Executive Summary



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Executive Summary

Khadi and Village Industries Commission is a statutory body of Government of India, which has been identified as one of the major organisations in the decentralised sector for generating sustainable nonfarm employment opportunities in rural areas at a low per capita investment.

It undertakes activities like skill improvement; transfer of technology; research and development; marketing for a diverse range of handcrafted products which ultimately helps in generating employment opportunities in rural areas.

KVIC sells these products through 7050 retail stores, inclusive of 12 Department Sales Centre (DSC) owned directly by the organisation. All other stores are being owned by KVIC affiliated institutions.

This is an era of sustainability where everyone wants to do their part to sustain the natural resources for upcoming generation. Khadi India provides plethora of handcrafted products which are produced without throbbing the environment, along with being a socially responsible entity. Though at the retail front, the shopping environment offered by KVIC is not appealing the Indian consumers and is also confusing them with incongruent store names at different locations. Due to these reasons, KVIC has not been able to settle on a brand identity for Khadi India.

For handcrafted products, the consumers are not price conscious but discerning enough to zero down on a quality product that is comfortable, skin friendly, nature friendly and certainly attractive. Being a decentralised organisation, KVIC has not been able to provide a standardized product across all stores as the affiliated institutions are separate business units, which are operating with limited funds. Due to this, there is a lack of design elements and size specifications in Khadi apparels.

With such an extensive retail presence and a wide product mix, there is an extreme potential for KVIC to establish itself as a brand that can provide quality products and satisfy the needs of right target consumers.

Objectives

The major objective of this Reengineering business plan is to revitalize the current structure of KVIC and make it a profit earning organization which will offer value proposition in following areas:



  • Retail Makeover of 12 Department Sales Centre

  • Establishing Khadi India as a brand.

  • Instilling Brand Preference

  • Cost effectiveness achieved through Supply Chain and Distribution

  • Effective Sales training

  • Offering standardized products.

In the first year, 12 Department Sales Centres have been selected for revival on the basis of their ownership, location and sales performance. The other stores would be revitalized in the next three years on the basis of their institutions grading system.

Key Financials

The initial investment required for the business plan is Rs. 15,96,38,646. The total projected sales after implementation of the plan amounts to Rs. 58,38,89,500 and the projected net profit at the end of the first year comes out to be Rs. 1,02,47,263 after providing for all expenses. The breakeven point in sales amounts to Rs. 53,62,13,406 which is achieved in the first year itself.



Khadi & Village Industries Commission (KVIC) is a statutory body established under the Khadi and Village Industries Commission Act, 1956 (61 of 1956), underneath the protection of the Ministry of Micro, Small and Medium Enterprises. The organisation is engaged in promoting and developing Khadi and village industries for providing employment opportunities in the rural areas, thereby strengthening the rural economy.



(KVIC Annual Report, 2008-09)
2.1 Organisation Objectives

(KVIC Annual Report, 2008-09)


2.2 Organisation Functions


  • Planning, promotion, organisation and implementation of programs for the development of Khadi and other village industries in the rural areas in coordination with other agencies engaged in rural development.

  • Building up of a reserve of raw materials and implements for supply to producers, creation of common service facilities for processing of raw materials as semi-finished goods and provisions of facilities for marketing of KVI products apart from organisation of training of artisans engaged in these industries and encouragement of co-operative efforts amongst them.

  • Including the use of non-conventional energy and electric power with a view to increasing productivity, eliminating drudgery and otherwise enhancing their competitive capacity and arranging for dissemination of salient results obtained from such research.



  • Providing financial assistance to institutions and individuals for development and operation of Khadi and village industries and guiding them through supply of designs, prototypes and other technical information.

  • Undertake directly or through other agencies studies concerning the problems of Khadi and/or village industries besides research or establishing pilot projects for the development of Khadi and village industries.

  • Establish and maintain separate organisations for the purpose of carrying out any or all of the above matters besides carrying out any other matters incidental to its activities.

