E-Newsletter
Volume 1, Year 13, January 2012

 

 
Planning Commissions Working Group on MSME Growth
- ANIL GUPTA, Immediate Past President, IIA
 
IIA hopes that the recommendations given by the Group are well accepted and incorporated in the 12th Five yr Plan so that the MSME sector grows to its full potential
Planning Commission constituted a Working Group on Micro, Small & Medium Enterprises (MSMEs) Growth for the 12th Five Year Plan (2012-17) with 46 members representing various Ministries/Offices of Government of India, representatives of selected State Governments and Industry Associations, NGOs etc. in May, 2011. Indian Industries Association is a member of the Working group which I, as the then President of IIA, had the opportunity to represent. The working group is headed by the Secretary, Ministry of MSME Govt. of India as its Chairman.


In order to prepare a comprehensive report of theWorking Group for 12th Five year plan, 11 sub groups were constituted to assist the Working group. Indian industries Association (IIA) participated actively in 6 sub groups classified under six important verticals of i) Credit & Institutional Finance ii) Technology & Innovation iii) Infrastructure iv) Marketing&Procurement v) SkillDevelopment&Training and vi) Institutional Structure.

As a result of several rounds of meetings of the Sub Groups, all the Sub Groups have submitted their recommendations and a final meeting of the Working group on MSME Growth was held on 22nd December 2011 under the Chairmanship of Secretary Ministry of MSME at Delhi. I as a representative of IIA attended thismeeting also. It is heartening to note that many recommendations submitted by Indian industries Association (IIA) found place in the final recommendations of the Sub groups and the Working Group being submitted to the Planning Commission for consideration.

A summary of major recommendations of IIA and corresponding recommendations of the Working group are reproduced below for the benefit of the readers :
Sub Group/ Verticals
IIA Recommendation
Sub Group / W.G recommendation
Technology Up- gradation& Support
At least Rs. 50 Crore per year may be earmarked for Technology Exposure visits of MSMEs within and outside the country. MSME Entrepreneurs may be encouraged through this fund to visit Technology Fairs internationally by providing them assistance similar to MDA/ICS Schemes. This scheme may be named as Technology Development Assistance(TDA). Depending upon the success of the scheme the allocation may be enhanced to cover 1%MSMEevery year over a period of time.
Developing collaborations of Public / Private R&D institutions with the cluster/industry associations to take up R&D in focused areas of manufacturing with clear objectives, deliverables, time line and project budget. Setting up of a Technology Acquisition and Support Fund with adequate allocation to assist both development of indigenous technology and acquisition of global technology by the Indian MSMEs. Separate schemes of the Ministry for installation of plants and equipments with advanced technologies, viz., CLCSS & NMCP components be merged into one scheme. At least 20 modular industrial estates with plug and play facilities in the respective areas may be launched in collaboration with IITs, IISc and other premier institutions.
Marketing and
Procurement

The active involvement of MSME Associations in the facilitation process can only ensure wider reach of the programme. NSIC is acting as a Nodal Agency for Marketing Facilitation and NSIC have signed MOU with few MSME Associations for extending its services including IIA. These MOUs can be made effective if NSIC contributes in the capacity building of MSME Associations with part of the revenue generated from the services provided to the MSME Associations.

  • The provisions of the purchase & price preference policies should be made mandatory instead of recommendery as on date.
  • A target of supporting at least 1% of MSMEs under MDA and International Cooperation Scheme per annum during the 12th Five Year Plan maybe set. The Micro & Small Enterprises may be supported upfront instead of reimbursement. MDA Support should be extended to sector specific fairs of the choice of MSME if participating individually.
  • MSME Associations/Private Investments with matching subsidy may also be encouraged rather than leaving it to the Government to setup the MSME display Centre & Exhibition hall.
New schemes for creating cluster-level, state-level and national level B2B portals with connectivity to international markets and marketing infrastructure such as setting up of testing facilities and establishment of information dissemination centres and display-cum exhibition centres. Setting up of marketing organizations in clusters in PPP mode through formation of SPVs, NSIC, may be the Apex Organisation to co-ordinate market development activities under different schemes. A corpus for country specific and product specific market studies, research, market forecasting , business practices & regulations in potential international markets and also for aggressive market promotion activities. The implementation of the Public Procurement Policy for MSME sector policy needs to be hastened. Further, there is also need for gradual inclusion of private sector in the procurement policy for the MSME sector.
Skill Development
& Capacity Building

Certification System similar to Credit Rating System applicable for industries should be implemented for training institutions/organizations. Institutions below acceptable ratingshould not be allowed to run the skill development programme. This certification system should have the provisions for testing the competencies of the trainers apart fromsetting standards for infrastructure facilities.

