question_answer 14)

Mishrilal has purchased a mechanical sugarcane crushing machine run on electricity and has set up on his field. Sugarcane crushing was earlier done with the help of bullock, but people prefer to do it by machines these days. Mishrilal also buys sugarcane from other farmers and processes it into jaggery. The jaggery is then sold to traders as Shahpur. In this process, Mishrilal makes a small profit.   (i) What capital did Mishrilal need to set up his jiggery manufacturing unit?   (ii) Who provides the labour in this case?   (iii) Can you guess why Mishrilal is unable to increase his profit?   (iv) Could you think of any reasons when he might face a loss?   (v) Why does Mishrilal sells his jaggery to traders in Shahpur and not in his village?

Answer:

(i) To set up his manufacturing unit Mishrilal needed the following capital   (a)Fixed Capital in the form of the sugarcane crushing machine.   (b) Working Capital in the form of money for buying sugarcane from other farmers for crushing and for paying the electricity bill of running the crushing machine. (ii)  The labour is provided by him and his family. Otherwise he will employ landless labourers. (iii)(a) Mishrilal has set up a small scale unit.   (b) The farm holdings in the village are very small of about 2 hectares in size and production of sugarcane is low as more area is under wheat, so raw material is also less.   (c) He has to pay for the electricity to run the machine.   (d) Since the industry is small scale, production is less and therefore, he is unable to increase his profit. (iv) Conditions under which he may face a toss can be any of the following                                              (a) If his crushing machine becomes defective, his production will reduce or totally stop.   (b) If due to drought or other calamity, the production of sugarcane in nearby areas reduces; his jaggery production will come down leading to a loss for him.   (c) If the demand for jaggery decreases, ne will not be able to sell enough to break even.   (d) If any other costs like electricity, labour or transportation costs increase, he may face a loss. (v)(a) Palampur is a small village with 450 families and there is not a big demand for jaggery there.   (b) Shahpur is a town where people come from different surrounding villages to buy things and there is more demand of jaggery there, so Mishrilal sells his jaggery to traders in Shahpur and not in his village.