Institutional Framework for Small Business Development

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ISO 90012000
Institutional Framework for Small Business
Development
H.P. Kumar Chairman-cum-Managing
Director National Small Industries Corporation
Ltd. New Delhi, India www.nsic.co.in
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Institutional Support Structure for SMEs in India

• At Federal Level
• Ministry of SSI
• Ministry of ARI
• Small Industries Development Organisation (SIDO)
• National Small Industries Corporation(NSIC)
• Khadi Village Industries Commission(KVIC)
• Coir Board
• Entrepreneurship Development Institutions (EDIs)

• At State Level
• Directorate of Industries
• District Industries Centres
• State Finance Corporation
• State Industrial Development Corporation
• Technical Consultancy Organisations
• Entrepreneurship Development Institutions (EDIs)

MSMEs

• Others
• Industry Associations
• NGOs
• Banks/Financial Institutions

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ABOUT NATIONAL SMALL INDUSTRIES CORPORATION
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The Government of India through its Ministry of
Commerce Industry in Collaboration
deliberation with the National Planning
Commission and International planning team (Ford
Foundation) decided to set up NSIC in 1955 with
mandate
To aid, counsel , assist, finance, protect and
promote the interest of Small Industries in India
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VISION
To be a premier organisation in the country
fostering the growth of small enterprises
including Tiny and Service Enterprises
MISSION
To enhance the competitiveness of Small
Enterprises by providing integrated support
services under Marketing, Technology and Finance.
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ORGANISATIONAL STRUCTURE
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ORGANIZATIONAL STRUCTURE
Contd.

• The Corporation is a fully owned entity of the
  Government of India.
• Policy guidelines are provided by the Board of
  Directors consisting of a full time
  Chairman-cum-Managing Director, two full time
  Directors, two Government nominee Directors, one
  SIDBI nominee Director and Six independent
  Directors.

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INTEGRATED SUPPORT
NSIC ISO 90012000
Marketing
Support Services
Technology
Credit
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Marketing Support

• Single Point Registration Scheme under Govt.
  Stores Purchase Programme
• Consortia Tender Marketing
• Raw material Distribution
• Exhibitions Buyer Seller Meets
• Export Facilitation

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TECHNOLOGY SUPPORT

• NSIC offers small units the following
  technology support services through its Technical
  Services Centres
• Advise on application of new techniques
• Material testing facilities through accredited
  laboratories
• Product design including CAD
• Common facility support in machining, EDM, CNC,
  DNC etc.
• Energy and environment services at selected
  centres
• Classroom and practical training for skill
  upgradation

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Credit Support

• Finance for procurement of Raw Materials
• Finance for Marketing
• Credit facilitation through linkage with banks
• Limited Financing for Equipments

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SUPPORT SERVICES

• Performance and Credit Rating Scheme
• Information Support
• Mentoring and Advisory Services
• Software Technology Park
• Technology Business Incubator
• International Consultancies International
  Cooperation
• Display Centre Exhibition Complex
• Marketing Development cum Business Park(Proposed)

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Performance and Credit Rating Scheme

• Enables small enterprises to ascertain their
  strengths and weaknesses of their existing
  operations and take corrective measures to
  enhance their organizational strength.
• An independent, trusted third party opinion on
  capabilities and credit worthiness of SSI units
  is taken.
• Good rating enhances the acceptability of the SSI
  units with Banks, FIs, SSIs customers and
  buyers.
• Facilitate prompter credit decisions from Banks
  on proposals of SSI units.
• Empanelled agencies ICRA, ONICRA, Dun
  Bradstreet, CRISIL, FITCH and CARE, SMERA

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International Co-operation

• Exchange of Business/Technology missions with
  various countries.
• Facilitating Enterprise to Enterprise
  cooperation, JVs, Technology Transfer other
  forms of sustainable collaboration.
• Explore new markets areas of cooperation
• Identification of new export markets by
  participating in sector- specific exhibitions
  all over the world.
• Sharing of Indian experience with other
  developing countries
  

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International Consultancy

• Feasibility studies
• Policy Institutional Framework
• Entrepreneurship Development
• Supply of small projects for SMEs
• Setting up of Tool Room Training Centres

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Building Synergies with Organizations serving
Small Enterprises in India

• Online Networking being established with
  Directorate General of Supplies and Disposals
  (DGSD) for procurement by Government departments
  and bulk purchasers
• Synergy with Export Credit Guarantee Corporation
  for Export Credit Insurance for Small Medium
  Enterprises

NSIC ISO 90012000
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Building Synergies with Organizations serving
Small Enterprises in India
Contd

• Well established linkages between organizations
  under Ministry of SSI ARI (KVIC, Coir Board
  SISIs under Office of Development
  Commissioner-SSI).
• Tie ups with bulk manufacturers of raw material -
  Godowns opened with major raw material supplier
  like HZL, RINL, NALCO, Sterlite. Tie ups also
  being made with Coal (India) Ltd for distribution
  of coal.

