The Technical Efficiency of Khadi and Village Industries Clusters in India

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1 The Technical Efficiency of Khadi and Village Industries s in India (Dr. E. Bhaskaran.B.E, M.B.A., Ph.D., M.I.E., (D.Sc)., Deputy Director of Industries and Commerce, Government of Tamil Nadu) 1. Introduction The Khadi and Village Industries (KVI) sector occupies a significant role in the total manufacturing sector of India. For the development of KVI sector, the Government is implementing various programmes / schemes through Khadi and Village Industries Commission (KVIC) for assisting eligible applicants in setting up village industries, Rebate scheme for Khadi Institutions, Interest Subsidy Eligibility Certificate (ISEC) scheme for providing bank loans, Rural Industries Service Centre (RISC) for providing common facility centres (CFCs) to provide infrastructure and service support, Scheme of Fund for Regeneration of traditional Industries (SFURTI) for development of clusters in Khadi, Village industries and Coir Sectors, Products development, Design Intervention and Packaging (PRODIP), marketing export promotion, exhibition at district, state, zonal and national level, design facility, brand building etc. As a result of these efforts, KVI sector has registered a growth of around 9.6 % in over the performance of previous year. The total KVI production during (up to 15 February 2012) is estimated at Rs. 23, crore (Khadi Rs crore and V.I. Rs. 22, crore) as against Rs crore (Khadi Rs crore and V.I. Rs crore) in Similarly, estimated sales of KVI products up to 15 February 2012 is Rs crore (Khadi Rs crore and V.I. Rs crore) in as against Rs crore (Khadi Rs crore and V.I. Rs crore) of the previous year. The total cumulative employment in the KVI sector is estimated to have also increased to lakh persons (10.35 lakh in Khadi and lakh in V.I.) by 15 February, 2012 as against lakh persons (10.15 lakh in Khadi and lakh in V.I.) of corresponding period of previous year. 2. Literature Survey India has a rich tradition in traditional industries. The eco-friendly products of traditional industries not only have great potential for growth in production and export but can also lead to widespread generation of employment opportunities in the rural areas of the country. With a view to making the traditional industries more productive and competitive and facilitating their sustainable development, the Central Government announced the setting up of a fund for regeneration of traditional industries, with an initial allocation of Rs. 100 crore. Pursuant to this announcement, a Central Sector Scheme titled the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) has been drawn up and approved at a total cost of Rs crore. The Scheme will be implemented by the Union Ministry of Agro and Rural Industries (ARI) and its organisations and institutions, in collaboration with State Governments, their organisations concerned, non-governmental organisations, etc. July - August, socio - economic voices

2 SFURTI is Scheme of Fund for Regeneration of Traditional Industries. Ministry of MSME has launched this scheme in the year 2005 with the view to promote development. KVIC is the nodal Agency for promotion of development for Khadi as well as for V.I. products. As on date, a no. of 76 s have come up as per the scheme and many of these clusters have completed. Outcome of the programme was very much encouraging which speaks of the enhancement of wages of Artisans and the increase in production and sales of the I.A. (Implementing Agency). Evaluation studies conducted for SFURTI s has rated the programme, as quite successful. Ministry of MSME proposed enhanced budget allocation during 12th five Year Plan for the promotion of the scheme in a bigger way, with certain modification. Due to global recession there is need for the study on the Technical Efficiency of KVIs s in India. 3. Objectives of the Study The objectives are 1. To study the list of Khadi and Village Industries s exists in India. 2. To Study the Correlation Analysis, Technical Efficiency (θ) and Peer Weights (λi) of Khadi s in India. 3. To Study the Input Slacks (S - ) and Output Slacks (S + ) of Khadi s in India. 4. To Study the Variable Returns to Scale of Khadi s in India. 4. Methodology The methodology adopted is collection of data from, KVIC, Government of India and analyzing with Data Envelopment Analysis of Input Oriented Banker Charnes Cooper (BCC) Model by taking No. of Artisans Benefited and Production as inputs and Annual Sales, Enhanced Wages for Spinner and Weaver as outputs. A DMU is efficient if θ = 1, S - = 0 and S + = Statistical Analysis 5.1 Village Industries s The list of Village Industries exists in India is given in Table 1. July - August, socio - economic voices

