Choice of Firms’ Location: Insights from Industrial Growth Centre Lassipora

 

 

 

 

Ajaz Ahmad Ganaie

Research Scholar

Punjab School of Economics, Guru Nanak Dev University, Amritsar

Email: ajazganaie430@gmail.com

 

Dr Anjali Mehra

 Assistant Professor

School of Social Sciences, Guru Nanak Dev University, Amritsar

Email: anjalieco@gmail.com

 

Jinny Sharma

Research Scholar

Punjab School of Economics, Guru Nanak Dev University, Amritsar

Email: jsharma_8919@yahoo.com

 

Choice of Firms’ Location: Insights from Industrial Growth Centre Lassipora

 

Abstract

Where to locate is one of the most important decisions that an entrepreneur faces during his entrepreneurial activities. It is one of the major influences for nascent entrepreneurs, as the benefit of concentration affects the profitability of new ventures. The present study focuses on the factors which encouraged entrepreneurs towards Industrial Growth Centre Lassipora. For this primary data were taken. Primary data was collected from 180 entrepreneurs who set up their business at Industrial Growth Centre lassipora through a well-structured questionnaire. The results showed that through Henry Garrett ranking technique entrepreneurs choose availability of infrastructure as a major factor which encouraged the entrepreneurs towards Industrial Growth Centre Lassipora followed by concentration of units, assured and cheap electricity, availability of manpower, availability of raw material, availability of incentives and subsidies from government, native place, transportation facilities, single-window clearance system, nearness to the market, telecommunication, banking and postal services and miscellaneous factors.

Key Words: Industrial Growth Centre, Lassipora, Location, Henry Garrett Ranking

JEL Codes: L9, L26, M13, R58

 

Introduction

The spatial locale of industries has consistently intrigued policymakers worldwide. In the present conditions, location is one of the critical issues which impact the efficiency of a firm. It is one of the major influences for nascent entrepreneurs, as the benefits of concentration affect the profitability of new ventures. There are numerous elements which impact location, like availability and accessibility of infrastructure facilities, like assured power, improve good transport, skilled manpower, technology, nearness to the market, easy provision of capital, government policy, provisions and schemes. The Industrial Growth Centre (hereafter abbreviated as IGC) scheme was announced by the government of India in 1988, for encouraging industrialization of backward regions of the country. An Industrial Growth Centre is an independent geographical region, which has top-notch infrastructure facilities and which houses business of industrial nature. IGC with well-developed road network, huge parcels of land, continuous power supply and it is proximately to various related ventures makes it very attractive for new firms to set up their units.  IGCs are explicit regions zoned for industrial activity in which infrastructure facilities and services are provided by the government but factory accommodation is constructed by entrepreneurs by himself or her.

The union territory of Jammu and Kashmir (earlier the state of Jammu and Kashmir) was allotted two   IGCs of which one is located at Lassipora in the district of Pulwama which has around 230plus units. The present study is an attempt to explore the factors which encouraged entrepreneurs in setting up their units at Lassipora. It has been divided into five sections including the present one. Section II while explains the IGC Scheme. Section III profiles IGC Lassipora, Section IV is devoted to highlighting the pertinent reasons which attracted entrepreneurs to IGC Lassipora and section V concludes and provides policy implications.

Methodology

          For the achievement of objectives primary as well as secondary data have been used for the study. Primary data has been collected through a well-structured questionnaire from 180 units operating in IGC Lassipora and secondary data from District Industries Centre (DIC) Pulwama, Department for Promotion of Industries and Internal Trade (DPIIT) Ministry of Commerce & Industry, Government of India. In order to highlight the factors which encouraged entrepreneurs in setting up the units at IGC Lassipora Garret Ranking Technique were used.

 Results and Discussions

Section II:  Industrial Growth Centre Scheme

The Government of India announced the IGC scheme in June 1988 with the following objectives

Ø  To promote the industrialization of backward areas in the country.

Ø  To minimize regional imbalances.

Ø  To develop entrepreneurs within the states

Ø  To give infrastructure facilities to the entrepreneurs and promote industrial growth.