  • Undertakes research and development activities through in-house research and also by sponsoring projects to other R&D organisations. The main objectives of the R&D programme are achieving increase in productivity and wages of the workers, improvement in quality, efficient use of local skills and local raw materials, and reduction of human drudgery. In addition to Jamnalal Bajaj Central Research Institute (JBCRI) now renamed as Mahatma Gandhi Institute for Rural Industrialization (MGIRI), Wardha, KVIC undertakes R&D activities through Central Bee Research and Training Institute (CBRTI), Pune; Dr Ambedkar Institute of Rural Technology and Management (AIRTM), Nashik; Kumarappa National Handmade Paper Institute (KNHPI), Sanganer, Jaipur; Central Village Pottery Institute (CVPI), Khanapur, Karnataka; and Khadi Gramudyog Prayog Samiti (KGPS), Ahmedabad.

  • For quality control measures KVIC has made arrangements with the National Institute of Design (NID), Ahmedabad; ‘Dastakar’, Andhra Pradesh; IIT, Delhi; and Textiles Committee, Mumbai. The Memorandum of Understanding signed between KVIC and the Textiles Committee, a statutory body under the Ministry of Textiles facilitates 13 laboratories of the Committee situated throughout the country, which are being used for testing of Khadi and polyvastra. Under the arrangement, the quality of Khadi is expected to receive a fillip, thereby improving its marketability. A number of Khadi institutions have availed of benefits of this arrangement.

(KVIC Annual Report, 2008-09)

2.5 Retail Structure

The retail stores under KVIC is a venture of Micro, Small & medium Enterprises. Khadi institutions are mostly nongovernment organizations (NGO) formed either under the Societies Registration Act (1860), Charitable Trusts registered under Indian Trust Act, 1882, Section 25 of the Companies Act, 1956 or State Cooperative Societies Acts.

2.6 Production and Sales Performance
The KVI sector recorded an improved performance during 2008-09 in comparison to the previous year (2007-08). The total KVI production during 2008-2009 (provisional)

stood at Rs. 17,358.00 crore (Khadi – Rs 565.00 crore and VI – Rs. 16,793.00 crore)

as against Rs. 16,677.71 crore (Khadi – Rs 543.39 crore and VI – Rs. 16134.32 crore) during 2007-08, thus reflecting an increase of 4 %. Similarly, sales of KVI products also registered an increase to Rs. 21,006.00 crore (Khadi – Rs.855.00 crore and VI Rs. 20,151.00 crore) during 2008-09.

(KVIC Annual Report, 20008-09)



2.7 Khadi
Khadi is the single largest product of the KVI subsector. Within the KVI subsector, Khadi is considered to have the most potential for inclusive development due to its marked emphasis on gender, minorities, and other socioeconomically marginalized people, as well as community based processes. At the bottom of the pyramid of the Khadi process are the spinners, weavers, and other artisans, such as skilled embroiders collectively referred to as artisans, are employed or engaged by Khadi institutions.

KVIC has 1,252 affiliated Khadi institutions and KVIB has 700. These institutions are engaged in production which comprises hand spinning of cotton sliver, silk, and/of wool; hand reeling silk into yarn; handloom weaving yarn into fabric; processing for finishing; and garment making followed by retailing of Khadi products. A few Khadi institutions are integrated into the production of raw materials (sliver or threads) from cotton.


Top Khadi Producing States:

Rank

Cotton Khadi (% Share)

Wool Khadi (% Share)

Silk Khadi (% Share)

1

Uttar Pradesh (45.36)

Haryana (23.48)

West Bengal (31.48)

2

Tamil Nadu (8.59)

Uttar Pradesh (19.12)

Tamil Nadu (31.02)

3

Gujarat (6.74)

Rajasthan (18.46)

Karnataka (7.69)

4

Haryana (6.41)

Karnataka (10.20)

Gujarat (6.13)

(ADB Report, 2008)



2.7.1 Khadi Value Chain

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