3 Table 1: List of Village Industries s in India Sr No. Name Industry State 1 Dress Making Other Arunachal Pradesh 2 Meghalaya Cane and Bamboo Cane & Bamboo Meghalaya 3 Tripura Beekeeping Bee-Keeping Tripura 4 Cane & Bamboo Pardo Cane & Bamboo Manipur 5 Barpeta Cane and Bamboo Cane & Bamboo Assam 6 Gauripur Cane and Bamboo Cane & Bamboo Assam 7 Carpentry Carpentry Wooden Works Manipur 8 Mon Beads Carpentry Wooden Works Nagaland 9 Gandhi gram Craft Pros Cane & Bamboo Tripura 10 Mizoram Cane and Bamboo Cane & Bamboo Mizoram 11 Muzaffarpur Beekeeping Bee-Keeping Bihar 12 Murshidabad Cane & Bamboo Cane & Bamboo West Bengal 13 Luburising Palm Jaggery Cane & Bamboo, Food Processing West Bengal and Health Drink 14 Singhbhum Beekeeping Bee-Keeping Jharkhand Paragana Beekeeping Bee-Keeping West Bengal 16 Arikama Bamboo Cane & Bamboo Orissa 17 Dausa Pottery Other Rajasthan 18 BaramulaEmb. Embroidery Jammu Kashmir 19 LadakhSeabuck Throne Food Processing and Health Drink Jammu Kashmir 20 Bhiwani Wooden Beads Carpentry Wooden Works Haryana 21 Handmade Paper Hand Made Paper and Fibre Haryana 22 Jammu Kathua Beekeeping Bee-Keeping Jammu Kashmir 23 Phulkari Embroidery Punjab 24 Una Plant Fibre Hand Made Paper and Fibre Himanchal Pradesh 25 Wooden Handicraft Carpentry Wooden Works Punjab 26 Punjabi Juti PCBI Punjab 27 Chamoli Beekeeping Bee-Keeping Uttaranchal 28 PratapgarhAmla Food Processing and Health Drink Uttar Pradesh 29 KanaujiAgarbathi Agarabatti Uttar Pradesh 30 Horns and Bone Horn & Bone Uttar Pradesh 31 Bamboo Craft Cane & Bamboo Madhya Pradesh 32 Lac Other Madhya Pradesh 33 Ektal Bell Metal Metal and Pottery Chhattisgarh 34 Sindhudurg Food Processing Food Processing and Health Drink Maharashtra 35 Gadchiroli Pottery Metal and Pottery Maharashtra 36 GujaratNeera Food Processing and Health Drink Gujarat 37 Chittoor Wood Carving Carpentry Wooden Works Andhra Pradesh 38 Amrawati Beekeeping Bee-Keeping Maharashtra 39 HindupurAgarbatti Agarabatti Andhra Pradesh 40 Devarakonda Jewellery Traditional Jewellery Andhra Pradesh 41 Coorg Beekeeping Bee-Keeping Karnataka 42 NachiyarkovilBrass metal Metal and Pottery Tamil Nadu 43 Siddha and Ayurveda Ayurveda Tamil Nadu 44 Kalpetta Bamboo Craft Cane & Bamboo Kerala 45 Kozhikode Bee Keeping Bee-Keeping Kerala 46 Mehsi River Shell Button River Shell Button and Lac Bihar 47 Gandhi gram Craft Processing Cane & Bamboo Tripura 48 Sikkim Bee Keeping Bee-Keeping Sikkim Source: KVIC, Government of India. July - August, socio - economic voices