  • Mechanism should be evolved to get all MSME manufacturing units registered so that an authentic data
    is available for assessment of trained manpower requirements and the skill sets.
  • A comprehensive online data of skilled manpower availability from all the institutions/ sources should be maintained and updated regularly. This Data should be made available region wise/area wise. MSME Associations should be involved and strengthened to participate in this activity.
  • Training institutions should get jobs fromIndustry and get
    these processed in respective institutions by the trainers
    under the guidance of expert trainers.
  • Industry representatives in adequate numbers should be
    involved in Governing Councils/Management Committees of the institutions.
  • Industry/Industry Associations may be encouraged to adopt Govt. training Institutions wherein they contribute
    to build the capacity of the institutions and are involved
    in themanagement of the institutions.
  • Funds may be allocated to set up an organization under
    the ministry ofMSMEto assess the training needs, design
    of curriculums and update these fromtime to time.

It is necessary to implement a rating system immediately for the training institutions and place the same in public domain. up-scaling of the training capacity of the Ministry through the public private partnership mode. Training programmes be also conducted for skill upgradation of Chief Executives/Owners of the MSMEs with some element of subsidy from the government. To ensure quality of training programmesconducted and transparency in the entire process of selection-registrationadministration- handholding of the trainees, a web-based management information system be launched. The respective portal should also host the details of the training curricula, trainer/faculty and process of training. Setting up of 100 Tool Rooms/ Technology Development Centres(TDCs)/ Central Footwear Technology Institutes (CFTIs)

To coordinate the entire process of conducting skill development programmes setting up of a virtual SME University has been recommended. Involvement of industry associations in training programmes has been recommended for identification of the skill gap, developing appropriate training curricula and handholding of trainees in self/wage employment.
Infrastructure
Development

Development of industrial areas in private sector / by Industry Associations should be incentivised. The maintenance of the existing industrial areas may also be handed over to industry associations /spv's.

Cluster development programme for Micro & Small Enterprises should also continue in 12th five year plan with substantially higher budget allocations and involvement of MSME Associations. The emphasis should be on performance and outputs from the clusters rather than number of clusters andmoney spent.

Majority of the autonomous and development institutions operating under the Ministry of MSME have failed to serve their objectives. Their performance should be evaluated in terms of number of MSMEs benefited. Beneficiaries should be made to record the gains whether it is related to technologies made available/ technical problems solved/ improvement in manpower skills etc.

The management of these institutions should be on the pattern of Institute Management

Committees (IMCs) as has been done for ITIs by the Ministry of Labour. In IMCs, involvement of Industry representatives is ensured. In case of MSME Development Institutions, prominent MSME Association may be involved in themanagement.

To strengthen and expand existing IID Scheme of M/o MSME, the Group recommends that the eligible project cost for infrastructure development (excluding cost of land) for Government of India assistance should be enhanced from present limit of Rs 10 cr to Rs 15 crore. To complement the efforts of State and Central Government, private sector (companies and SPVs) should also be allowed for development of infrastructure development, with Government of India assistance under MSE-CDP.