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• Expanding Reach
• MOUs signed with various Industry associations to
  use their services for disseminating NSIC schemes
  among their members. Scheme to be operated on
  revenue sharing basis.
• Linkages being developed with various public
  private RD institutions and Production-cum-Proces
  s Development Centres, Regional Testing Centres,
  Tool Rooms
• Structured Intensive campaigns/seminars
  organized for reaching out to SSI units.

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Case Studies Cluster Development
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NSICs Approach

• Holistic and demand led
• Drawing lessons from the successful clusters
• Networking with the existing cluster development
  agencies to avoid duplication and obtain synergy
  
• Building up of local capabilities
• Involvement of various cluster participants like
  SSI units, industrial associations and other
  stake holders

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The Process

• Understanding the socio-economic environment in
  which the Cluster operates
• Identifying the most effective leveraging points
  for intervention
• Business and Value Chain Analysis
• Analyzing potential for each Cluster participant
  and drawing up plans for their capacity building
  in the Cluster
• Developing a base for future monitoring and
  evaluation

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Methodology
Identification of cluster stake holders, actors,
units, associations and institutions. Networking
of the same. Diagnostic study Technology mapping
and gaps identification Consolidated business
plans to fill up the gaps Implementations of
Business Plans with respect to NSICs service
portfolio . Monitoring for implementation.
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Flexible Criteria of Selection

Importance of Clusters Existence of critical
gaps Its viability promotability Replicability
dissemination potential Scope of creating
synergy between the cluster NSIC.
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Monitoring Mechanism

• Cluster level Advisory Committees constituted
  for policy support and evaluation
• Quarterly cluster level review by Regional Heads
• Half yearly Annual review of the Cluster
  Development Managers at Corporate level
• Benchmarking of the clusters with the best
  practices in
• Performance in business
• Credit absorption capacity
• Energy efficiency
• Technology upgradation
• Market penetration

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Sharing of a few Successful Interventions
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Foundry Cluster Rourkela
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Structure of the Cluster
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NSICS Initiatives
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Outcome
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Hand Tools Cluster, Jalandhar
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Structure of the Cluster
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Problems being Addressed

• Raw material (steel) problem due to erratic
  supply, exorbitant price fluctuations and quality
  of steel
• Stagnation in technology upgradation activities
• Technology being used - neither obsolete nor the
  latest
• Limited exposure to domestic markets particularly
  to MNCs and auto giants
• Down trend in exports in the last few years
  because of products from China and Taiwan

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NSICs Initiatives
Contd..

• Action initiated for consortia formation and
  procurement of raw materials in bulk directly
  from producers under NSICs RMA Scheme
• Business / technology delegations to China and
  Taiwan organised to expose the SSI units in the
  cluster for latest developments.
• Formed marketing consortia for participation in
  Govt. tenders through Government Purchase
  Programme
• Organised Buyer Seller meets at Jalandhar
• A workshop on improved technology for foundry
  industry organised in March, 2005

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NSICs Initiatives

• Export order for Dubai worth US 19,500 executed
  during April Oct 2003. Associate SSI units were
  first time exporters.
• Export Orders from Dubai for wood working and
  allied tools procured.
• Formed consortia for participation in
  International Exhibition at Cologne (Germany)
  during March, 2004

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Pipe Fitting Cluster, Jalandhar
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Structure of the Cluster
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Problems Identified

• Raw material (pig iron) problem existed due to
  erratic supply, exorbitant price fluctuations and
  bulk requirement-
• Obsolete technology
• Losses at various stages of the process i.e.
  casting, cutting, tooling, tapping
• Manual system for casting and zinc plating
• Dangerous working conditions
• Lack of information on the improved technologies
  and resource agencies
• Limited exposure to export markets

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NSICS Initiatives

• identified Experts foundry technologists to guide
  in technology improvement and RD needs of the
  cluster
• Exports worth US 211434 of pipe fittings
  allied foundry items like scaffolding realised.
  All the associate units participated in the
  exports were first timers
• Samples exhibited at various international
  exhibitions
• A consortia from the cluster has been formed for
  participation in Government tenders through NSIC

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Roadmap

• Replication of energy efficient technologies
• Enhancing share of exports from the cluster
• Dissemination of technological information and
  creating awareness of the latest developments to
  the cluster participants

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Case Studies Performance and Credit Rating of
Small Enterprises
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Simplified Rating Process
Application for Rating with Information
Information Review
Interaction Verification
Evaluation
Publish Rating and report
Rating Assigned (Option to refuse)
Rating Committee
Total duration 15-30 days after receipt of
Information
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Impact of Performance Credit Rating Scheme for
Small Enterprises

• 67 of the rated units who had informed their
  banks about their rating status got the benefit
  of increase in volume of credit
• 17 of total respondents revealed that rating
  helped them in negotiating cheaper interest rates
  from the banks
• 30 units felt the rating helped them in
  increased recognition from their buyers/customers

Data based in respect of respondent units
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Impact of Performance Credit Rating Scheme for
Small Enterprises
Contd..