The Scheme is Centrally sponsored, working under the aegis of Department for Promotion of Industries and Internal Trade (DPIIT) Ministry of Commerce and Industry.  Under the Scheme, each Growth Centre is given funding of Rs 30 crore of which the Union government contributes 33.33 percent i.e.  Rs 10 crore, and the 10 crores are contributed through market borrowings while 5 crores (16.66 percent) each is a contribution of financial institutions /banks and respective state governments.

Table: 1 Funding Pattern of Industrial Growth centre

Components	Funding amount	Percentage
Central Government	10 crore	33%
Market Borrowings	10 crore	33%
Financial Institutions/Banks	5 crore	17%
State Government	5 crore	17%
Total	30 crore	100%

Source: Development Commissioner (MSME)Ministry of Micro, Small and Medium Enterprises, Govt. of India

 

Each growth centre is provided with best infrastructure facilities like water, electricity, telecommunication, sufficient land, proximity to the railway station or national or state highways or ports. Though both the IGC scheme and Industrial Estate Programme seem to be similar there is an underlying major difference. IGC is one where the infrastructure facilities and services are provided by the government, but factory accommodation is constructed by entrepreneurs. In an Industrial estate, both infrastructural facilities and factory accommodation are provided by the sponsoring authority. In 1988, initially, 68 IGC were set up all over the years the number has gone up to seventy-one, with maximum being allotted to UttarPradesh (7), followed by Bihar(5), Maharashtra(5), Rajasthan(5), Madhya Pradesh(5), Andra Pradesh(3), Assam(3),Gujarat(3), Karnataka(3). The earlier state of Jammu and Kashmir was allotted two IGCs one at Lassipora in Pulwama district and another at Samba in Jammu division.

Table: 2State-Wise Distributions of Industrial Growth Centres (2018)

States /Union Territory	No of IGCs	States /Territory	No of IGCs
Andra  Pradesh	3	Manipur	1
Arunachal Pradesh	1	Meghalaya	1
Assam	3	Mizoram	1
Bihar	5	Nagaland	1
Chhattisgarh	2	Odisha	4
Goa	1	Pondicherry	1
Gujarat	3	Punjab	2
Haryana	2	Rajasthan	5
Himachal Pradesh	1	Sikkim	1
Jammu and Kashmir	2	Tamil Nadu	3
Jharkhand	1	Telangana	1
Karnataka	3	Tripura	1
Kerala	2	Uttar Pradesh	7
Madhya Pradesh	4	Uttarakhand	1
Maharashtra	5	West Bengal	3
Total	38	Total	33

Source: Department for Promotion of Industries and Internal Trade (DPIIT), Ministry of Commerce & Industry, Government of India

 

Section III Industrial Growth Centre Lassipora

 

The erstwhile state of Jammu and Kashmir was allotted two IGCs one at Lassipora and another one at Samba.

Table: 3 Snapshot of Industrial Growth Centre Lassipora

Establishment (Year)	1988
Total Land acquired	774.12(Acres)
Functional Units	209
Closed Units	21
Under Execution Units	286
Total No of Units	516

Source: District Industries Centre, Pulwama

 

Table 3 gives a snapshot of the IGC Lassipora. Established up at 1988, IGC Lassipora is located in an area of 774.12 acres which was procured from the six neighbouring villages of Pulwama and Shopian districts namely Armulla, Gund Achan, Nowpora Balla, Pettipora, Tantray pora and Turke Wangam. The procured land comprised of proprietorship as well as pasture land. 516 units have been commissioned at IGC Lassipora of which 209 are operational, 286 are under execution at various stages and 21 units have shut down over the time period.

