Chapter VI

PRODUCTION, PRODUCTIVITY AND WAGE ANALYSIS

6.1 HANDLOOM SECTOR (SOCIETIES) 151

6.1.1 Production

6.1.2 Productivity

6.1.3 Wages.

6.2 KHADI AND-VILLAGE INDUSTRIES (KVI) SECTOR 181

6.2.1 Production

6.2.2 Productivity

6.2.3 Wages

6.3 SMALL SCALE INDUSTRIES SECTOR 196

6.3.1 Production

6.3.2 Productivity

6.3.3 Wages

6.4 TINY SECTOR UNITS 206

6.4.1 Production

6.4.2 Productivity

6.4.3 Wages

6.5 SUMMARY. 219

PRODUCTION, PRODUCTIVITY AND WAGE ANALYSIS

The production function, manpower productivity and wages in the organised

rural industries have been analysed sector-wise in this chapter. The organised

handloom units in the district consisted of 22 handloom weavers cooperative

societies. The organised KVI units in the district consisted of those that are managed

by the Khadi and Village Industries Board and the units that have taken the support

of the Khadi and Village Industries Commission, identified as the second sector for

analysis. The SSI units and the Tiny sector units have been identified as the third and

fourth sectors.

6.1 HANDLOOM SECTOR (SOCIETIES)

The handloom societies in this district are supported by the Central and State

Governments, the coordinating and controlling intermediary being the office of the

Assistant Director, Department of Handlooms and Textiles, Tamil Nadu located at

Uraiyur, Tiruchirapalli,. These societies procure die raw materials for its members

and perform other supportive functions for its weaver members.

. The weaver members weave the various items demanded by the societies, with

the materials provided by the societies in their looms and receive the wages from die

societies. Apart from wages, the weaver members are beneficiaries of the supportive

programmes and schemes offered by the state and central governments.

6.1.1 PRODUCTION

Analysis of the production in die manufacturing unit becomes essential since it

determines die efficiency of die unit. Production is generally quantified by the

quantity of output. The efficiency of all die inputs are directed towards, and are also

evaluated, based on this quantity of output obtained. In this study, since the output of

the various categories of industries are heterogeneous and cannot be measured in

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common units, the output is expressed as the value of production (i.e.) in rupee value

per year.

It is well known that the output or production in an industrial unit is influenced

and affected apart from an array of manpower related factors, by technology

employed, the quantity and quality of labour, utilisation of labour and also the

working conditions and climate of the work place.

Capital is a scarce resource that becomes the crux of planning for economic

growth in a country like India where labour is available in abundance. Moreover

capital invested in fixed assets is considered as an indicator for die level of

technology. Hence die variable fixed capital (investments in fixed assets) is

considered for analysing die production function. There is also a direct correlation

between the productivity of labour which determines the output of labour and the cost

of production, and in specific, labour cost, because an increase in output per unit of

labour input means reduction in cost per unit1 Moreover labour cost considerations

are important from die management point of controlling the cost of production,

according to Seymour Melman. According to him, when the cost of labour rises and

other conditions do not remain the same, management, in order to counter the effect

on costs from a rising wage level, seeks out changes in the design of production,

organisation and mediods of production. Thus the total cost increase is contained.2

Hence labour cost has been taken as a variable to analyse the production function.

According to J.P. Srivatsava, in recent years, it has been found that in the

case of industrial enterprises where no major expenditure in plant or equipment is

involved, die management would do well if it concentrates on utilising the manpower

and on raw materials (ie) by ensuring right type of material in proper quantity and at

right time.3 Hence the expenditure on raw materials has been taken as a variable

when analysing die production function.

156

A large number of maiidays in a unit does not necessarily lead to a higher

output according to Jagadish Prasad & Rajendra" Prasad4. According to them a

positive and significant relationship prevail between output and value added per

worker. An increase in capital does not necessarily mean an increase in output.

Hence, the variables namely investment in fixed assets, expenditure on raw

materials, expenditure on labour, die quantity of manpower used and the capacity

utilisation (of plant machinery and other installations) have been selected for

analysing their influence over production.

HANDLOOM SECTOR

In (he case of the Handloom sector the production process of weaving was

performed on looms in the households of (he weavers who were members of the co­

operative societies. There were also weavers working under master weavers and

entrepreneurial weavers in die district.

The organised sector of the Handloom industry consisted of the 22 cooperative

societies in the district.

157

According to K. Renganadian5 the operative hours per metre of handloom

fabric is about 12 to 15 times more than in the other sectors. T.V.Ratnam6 maintains

that the method of production was the major reason for die low productivity of the

handloom weavers. According to R.Balasubramanian7 the wage cost depends not

only on the wage rates but also on die effective hours of productive employment.

The crux of die issue dius was the lowered quantity of output in relation to the

inputs, since labour productivity mathematically was die ratio of the output to the

input. The question to be answered was, whether die output was commensurate with

the manpower and manpower related factors like die expenditure on raw materials,

expenditure on labour, die quantity of labour used, the capacity installed, and the

investments on fixed assets. The output per loom per day on die average in the

identified units was 3.6 metres whereas for a normal weaver it was 6 metres per

loom per day. Were die above said variables causal for this phenomena of low output

per loom? Secondly what was the reason for the relatively high operative hours per

unit of output? Whether die skills in die weavers diemselves a reason? Or was die

level of technology deployed a reason? Or were diere any other external factors

resulting in increased operative hours per metre of cloth produced?

The 22 handloom societies which constituted die organised sector of the

handloom industry in the district were engaged in producing a variety of 100 count,

80 count, and 60 count sarees and 120 and 100 count dhothies, towels, and

angavasthirams in cotton (the counts denoted die quality of yarn used). The

Thathiayangarpettai sarees were very famous among diem.

Pit looms and raised pit looms were used generally for finer counts such as 60

counts and above, while frame looms were used for coarser .counts (below 60

counts), like when weaving bed sheets and pillow covers.

158

Weaving in this district was resorted to, as a traditional occupation by families

which have been in this occupation for generations. Hence there was almost cent per

cent dominance of family labour. Not only adult members of the family but also the

grown-up children work on the looms, at least part time, till they leave to school.

The weaving process involved a series of pre-weaving activities namely,

dyeing, bleaching, warping and winding apart from preparation of the loom for

weaving (ie) laying the reeds and healds for performing the process of weaving.

These pre-weaving activities do not require much skill, and hence are performed by

any member of the family including grown-up children, while the process of weaving

requires skill and perseverance. The pre-weaving activities require 2 to 3 days time.

Weaving is a caste-based occupation in this state, adopted as a traditional occupation

by the padmasaliars, saliars and the devangar castes. Thus the so-called training in

die occupation is gained from the childhood, along with the day-to-day activities, the

skills thus being transferred from father to son. About three per cent of the weavers

were found to have adopted the occupation afresh without any traditional background

in weaving. These new generation of weavers were from other castes including the

scheduled castes, mutharaiyar and g'ounders.

In the production function the dependent variable (Production output) is

expected to be positively related with all the independent variables included in the

function.

For all the sectors the multiple linear regression equations were fitted and the

validity was tested using suitable statistical tools.

The results of the application of the multiple regression and the required

statistical tests on the variables in the handloom sector (given in Table 6.1.1.1) are

presented in table 6.1.1.2, 6.1.1.3 and 6.1.1.4.

161

Analysing the relationship of the production function with the investments in

fixed assets it is found that production is highly and positively correlated with the

fixed assets. This means that when the production increases, expenditure on fixed

assets increases and production would decrease when investment in fixed assets

declines. In other words, increments of investments in fixed assets was capable of

enhancing the output in this sector.

' The analysis of variance in production obtained from applying the variance

tool and the step-wise contribution (shown in tables 6.1.1.3 and 6.1.1.4) also confirm

that the expenditure on fixed assets is very high in the handloom sector, next to the

expenditure on labour (21.56 and 55.34 per cent respectively).

