsectors. This would not only bring more ecofriendly materialsto the global consumers but also contribute to betterutilization and hence reduction in waste of basic raw

materials.

Agro industries are considered as extended arm ofagriculture but in India they have seldom received anyattention compared to agriculture. Only 2 % of horticultureproducts are estimated to be processed and more than 30%

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of production is wasted due to lack of storage andprocessing facilities. The Agro industries which consist ofhuge village industries owned and run by rural householdswith very little capital investment and a high level of manual

labour, have however scanty ability to bring in capital andcapacity to market products. Agriculture cannot lure in valueaddition in a Country like India, where production andconsumption there is a wild mismatch. These units dependlargely on local resources, both in capital as well as labour.

India and Sri Lanka, leading producers of Coir fibreproducing 75% and 25% of world production (0 .9 millionmetric tones). This high Indian share is in spite of fibreextraction from only 45% of the nuts produced in the

Country. The rest of potential fibre source either becomesgarbage or is dried and used as fuel.

Coir as a product is wonderful. You can put it ineverything. Not only for flooring but also for lifestyleaccessories, and even furniture. It could be put onto a diningtable top covered with glass. Heavy upholstery neverexisted in Kerala. You need to have ventilation in yourbackrest. Now that nature plays an important part in

Tourism, even foreigners arriving in Kerala want to dowithout air conditioning. So, Coir is increasingly preferred.

India is one of the largest producers of Coconut in theworld accounting for around 15.84 billion nuts per annum. Abulk of the farmers in the coconut industry is small cropholders. The net contribution from Coconut to the GDP is Rs83,000 million which is equivalent to 2% of the contributionof agriculture and allied sectors. While Coconut exports arearound Rs 650 Cr, Coir from coconut fibre accounted foraround Rs 1,000 Cr (value) during 2011-12. India leads theAsian countries in productivity of Coconut with 8303 nuts perhectare per annum while in production we are secondposition behind Indonesia. Sri Lanka has enough marketsearning 3 times what India is earning from Coconut industryincluding Coir, export earnings of Philippines is 14 times and

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Indonesia 9 times that of India. They have madecommendable strides in the Coir production and exports ofCoir value added products gradually and consistently. Thiswould pose a serious risk to Indian coir and Coconut industry

in the medium to long term and caution needs to beexercised and situation needs to be watched.

India: Coconut State wise Area, Productivity,production

State/UT Area(000ha) Production(million nuts)

Productivity(nuts per ha)

AndhraPradesh

104.0 970.0 9327

Assam 18.8 147.1 7824Goa 25.6 128.2 5005Gujarat 16.0 157.4 9851Karnataka 419.0 2176.0 5193Kerala 787.8 5802.0 7365Maharashtra 21.0 175.1 8338Nagaland 0.9 0.6 598Orissa 51.0 275.8 5408

Tamilnadu 389.6 5365.0 13771

Tripura 5.8 11.4 1966West Bengal 28.6 355.5 12430A&N Islands 21.7 82.0 3781Lakshadeep 2.7 53.0 19630Pondicherry 2.1 30.7 14619

Total(allIndia)

1894.6 15729.8 8303

(Courtesy: Coconut statistics, Vol III, Published Jan2011(Pub No 154, Coconut Development Board, Kochi)

The economics of Coir fibre production are based upona multi linked chain in which much of the production isdependent on cheap and abundantly available manual

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labour. Because of socio-economic conditions prevailing atthe village level, mechanizing the fibre extraction plant maynot be the most obvious way forward.

Mechanization practices have to be introduced withsensitivity, that people are not put out of work withoutproviding any real alternatives for income earning in thecommunity. The situation is further complicated, becausethere are few alternatives to manual work within localcommunities. There are neither simple nor appropriatetechnologies developed and applicable, nor those that canbe easily adopted from other fibre industries. Spinning,weaving and matting of Coir employs large number of peoplein the South of India and Sri Lanka. At village level, home

workers supply co-operatives and private Companies withRaw materials (such as yarns and mats) of varying qualityfor further treatment of Trade. Increasing productivity is onlyof interest when market demand expands. Investment inexpensive equipment is not economically or practicallyviable as long as labour costs are low. However, traditionalpractices cannot remain entrenched in a constantly changingindustrial sector.