Three different approaches have been applied for classification of the units set up at IGC Lassipora like classification in terms of specialization, classification in terms of National Industrial Classification 2008 and classification in terms of Investment pattern. The classification in term of specialization of the firms  can be classified into three categories of which the maximum number of units 194 (84 percent) are involved in manufacturing of final products; twenty-three units (10 percent) are involved in manufacturing of semi-finished products and another thirteen units (6 percent) are service providers they are providing services like packing, sorting/grading, ripeness, storage of fruits as well as assessing the internal and external quality of fruits

 

Table: 4 Classification of Units at IGC Lassipora according to specialization

Specialization	No of Units
Manufacture of Final Product	194(84)
Manufacture of Semi-Finished Product	23(10)
Service  Provider Units	13(6)
Total	230(100)

Source: District Industries Centre, Pulwama

 

 

 

Table 5: Classification of Units at IGC Lassipora according to National Industrial Classification (NIC) 2008

Section	Division	No. of Units	Group	No of Units	Class	No of Units	Sub Class	No of Units
C:Manufacturing	10:Manufacture of Food Products	39 (16.95)	101	02	1010	02	10104	02
			103	17	1030	17	10302	02
							10304	06
							10309	09
			104	03	1040	03	10409	03
			105	05	1050	05	10501	05
			106	03	1061	03	10611	03
			107	05	1071	02	10711	02
					1079	03	10795	03
			108	04	1080	04	10801	02
							10802	02
C:Manufacturing	11:Manufacture of  Beverages	02 (0.86)	110	02	1104	02	11041	01
							11043	01
C:Manufacturing	13: Manufacture of Textiles	12 (5.21)	131	04	1312	04	13122	01
							13123	03
			139	08	1392	06	13924	06
					1393	02	13939	02
C:Manufacturing	14: Manufacture of Wearing Apparel	01 (0.43)	141	01	1410	01	14101	01
C:Manufacturing	15:Manufacture of Leather and Related Products	05 (2.17)	151	05	1511	04	15112	04
					1512	01	15121	01
C:Manufacturing	16: Manufacture of Wood and of Products of Wood and Cork, Except Furniture; Manufacture of Articles of Straw and Plaiting Materials	20 (8.69)	161	10	1610	10	16109	10
			162	10	1621	10	16211	10
C:Manufacturing	17: Manufacture of Paper and Paper Products	27 (11.73)	170	27	1702	22	17022	21
							17023	01
					1709	05	17092	01
							17099	04
C:Manufacturing	20: Manufacture of Chemicals and Chemical Products	05 (2.17)	201	01	2011	01	20111	01
			202	04	2021	01	20211	01
					2023	02	20231	02
					2029	01	20293	01
C:Manufacturing	21:Manufacture of Pharmaceuticals, Medicinal Chemical and Botanical Products	04 (1.73)	210	04	2100	04	21001	03
							21006	01
C:Manufacturing	22: Manufacture of Rubber and Plastic Products	26 (11.30)	222	26	2220	26	22201	10
							22203	03
							22208	12
							22209	01
C:Manufacturing	23: Manufacture of Other Non- Metallic Mineral Products	30 (13.04)	239	30	2394	03	23949	03
					2395	26	23952	22
							23954	04
					2396	01	23960	01
C:Manufacturing	24: Manufacture of Basic Metals	08 (3.47)	241	04	2410	04	24107	01
							24109	03
			242	03	2420	03	24201	02
							24202	01
			243	01	2431	01	24311	01
C:Manufacturing	25: Manufacture of Fabricated Metal Products, Except Machinery and Equipment	24 (10.43)	251	23	2511	23	25111	16
							25112	04
							25119	03
			259	01	2599	01	25991	01
C:Manufacturing	27: Manufacture of Electric Equipment	07 (3.04)	271	05	2710	05	27102	05
			273	01	2732	01	27320	01
			275	01	2750	01	27504	01
C:Manufacturing	31:Manafacture of Furniture	04 (1.73)	310	04	3100	04	31001	04
Section E: Water Supply; Sewerage; Waste Management and Remediation Activities	38:Waste Collection, Treatment and Disposal Activities; Materials Recovery	03 (1.30)	381	03	3811	02	38110	02
					3812	01	38120	01
Section H: Transport and Storage	52:Warehousing and Support Activities for Transportation	13 (5.65)	521	13	5210	13	52101	13
Total		230 (100)		230		230		230

Source: NIC 2008, Central Statistical Organization, Ministry of Statistics and Programme Implementation Government of India, New Delhi

 