The multiple linear regression of xi on xi, X3, x<t, xs and Xfi for the data given

in Table 6.1.1.1 is

The above table reveals that the expenditure on labour (x<i) contributes much to

the production (xi). At the same time the Manpower (xs) contributes least to the

variable xi.

Moreover the correlation of tlie capacity utilisation with production, though

positive is not significant enough, indicating idle capacity in the fixed assets or die

infrastructures in the sector. This is also confirmed by the inverse relationship of the

investments on fixed assets with die capacity utilisation of the looms.

Rarely the weavers cooperative societies own a building to function their

administrative office. Generally they function in rented buildings located in the heart

of the rural area of their respective jurisdictions. Apart from the land and building of

the administrative office, the fixed assets of the society consists of the machinery

which in this case are the looms of die weavers. The weavers generally have their

looms installed in their households, which in most of die cases are not pucca cement

structures. In most of the cases only die hall room of the household, which houses

the loom alone has cemented concrete floors.

The government participates by way of investing in the paid-up share capital

of the societies in order to help the society in establishing itself in the rural pockets.

A sum equal to the total of paid up share capital of the members was invested by the

government apart from central government cash credit, 10 times the paid-up share

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capital, through the central cooperative bank at 10'/2% interest, with an interest

subsidy of Vh%. The societies also could lean on the thrift and security deposits of it

their members.

The raised-pit looms which are generally used by die weavers in this district in

most of the cases have been found to be transferred for generations, from father to

son. A new loom costs around Rs.4000/- inclusive of healds and reeds.

* The Government now provides a loan for die purchase of looms along with a

50% subsidy on die cost of looms, and cent per cent subsidy on loom accessories.

Thus the investment on fixed assets by die weavers was as low as Rs.2000/-. But

even this seemed to be a very huge boulder on die shoulders, mainly because die

weavers were not exposed to any odicr trade skills and hence were solely dependant

on this occupation. In most of die families the earnings from weaving was the only

source of income for die whole family.

Reverting back to the Industrial co-operative societies which provided a

centralised working shed and machinery ((ie) die looms, and die other accessories),

maintained and made available for the weavers, would prove to be a remedy to this

drowning industry. The weaver members in spite of spoon feeding by the

government were unable to steer themselves above, from the staggering debts. In

their struggle to bring both the ends together, diey sometimes went to die extreme of

pledging the raw materials provided by the society for a temporary relief. But

reverting back to the industrial cooperative society system would pose heavy

problems to the societies, since diat would, entitle die weaver members to become

workers' who according to statutes were entitled to certain minimal, welfare and

social security benefits.

The need to increase the increments on fixed assets for creating infrastructural

facilities to enhance output in the societies can be amicably settled without creating

164

financial pressures on the already sinking societies, by reviving the 3239 idle looms

in the district into production. According to primary sources out of a total of 79,308

looms in the societies in the district, only 1369 were in use. More than seventy per

cent of the weavers families had more than one loom, (details in Chapter IV).There

remains two major steps die government has to take in this regard. In the mid-

ninetees the government in order to limit die number of members from each family,

who would claim for the various welfare had insisted on the cooperative principle of

'one loom for one family'. Since the membership was based on die possession of the

loom, this limited die membership claims to one member from each family. Thus

each family was by order permitted to utilise one loom. Heavy stagnation of the

Handloom society's product after 1997 made the temporary embankment of the

functioning of additional looms, a permanent one, idling about seventy per cent of

the looms.

Inferring from the correlation coefficient (Table 6.1.1.2) the expenditure on

labour is found to be more closely correlated with production as compared to die

expenditure on raw materials aldiough bodi were found to be positively correlated

with production. The analysis of variance also exhibits a very high contribution by

the variable expenditure on labour over production, indicating that die activities in

the handloom sector were labour intensive. At the same time the contribution by die

variable quantity of labour towards production is shown to be die least (Table

S. 1.1.4), leading to the inference diat less number of weavers were paid more.

This could be tine since the weavers diough were paid low wages, were

Enjoying a lot of non-wage benefits (details given in tables 4.4.5 to 4.4.9 of chapter

fV) provided by the state and central governments through die weaver's co-operative

societies. All the twenty two societies in the organised sector of the handloom

Jidustries were seeing the red, after a heavy slide in the growdi of the industry since

1997. The number of societies had declined from more than 100 in the early nineties

165

to a meagre 22 in the year 2000 and the number of members and die active looms

had also declined to the lowest record of 6705 members (from nearly 31,000

members in 1990-91) and 1369 active looms (from about 18,000 looms in 1991). The

stagnation of the handloom goods due to its uncompetitive prices and unattractive

designs and colours as compared to the products of its close competitors - the power

loom and die mill sector, were die major reasons for this heavy decline. This

stagnadon obviously lead to die suffocation of die weaver's working capital cycle.

The implications of die WTO agreements posed a much heavier threat since

the handloom products will have to compete with die products from other countries

as well. Thus die decline in output was partly affected also by market influences.

The variance tool applied confirmed that die quantity of manpower utilised (ie)

the number of workers involved in die production process when compared to the

output were less (Table 6.1.1.4). But the inter-correlation matrix (Table 6.1.1.2) for

the variable quantity of manpower showed that it was very highly and positively

correlated with production. Thus it can be inferred that the hours spent by die

weavers in relation to die output achieved were very huge or high. In other words die

weavers spend large operative hours, which can be said to be less productive.

In die field, die observations confirm this act of die labour hours being

relatively less productive. The weavers were found to engage in the weaving

activities, sometimes even from 5 a.m, and with no fixed schedules of work, die

process being interrupted by die household chores, or taking care of die milch

animals, or sometimes by agricultural occupations. They continued die process even

upto 9 p.m. On die average diey were found to spend 10 to 12 hours per day in the

production process. It was also noticed that die output after 3 to 4 hours of

continuous weaving was gradually lessening due to fatigue, probably due to die

monotony of the job. The technology involved as such could be a reason for this

declining output after 3 to 4 hours of continuous weaving.

166

The weavers were also found to turnover to serve for master-weavers and

private exporters now and then, since the wages were more lucrative and there was

continuous availability of work.

The regression model computed for further estimation purposes in this sector

indicate that the looms were utilised only to the extent of 9.07%. It can be inferred

that the remaining 91% of the loom capacities have not been utilised due to reasons

discussed above. The major reasons were intermittent switching of the weavers

towards serving die master weavers and private exporters, idle looms during die pre-

weaving preparations which would consume two to three days, and the fatigue that

sets after 3 to 4 hours of continuous work in the looms.

Whedier the technology involved or the skill of the weavers or was tiiere any

other factor to this unproductive labour in this sector?

Another reason for die delayed operative cycle was the shortage of raw

materials, namely the yarn. The societies were found to suffer with die lack of

availability of the right quality of yarn at nominal prices. The correlation matrix

though indicates a positive relationship, suggests lack of effective materials

management.

From die information collected in the field the raw material used, namely die

yam diat were procured by the weavers societies were generally below die standards,

leading to wastages and also delays in die process, since the wefts get cut in between

due to low quality. Apart from this problem of die quality of yam, due to frequent

changes in die policies of die government, and also due to frequently changing

governments, die procurement of raw materials by the societies were found to be

affected. Undue delays in sanctions from die government have caused inordinate

delays in the yarn procurement by die societies, which have affected the weaver

members disastrously. Even die meagre earnings of the weaver's family gets

167

affected, since the raw material - production - wages - raw materials cycle gets

disrupted.

Now the societies were permitted to directly transact with cooperative and

private sector mills to procure their raw materials.