Scheme:

Modernization of micro and Small CoirEnterprises

Coir Industry has seen market upheavals, but, it hasbeen able to penetrate Indian domestic market with Rs1,300 Cr Coir mattresses, Rs 400 Cr worth of Coir Yarn, and

Rs 600 Cr of mats, mattings. Coir products from India havecrossed as many as 105 countries of the world withmerchandise worth Rs 1,000 Cr having been shipped in2011-12 alone. Indian Coir products can fetch more

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prices and penetrate more markets, if modern techniques,technology up-gradation, modern designing capacity, newnascent products out of Coir are manufactured.

We need to position Coir products asHomemaker products instead ofHome dcor products.

Coir industry looks vulnerable at the bottom of hismanufacturing pyramid because it does not have the muscleto embrace technological up gradation due to paucity ofFinance. If the Micro industry{investment within Rs 25lakhs} needs to upgrade and modernize and opt fortechnological up gradation, it requires governmentalintervention and patronage. In the second arm of the

industry, there is a value added manufacturing stream [up toRs 2 Cr] which has not been able to move the value chaindue to its inability to infuse finance. This sector also needssupport.

We have evolved a Scheme, surrounding these twosegments of the Coir sector for special and purposefultreatment in the XII Plan, so that industry is able to ladder upto the market expectations and value chain.

Comprehensive Outlay for Micro, Value added Coir Segments

Sl No. Category Outlay Description Period

01. Micro Rs 25lakhs

Grant: 40%Investment:

5%Term loan:55%

5Years

02. Value added Rs 100lakhs

Grant 30%Investment:

15%Term Loan

55%

5Years

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Note: In the case of Micro, the loan amount provided is Rs13.75 lakhs, of which Rs 10 lakhs is covered under CreditGuarantee Trust Fund Scheme of the MS&ME. The balanceRs 3.75 lakhs need to be covered by collateral or third party

guarantee including the proceeds purchased out of the loanamount for the avowed business purpose;

2. In the case of the Second category, Rs 10 lakh is coveredout of Rs 55 lakhs under Credit Guarantee Trust FundScheme and for the rest collateral guarantee or third partygurantee need to be provided including the assets acquiredby the beneficiary out of the funds advanced by the Bank forthe avowed business purposes.

Deliverables on implementation of the intervention inMicro units Sector

Unit Outlay: Rs 25 lakhsCost of Machinery: Rs 15.00 lakhsAccessories & Tools: Rs 3.00 lakhsGenerator: Rs 3. 00 lakhsWork-shed: Rs 45.00 lakh

The micro enterprises sector in the Coir industry is thebasic source of production of Coir fibre for processing inother sectors which produces value-added products.However, it has to be noted that the Coconut husks that arepurchased in bulk may not be of good quality. Some of themwill have to be discarded which goes as waste. Even thoughIndia is said to produce 15,000 million nuts, because ofvarying types of farming and harvesting, the coconut huskhas varying quality parameters. In Tamilnadu, theproductivity per hectre is 13,771 nuts while in Kerala it is7,365. The availability of husks is dependent of harvestingof Coconuts, then separating the husk from Coconut, andthen husk must be taken to the de-fibering mills. This is donein piece meal which necessarily endures a transportationcost not necessarily by a motor vehicle but by other meansof transport. The Law of diminishing Return from the

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Coconut yield is one of the reasons why the productivity ofcoconut has been thinning. Coconut Development Boardsscheme of Rejuvenation and Replantation Scheme, whereold trees are completely cut and new saplings are planted

gives gestation time for coconut trees growth. This willdefinitely diminish the number of Coconuts which

necessarily has a cascading reaction on the availability ofCoconut husk. In Tamilnadu, which has about 5,365 millionnuts has been at the centre stage of Coir fibre productionusing de-fibering units. The Rejuvenation, Modernizationand Technology Up gradation Scheme of the Coirindustry being implemented by the Coir Board has been put

to maximum optimal use by the Tamilnadu industry toincrease their output of Coir fibre. At the end of the XI Plan,6,90,000 m tonne Coir fibre was produced as against4,60,000 tonnes at the end of theX Plan.

The Scheme envisages modernizing the existing microenterprises. One of the objectives of the Scheme is toincrease utilization of coir husk to touch 60%.