Table 5, attempts to classify the 230 firms on the basis of National Industrial Classification (NIC) 2008. Under this classification the line of activity of the units has been divided into three sections namely Section C (Manufacturing), Section E: (Water Supply; Sewerage; Waste Management and Remediation Activities) and Section H: (Transport and Storage). It was observed that the maximum number of 214 units (94.5 percent) belong to section C (Manufacturing). Out of the214units, thirty-nine were manufacturers of food products like processing and preserving of fruits and vegetables, dairy products, grain mill products, bakery products and manufacture of prepared animal feeds. Twelve were the manufacture of textiles like the weaving of silk and silk mixture fabrics, wool and wool mixture fabrics, finishing of wool and blended wool textiles, other floor covering n.e.c, bedding, quilts pillows, sleeping bags etc. Five were the manufacture of leather and related products, like tanning and dressing of leather; and dyeing of fur. Twenty were the manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials, like sawmilling and planing of wood, plywood and veneer sheets and other plywood products n.e.c. Twenty-seven were of manufacture of paper and paper products like corrugated paper board containers, cardboard boxes, paper cups, saucers, plates and other paper products n.e.c. Twenty-six were the manufacture of rubber and plastic products like semi-finished of plastic products, plastic articles for the packing of goods and polymer/synthetic/PVC water storage tanks. Thirty were the manufacture of other non- metallic mineral products like articles of concrete, cement or artificial stone (tiles, bricks etc) and R.C.C. bricks and blocks. Twenty-four were the manufacturer of fabricated metal products, except machinery and equipment, products like doors, windows and their frames, shutters, and rolling shutters, gates and similar articles used on buildings. Under section E (Water supply, sewerage, waste management and remedial activities)it was observed that only three units were engaged in the collection of non- hazardous waste, treatment and disposal of non – hazardous waste. It was observed that undersection H (warehousing and support activities for transportation) thirteen units were engaged in warehousing of refrigerated (cold storage). In addition to this, there are around 286 firms which are at different stages in the processing of setting up.

Table: 6 Investment Wise classification of units at IGC Lassipora

Year	Size	Units	Employment	Total Investment	Year	Size	Units	Employment	Total Investment
1993 To 2005	Micro	02	20	92.03	2012	Micro	08	89	180.92
	Small	01	15	46.94		Small	02	15	172
	Medium	-	-	-		Medium	-	-	-
	Large	-	-	-		Large	01	95	3718
2006	Micro	05	41	85.77	2013	Micro	12	146	285.92
	Small	-	-	-		Small	09	127	2244.41
	Medium	-	-	-		Medium	-	-	-
	Large	-	-	-		Large	-	-	-
2007	Micro	05	59	75.18	2014	Micro	10	90	303.54
	Small	-	-	-		Small	18	259	3744.25
	Medium	01	20	168		Medium	-	-	-
	Large	-	-	-		Large	01	15	2653
2008	Micro	05	77	140.91	2015	Micro	18	155	443.76
	Small	01	31	186.77		Small	16	189	2066.3
	Medium	01	14	300		Medium	-	-	-
	Large	-	-	-		Large	05	210	15214
2009	Micro	03	24	96	2016	Micro	10	53	321.96
	Small	07	84	903.9		Small	18	173	1801.31
	Medium	-	-	-		Medium	-	-	-
	Large	-	-	-		Large	02	62	8934
2010	Micro	02	25	71	2017	Micro	29	344	917.69
	Small	03	40	399		Small	21	262	2237.24
	Medium	-	-	-		Medium	-	-	-
	Large	-	-	-		Large	03	93	6957
2011	Micro	08	59	156.5	Total	Micro	117 (51)	1182 (40)	3171.18 (6)
	Small	03	90	1577.42		Small	99 (43)	1285 (43)	15379.54(27)
	Medium	-	-	-		Medium	02 (1)	34 (1)	468 (1)
	Large	-	-	-		Large	12 (5)	475 (16)	37476 (66)
Grand Total							230	2976	56494.72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: District Industries Centre Pulwama, Jammu and Kashmir

Note: Units in Numbers, Employment in Numbers and Investment in Lakhs

 