Thus the output in this sector was not only influenced by the internal variables

like investment of fixed assets, expenditure on raw materials and labour, and the

capacity utilisation of the looms, but also by external factors to which the societies

tend to respond. Apart from the competition from the mill and power loom sector in

the domestic market, the WTO agreements posed the challenge of the handloom

products having to compete with the foreign goods. A few of die societies have

successfully ventured into export of handloom items like curtain and furniture cover

materials. Usually grey in colour the Indian handloom voil pieces have been found to

gain acceptance in certain foreign markets. In the year 1999-2000 alone the district

societies had realised an export of Rs. 1 crore, much ahead die stipulated time. The

whole procedure for taking up export ventures were made easy by the Handloom

Export Promotive Council (ITEPC). The society had to just produce die handloom

varieties according to the specifications and handover within the time stipulated.

Dyeing was generally done by die exporter. The society was provided with a 20%

rebate on the export sales. These initiatives have been taken to re-stabilize the sinking

societies through developing export outlets which can absorb the stagnated output and

also provide a continuous demand for die produce of die societies. But the power

loom units apart from creating an unhealthy competition in die domestic market was

found to duplicate die handloom produce and deceive the export agents.

6.1.2 PRODUCTIVITY

hi a broad and fundamental sense, though the concept of overall productivity

may be of special interest, sdll to speed up economic growdi in general and to

168

increase industrial efficiency at the plant or job level in particular, planning to ensure

increases in intrinsic efficiencies of the individual production factors was essential.

This concept of productivity though partial, is a valuable piece of information for

such purposes as projecting the demand for an individual factor. In the light of

relative productivities of all input factors, the planning authorities or the

management, as the case may be, can either resort to adjustments in blending and

combinations of the various input factors in the production functions or take

necessary steps to improve the productive efficiency of individual factors for

improving the overall or composite productivity.

Thus labour productivity has been specified for analysis, in order to ascertain

the degree to which the intrinsic efficiency of the manpower has been utilised in the

production structure.8

The mathematical definition of labour productivity as "the ratio of output per

unit of labour time expended", is also termed as unit labour requirement or man

hours expended per unit of production, and hence has some indication of the measure

of the degree or rate of effectiveness of human power to produce.9 U.S. David

differs and is in support of the view that, "The measure of man-hours used is only a

rough measure and does not register variations in the degree of effort or grade of

ability extended."10 The man-hours measurement technique has also been criticised

by authorities like W.Kendvick, Solomon Fabricant, Dr. L.Rostas, Irving. H. Siegel,

D.H. Bhutani and others with valid reasons. According to Dr. D.H. Bhutani, the

quality of labour, that is, the skills, the attitudes, and the educational background are

dynamic and have all undergone changes such that a man hour of one year cannot be

a man-hour of a few years later. Hence die labour productivity statistics cannot be a

genuine base for any decision.

Thus physical out put per head is a good measurement of relative productivity.

Moreover the employment creation should be rightly considered as a very important

169

means of increasing labour productivity. This macro economic approach would help

developing countries like India to frame policies for increasing the employment upto

full utilisation of the technical productivity capacities, for selecting the industries

which are worth developing, for determining the extent to which complementary

investments are required like in education and other social overheads and for phasing

of the programme of industrialisation etc.

Hence manpower productivity in this study has been measured in terms of per

capita output (ie) output per worker expressed in terms of value of the output per

worker, (either in lakhs per year or rupees per day).

According to Jagadish Prasad and Rajendra Prasad" productivity is closely

related to die size of die unit. According to K.K. Dewitt and Satish Wadhavan12

productivity of die workforce depends on the quality of die population - their

literacy, healdi, energy, spirit and entiiusiasm. According to K.Renganadian,13 die

low productivity in the handloom sector results in high conversion costs. According

to P.V. Rauiam,14 the technology employed in die production process influences the

productivity of die workforce. Pie confirms tiiat outmoded looms and methods of

production are die major reasons for die low productivity of the handloom workers.

A similar influence of die technology factor on die productivity has been observed by

H.G. Hanumappa and Erappa15 and T.S.P. Haraii'6 in die silk reeling units. The

cottage basins using improved reeling techniques were more productive than the

charkha units. Worldng with low quality yarn decreases the work efficiency and in

turn the labour productivity of die weavers (Dr.Arputharaj17) in die handloom

industry.

The non-availability of quality raw materials resulting in lowered productivity

has also been confirmed in the sericulture industry by Sonwalkar18.

170

The influence of the labour cost, the raw material cost, the quantity of

manpower used and the utilisation of the plant capacity on the output and hence the

productivity has already been discussed under die analysis on production.

With regard to die manpower resource in die rural industries, how far was

their productivity influenced by their skills? Was the labour productivity in the rural

units influenced by die wages, which were very low. Whether the investments in

fixed assets in diese capital-saving, labour intensive industries die cause for the

relatively low productivity of labour in these industries?

HANDLOOM SECTOR:

From table 6.1.2.1 displaying the labour productivity (measured in tliis study

by the output per labour per day or per capita output) it is obvious that the labour

productivity in the labour-intensive handloom industry was the lowest of all die four

category of industries, witii an average per capita output per day of 62 rupees. The

average per capita output was the highest (Rs.2076/-) in die relatively labour-saving,

capital intensive Small Scale Industrial units.

171

also due to the lack of availability of the right quality and quantity of raw materials at

the right time. In terms of metre, the productivity recorded a low 3.4mt/day per

worker, on an average. It has to be remembered here that the average All-India

productivity was about 5.12 mts per day, while the average productivity for the

Tamil Nadu state was 4.7 mts per day, as per past studies and secondary data

sources. Apart from (lie factors found to influence the out put (discussed under the

heading "production' -(6.1.1)), can the low wages and lack of updated skills and

formal technical inputs, which were almost nil in this sector be attributed as causes

for this very low manpower productivity in this sector? Were supportive factors like

per capita investment on labour which can be said to decide the worker morale, and

average investment on fixed assets which can be considered as an indicator of the

technology levels in the units, influencing the per capita output in this sector? The

relationship of these two variables with manpower productivity has been analysed

below.

AVERAGE INVESTMENT AND MANPOWER PRODUCTIVITY

It is assumed from die scattered plot of the data in Table 6.1.2.2 that the

average investment and per capita output are linearly correlated in the rural industries

under study.

175

Since the skill levels, and the means of acquisition of skills, and the wages and

their establishing institutions were totally different for the four types of industries,

the influence of die skills of the manpower and the wages received on die

productivity of die labour has been studied sector wise.

CORRELATION BETWEEN SKILL AND MANPOWER PRODUCTIVITY -

HANDLOQM SECTOR:

Skill is the competence to do psychomotor functions perfectly. It is die

competence to do a particular job in the best expected way. The influence of this

composition of skill in die workforce, on manpower productivity in specific, has

been analysed using die Karl Pearson coefficient of correlation.

Analysis of die data from die field reveals that 73% of die total industries

were traditional which included the handloom, coir and coir-based products

manufacturing, basket making, carpentry, tanning and shoe making units. These

traditional industries were mostly inherited (83%). By inherited is meant, the transfer

of skills or acquiring of die trade skills from one generation to the next, (i.e.,) from

father to son and so on. Among die non-traditional industries only about 27% were

inherited. The non-traditional industries included flour mills, soap making,

engineering and plastic industries. The evident domination of die traditional form of

rural industries have rendered die rural artisans to continue their trade. Since most of

these trades were not providing full employment and sufficient income, diese artisans

were compelled to engage in some other occupation other than the craft / trade & in a

good majority of diem (74%) it was agriculture. Thus in more tiian seventy per cent

of die rural artisans the skill was transferred from father-to-son for generations,

leading to lack of updation in the skills. The artisans failed to acquire new skills and

in most of the case were illiterates. Thus 68% of die sampled labour (Table 6.1.2.5)

were found to be illiterates while only 3% of them were higher secondary literates.