The Micro enterprises sector forms the forward-backwardlinkage of the traditional as well as non-traditional sectors ofthe Industry. These units are the heart of the Coir industryfor they produce the much needed coir fibre. These unitsplay the role of the feed sector for manufacturing valueadded products (domestic as well as external).

The fibre extraction and value addition processtechnology in the micro level with technical inputsmake these units viable to enhance the utilization ofcoconut husk and generate new employment in theSector;

These units are considered to be the nucleus of the Coirindustry and the big players in the Coir industry

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outsource their requirements from them(bothdomestic/external);

Their production abilities encompass conversion ofcoconut husk into fibre and there on to value added

products viz. Curled Coir, Coir Yarn, briquette Coir Pith,Coir garden articles, Coir pith organic manure, rubberblended Coir mat etc.

These units employ the maximum number of womenworkers as the work involved is semi-skilled. Increase inrural women empowerment, as most of the units aresituated in rural areas.

This Sector needs infusion of modern technology,assistance for infrastructure development to convert the noof days of work from 200 to almost 300 days.

The total package envisaged under the Scheme is toprovide financial assistance for development of technologyand infrastructure with a standard outlay of Rs 25 lakhs. 540units will come under the ambit of the Scheme. The total

financial outlay ear-marked for the entire micro sector wouldamount to Rs 135 Cr and the intervention will generate13,000 new employments in the Sector.

The Scheme would have a SC/ST component as well asearmarked percentage for North Eastern region based on theextant instructions of the Government of India.

This is a pre level fibre production activities for whichthere are no Schemes, assistance. Micro level units providethe base to the Coir industry. The present Scheme is drawnwith the objective of providing assistance to enterprises atthe micro level to develop its infrastructure for its sustainedgrowth. The major chunk of this sector is engaged intraditional and non traditional sectors, and their

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development has to be ensured. The total standard outlay isarrived at Rs 25 lakhs.

The list of need based machinery, their make with their

cost need to be a part and parcel of the Scheme so as tocause no ambiguity. This will be added, when the final PlanScheme will be drawn up.

Quantum of Assistance:

(Rs in Crores)No of microenterprises

InvestmentBy theentrepreneur

Term Loan Grant Total

540 6.75 74.25 54.00 135.00

Distribution of outlay:Standard Cost Rs 0.25 CrLoan Component 55%

Grant 40%Self investment 5%

Repayment 5 YearsYear-wise implementation progress:

(Rs in Crores)SlNo.

Year No ofUnits

Investt

Termloan

Grant Total EmploymentGeneration

1. 2012-13

20 0.25 2.75 2.00 5.00 480

2. 2013-14

200 2.50 27.50 20.00 50.00 4820

3. 2014-15

200 2.50 27.50 20.00 50.00 4820

4. 2015-16

60 0.75 8.25 6.00 15.00 1440

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5. 2016-17

60 0.75 8.25 6.00 15.00 1440

Total: 540 6.75 74.25 54.00 135.00 13000

Eligibility:

a. Any Coir micro enterprise registered with the Coir Board under theCoir Registration Rules, 2008 is eligible

b. Any applicant having a minimum experience of 2 years in Coirindustry is eligible

c. Standard cost of Rs 25 lakhs will be the eligible assistance underthe Scheme

d. The applicant shall submit the application in the prescribedformat. Mere applying will not be criteria for grant of assistanceunder the Scheme. The applicant shall produce certificates duly

attested to show his ability totake on the Project with the necessary financial documents andtangible assets to satisfy the requirement of the Bankers;e. The application will be scrutinized by a Committee, and if being

satisfied about the bonafides, shall submit the application papersalong with the documents to the Bank, which will satisfy itselfwhether the assistance can be sanctioned as per the norms of thatBank. Physical verification will be done by the Board byoutsourcing a component Specialist who will submit his report tothe Board.

f. Bank interest norms will be as per the Bank rules and RBI

directions on the subject from time to time.g. All equipments/machinery purchased/proposed shall be inaccordance with the Specifications approved by the Board andfrom such machinery manufacturer as approved Machinerysupplier in the Coir Board web-site

h. The first Rs 10 lakhs availed as loan will be covered by the CreditGuarantee Trust Fund Scheme, while for the rest of the loanindependent mortgage/lease/personal guarantee have to beprovided as per Bank norms.

Illustration to draw home the fact that why presently, Coir

fibre extraction unit is unviable (Case history): It is only anexample:.

