Unit 4 Large Scale Industries

Meaning of large scale industries
Large scale industry employs large number of persons and consumes vast quantity of power.
Huge capital investment is needed. Iron and steel industry, textile industry, manufacture
of heavy machinery, locomotives and railway rolling stock, automobiles,
shipbuilding are some examples of large scale industry.
Problems of large scale industries
1. Lack of capital
For the establishment of medium and large scale industries huge amount of capital is required
which is very difficult to be formed in the context of Nepal. So, lack of capital is the problem
of medium and large scale industries.
2. Lack of infrastructure
Infrastructures such as transportation, communication and electricity are the most essential
elements for a industry to be operated. In our country all there mentioned infrastructure are
not available in adequate number or are not sufficient.
3. Lack of skilled–manpower
Generally, medium and large scale industries need skilled manpower for handling the delicate
task but there is a situation of Brain Drain in our country. So, there is scarcity of skilled
manpower.
4. Lack of competitiveness
Most of the Nepalese industrial products are of low quality. Such low quality products pose a
formulate difficulty to complete in both domestic and international market. Car telling is the
major problem of Nepalese market.
5. Limited Market
The domestic market for Nepalese industrial products is very limited due to low purchasing
power of the people. There is lack of transport and communication facilities to sell the
commodity throughout the country.
Meaning of small scale industries

Small scale industries (SSI) are those industries in which manufacturing, providing
services, productions are done on a small scale or micro scale. For example, these are the
ideas of Small scale industries: Napkins, tissues, chocolates, toothpick, water bottles, small
toys, papers, pens.
Problems faced by Small Scale Industries
The following are the problems faced by Small Scale Industries:
1. Poor capacity utilization

In many of the Small Scale Industries, the capacity utilization is not even 50% of the installed
capacity. Nearly half of the machinery remains idle. Capital is unnecessarily locked up and
idle machinery also occupies space and needs to be serviced resulting in increased costs.
2. Incompetent management
Many Small Scale Industries are run in an incompetent manner by poorly qualified
entrepreneurs without much skill or experience. Very little thought has gone into matters such
as demand, production level and techniques, financial availability, plant location, future
prospects etc. According to one official study, the major reason for SSI sickness is deficiency
in project Management i.e., inexperience of promoters in the basic processes of production,
cash flow etc
3. Inadequate Finance
Many Small Scale Industries face the problem of scarcity of funds. They are not able to
access the domestic capital market to raise resources. They are also not able to tap foreign
markets by issuing ADR’s (American Depository Receipts) GDR’s (Global Depository
Receipts) etc because of their small capital base. Banks and financial institutions require
various procedures and formalities to be completed. Even after a long delay, the funds
allocated are inadequate.
4. Raw material shortages

Raw materials are not available at the required quantity and quality. Since demand for raw
materials is more than the supply, the prices of raw materials are quite high which pushes up
the cost. Scarcity of raw materials results in idle capacity, low production, inability to meet
demand and loss of customers.
5. Lack of marketing support

Small Scale Industries lack market knowledge with regard to competitors, consumer
preferences, market trends. Since their production volume is small and cannot meet demand
for large quantities their market is very restricted. Now with the process of liberalization and
globalization they are facing competition from local industries as well as foreign competitors
who sell better quality products at lower prices. For e.g. heavily subsidized but better quality
imports from China has made most of the Indian SSI units producing toys, electronic goods,
machine tools, chemicals, locks and paper etc.,
6. Problem of working capital

Many Small Scale Industries face the problem of inadequate working capital. Due to lack of
market knowledge their production exceeds demand, and capital gets locked in unsold stock.
They do not have enough funds to meet operational expenses and run the business.
7. Problems in Export
They lack knowledge about the export procedures, demand patterns, product preferences,
international currency rates and foreign buyer behavior. Small Scale Industries are not able to
penetrate foreign markets because of their poor quality and lack of cost competitiveness. In
countries like Taiwan, Japan etc. products produced by Small Scale Industries are exported to
many foreign countries. But in India not much thought and focus has gone into improving the
export competitiveness of Small Scale Industries.
8. Lack of technology up-gradation

Many Small Scale Industries still use primitive, outdated technology leading to poor quality
and low productivity. They do not have adequate funds, skills or resources to engage in
research and development to develop new technologies. Acquiring technology from other
firms is costly. Therefore Small Scale Industries are left with no choice but to continue with
their old techniques.
9. Multiplicity of labor laws

One of the merits of Small Scale Industries are that they are labor intensive and can provide
employment to a large number of people. But the multiplicity of labor laws, need to maintain
several records (PF, ESI, Muster Rolls etc), fines and penalties for minor violations etc place
Small Scale Industries at a great disadvantage.
10. Inability to meet environmental standards

The government lays down strict environmental standards and Courts have ordered closure of
polluting industries. Small Scale Industries which are already facing shortage of funds to
carry out their business are not able to spend huge sums on erecting chimneys, setting up
effluent treatment plants etc.
11. Delayed payments

Small Scale Industries buy raw materials on cash but due to the intense competition have to
sell their products on credit. Buying on cash and selling on credit itself places a great strain
on finances. The greater problem is payments are delayed, sometimes even by 6 months to
one year. It is not only the private sector but even government departments are equally guilty.
Delayed payments severely impact the survival of many Small Scale Industries.
12. Poor industrial relations

Many Small Scale Industries are not able to match the pay and benefits offered by large
enterprises, because their revenues and profitability are low and also uncertain. This leads to
labor problems. Employees fight for higher wages and benefits which the SSI is not able to
provide. This may lead to strikes, resulting in damage to property in case of violence by
employees, production losses etc.

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Unit 4 Large Scale Industries

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Meaning of large scale industries

Problems of large scale industries

Meaning of small scale industries

The following are the problems faced by Small Scale Industries:

1. Poor capacity utilization

4. Raw material shortages

5. Lack of marketing support

6. Problem of working capital

8. Lack of technology up-gradation

9. Multiplicity of labor laws

10. Inability to meet environmental standards

11. Delayed payments

12. Poor industrial relations

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