Table 6gives the chronological setting up of firms classified according to fixed investment in micro, small, medium and large units as per the (MSME Act 2006).  Since the year 1993, most of the units set up either in micro or small scale.  Though Lassipora was allotted IGC in 1988, the first unit was set up in 1993which is engaged in the tanning of leather with an investment of Rs 46.94 lakhs and providing employment to fifteen workers. From 1993 to 2005 there were only three units setup at IGC Lassipora providing employment to thirty-five workers with an investment of Rs 138.97 lakhs. From 2006 to 2010 there was a gradual increase in the number of units. In the year 2010, there was a decline in the pace of setting up as only five units were set up with an investment of Rs 470. This may be due to the agitation in the Kashmir valley in 2010 in which 120 protestors killed by security forces (Bukhari, 2010).From 2011 to 2015 the number of units increases from five to 111 with the employment of 1,539 workers and investment of Rs 32,760.02 lakhs. In the year 2016, there was again decline due to the volatile environment. This was the year when Burhan Wani was shot by security personnel resulting in total closure of Kashmir valley for 100 days. This adversely affects the investment climate (Yaseen, 2016).

Post-2016,with gradual improvement in the number of units being set up again, increases from thirty units in 2016 to fifty-three units in 2017 with an employment of 288 to 699 workers and investment of Rs 11,057.27 lakhs to Rs 72.731.93 lakhs.At, present we have 230 units registered in IGC Lassipora out of these 230 units 117 are in micro scale with an employment of 1182 workers and investment of Rs 3171.18 lakhs, ninety-nine are in small scale with an employment of 1285 workers and investment of Rs 15379.54 lakhs, two are in medium-scale with an employment of thirty-four workers and investment of Rs 468 lakhs and twelve units are in large scale with an employment of 475 workers and investment of Rs 37476 lakhs.

 

Section III Factors Affecting the Decision of Entrepreneurs to Locate at IGC Lassipora

 

In order to pinpoint the factors which attracted entrepreneurs to Lassipora a well-structured questionnaire was prepared and administrate to all the entrepreneurs having units there. The survey was carried during the months of January and February 2018.It was observed that 209 which were operational and twenty-one units were found to be locked and other twenty-nine units were those from where the response was not forthcoming. Thus only 180 entrepreneurs agreed and thus the questionnaire was administrated to them and the data was collected and tabulated. Garrett Ranking technique was applied to rank the factors which attracted the entrepreneurs in the following manner. The respondents were asked to rank twelve major factors. These ranks were then changed into score values using the following formulae.

Percent position = 100(Rij-0.50) Nj

where

Rij = Rank given for the ith variable by the jth respondent

 Nj = Number of variable ranked by the jth respondent

The percent positions assessed were then changed to scores with the help of Garrett table. For each factor, the scores of individual were added and then total value and mean value of scores was calculated. From it, the factor having the highest mean score was considered the most important factor. The results of Garrett ranking are given in Table no 7, 8and 9.

 

 Table 7: Percent Position and Garrett Value

S. No	100(Rij – 0.5) Nj	Calculated Value	Garrett  Value	S. No	100(Rij – 0.5) Nj	Calculated Value	Garrett Value
1	100(1 - 0.5)/ 12	4.16	84	7	100(7 – 0.5)/ 12	54.16	48
2	100(2 – 0.5)/ 12	12.5	73	8	100(8 – 0.5)/ 12	62.5	44
3	100(3 – 0.5)/ 12	20.83	67	9	100(9 – 0.5)/ 12	70.83	40
4	100(4 – 0.5)/ 12	29.16	61	10	100(10 – 0.5)/ 12	79.16	34
5	100(5 – 0.5)/ 12	37.5	57	11	100(10 – 0.5) /12	87.5	28
6	100(6 – 0.5)/ 12	45.83	53	12	100(10 -0.5) / 12	95.83	17

 

 

 

