WHAT IS AN ANCILLARY UNIT?

An industrial unit which is engaged or is proposed to be engaged in the manufacture or production of parts, components, sub- assemblies, tooling or intermediaries, or the rendering of services and the undertaking supplies or renders or proposes to supply or render not less than 5o percent of its production or services, as the case may be, to one or more other industrial takings and whose investment in fixed assets in plant and machinery whether held on ownership terms or on lease or on hire purchase, does not exceed Rs 75 lacs.

DEVELOPMENT OF ANCILLARY INDUSTRY IN INDIA

The programme of ancillarisation includes motivation of public and private sector units to offload production of components, parts, sub- assemblies, tools, intermediates, services etc to ancillary units. The programme of ancillary development has specific advantages for both for large as well as small industries and also for the total economy of the country. The large scale units have the advantages in the form of savings in investments, inventories, employment of labour, etc. and getting the items of the desired specifications, while the small scale units have the advantage of getting assured market for their products, availability of technical assistance and improved technology from the parent units. This programme also helps in overall economy of the country.

The strategy for ancillary development was originally outlined with the objective of:

1. Development of employment opportunities coupled with growth of entrepreneurship in different fields and different parts of the country.
2. Increase in productivity of the small scale units.
3. Growth of a low cost economy through reduction in costs brought by appropriate technology followed by ancillary units.
4. Development of a single or multi discipline expertise in different fields to bring about economies of scale.

FACTORS AFFECTING ANCILLARISATION

Recently there has been a growing trend towards ancillarisation due to the series of rapid developments that have been taken place in the industrial structure in the country.

• The size of operations of industrial units has increased enormously; with the result that they are compelled to sub- contract some of the items of production to ancillaries.
• It was more convenient for large scale manufactures to get the ancillary units to produce certain items for them. With the growing complexity of management, the large scale manufacturer can now concentrate on the problems of organization, marketing etc, rather than concentrating on availability of raw materials etc.
• Large scale manufacturers can economize on transport costs, storage space, etc, by contracting rather than by producing the same components themselves.
• It is economic to have some items manufactured by ancillary units because the cost of these items is higher when they are fabricated by large scale manufacturers.
• By outsourcing, large scale manufacturer is able to insulate him against fluctuations in the prices of raw materials over a period of time by entering into contracts for the supply of these items.

All these facts underscore the point that the development of ancillaries and their growing popularity have been well supported by economic and management considerations.