4 5.2 Khadi Industries The list of Khadi s exists in India is given in Table 2. Table 2: List of Khadi s in India Sr Name Industry State/ Office products No. 1 DimapurKhadi Cotton Nagaland EriChadar; Eri scarf, Readymade Garments, Eri Than, Silk Shirting 2 MukulmuaKhadi Silk Assam Silk Saree, Silk Shirting, Eri, Muga&Mulberry Silk etc. 3 SrtKhadi Cotton Maharashtra Dari, Bed sheet, Muslin Shirting, National Flag Cloths, Poly Shirting etc. 4 SurendranagarKhadi Cotton Gujarat Shirting, Coating, Dress Material, Dari,kurta, Towel, Napkin, Denim, Chaddar,Bedsheet etc. 5 NawadaKhadi Cotton Bihar Woollen Product (Sweater, Muffler, Blanket),Mataka, Katiya, Tasar, endi, Muslin, Khes,Dari etc. 6 PalamauKhadi Woollen Jharkhand Blanket 7 MaldaKhadi Silk West Bengal Silk dress materials (Gents, ladies and kids), Saris (printed, Jacquard, embroidery), Muslin Khadi, Readymade Garments, etc. 8 BelurKhadi Cotton Karnataka National Flag, Shirting, Polyvastra Shirting & Coating, Dress Material, College Uniform etc. 9 HebballiKhadi Cotton Karnataka National Flag, Shirting, Polyvastra Shirting & Coating, Dress Material, College Uniform etc.cotton, Silk Shirting, Dhotis, Bedsheets,Lungies etc. 10 SulurKhadi Cotton Tamil Nadu Cotton, Silk Shirting, Dhoties, Bedsheets,Lungies etc. 11 Coimbatore Khadi Cotton Tamil Nadu Cotton Khadi Shirting, Dhotis, Towels and Bed sheet, Silk Sarees, Shirting, Embroidery Silk Sarees and Printed Silk Sarees, Polyvastra Shirting and Dhotis etc. 12 KaraikudiKhadi Cotton Tamil Nadu Puliyangudi Cotton Lungies, Handkerchief, Jacquard Bed sheets, Printed and Woven Design Shirting etc. 13 SircillaKhadi Cotton Andhra Pradesh Shirting, Towels, Bed Sheet, Coating, Carpets, Mosquitoes nets etc. 14 SrikakulamKhadi Cotton Andhra Pradesh Dhoti, Muslin, Sarees, Lungies, Towels, Hankies etc. 15 Thalappally Cotton Khadi Cotton Kerala Dhotis, SheethalKhadi Branded Shirts, Cotton Mats, Lady garments 16 Thiruvananthapuram Khadi Cotton Kerala Muslin Shirting, Kuppadamdhothy, Khadi Branded Shirts, Fine Cotton Shirts. 17 PondicherryKhadi Cotton Tamil Nadu Readymade Shirts, Suites,mattress, Pillow, Bed cover etc. 18 Amritsar WoollenKhadi Woollen Punjab Shawl, Chader, Tweeds, Blankets, Namda, gubba, shirting 19 BandiporaWoollenKhadi Woollen Jammu Kashmir Shawls, Sweaters, Caps, Bandies, Coats, Trousers, Tweeds (Shirting & Coating) etc. 20 BassiKhadi Cotton Rajasthan Cotton, Polyvastra, Khes, Dari, Towel etc. 21 GuduraWoollenKhadi Woollen Jammu Kashmir Tweeds (Coating & Shirting), Shawls, Chadder, Hosiery Goods, Pullovers, Bundies, Mufflar, July - August, socio - economic voices