The rest of them were literate with primary, middle or high school level of

education. There were very meagre traces of exposure to formal technical skills, a

Thus the main source of apprenticeship in die case of traditional firms that

were inherited were informal, obtained from parents mid grand parents. Work

experience in other organisations or in the same organisation seemed to provide an

exposure to learn the psychomotor skills of the job or the trade in bodi the non-

traditional and traditional firms that had not been inherited from die previous

generation. Since almost all the activities in the rural industries were not technical the

work experience had provided sufficient abilities to perform die jobs fairly well.

Hence labour with more than one-and-a-half years of experience were considered to

be 'skilled', having gained the ability to perform their jobs with sufficient dexterity.

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An experience of 6 months to one -and-a-half years enabled die workers to perform

their job with a considerable speed and perfection and hence were termed " semi­

skilled'. Those artisans / workers with less than 6 months job experience were

considered as unskilled. Thus about eighty eight percent of the total workforce (Table

6.1.2.7) of 2793 workers/artisans involved in the production processes in the

organised rural industries of the district, were skilled' while 10% were "unskilled'.

The average 'skills score' fore each unit has been obtained by calculating die average

of tlie total scores of die workers of each unit, in the following manner. A unit is

allocated 10 points for each of its 'skilled' worker, 5 points for each of its 'semi

skilled' worker and the skill score is nil for unskilled workers. One striking feature

noticed in die sampled rural workforce was the high percentage of die workers with

more dian 10 years of service (about 46% -table 6.1.2.6)

Thus the workforce in die industries under study was very poor in formal

education and technical know-how but very rich in on-the-job experience.

From the data in table 6.1.2.9 it can be seen that there is no obvious variation

in the skill level, since all the weavers in the societies were highly skilled in terms of

experience in die job and exposure to learning from their parents and grand parents.

Hence it can be inferred that correlation between skill and manpower productivity

does not exist in die handloom sector. In other words the skill levels do not yield any

influence on the productivity. It can hence be inferred that the skills of the weavers

were not fully utilised in die present technology.

WAGE AND MANPOWER PRODUCTIVITY:

The National Commission on labour (India) has observed that man is

motivated by a complex of stimulants- economic, biological, social and

psychological. He has several needs, which he tries to satisfy simultaneously.

Therefore it is important that for optimum results from personal factors, application

of all forms of motivation - financial and non-financial are simultaneously applied.22

Thus based on the principle that die worker strives to meet die basic necessities'of his

family and is motivated by financial benefits, (both wages and incentives) to putforth

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efforts towards accomplishment of the conditional tasks, wage can be considered to

positively influence manpower productivity. The wage in the case of the rural

industrial workers is supposed to provide his family their livelihood. It can also be a

deterrant to his preparedness to use his fullest capacity when it does not satisfy his

needs or in other words when it is not to his expected levels. This approach that

wages, if not properly handled, can develop dissatisfaction was held by Herzberg and

his followers.12.

Whether the wage in die case of die rural industrial units under study was a

motivator, positively influencing the productivity or a dissatisfier deterring the fullest

contribution of manpower efforts towards output accomplishment has to be seen.

Secondly were die wages paid commensurate with die manpower productivity?

The coefficient is very small but positive. This means any rise in the wage will

not much affect the manpower productivity.

In other words the influence of wages on the manpower productivity is very

meagre. It can also be inferred from the above that the low wages'in the handloom

sector has not been a significant causative factor for the low productivity in the

handloom sector.

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6.1.3. WAGES

R.K. Gupta19, R. Balasubramaniam20, and M.Ponnambalam21 based on their

studies confirm that the socio economic conditions of the weavers in die handloom

industries was very low and die monthly income was very low (including other

sources), ranging between Rs.200/- and Rs.700/- per month.

Were die workers in die rural units paid wages commensurate with their skill

levels? Were the workers remunerated based on their contribution to the output?

181

The 10 per cent t-lablc value lor 2 degrees of freedom is 2.92. At 10% level of

significance the null hypothesis that average output and average wage are uncorrected

may be rejected. Thus, it is concluded that the average output and average wage are

linearly related.

It can hence be inferred that the workers are paid commensurate with increase

in output. Thus it can also be taken that, increase in size of the firm, in terms of

output will result in increased wages.

6.2 KHADI AND VILLAGE INDUSTRIES (KVI) SECTOR

6.2.1. PRODUCTION

Twelve out of the total of 17 units coming under the KVI category of the

units under study are production units that are directly run by the Khadi and Village

Industries Board, while 3 units have taken the support from KVIC, and hence come

directly under its control. The Tiruchirapalli leather workers cooperative society

(INDCO), the Tiruchirapalli Tanners Industrial Co-operative society and the

Karungulam carpenters and blacksmithy Industrial co-operative society are 3 societies

that come under die KVI sector.

The production and administration activities are either run on rented buildings

or buildings on land sites that belong to die government or are sometimes in own

buildings that have been developed from government and other contributions.

The Rural Textile Centres (9 units in total) produced yarn from cotton while

the 2 Nepali Loom Centres produced cotton fabrics (khadi towels and khadi shirting

materials). Recently due to the recession in khadi sales, some of the units have started

to produce polyester yarn and polyester uniform materials and fabrics for trousers.

The carpentry societies produced wooden household furniture, office furniture,

doors, cots and windows and also steel furniture like cupboards, almirahs and other

182

similar items. The Trichy leather tanners cooperative society is involved in the

tanning (ie), cleaning, treating and flatening of buffalow and cow skins, producing

semi finished leather. The Tiruchirapalli Leather workers cooperative society

produced leadier shoes, chappals, bags, purses and caliper boots worn by polio

affected persons. The Kliadi production centre produced silk sarees and silk dhothies.

The carbolic soap unit coming under the Kliadi and Village Industries Board

produced bathing soaps (bars), that were generally supplied to industrial units.

It is evident that the fixed assets in the Khadi and Village Industries units are

direcdy and positively correlated widi production, meaning, an increase in production

would result in an increase in fixed assets and vice-versa. It can hence be inferred that

the increase in investments on fixed assets, were capable of enhancing output in the

KVI sector.

185

more than Rs.50,000 per capita. In other words, a project with capital of 1 lakh of

rupees should be able to employ at least 2 persons. The objective behind such a

ceiling was to safeguard die employment potential of tire units or to maintain its

labour intensive characteristic. The increased investment requirement in fixed assets

can be taken to indicate the expansion of the production capacities of tiiese units to

increase die output.

The estimate of production that can be generated by an increment of Rs. 1 lakh

in fixed assets in the KV1 sector, based on die regression model obtained (Table

6.2.1.3), is Rs. 3.5985 lakhs. This indicates strongly that die KVI units are capital

saving and also adopt very low technology levels in die production processes,

involving very low investments on machinery and other installations.

Analysing die influence of the variable expenditure on raw materials over

production, it can be inferred from die inter-correlation matrix (Table 6.2.1.2), and

the regression model (Table 6.2,1.4), that the contribution of expenditure on raw

material was on the lower side as compared to die output.

Information collected from die field show that more than 90% of the raw

materials required were procured mostly from local resources or from within the

state. In the case of the Rural Textile centres constituting 52% of die KVI units the

raw material, namely, cotton is obtained from Soolur which is about 200 Ions, away

from these units. The Nepali loom centres which constitute twelve per cent of the

KVI units procure Uieir raw material namely yarn from other KVI units (from the

Rural Textile Centres of the KVIB with spin yarn) witiiin die district, as well as from

other districts of die state. Thus, this policy of forward integration adopted by die

Khadi and Village Industry ensures stable and secure prices.

In die case of the Khadi production centre the raw materials namely silk yarn

and zari are procured from Dharmapuri district and Surat respectively. The carpentry

186

units utilise the local, country wood and also teak and kombu varieties of wood from

nearby manapparai and outskirts of Tiruchirapalli district.

It can be concluded from table 6.2.1.2 and Table 6.2.1.4 that the expenditure

on labour cost in the KVI sector was already very high. A further increase in labour

cost would result in a decrease in output, since these two factors are inversely related.