  • Continuation of the infrastructure development scheme with increased allocation.
  • Accommodation problem of industrial workersmay be addressed to a great extent by supporting dormitories (in or around industrial estates/ areas). SPVs may run the dormitories on sustainable basis. Flatted factory complexes should be established.
  • It may be appropriate to handover maintenance of Industrial Estates to industries associations, local bodies, state government agencies, SPVs on self sustaining basis.
  • The Cluster Development Programme of the Ministry of MSME (MSE-CDP) be continued for the 12th Plan period with scaled up interventions, both hard and soft, inMSMEclusters.
  • In order to provide integrated marketing support to MSMEs, the Group recommends for introduction of a new 'Scheme for development of Marketing Infrastructure forMSMEs'during 12th Plan Period.
  • setting up of at least 100 quality testing laboratories for MSMEs in cluster/industry concentration, district/major industrial area in Public Private Partnership mode.
  • 100 Tool Rooms / TDCs/CFTIs etc be set up in important clusters/industrial districts during the 12th Plan period.
Institutional
Structure
  1. IIA had submitted an exhaustive provision-wise proposal for amendment of theMSMEDAct vide its letter No. 3&4 UP&GOI/9411 dt July 13, 2011 to the Office of DC MSME.
  2. IIA recommend that the Strategic action plan should be “To make DIC's responsible to get all MSME registered, update their details annually and make district wise, category wise, block/area wise contact & other details available on Website.”This information should be linked to Minister of MSME Govt. of IndiaWebsite also. IIA also recommend to delete un-necessary “NOTE” i.e “THE ISSUE OF THIS ACKNOWKLWEDGEMENT DOES NOT BESTOW ANY LEGAL RIGHT-------COURT ORDERS.” from the E.M.NumberAcknowledgement form.
  3. IIA has taken up the issue of delayed payment on various forums andmy proposal during the Group meetingswas: “MSEs may be paid the bills of supplies made by them to Government Departments/purchasers as soon as the material is received by them in satisfactory condition. Govt. Department/purchaser will then deposit the payment to the concerned bank directly. In case, Government Department/purchaser fails to make payment within the stipulated time, the Bank may file a case in MSE facilitation Council constituted under the Act in every state and realize the delayed payments with penalty as per the Act.”
  1. The enactment of Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 is a harbinger for the growth of MSME Sector. However, there is an urgent need to strengthen various provisions of the Act along with enactment of the rules under various sections.
  2. The District Industries Centres under State Governments and MSME Development Institutes of Ministry ofMSMEare now in a near defunct stage. The Group recommends an elaborate programme during the 12th Plan Period for re-engineering of the office of DC, MSME as well as the network of field offices and retraining of the officers. Similarly, creation and maintenance of a comprehensive database of MSME sector, including unorganized sector, is a pre requisite for sound policy formulation. The group recommends immediate attention to these requirements. Implementation of the process of filing of Entrepreneurs Memorandum is still full of road blocks. The Group recommends for application of egovernance for streamlining of procedures and for that
    purpose setting up of an information and data base networkamongthe DICs, MSME-DIs and the Ministry.
  3. Most of the Micro & Small Enterprises Facilitation Councils (MSEFC) are not operating efficiently. The Group recommends immediate action for up scaling the activities of these MSEFCs and introduction of an information and communication network for operation and monitoring of these MSEFCs.
Credit &
Finance
  • Effective implementation of PMEGP
    During 11th five year plan, one of the flagship schemes of Ministry ofMSMEisPMEGP with a target to generate 37 Lakh self employment opportunities. The design of the Scheme is good; however, its implementation has many loopholes. The scheme should be continued in 12th five year plan by plugging the following loopholes:-
    1. Identifications and selection of beneficiaries lack transparency To plug this loophole MSME Associations should be involved in identification and selection of potential entrepreneurs and applications received through the MSMEassociationsmay be dealt on priority.
    2. Support for preparing bankable project reports, not available to the beneficiaries.This bottleneck can also be minimized with active involvement of MSME Associations who have sufficient MSME support staff and infrastructure. Nodal agencies and Financial Institutions can also play an important role in helping beneficiaries to prepare bankable project report rather than only inspecting and rejecting it.
    3. The budget allocation for this programmeis insufficient It may be enhanced substantially.
    4. Subsidy sanctioned does not reach the beneficiary in full.

A cluster- centric approach is the best bet for addressing the credit needs of the MSME sector, because of reasons of operational convenience and trust building. Information flow and transparency, through use of IT,would contribute greatly to the process of adequate, timely and affordable credit to the MSMEsector.

To address the risk perception of banks, the Credit Guarantee Scheme needs to be strengthened with enhanced budgetary support. Also, there should be substantial increase in the number of MSEs covered under the Performance and Credit Rating Scheme which is a facilitating factor for easy access to credit with liberal terms.

In order to fill equity gap, the Working Group recommends introduction of a new scheme to supplement Promoter's Contribution byway of equity support.

Access to finance needs to be enlarged through alternative sources of capital such as private equity, venture capital and angel funds. Further, prospective enterprises in emerging areas such as nano-technology, bio-technology, aero-space, defence-applications and homeland security would also require such alternative sources of finance since traditional channels are unable to meet their needs. Apart from fiscal incentives for promoting such alternative sources of capital, there has to be aggressive market intervention.

Summary and Conclusion :

The Group has mentioned the following Game Changers in the recommendations, implementation of which will be crucial for the ski-jumping of MSME Sector in the global market place:

Finance
- Operationalisation of SME exchanges for enabling access to Equity Finance.

Technology
- Scheme for acquisition and upgradation of technology

Infrastructure
- Developing clusters of excellence
- Setting up of 100 Tool Roomsand PPDCs

Marketing
- Procurement policy for Goods/services from MSEs by the Government Deptts. and Central PSUs.
- B2B International portal
- Enabling global footprints ofMSMEs
- Leveraging Defence Offset Policies in favour ofMSMEs

Skill Development
- Revamped Skill Development & Capacity Building Programme.
- Upscaling PMEGP and implementation of Electronic Tracking System

Institutional Structure
- e-governance in promotional and regulatorymatters

Details of IIA's recommendations submitted in the planning commission working groups/sugroups and recommendations of the working groups may be seen at IIA website at http://www.iiaonline.in/ important/fiveyrplan.php
 
 

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