5 22 Kurukshetra Cotton Khadi 23 Gorakhpur Khadi Cotton Uttar Pradesh Socks, Caps & Pashmina Goods. Cotton Haryana Shirting, Duster, Cloth, Towel, Traditional Embroidery, Ladies Suits, Readymade Garments, Bed Sheets, RajaiAbhra, Dari etc. Woollen product- (Sweater, Muffler, Blanket) Silk-(Mataka, Katiya, Tasar, Endi), Muslin, Khes, Dari etc. 24 HaldwaniKhadi Cotton Uttaranchal Shirting, duster, khes, Woollen shawl, Tweed, jacket, Readymade shirts, Khadi bags etc. 25 Rae BareliKhadi Cotton Uttar Cotton &Polyvastra Pradesh 26 TikarmafiWoollenKhadi Woollen Uttar Readymade garment Pradesh 27 SitapurKhadi Cotton Uttar Pradesh Bed sheet, Pillow Cover, Readymade Shirt, Kurta, Ladies Tops etc. 28 SRT Khadi Cotton Maharashtra Dari, Bed sheet, Muslin Shirting, National Flag Cloths, Poly Shirting etc. 5.3 CORRELATION COEFFICIENCY ANALYSIS The correlation coefficient Analysis is given in the table 3. Variables No. of Artisans benefited Production in Rs. lakhs Annual Sales in Rs. lakhs Enhanced Wages for Spinner Enhanced Wages for Weaver Source: Computed Data No. of Artisans benefited Table 3: Correlation Coefficient Analysis Production in Rs. lakhs Annual Sales in Rs. lakhs Enhanced Wages for Spinner Enhanced Wages for Weaver There is high degree of relationship exists between Production and Annual Sales. 5.4 Technical Efficiency of Khadi s Data Structure The No. of Artisans Benefited and Production is taken as inputs and Annual Sales, Enhanced Wages for Spinner and Weaver is taken as outputs corresponding to 28 DMUs (s). July - August, socio - economic voices

6 5.4.2 Data Envelopment Analysis- Banker, Charnes and Cooper Model (BCC Model) Input Oriented BCC Model (BCC-I) Min Z 0 = θ ε 1 S + - ε 1 S - θ, λ, S +, S - Subject to Y λ - S + = Y 0 θx 0 - X λ -S - = 0 1 λ 1 λ, S +,S Model Description The Scalar variable θ appears in the primal problem, is the reduction applied to all inputs of DMUs to improve efficiency. This reduction is applied simultaneously to all inputs and results in a radial movement toward the envelopment surface. The presence of non-archimedean (Infinitesimal constant) ε in the primal objective function effectively allows the minimization overθ to preempt the optimization involving the slacks. Thus, the optimization can be computed in a two-stage process with i) maximal reduction of inputs being achieved first via θ ii) Here, the constraint A DMU is efficient if and only if a) θ = 1, then in the second stage movement on to the efficient frontier is achieved via the positive input and output slack variables (S -,S + ) 1 λ 1 is known as convexity constraints, which will admit variable return to scale (VRS). The above discussion leads to form the following statement. b) All slacks are zero. S - = 0 and S + = Computing Methodology Initially we consider Dimapur Khadi, as the studied DMU and the LP Model is formulated as given below Min θ 0 July - August, socio - economic voices

7 Subject to 98.12λ λ λ Output Constraints 3.00λ λ λ Output Constraints 1.5λ λ λ Output Constraints 326 θ λ 1-718λ λ 28 0 Input Constraints θ λ 1-203λ λ 28 0 Input Constraints λ 1 +λ 2 + λ 28 =1. λ 1, λ 2, λ 28 0, θ 0 is unrestricted. By solving the above and continuously changing the studied DMUs we get the values we get the value of λ i s and θ i s for each DMU Efficiency Scores The value of θi s being the efficiency scores of the s are given in the Table 4 and in the Figure 1. July - August, socio - economic voices