It can be concluded that the labour cost and hence wages paid constitute a

major share in the expenditures involved in production. This is again an expected

phenomenon since the KVI units are emphasized to be labour intensive. The wages in

the case of the KVI units constitute more than 73% of the labour cost. The labour

cost includes apart from wages, the components of festival bonus (currently Rs.860/~

per year), 10% of wages as contribution by the Board / commission towards the

Welfare Fund (which is currently Rs.50/- approximately) and 12% incentive (which is

currently Rs.60/- approximately). But die inter correlation matrix indicates that the

labour cost, and hence the wage is not correlated with the output. It can be inferred

from the above that the workers in die KVI sector are not paid wages, commensurate

with the changes in die output achieved. It can also be inferred that die labour cost

and hence wages do not wield any influence on die output of these units.

As seen in table 6.1.3.1, among die rural industries the average wage per day

is the lowest in die KVI sector. (Rs.47.94 per day). More than 65% of the workers in

the KVI sector earn less than Rs.25/- per day.

Thus, though the wages paid in die KVI sector are relatively low, die labour

cost constitutes a major chunk of die expenditure involved in production, indicating

two possibilities. That the non-wage monetary benefits (exclusive of welfare and

social security measures) were very high and number two that the number of workers

involved in the production process were relatively more. The first possibility has also

been confirmed since the non-wage monetary benefits constitute more than 28% per

187

cent of the labour cost, as discussed in the previous paragraphs. A cursory

observation of the influence of the quantity of manpower on production (Tables

6.2.12, 6.2.13 & 6.2.14) diagnosed by the inter correlation matrix, the analysis of

variance and the regression model developed for the production function show that the

variable is negatively correlated with the production function, indicating deployment

of more labour than necessary. Thus it may be concluded that the wages in the KVI

sector are relatively very low. A good majority of them being paid less than Rs.25/-

per day. The non-wage monetary benefit are heavy resulting in the labour cost

contributing a major chunk towards the expenditures on production. A heavy labour

cost component is found to be spent on much lesser number of workers resulting in a

situation of under-utilisation of labour.

When analysing the influence of the capacity utilisation in the KVI units on die

production function it is seen from the correlation matrix (Table 6.2.1.2) that the

capacity utilisation is positively correlated with the production, indicating the

possibility of enhanced output by increasing the percentage of capacity utilised. But

the percentage of contribution of the capacity utilisation factor towards production is

very low (5.98% contribution) indicating, very little efforts towards better utilisation

of capacity in these units.

In the light of this phenomenon, it is observed in the field that about 50% of

machinery involved (Nepali Looms) in production in the Nepali Loom centres,

weaving cotton khadi and polyester uniform and pant materials have been kept idle.

Similarly in the work sheds maintained by the Tiruchirapalli tanners industrial

co-operative societies, more than 85% of the facilities remain unused. The society

which had housed the leadier processing activities of about 193 members, has only 3

active members. The promulgation of the statutory provisions for effluent control had

ended with the sealing of all the leather units in the district that had no means for

effluent treatment. At present only die Central Leather Research Centre can redeem

188

the situation by developing a centralised efficient treatment plant for treating plant

effluence since individual effluent treatment measures were very costly and beyond

reach by individual units in the district. Another major problem for the tanning

industry, was the substitutes for leather shoes namely plastic and foam shoes in the

market. Even the little demand for die leather shoes are catered by imported leather.

The leather goods producers maintain that the locally available skins are thin and

requires care full handling. The only outlets for these locally tanned skins at present

are the exports markets. The Government, can relieve the problem of the tanning

societies by developing a centralised treatment plant which is beyond the imagination

of the tanning societies. Apart from the two Leather tanners society, a cluster of about

20 leather based units in the SSI sector are localised in the Sembattu area of die

district. Thus the centralised effluent plant if established, would cater to the effluent

control needs of all these units in the district. The Government can help die dwindling

rural tanning units in the district by developing the export potential for the units, and

ensuring and enabling the export of dieir tanned skins to other countries.

Lack of timely supply of raw materials namely yarn and the closure of a

considerable number of cotton yarn spinning units had resulted in a heavy shortage of

raw material. Moreover in order to accommodate to the changing consumer needs and

to increase the saleability of die fabrics produced, some of the spinning and weaving

units in this sector have shifted (in die year 1999-2000) to produce polyester fabrics.

Thus a continuous consumption potential in the market for the textile produced could

be a solution to the problem of idle machine power.

This would not only ensure the resuscitation of the looms and charkas in the

Rural textile centres and the Nepali loom centres, and enhance the performance of

these units, but also enable better utilisation of the manpower employed in these units.

189

Thus from the above discussion of the problems faced by a majority of the KVI

units under study, the overall demand for die KVI products have declined.

Consequently the production had declined and so the utilisation of manpower

reduced. Product diversifications utilising the present manpower resourcefully would

be an amicable solution.

6.2.2 PRODUCTIVITY

As discussed earlier, the issue that needs to be analysed is the influence of the

manpower on the productivity and hence on die performance of die KVI units. It has

to be reminded here, that the KVI units were supported by the Khadi and Village

Industries Commission and the Khadi and Village Industries Board with the sole

objective of creating employment opportunities in the local rural pockets. As was the

emphasis in all the categories of the KVI units, die Rural textile centres (Spinning

units) and the Nepali loom centres (weaving units) that were located in the rural areas

of the districts shifted to use the intermediate 6 spindle, 8 spindle and 12 spindle

charkas for spinning and Nepali looms (pedal type) for weaving. All the activities in

these two production techniques were purely manual, utilising the physical process

and the psychomotor dexterity of die labour. The carpentry units similarly continued

to use the traditional tools which were also purely manual. The leather tanning

societies had also employed purely manual processes in die tanning of leatiier (with

very negligible exceptions). The Khadi production centre also involved the labour-

intensive looms for weaving silk sarees. Though the single soap unit was relatively

more capital-heavy than the other KVI units, the process involved was very traditional

to enable the absorption of the untrained labour in the rural segment.

The crux of the problem was the manpower in these units, lacking any formal

technical input. Were the labour employing such traditional techniques as discussed

above, able to be productive? Were the skill levels (in terms of experience obtained)

sufficient to enable them work productively, since the technology involved was

190

obviously low in these units. The average wage per day was the lowest in the KVI

sector units - Rs. 47.79/- (Table 6.1.3.1). Were the low wages conceptually held to

influence the productivity of the workforce negatively, a cause for the existing

productivity levels in the units?

In other words was the wage influential enough to be used as a tool to motivate

workers towards more productive efforts at the existing skill levels? It is cleared from

the application of the Karl Pearson's coefficient of correlation on per capita

investment and per capita output (Table 6.1.2.4) that the former was not influential on

the latter, in the rural industries. Average investment and manpower productivity (per

capita output) were found to be correlated in the rural units of study. (Table 6.1.2.3)

Karl Pearson's coefficient is used to observe the intensity of relationships

between skill and manpower productivity; and wages and manpower productivity.

Clearly the correlation is significant. It may be concluded that the manpower

productivity is more when the wage is more. It can also be inferred that manpower

productivity levels among the workers can be raised by increasing the wage returns

in this sector.