Fibre Extraction unit

ExpensesExisting

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Raw material 8000 husk/day@ Rs 250/- Rs2,000.00Power charge(25HP)800.00

Skilled (Labour)(5) 150/day750.00Unskilled(6) 100/day600.00

1,350.00Store:80 Kg x 6480.00

Maintenance Cost250.00

EstablishmentCharges/Accountant:4,000.00(Per Month)Materials is collected/SuppliedEx-factory basis

(No transportation costs)

Daily:5,080.00ExpenditureMonthly:Rs1,01,600.00

Income [Present]

80x8(1000husk80Kg of fibre) 640

Kgs1 Kg = Rs 8x640) Rs.5,120.00

20 days1,02,400.00Income: Rs

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1,02,400.00Expenditure:Rs1,01,600.00 800.00

==========Notes:The expenditure include bare costs, office administration expenditure,rent, bank interest, RoI, etc are deliberately avoided to show that evenunder normal working conditions, expenses being high, and return beinglow, the unit is viable. To restore viability, the need to provide cushion inthe form of subsidy to increase the productivity, the value of the endproduct, etc needs extensive looking into

In the present scenario, entrepreneurs do not want to go for fibre

extraction, because of poor margins.

II. Value-added Enterprise

Machinery: Rs 78.00 lakhsAccessories& Tools& testing equipments 8.00 lakhsGenerator 8.00 lakhsDyeing yard, others 6.00 lakhsTotal: 100.00 lakhs

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Total Outlay:(Rs in Crores)

No ofManufactur

ers

InvestmentBy

beneficiary

Term loan Grant Total

210 31.50 115.50 63.00 210.00

Standard cost

Standard Cost Rs 1.00 CrLoan Component 55%(Rs 0.55 Cr)

Grant 30%(Rs 0.30 Cr)Investment by beneficiary 15%(Rs 0.15 Cr)

Repayment Period 5 Years

Year-wise Outlay(Rs in Cr)

SlNo.

Year MfgsNos

Investt

TermLoan

Grant Total EmploymentGeneration

1. 2012-13

25 3.75 13.75 7.50 25.00 1095

2. 2013-14

50 7.50 27.50 15.00 50.00 2190

3. 2014-15

50 7.50 27.50 15.00 50.00 2190

4. 2015-16

50 7.50 27.50 15.00 50.00 2190

5. 2016-17

35 5.25 19.25 10.50 35.00 1535

Total 210 31.50

115.50

63.00

210.00

9200

The Coir fibre production in India has been risingsteadily due to the various specific programme initiatives ofthe Coir Board in the non traditional areas. Even thoughCoconut husk was available, and fibre defibering was activein some states, due to low production of value addedproducts, notably because of lack of interest by

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entrepreneurs to invest in the Coir production industry,defibering of fibre and its value remained very low andstagnant, with the result that such industries becameunviable and closed shop. (Please see example elsewhere).

Banks are loathe to provide credit to entrepreneurs in theCoir sector, as a result credit crunch and other financialdifficulties caused poor optimum utilization in capacities,with the result that idle capacity in manufacturing industrycaused its own concern among the labour force whomigrated to construction industry which was flourishing andpaid the labourer well. This migration of labour in recenttimes has left the industry with less skilled persons. Coirindustry needs to produce in large volumes to get very lowvalues, causing a mismatch of fund equation. Coir industry, if

it has to grow, should widen its product base, diversify intonew products having higher value addition in addition todemand, both domestic and overseas. Coir Board has beenrelentlessly pursuing the task of increasing the conversion ofCoconut husk from 40% to 60%.

But it needs to be observed, that the total Coconutproduction is estimated at 15,000 million nuts, of whicharound 2,500 million nuts belong to the tender Coconut

category, hence cannot be used. Among the rest, due tostrange diseases which has affected the Coconut production,the husk is not fit for use. In order to rejuvenate the Sector,GoI is implementing a scheme by which old coconut treesare felled and new saplings are planted. This programme isnow implemented in Thiruvanthapuram, Kollam and Trichurdistricts, and its outlay is likely to be increased in the 12th

Five Year Plan when more areas will be included. This willshrink the nut availability. Law of diminishing returns isanother aspect which is hurting the Coconut industry. Underthe circumstances, the availability of husks itself is

going to create a shortage. However, due to sustainedefforts of Coir Board, and through the Rejuvenation,Modernization and Technology Up gradation Scheme of the

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Coir Industry, the availability and utilization of Coir fibre hasreached 6,90,000 tonnes.