8 Sl.N o s in India Table 4: Efficiency Scores of the Khadi s in India No. of Productio Annual Enhanced Enhanced Artisans n in Sales in Wages for Wages for benefited Rs.lakhs Rs.lakh Spinner Weaver s (%) (%) 1 DimapurKhadi MukulmuaKhadi SrtKhadi Surendranagar Khadi NawadaKhadi PalamauKhadi MaldaKhadi BelurKhadi HebballiKhadi SulurKhadi Coimbatore Khadi KaraikudiKhadi SircillaKhadi SrikakulamKhadi Thalappally Cotton Khadi Thiruvananthapuram Khadi PondicherryKhadi Amritsar WoollenKhadi BandiporaWoollenKhadi BassiKhadi GuduraWoollenKhadi Kurukshetra Cotton Khadi Gorakhpur Khadi HaldwaniKhadi Rae BareliKhadi TikarmafiWoollenKhadi SitapurKhadi SRT Khadi Source: KVIC and Computed Data As per table 4 and figure 1, nearly 12 clusters have θi = 1 and rank=1 and they are highly efficient. The efficiencies and ranks of other clusters θ < 1 are also given. They have to perform well to attain 100% efficiency and rank 1. Scor e θi s Rank The overall efficiency of the Khadi s in India is 0.82 which is much satisfactory. It needs only 18% to attain 100% efficiency. July - August, socio - economic voices

9 Frequency of highly efficient cluster is given in the Table 4. Table 4: Frequency in Reference Set Peer set Frequency to other DMUs Source: Computed data DimapurKhadi 9 SrtKhadi 0 PalamauKhadi 13 KaraikudiKhadi 2 Amritsar Woolen Khadi 6 Gorakhpur Khadi 3 HaldwaniKhadi 5 Palamau Khadi is referred by other clusters around 13 times so it gets rank 1 highly efficiency among other 12 clusters. Next Dimapur Khadi is referred around 9 times and it has got rank 2 and Amritsar Woolen Khadi has got rank 3 as it is referred around 6 times by other clusters Input and Output Slacks of Khadi s in India The Input and Output Slacks of Khadi s is given in the table 5. Table 5: Input and Output Slacks of Khadi s in India No. DMU Score No. of Artisans benefited Excess Excess Shortage Shortage Shortage Product ion in Rs.lakh s Annual Sales in Rs.lakhs Enchanced Wages for Spinner Enhanced Wages for Weaver S-(1) S-(2) S+(1) S+(2) S+(3) 1 DimapurKhadi MukulmuaKhadi SrtKhadi SurendranagarKhadi NawadaKhadi PalamauKhadi MaldaKhadi BelurKhadi HebballiKhadi July - August, socio - economic voices

10 10 SulurKhadi Coimbatore Khadi KaraikudiKhadi SircillaKhadi SrikakulamKhadi Thalappally Cotton Khadi Thiruvananthapuram Khadi PondicherryKhadi Amritsar Woolen Khadi Bandipora Woolen Khadi BassiKhadi Gudura Woolen Khadi Kurukshetra Cotton Khadi Gorakhpur Khadi HaldwaniKhadi Rae BareliKhadi Tikarmafi Woolen Khadi SitapurKhadi SRT Khadi Source: Computed Data 12 s, are efficient by having θ = 1, S - = 0 and S + = 0. The remaining 16 clustersneed improvement by increase in annual Sales. The S > 0 obtained for other 16 clusters reveals the excess Production in Rs.lakhs (S - ) in the s or shortage in annual sales (S + ) Variable Return to Scale of Khadi s For a long time DEA models were based on Constant Returns to Scale (CRS) and it has been criticized as a limiting factor for the application of DEA. Many economists viewed CRS assumption as over restrictive and preferred alternative methodologies. Banker et al (1984) for the first time introduced the VRS in DEA models through convexity constraints and thereafter remarkable change has led to make changes in CCR DEA models. Variable Return to Scale of s is given in table 6. July - August, socio - economic voices