• Nearly 16 realised a higher sales figure and
  almost same proportion received higher customer
  queries
• 23 rated industries improved people management
  system and policies equipping them for higher
  competitiveness.
• 38 felt that their employee pride had increased
  with rating of their units

Data based in respect of respondent units
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A few Perceptions of Rated Small Enterprises

• This rating comes as a real surprise to us, as
  initially we thought that it would be useful only
  from the perspective of the banks. However, we
  got good response from market.. Lexi Pens
• We are in fact, smitten over by the impact that
  has resulted from this rating. We now find Banks
  and Financial Institutions chasing us. A Lot of
  foreign investors have suddenly become interested
  in Su-Kam. I must also confess that I had
  perhaps undermined the importance of this rating
  earlier but it is proving to be very beneficial
  for our organization. Su-Kam Power Systems Ltd.

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A few Perceptions of Rated Small Enterprises

• We would be using the report for bank
  appraisals and investors. We find the rating very
  good and useful. Xytel India Pvt. Ltd.
• The strengths and weakness of the company,
  notes, information about competitors, industry
  overview, graphical representation, give a true
  picture of what is happening. STJ Electronics
• We will work on this rating and try to improve
  upon the factors, as mentioned in report HGS
  (India) Limited.

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THANKS
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SUPPORT MEASURES FOR SMES IN INDIA
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Institutional Support Structure for SMEs in India
Contd..
SIDO Coordinates and implements small
industries promotion programmes of Government of
India NSIC Provides integrated support through
marketing, technology, finance and
information KVIC Promotes village industries
producing products from handmade yarns EDI
Augments supply of entrepreneurs through
entrepreneurship development education, training
and research Directorate of Small Industries
Responsible for promoting small industries at the
state level. State Financial Corporations
Provide medium and long term credit to industries
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Support Measures for SMEs in India

• Micro, Small and Medium Enterprises Development
  Act, 2006 a legal framework for development and
  enhancing competitiveness
• Enhanced credit support
• Support for technological upgradation
• Comprehensive support for cluster development
• Marketing assistance and export promotion support

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Micro, Small and Medium Enterprises Development
Act, 2006 Salient Features

• Introduction of concept of enterprise and limit
  of small and medium enterprises
• Constitution of National Micro, Small and Medium
  Enterprises Board as the apex advisory body for
  promotion and development of MSMEs
• Strengthening the exisiting legislation to tackle
  the chronic problem of delayed payment to micro
  and small enterprises by large buyers
• Preference for products of micro and small
  enterprises in Government procurement

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Micro, Small and Medium Enterprises Development
Bill, 2005 Salient Features (Contd)

• Provision for filing of voluntary memorandum for
  investment level, product, technology and
  employment etc. by enterprises
• Provision for a scheme of fast track closure of
  business

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Credit Support

• Public sector banks advised to double the flow of
  credit to SMEs within 5 years
• A minimum of 40 of bank credit earmarked for
  priority sector lending (including SEs)
• Specialised SME Bank branches in industrial
  clusters for smooth flow of credit to SMEs
• Credit Guarantee Fund Scheme for enabling MSEs to
  acquire institutional credit without collateral
  security

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Credit Support (Contd..)

• Performance and Credit Rating Scheme for
  facilitating credit flow to MSEs at affordable
  rates of interest
• Scheme of Fund for Regeneration of Traditional
  Industries(SFURTI) providing credit facilities
  for revival of traditional industries
• Special debt restructuring scheme for revival of
  potentially viable sick MSMEs
• One Time Settlement (OTS) scheme for settling
  NPAs of MSMEs

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Technological Support

• Credit Linked Capital Subsidy Scheme for
  Technology Upgradation of Small Scale Industries
• Technology Business Incubators
• Testing Centres for Quality Certification
• Tool Rooms and Training Centres for skill
  upgradation of the MSE workers
• Incentive scheme for obtaining ISO Certification

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Marketing Assistance and Export Promotion

• Support to MSE entrepreneurs for participation in
  trade fairs and exhibitions local as well as
  international
• Training programmes on packaging for exports
• Purchase preference to products in Government
  procurement
• Market Development Assistance Scheme for
  publicity, market studies and adoption of modern
  market practices

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Cluster Development

• Small Industries Cluster Development Programme
  for focussed development of MSE clusters. The
  programme provides for upgradation of technology,
  improvement of productivity, energy conservation,
  pollution control, product diversification as
  well as meeting the training capacity building
  needs of MSEs
• Integrated Infrastructure Development (IID)
  Scheme to facilitate growth and development of
  industrial clusters. The scheme also provides
  common service facilities and technology back-up
  services.