Table: 8 Ranking of Factors by Entrepreneurs at IGC Lassipora

S. No	Factors	Rank rendered by the respondents
		I	II	III	IV	V	VI	VII	VIII	IX	X	XI	XII	Total
F1	Availability of Infrastructure	16	31	26	21	12	20	2	6	11	12	15	8	180
F2	Availability of Raw Material	19	13	17	18	19	8	12	16	16	22	14	6	180
F3	Availability of Manpower	24	18	19	18	19	9	10	9	10	9	12	23	180
F4	Availability of Incentives and Subsidies from Government	17	21	16	17	9	12	15	10	18	10	20	15	180
F5	Cheap and Assured Electricity	26	24	15	30	7	11	3	2	20	15	17	10	180
F6	Concentration of  Units	15	19	13	17	10	16	15	12	12	20	15	16	180
F7	Nearness to the  Market	18	11	9	15	16	6	21	17	11	10	25	21	180
F8	Native Place	14	13	14	10	13	25	14	21	17	14	16	9	180
F9	Single Window Clearance System	3	9	10	8	25	24	34	19	17	26	2	3	180
F10	Transportation Facilities	15	14	26	10	15	30	10	16	25	16	2	1	180
F11	Telecommunication ,Banking and Postal Services	8	4	9	9	21	10	25	23	13	12	15	31	180
F12	Miscellaneous Factors	5	3	6	7	14	9	19	29	10	14	27	37	180

Source: Based on Field Survey

 

Table: 8 Calculations of Garret Score and Ranking

S. No	Ranks		I	II	III	IV	V	VI	VII	VIII	IX	X	XI	XII	T.S	A.S	R
	Scale Score		84	73	67	61	57	53	48	44	40	34	28	17
F1	Availability of Infrastructure	f	16	31	26	21	12	20	2	6	11	12	15	8	10138	56.32	1
		fx	1344	2263	1742	1281	684	1060	96	264	440	408	420	136
F2	Availability of Raw Material	f	19	13	17	18	19	8	12	16	16	22	14	6	9451	52.51	5
		fx	1596	949	1139	1098	1083	424	576	704	640	748	392	102
F3	Availability of Manpower	f	24	18	19	18	19	9	10	9	10	9	12	23	9570	53.17	4
		fx	2016	1314	1273	1098	1083	477	480	396	400	306	336	391
F4	Availability of Incentives and Subsidies from Government	f	17	21	16	17	9	12	15	10	18	10	20	15	9254	51.41	6
		fx	1428	1533	1072	1037	513	636	720	440	720	340	560	255
F5	Cheap and Assured Electricity	f	26	24	15	30	7	11	3	2	20	15	17	10	9605	53.36	3
		fx	2184	1752	1005	1830	63	583	144	88	800	510	476	170
F6	Concentration of  Units	f	15	14	26	10	15	30	10	16	25	16	2	1	9880	54.89	2
		fx	1260	1022	1742	610	855	1590	480	704	1000	544	56	17
F7	Nearness to the  Market	f	18	11	9	15	16	6	21	17	11	10	25	21	8656	48.09	10
		fx	1512	803	603	915	912	318	1008	748	440	340	700	357
F8	Native Place	f	14	13	14	10	13	25	14	21	17	14	16	9	9092	50.51	7
		fx	1176	949	938	610	741	1325	672	924	680	476	448	153
F9	Single Window Clearance System	f	3	9	10	8	25	24	34	19	17	26	2	3	8903	49.46	9
		fx	252	657	670	488	1425	1272	1632	836	680	884	56	51
F10	Transportation Facilities	f	15	19	13	17	10	16	15	12	12	20	15	16	9073	50.41	8
		fx	1260	1387	871	1037	570	848	720	528	480	680	420	272
F11	Telecommunication ,Banking and Postal Services	f	8	4	9	9	21	10	25	23	13	12	15	31	8457	46.98	11
		fx	672	292	603	549	1197	530	1200	1012	520	408	420	527
F12	Miscellaneous Factors	f	5	3	6	7	14	9	19	29	10	14	27	37	7192	39.96	12
		fx	420	219	402	427	798	477	912	1276	400	476	756	629

Note:X= Scale Value, f= Number of Respondents, fx=Score, TS=Total Score, AS= Average Score and R= Rank