11 Table 6: Variable Return to Scale of Khadi s in India No. DMU Score RTS RTS of Projected DMU 1 DimapurKhadi 1.00 Constant 2 MukulmuaKhadi 1.00 Decreasing 3 SrtKhadi 1.00 Decreasing 4 SurendranagarKhadi 1.00 Decreasing 5 NawadaKhadi 0.80 Decreasing 6 PalamauKhadi 1.00 Constant 7 MaldaKhadi 1.00 Constant 8 BelurKhadi 0.55 Constant 9 HebballiKhadi 0.44 Constant 10 SulurKhadi 0.57 Constant 11 Coimbatore Khadi 0.84 Increasing 12 KaraikudiKhadi 1.00 Increasing 13 SircillaKhadi 0.95 Constant 14 SrikakulamKhadi 0.90 Constant 15 Thalappally Cotton Khadi 1.00 Decreasing 16 Thiruvananthapuram Khadi 0.79 Increasing 17 PondicherryKhadi 0.61 Constant 18 Amritsar Woolen Khadi 1.00 Constant 19 Bandipora Woolen Khadi 0.48 Constant 20 BassiKhadi 0.67 Constant 21 Gudura Woolen Khadi 0.43 Constant 22 Kurukshetra Cotton Khadi 0.57 Constant 23 Gorakhpur Khadi 1.00 Constant 24 HaldwaniKhadi 1.00 Constant 25 Rae BareliKhadi 0.93 Increasing 26 Tikarmafi Woolen Khadi 0.68 Constant 27 SitapurKhadi 0.76 Constant 28 SRT Khadi 1.00 Decreasing Source: Computed Data July - August, socio - economic voices

12 Table 7: Overall RTS of Khadi s RTS Efficient Projected Total No. of IRS No. of CRS No. of DRS Total Source: Computed Data From table 6 and 7 it is proud to say that the RTS of 4 s are increasing RTS. For other 18 s it is constant RTS and 6 s are decreasing RTS needs improvement. 6. Findings and Conclusions The Funds given under the Scheme of Fund for Regeneration of traditional Industries (SFURTI) for development of clusters in Khadi and Village industries is successful one and many Common Facility Centres (CFCs) were created with the help of highly reputed technical agency. Interventions are carried out in Design product Development of Khadi and Village Industries. Market Promotional Assistance was taken place. Capacity Building Measures like exposure visit to other successful cluster and need based training within the clusters (skill development, Self Help Credit & others) were also conducted. Many Self Help Group were formed, registered and tied up with Bank to get credit. There is also achievement in the s for example The DimapurKhadi, MukulmuaKhadi, Malda Khadi, Sircilla Khadi and Amritsar Woolen Khadi has got ISO: The Thiruvananthapuram Khadi has exported some of the products. There is enhanced wages for Spinner, Weaver and Artisans after Development Approach. The Social Security Coverage of Artisans is increased by way of artisan Insurance scheme, Health Insurance Card, educational assistance, and many of them are covered under jan Shree Bima Yojana (JSBY) & they are issued passbook. The achievement is also by Improved Packaging and Branding of products. To conclude, for inclusive growth and sustainable development, the inefficient Khadi clusters should increase their Production or Sales. Moreover the Khadi s should strengthen infrastructure interrelationships, technology interrelationships, procurement interrelationships, production interrelationships and marketing interrelationships and should make use of the benefits announced by Government of India under SFRUTI. The soft and hard intervention on Development Programme of Government of India will help Khadi and Village Industries s in India to increase their productivity and efficiency. July - August, socio - economic voices

13 References 1. Annual Report ( ) of Ministry of Micro, Small and Medium Enterprises, New Delhi. 2. Annual Report ( ) of KVIC, Mumbai. 3. Website of KVIC, Mumbai Website of SFRUTI, Government of India. 5. William W.Cooper, Lawrence M.Seiford and Kaoru Tone, Data Envelopment Analysis, Kluwer Academic Publishers, Boston / Dordrecht / London. July - August, socio - economic voices