It can thus be concluded that the manpower productivity in the KVI units can

be manipulated by elevating the wage income of its workers. The low skill levels have

not influenced the workers ability to perform their tasks effectively. As such the

government can plan to elevate the wage returns of the workers, either by directly

increasing the wages or by increasing the non-wage labour benefits. As explained

earlier, the KVI workers were enjoying an average of Rs.2180/- per year non-wage

benefits in the form of festival advance, the welfare fund contribution by the Board /

commission and wage incentive of 10% on their wages. From the data obtained from

the field of study it can also be leamt that the wages earned, ranged between a

minimum of Rs.15/- per day to Rs.150/- The Board as such is already providing a

10% incentive based on the wages earned. Though this might work as a motivation,

193

the workers with very low wage per day were not benefiting much out of this

incentive offered. The Board can ensure a basic minimum wage, since certain

categories of village industries units like the tanning and spinning units were very

much affected with very low production targets as such, where in, workers

willingness to put in more efforts is discouraged. In die case of die tanning society for

example, as explained earlier heavy competition from substitutes for leather products,

like foam and plastic makes and imported leadier which was more preferred due to

their durability, led to stagnation of the finished tides, resulting in the miserably thin

membership as well as locked-up capital and very low production. Hence the very

low wages. (The average wage per day was die lowest in the KVI sector - Rs.47.79/-

and a majority of die KVI workers earned less than 20Rs. per day).

6.2.3. WAGES

As discussed earlier the issue with regard to the wages in the rural sector was

the adequacy of the wages in relation to the output. The second querry was whether

the labour were remunerated commensurate with the skill possessed. The first issue

that is based on the relationship between output and the wages have been verified

under Table 6.1.3.1. The coefficient of correlation between the average wage per day

and the average output in all the four sectors of study was obtained. This lead to the

conclusion that the average wage and the average output were correlated significantly

and that the wages paid in these four sectors were commensurate with the output.

The relationship between die skills (measured in terms of experience gained),

and die wages (Table 6.2.2.1) is analysed by the coefficient of correlation' given

below:

CORRELATION BETWEEN WORKERS' SKILL AND WAGE:

It is assumed that the average wage (y) is linearly dependent upon the workers'

skill (x). Here the workers' skill is quantified adopting a scoring scale based on the

The 1% t-table value for 15 degrees of freedom is 2.947. Since the calculated

t-value is greater than the table value, the null hypothesis is rejected at 1 % level of

significance. Thus, it may be concluded that the wage linearly depends upon the skill

of the workers in the KVI sectors.

It is implied from the analysis of the coefficient of correlation that the

relationship between the wage and the skills is such that the wage increases as the

skill level increases.

Since the analysis of productivity in this sector shows that the skills of the

workforce have not been fully utilised, as it is not influential on the productivity in

this sector, two major features of the labour in this sector can be identified. Both the

wages and the manpower productivity in this sector have been confirmed to be

relatively low. The productivity has not been found to be influenced by the skill.

This leads finally to the possibility of the technology factor which has been

deliberately maintained at very low levels (to maintain the labour-intensive

characteristic,) contribute towards the low skill utilisation.

Hence the solution to this interrelated labour problem would be to elevate the

technology level at a very calculated pace such that the labour absorbing capacity of

the sector is maintained and at the same time raising the productivity. This would

result in better utilisation of manpower ensuring better wages to the labour.

The Khadi and Village Industries Commission, which has been engaged in the

establishment and development of Khadi and village Industries for over a quarter of a

century has been carrying on research and development activities to improve tools and

equipment and the techniques of production in the various industries. The details have

been enclosed as annexure.

Though the single soap unit under the study uses the machines suggested by

the KVI research institutions including plodders, they can be considered to be

traditional in its technology since all these innovations that have been discussed, and

advocated by the research institutions under the ageis of the KVIC have been almost

more than 2 decades old. Updating with the subsequent progress in the relevant

technologies is required.

The next category of the KVI in the district, namely, the carpentry and the

blacksmithy, the 2 carpentry and blacksmithy units coming under the purview of the

KVI, have leaned both in terms of output as well as membership as discussed earlier.

Obviously the technology involved were very traditional, and consisted mainly of

tools. The blacksmithy artisans used machines for very few activities like welding,

196

grinding and drilling. Even the dyeing and bending machines were manually operated

by the artisans. Every year more than 15,000 persons are trained under KVIC, the

programmes covering all the major categories of industries like the Khadi, the

mineral based industries, agro based and food industry, polymer and chemical based

industry textiles and others. In the eighth five year plan alone, more than 1114 persons

have been trained for cottage soap manufacturing, 932 persons for leather, 619

persons for polyvasthra, and 263 persons for rural engineering among otiier crafts and

categories. About 61,200 persons in all, have been trained during the eighth plan,

including training in marketing, management, inspection and entrepreneurship.24

From the discussion on the steps taken towards technological progress by the

Government through the Khadi and Village Industries Commission and other village

industries institutions, (given in detail in the annexure) it is clear that the research

institutions constituted for the purpose have, without failing to sustain the labour-

intensive nature and employment motive of die KVI, contributed towards advocating

modernisation and innovations at a limited pace. Thus it can be inferred that the

technological progress has been deliberately contained in the KVI units.

6.3 SMALL SCALE INDUSTRIES SECTOR:

6.3.1 PRODUCTION:

The results of the multiple regression on the variables of production in the SSI

units (data tabulated in Table 6.3.1.1.) are presented in Table 6.3.1.2, 6.3.1.3, and

6.3,1.4.

The above table shows that the contribution by the variable X3 is more than the

other two variables.

Based on the analysis of inter-correlation matrix (Table 6.3.1.2), with regards

to the investments in fixed assets (X2), and the contribution of fixed assets towards the

variance in production as shown in Table (6.3.1.6) it can be inferred that the

investment in fixed assets in the SSI units is not commensurate with the output. Since

the two variables are inversely proportional, it is indication that the investments

already made in the assets have to be more intensively used to increase the output in

these units. The underutilised investments on fixed assets is also reflected in die

negative correlation of the capacity utilisation and production in this sector (also seen

in the coefficient matrix).

The contribution of the variables quantity of manpower and the capacity

utilisation towards the production function is found to be negligible and hence have

been removed to obtain the regression model. Capacity utilisation is also found to be

negatively related to production (Table 6.3.1.2). The number of workers employed is

much less when compared to the volume of output in these SSI units under study.

Secondly, the capacity utilisation of die machinery installed indicates that tiiere is

heavy underutilised capacity. It can hence be inferred that more manpower employed

can help to realise better utilisation of installed capacities. The expenditure on labour

201

though not significantly related to die production function is positively correlated,

indicating that the expenditure on labour was commensurate with the output obtained.

Thus it can be concluded that the expenditure on raw material and labour and also the

quantity of labour do not wield any influence on the production function as such.

Very heavy expenditure on the fixed assets if well utilised by effective utilisation of

the infrastructure can result in enhanced production performance in these units.

The labour cost in the case of die SSI units constitute only the wages and

festival advance excepting in about 2% of die units which provide tea and snacks

daily, apart from loans and salary advances. Thus these workers are not provided with

any other welfare or social security measures as provided in the case of the KVI or

Handloom societies. But die wage rate per day is die highest in die SSI units (Rs.98/-

per day) followed by the Tiny sector units (Rs.66.68/- per day) and the handloom

societies and the KVI units (paying Rs.53.69/- and Rs.47.79 per day respectively).

6.3.2 PRODUCTIVITY:

The manpower productivity (depicted in table 6.1.2.1) is the highest in diis

sector, the average per capita output per day being Rs.2096/- and the average per

capital output per year tabling 5.98 lakh rupees. The influence and relationship of the

skill levels of the manpower in die SSI units and wages earned with manpower

productivity has been studied using die Karl Pearsons coefficient of correlation

technique.

203

This value is significant even at 1 % level of significance since the table value is

3.707.

This indicates that the manpower productivity in this sector increases when the

skill levels of the workers increases, and decreases when the skill level decreases.

Thus it can be concluded that the manpower productivity in the SSI sector is

influenced by the skill levels of the workers. In other words manpower productivity in

this sector can be improved by increasing die skill levels of the workers in this sector.

WAGE AND MANPOWER PRODUCTIVITY:

The influence of wage on manpower productivity is determined using the

coefficient of correlation technique.

Tins is very low, though die correlation is positive. Since it is not statistically

significant, it may not be claimed that manpower productivity is linearly correlated

with wage.

