Page 45 - Banking Finance April 2022

ARTICLE

Labour: Due to the population of our country labour
availability is not a problem but when skilled or semi
skilled labour is required then one should ensure its
availability for setting of the unit. Besides its availability,
the prevailing labour wages and labour unrest is to be
studied before setting up of any industrial unit.

Raw Material: When the raw material is bulky and costly
for its transportation, the unit should be set up near to
its source and when the product is such that the quality
may deteriorate then unit should be near to the
market. The borrower should ensure the sources and
availability of raw material at the location in line with
overall cost in other areas to make the product more
competitive. Sometimes government restriction may be
there for the availability of the raw material, so the different by using the alternative raw materials and
borrower has to obtain the approval from the respective alternate processes. We have to study the manufacturing
government department. process proposed by the borrower along with any other
alternative method available for its feasibility. After studying
We have to study the business model of the borrower for the manufacturing process the proposed plant and
making the raw material availability in sufficient quantity machineries are need to be studied in line with the prices
and in competitive rates. Availability of raw material / of the various machineries, suppliers and manufacturing
consumable, lead time for procurement, present prices, and capacity. There should be balancing of the manufacturing
arrangement for raw material storage godowns etc. needs capacity at its manufacturing stage so that during
to be verified. manufacturing no machine remains idle.

Manufacturing Process/Technology: The method to be used The plant & machinery should be need based and all the
for production / manufacturing technology proposed by the machinery required to manufacture the product are to be
borrower needs to be studied thoroughly. It is easy to use included in the list of plant & machinery. The comparative
conventional method for manufacturing but at the sametime quotations are to be obtained to verify cost reasonableness.
technological advancement taken up to be studied so that The suppliers of machinery should be reputed and
manufacturing cost is reasonable and competitive. justification to be obtained from the borrower for selection
of machinery supplier and to be verified by Bank official from
Sometimes the customer has proposed new technology of similar units financed and market enquires.
manufacturing but when he is not sure about success in the
market then it is always risky to finance that industry. When the borrower has second hand machineries then
residual life certificate is to be obtained from the chartered
We also have to study the knowledge of the promoter or
the consultant appointed for setting up of that plant so that engineer along with the cost certificate of each machine.
at the later stage it may be possible that the plant is not
Government Approvals and Clearance: For setting up of a
successful at all due to some technical fault. We have studied unit various government approvals and clearances are
the agreement of the contract between the company and
required. Like non agriculture land, building plan approval
the consultant and it is to be ensured that the consultant
etc. Besides these approvals as per manufacturing method
will help till the final product is produced. Like in paper plant and effluent generated during the manufacturing pollution
when due to some alignment problem in the machineries
the product is not produced as per required specifications control board permission is required. Pollution control board
then setting up whole the plant and machineries will be of first gives permission consent to establish and afterwards
no use or it may lead to cost run and time over run. looks into the quantity and quality of effluent generated and
method for its disposal, the consent to operate is given.
Plant and Machineries: The product manufacturing is Sometimes environmental clearance, forest department,

BANKING FINANCE | APRIL | 2022 | 45