The present segment of the Scheme tries to utilize the fibreto go in for value added products which have niche

markets as well as domestic demand. The infrastructuredevelopment and bank credit will attract enterprises to go infor high quality, high value products. With technologicalinterventions, not only productivity will increase, the qualityof products also will enhance the price value of the productsmanufactured. Coir entrepreneurs have to be motivated.

They are in depressed environment and with fresh initiativesand support from Coir Board, the industry will grow.

III. Allocation of Funds for Survey, monitoring, Evaluation,

Consultancy, etcHeads Money earmarked

1. Survey:2. Monitoring& Evaluation3. Publicity:4. Consultancy:5. Others:

Rs 15.00 lakhsRs 50.00 lakhsRs 15.00 lakhsRs 17.50 lakhsRs. 2.50 lakhs

ANCHORING OF FUNDS: (Rs in Cr)

No. Category Investment

TermLoan

Grant Total

01 MicroEnterprises

6.75 74.25 54.00 135.00

02. Value addedmanufacturers

31.50 115.50 63.00 210.00

03 Survey, Monitoring,Evaluation,

Project Consultancy

1.00 1.00

Total: 38.25 189.75 118.00 346.00

While the grant amount of Rs 118 Cr will be released on the presetuse depending upon the no of beneficiaries who would be granted theLoan as per norms, the entire term Loan of Rs 189.50 Cr be created as aLine of Credit so

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that the amount utilized would alone would come under fixed normalrate, with flexibility for the beneficiary to close the account or repay asand when he has surplus money, will go a long way to ensure that hedoes not have to mortgage or offer collateral security. This will save himfrom unnecessary higher interest paying obligation. The Bank may offer

the beneficiary for the first six months with teaser rate applying andthereafter fix a standard interest of 8.5%, since agro sector is a by-product of agri culture, which is one of the priority sector in bankingparlance.

Credit Flow(Rs in Cr)

Year Credit Flow

2012-13

2013-142014-152015-162016-17

Micro Value added Total2.75 13.75 16.50

27.50 27.50 55.0027.50 27.50 55.008.25 27.50 35.758.25 19.25 27.50

74.25 115.50 189.75

The Government shall open a line of Credit to the extent of Rs189.75 Cr so that the amount is utilized as per requirement, andshall not incur unnecessary interest. The drawal from theaccount shall be on the prior approval of the Ministry of MS&ME

Grant (2012-17)

2012-13

2013-14

2014-15

2015-16

2016-17 Category Total

2.00 20.00 20.00 6.00 6.00 Micro 54.007.50 15.00 15.00 15.0

010.50 Value-

addedmfrs

63.00

9.50 35.00 35.00 21.00

16.50 117.00

Direct disbursal based on accommodation through thebudget on an annual basis and subject to submittingutilization certificate.

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Note: Selection Methodology, implementationstrategy, Selection of beneficiaries, state-wisetargets, inspection, Market linkage, tangibleachievements, and a detailed Project Report will be

prepared later with the Plan prepared is found to beuseful. This is only a base Plan.

-o-o-o-o-o-o-

Definitions:

Coir industry means the definition which has been spelt

out in the Coir industy Act, 1953

The Ministry means, the Ministry of Micro, Small and MediumEnterprises, Government of India, which is the administrative Ministry ofCoir Board

The words,, micro, small, medium enterprises wherever they areused , have the same meaning as defined in MSME Act 2006. That isinvestment in Plant and machinery. Its in no way dependent on theturnover of the enterprise;

Credit Guarantee Trust Fund Scheme means, Credit GuaranteeTrust Fund Scheme operated by the MSME Ministry;

Coir products means products made of Coconut husk.

Grant means the subsidy that is granted by the Government to makethe unit viable through intervention

Line of Credit means a Credit that is created by Government with itsguarantee

The Scheme will be implemented all over India. There would beadequate quota as per extant instructions on the % of allotment to SCs,STs, NE Region, etc.

Bankmeans any bank that is included in the 2nd Schedule of theReserve Bank of India Act.

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how to increase prowess of micro,small traditional industry?

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