It is understood from the above that the wages were not only foiling to

influence the productivity of the workforce, but can also be said to be non consistent

with productivity. In other words it can be concluded that the workers in the- SSI

sector were not paid commensurate with their productivity. It has to be remembered

that the manpower productivity is the highest in this sector, Rs.5.98 lakh per year per

worker.

204

6.3.3. WAGES

Though the average wage per day was found to be comparatively higher, it is

essential to evaluate the wages in relevance to the skill possessed by the workers. It is

to be reminded here that the average wages earned were found to be positively related

with the average output in the rural industries under study (Table 6.1.3.1) implying

wages were commensurate with the output.

This also implies that as the size of the firm increases in terms of output or.

production, the wages tend to increase. Thus the wages would be relatively on the

higher side in units which have better utilized their plant capacities.

As mentioned earlier die SSI units had the problem of high labour turnover,

especially during the agricultural season. The workers were found to abstain from

their industrial activities, also when they, find opportunities in the construction

activities like in road and bridge constructions or even house constructions. This

temporary migration, causing a heavy disturbance in the production process of the

industries were due to the poor wages. In die plastic industry for example, the

generally accepted wage was Rs.40/~ per day and on an average an worker earned

Rs.1200/- per month. (This accepted market rate was around Rs.1600/- to Rs.1700/-

in Bombay and other metropolis) The workers tend to utilise die more rewarding

seasonal opportunities in the construction and agriculture sector, where die wages

were on an average Rs.80/- per day for men and Rs.40/- for women and Rs.70/- for

men and Rs.30/- for women respectively. This unexpected labour turnover sometimes

leads to a considerable loss since the set-up cost (involving development and

maintenance of heat) and set-up time might be very high in certain SSI units as in the

case of the plastic industries.

This is not significant at 5% level since the calculated t-values is less than the

t-table value (2.447). The theory does not support the existence of linear correlation

between skill and wage. This may be due to the reason that the number of units in this

sector is only 8.

Further, the percentage of skilled in terms of technical knowledgeability is

found to be very less in this sector in spite of the fact that the phenomenon of

mechanisation is very high in this sector. The major reason attributed to this

anomalous lowered demand for skills in this mechanised sector of the rural industries,

was the fact that most of the machines in these units were automatic. Hence technical

skills were required only at the supervisory level. Thus only 10 to 15% of the total

206

workforce (consisting of the supervisors) were technically skilled. The rest of the

"workforce (workers) were unskilled, excepting their experience on the job. For

example, in the plastic industry, once the mould is made and the trial over, all

parameters are preset and only mass production follows. The same is the case of the

flourmills and saw mills. The SSI units had not insisted more technical skills in their

manpower, also because that would mean paying higher wages. Thus inspite of

relatively higher degree of mechanisation and technology upgradation in the

production process, the SSI units were not demanding formal skills inputs.

6.4 TINY SECTOR UMTS

A brief on the constitution of the units in this sector in this district is required

since, it includes not only various categories of industries but also various types of

industries differing in their organisation structures. The organised tiny sector in this

district consisted mainly of coir units, (34%) handicraft units, (25%), the remaining

consisting of a heterogeneous array, including saw mills, flour mills, brickworks, mat

producing units, gem cutting units tailoring units and one sericulture unit involved in

reeling silk. Organisation structure -wise this sector includes a single government unit

(sericulture), partnership firms and sole proprietor units. Fifty percent of the units in

this sector were household units, with the dominance of entrepreneurship over die

wage-dependent members.

6.4.1. PRODUCTION

Since the handicraft units involved purely manual, psychomotor activities

executed with just human hands, or in certain cases with some tools, the need for the

variable capacity utilisation never existed in them. Hence the production function has

been analysed separately for the handicraft and non-handicraft units in this sector.

210

Since the correlation between production and the investment on fixed assets is

not very significant the (Correlation matrix - Table 6.4.1.2) and die contribution of

fixed assets towards the multiple regression is almost negligible (Table 6.4.1.4)

indicating very meagre investments in fixed assets, it can be inferred that increased

investments in fixed assets might not bring any conspicuous changes in the output.

The variables expenditure on raw materials seems to influence the output significantly

since, the tables 6.4.1.2 and 6.4.1.4 indicate a very positive correlation between the

two variables and also heavy expenditure on raw materials in these units implying that

further increase in expenditure on raw materials might not be required.

Similarly, it can be inferred that the variables expenditure on labour, quantity

of manpower and die capacity utilisation of due plant also receive relatively very little

budgets (based on Table 6.4.1.4), and are positively related to production. In other

words, die production performance in this sector of die rural industry can be

enhanced, if efforts are channelised, in increasing die number of workers in die unit

and ensuring better financial benefits to die workers and fuller utilisation of the

installed plant capacities.

In'the case of the handicraft units of die tiny sector, production is found to be

almost independent of the investments in fixed assets (which is very low), indicated

by a negative correlation between die two variables (Table 6.4.1.6).

Very much close to the theoretical derivations obtained and presented above,

the investments on fixed assets, the expenditure on labour, and die capacity utilisation

have all been found to be very low in this Tiny sector.

The average investment in fixed assets per unit was as low as Rs.32,700/-. The

major component of die fixed assets, namely the machinery in this sector, was used in

a very limited way. Only about 47% of the units in the sector required machinery in

their production process. They included the saw mills, the flour mills that ground

211

cereals and pulses, mat units which used power driven machinery to stitch the grasses

into mats, the coir units which used a relatively higher share of machinery to

decorticate coconut husks and defibre them, and the gem cutting units, which used

power propelled rotary plates to cut and polish die artificial diamonds / stones.

In about 10% of the units the production process was purely manual as in die

hand-made- mat units, units producing paper-mesh products and units producing

plaster-of-paris (P.O.P) idols. In units producing bricks, coin yarn, bamboo products,

mud pots and odier mud-based aesthetic pieces, only tools were used to aid the

production process.

Observation of the investments in land and buildings and otiier installations

show, that in nearly one half of the units in this sector, the production process was

carried out in the households themselves. In certain cases like the P.O.P. units the

artisans needed more space to assemble the huge mesh-works and P.O.P. works which

were sometimes 5 to 6 feet tall. Hence the production process was carried out in tree-

shades and under tarpaulin roofs. In some of the coir spinning units the fixed assets

consisted of only a few ratts, since the spinning process in these units were conducted

on roadsides, under shady trees or small groves near fields and hillocks. Only thirty

four percent of the units in this sector has separate owned buildings or worksheds.

The investments on machinery was relatively high in the remaining 43 % of the

units, due to the infestation of mechanisation in the production process in these units.

The labour cost in about 41% of the tiny sector units which were

entrepreneurial units utilising only family labour, would mean the returns received out

of their entrepreneurial endeavour, which in most cases was out of high distress. For

example, in some of the coir units (producing rope by spinning using ratts) the sole

income was 18/- to 20/- rupees per day, per head, obtained after investing on raw

fibre and a day's work. In the rest of die units hiring workers, the labour cost was

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calculated to include the daily wage, festival bonus, and in a very few cases salary

advances or Loans. Thus the labour cost in this sector of the rural unit would

constitute mainly the wage. Exceptions were the brick units and sericulture. The brick

units though privately managed, provided the workers with provident fund

contributions (amounting to 12% of the wage) and free housing facility for 6 months.

(The actual production of brides was seasonal, production being affected during the

rainy and winter seasons). The sericulture unit being managed by the Government

provides apart from wages the contributions to the welfare fund, and also festival

advances and loans. Thus in more than 90% of die tinny sector units the labour cost

constituted only the wages.

Production is more dependent on the raw materials and the expenditure on

manpower (since die correlation table 6.4.1.6 shows a positive significant relationship

between the two variables). Since die percentage of contribution towards the multiple

regression by these two variables are already quite significant (63.43 per cent and

32.53 per cent), indicating heavy expenditures, already on these two variables,

increasing the quantity of manpower employed would enhance the production function

in this segment of the tiny sector.

The raw materials were mostly available locally and hence the raw materials

were easily procured cheap and always available without shortages. More than 85% of

the units employed only family labour hence the labour cost in these units would

mean & includes the returns obtained from these small entrepreneurial occupations.

The returns in certain cases were as high as Rs. 160/- per day per artisan, but such

highly promising handicraft products had only seasonal demand, (e.g) Paper mesh &

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P.O.P. works. There were only a couple of families of artisans in this district, who

continued to produce paper mesh / P.O.P. idols of deities. They produced huge five

foot idols (selling price more than Rs. 1000/- per piece) as well as small pieces (selling

price Rs.10 per piece), that are generally used as gifts or showcase pieces. These huge

idols were very much in demand during the Vinayaga Chathurthi / Pooja time

celebrations and hence these artisans were very busy and their labour utilised only for

about 60 to 65 days in a year.

Although the expenditure on raw materials was, found to be positively

correlated with production, indicating its influential nature on the production in both

the segments of the tiny sector (the handicraft and non-handicraft segments), the

magnitude was very heavy in the non-handicraft unit than in the handicraft units. In

the case of the handicraft units the raw materials were all locally available within the

district (in about 88% of the units) or at the maximum within the state excepting die

applique work unit that procured its raw materials like fabrics and other materials

from Chennai. Hence the raw materials, were bodi relatively cheaper and very much

available near the units. The fine mud required by the potters (artisans), the P.O.P.

combination consisting of the paper flour, paste flour, flour of tubers, and the

Kalnagu flour, the bamboos for baskets and other show-pieces, were the major raw

materials used. The fuel requirements were also locally available and sometimes

included materials that would otherwise be a waste. For example the artisans making

pottery used the hay from paddy fields, coconut husks and dried cow-dung pieces to

cook their products (baking).

In the case of the non-handicraft segment of the tiny sector, the raw material

expenditure was obviously heavier due to two reasons. Most of the raw materials

required were not locally available and hence had to be procured from outside the

state. Secondly the fuel in most of the cases was electricity and in certain cases were

materials procured from neighbouring districts or states. For example the gem cutting

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units in this district procured 80% of their raw material (raw stone) called 'Dhalam'

from Switzerland and Hongkong (80%) and 10% from Meetupalayam. African timber

was imported through Tuticorin by some of die saw mills in this district. The oil

seeds were procured from all over die state by the oil mills. The fuel in the case of the

brick works, for example, consisted of huge lorry loads of dust powder and fire wood

procured from Neyveli.

With regard to the wage returns, the entrepreneurial returns were much

lucrative than die wages earned by die hired workers. For example in the applique

works units die wage earned by fired workers were as low as, Rs.I7/- per day while

the entrepreneurial returns were as high as 160 Rs. per day. In the case of certain

units like those producing RO.P pieces, die returns was as high as Rs.814/- per day,

but the demand for the product was only seasonal, (only 2 months a year).

6.4.2. PRODUCTIVITY

As in die case of die odier sectors the relationship between the manpower skill

and the manpower productivity and die influence of die wage on the productivity of

the workforce were analysed applying the Karl Pearson's coefficient of correlation.

As seen earlier (Table 6.1.2.3) die manpower productivity (measured as die

per capita output in this study) was found to be positively influenced by Average

Investment in the rural units, implying that productivity can be promoted by

increasing die investment in fixed assets in these units.

MANPOWER SKILLS AND MANPOWESR PRODUCTIVITY

The coefficient of linear correlation between skill' and manpower productivity

is calculated to be r = -0.037. This coefficient is low but negative. Though it is

statistically insignificant the manpower skill can be held to have inverse effect upon

the man power productivity of die labourers. It can hence be inferred that the tiny

sector activities do not call for high skill levels. Hence the skill levels of the workers

do not wield any influence on their productivity.

WAGE AND MANPOWER PRODUCTIVITY

The Karl Pearson's coefficient of correlation between average wage and

manpower productivity is calculated to be r = 0.467. It is statistically significant at

5% level since the calculated student's t value 2.48 is greater than the t-table value of

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2.07. Thus, both variables more in the same direction. This indicates that manpower

productivity can be increases with increase in the average wage and vice versa.

It is hence confirmed that increase in wage can generate more productivity in

the manpower. In other words the wage is found to be a powerful motivator and hence

can be used as a tool to improve the productivity in the workers.

. 6.4.3 WAGES

It is assumed that the average wage depends upon die skill of die labourers.

Hence, the linear correlation is calculated between the skill and average wage as

This is low positive. The statistical test also reveals that it is not significant.

Hence it may be concluded that the skill has no direct impact on the wages in this

sector. These tiny sectors do not involve labourers with high skill.

It should also be remembered here, that more than one half of the tiny sector

units were traditional and hence do not call for very high skill levels. The production

processes were as such simple. Skills gained by practice (of performing the task

repeatedly) seems to be sufficient to perform the tasks involved the production

process. I

Thus lack of technical skill inputs in the workers do not seem to influence the i

wage levels in the sector.

6.5 SUMMARY:

The output in the handloom sector has been confirmed to be affected by

underutilised loom capacities to the extent of 91%, underutilised family labour, lack

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of timely supply of quality raw materials and by heavy stagnation of the handloora

produce in die market. In spite of heavy spoon feeding by the Governments (both

central and state governments) in die form of subsidies and supporting schemes right

from provision of share capital, tiirough die various activities, to the rebates on sales,

the societies were still found to be in die red. The new vistas seen in the success of

the export ventures would redeem die societies from perpetual sinking. The

manpower productivity in die sector has been found to be die least in this sector (Rs.

62/- per day per weaver). Raising die wages of the skill levels in the weavers has been

inferred to have little effect on the manpower productivity, while raising the

technology level, is confirmed to have the capacity to raise die manpower productivity

levels and also enable die society produce demand-based goods.

The capital output ratio was the least in die Khadi and Village Industries sector

(1:3.5) confinning the labour intensive nature of this sector, which is also confirmed

by a relatively heavy expenditure on labour. Under utilisation of die machine

capacities and the manpower have also been confirmed, while die wages paid were die

least in this sector (average wage per day Rs.47.94/-). Under utilisation of the skills

in the workforce have resulted in low manpower productivity, while increments in

wages have confirmed to influence the manpower productivity positively. Adoption of

technological improvisations was deliberately contained at a slow pace, in order to

maintain die labour intensive nature of die sector.

The average investment in fixed assets per unit was found to be the highest in

this sector (average of 18.9 lakh rupees), while per capita investment was about

Rs.0.83 lakhs, confirming the capital intensive nature of this sector. Improved

utilisation of die installed plant capacities is confirmed to have the capacity to

generate enhanced output in this sector. The per capita output was Rs.5.98 lakhs, the

highest among the rural industries. Increasing the skill levels in the manpower is

inferred to have a positive influence on die manpower productivity, while increase in

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wages seem to have little effect on the productivity. Though the wages earned per day

was the highest in this sector of the rural industries, seasonal labour turnovers to

agriculture and construction sectors have been confirmed.

In the case of the Tiny sector, increased expenditure on labour and raw

materials were found to have the capacity to generate enhanced output. Increasing the

manpower deployed and increase capacity utilisation also have been confirmed to have

positive influence on die output. Production in majority of the units involved only

manual processes (without use of power) resulting in very low investments in fixed

assets per unit (average of Rs.32,700/- per unit). Increase in skill levels were not

warranted for this low-technology sector, and hence failed to influence the manpower

productivity, whereas increase in wages could be used as a motivating tool to

manipulate manpower productivity in this sector. The wage returns per head in the

entrepreneurial units were more rewarding than die wages in the hired labour.

Regulating and synchronising die demand would enable enhanced production

throughout the year in the handicraft segment of this sector, which were highly

rewarding and equally seasonal.