NMCP: Developing global competitiveness among Indian MSMEs

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Dinesh Rai | 25 Aug, 2009
The Micro, Small and Medium Enterprises (MSME) sector contributes significantly to the manufacturing output, employment and exports.

It is estimated that in terms of value, this sector accounts for about 45 per cent of the manufacturing output and 40 percent of the total exports of the country. The sector is estimated to employ about 42 million persons in over 13 million units. Further, this sector has consistently registered a higher growth rate than the rest of the industrial sector. There are over 6000 products ranging from traditional to high-tech items, which are being manufactured by the MSMEs in India. It is well known that after agriculture, the MSMEs provide the maximum opportunities for both self -employment and jobs.

Recognizing the contribution and scope of the sector, the definitions and coverage of the MSE sector were broadened significantly under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 which gave recognition to the concept of "enterprise" to include both manufacturing and services sector. Further, it gave a legal definition of medium enterprises. For capturing the data for the MSME sector (including khadi, village and coir industries), the Fourth All India Census of MSMEs for reference year 2006-07 is being conducted in the country. This will provide the first database on the MSME sector after the enactment of MSMED Act, 2006.

The Government has taken several initiatives and measures for enhancing the competitiveness of SMEs in the present global environment. The most important among them is the enactment of the ‘Micro, Small and Medium Enterprises Development Act, 2006’, which aims to facilitate the promotion and development and enhance the competitiveness of MSMEs. The Act has come into force from 2nd October 2006 and has substantially strengthened the earlier provisions to check delayed payments by larger enterprises to MSEs. Besides laying down that payments must be made within 45 days of supply, the legislation lays down the institutional framework in the shape of MSE Facilitation Councils to be constituted by each State. The Government has also announced a comprehensive package for promotion of micro and small enterprises. The Package comprised of several proposals/schemes for providing requisite support to the MSEs in the areas relating to credit, fiscal, cluster-based development, infrastructure, technology and marketing. The Package also provides thrust on capacity building of MSME Associations and support to women entrepreneurs.

For enhancing the competitiveness of the Indian manufacturing sector, the Government has launched the National Manufacturing Competitiveness Programme (NMCP). The NMCP is the nodal programme of the Government of India to develop global competitiveness among Indian MSMEs. Conceptualised by the National Manufacturing Competitiveness Council, the Programme was initiated in 2007-08. An amount of over Rs.600 crore has been allocated over the 11th Plan period for the scheme. There are ten components under the NMCP targeted at enhancing the entire value chain of the MSME sector. It includes programmes like establishment of new Tool Rooms, benchmarking of the global competitors, enhancing of product and process quality, cost reduction through lean manufacturing techniques, etc. The Programme is to be implemented through Public Private Partnership mode with close physical and financial participation of the MSME sector.

The first component that was made operational under the Programme was "Marketing Assistance/ Support to MSEs". The objective of the scheme is to popularise the Bar Code registration and motivate the micro and small manufacturing enterprises to adopt the Bar Code Certification on large scale and to sell their value added products worldwide and enable higher export price realization. It also helps in domestic marketing (wholesale & retail). Under the Scheme, 75% of annual fee (recurring) of Bar Code certification for the first three years are reimbursed to micro and small entrepreneurs. Under the scheme, Rs.5.64 lakh have been reimbursed to 133 MSEs during the year 2008-09. In order to motivate and encourage more and more MSEs for use of Bar Codes, 34 one-day seminars have been conducted by MSMEDevelopment Institutes (DIs) throughout the country during 2008-09.

The scheme for "Building Awareness on Intellectual Property Rights (IPR) was launched to enable Indian MSMEs to attain global leadership position and to empower them in using effectively the tools of Intellectual Property Rights (IPR) of innovative projects. The main features of the scheme are: (i) Awareness/Sensitization Programmes on IPR; (ii) Pilot Studies for Selected Clusters/Groups of Industries; (iii) Interactive seminars/Workshops; (iv) Specialised Training; (v) Assistance for Grant on Patent/GI Registration; (vi) Setting up of IP Facilitation Centre (IPFC); and (vii) Interaction with International Agencies. These initiatives are being developed through Public-Private Partnership (PPP) mode. During 2008-09, a sum of Rs.48.87 lakh has been sanctioned to different organizations/implementing agencies for organizing/conducting 23 Awareness/Sensitization Programmes, 1 Pilot Study, 7 Workshop/Seminars and establishing an IPFC. The IP Facilitation Centres (for MSMEs) has been established by BCIL, New Delhi, which has started functioning from 06.03.2009.

"Providing Support for Entrepreneurial and Managerial Development of SMEs through Incubators" aims at nurturing innovative business ideas (new/ingenious technology, processes, products, procedures, etc), which could be commercialized in a year. Under the scheme, various institutions like Engineering Colleges, Research Labs, etc. are provided funds up to Rs.6.25 lakh for handholding each new idea/entrepreneur. The incubators provide technology guidance, Workshop and Lab support and linkage to other agencies for successful launching of the Business and guide the entrepreneur in establishing the enterprise. Under the scheme, twenty five institutions have been approved for nurturing innovative business ideas from individuals/MSEs that are near commercialization stage.

Under the NMCP, the Government has also launched a scheme, namely, "Enabling Manufacturing Sector to be Competitive through Quality Management Standards (QMS) and Quality Technology Tools (QTT)" in order to improve quality and productivity in the MSE sector. The scheme is aimed at improving the quality of the products in the MSE sector and inculcates quality consciousness in this sector. The major activities under this scheme are Introduction of Appropriate Modules for Technical Institutions; Organising Awareness Campaigns for MSEs; Organising Competition-Watch (C-Watch); Implementation of Quality Management Standards and Quality Technology Tools in selected MSEs; Monitoring International Study Missions; and Impact Studies of the initiatives. During the year 2008-09, the activities undertaken include: (a) Introducing Training Course in ITIs - conducted 4 Regional (stakeholders) workshops, 1 five-day awareness programme for DGET officers, Gap analysis study conducted by visiting select ITIs and MSME clusters, draft modules prepared/revised and conducted harmonization workshops; and (b) Awareness Programmes - conducted a total of 65 programmes through organizations viz., Quality Council of India, MSME-DIs and autonomous bodies.

Under the scheme, "Mini Tool Rooms under PPP mode", 15 Mini Tool Rooms will be set up during the 11th Plan period. Competitive bidding from entrepreneurs and Associations will be invited to set up Tool Rooms with Government support up to Rs.9 crore. They will be more competitive and user friendly as they will not be bound by the Government procedure and competitiveness will be the only criteria for selection of promoters of these Tool Rooms. The approved Plan expenditure under the Scheme is Rs.135 crore. It is proposed to commence work on at least two mini tool rooms at Chennai and Bhiwadi shortly.

In July 2009, the sixth component of the NMCP, namely, "Lean Manufacturing Competitiveness Programme for MSMEs”, was launched. Under the Lean Manufacturing Programme (LMP), MSMEs will be assisted in reducing their manufacturing costs, through proper personnel management, better space utilization, scientific inventory management, improved process flows, reduced engineering time and so on. LMP also brings improvement in the quality of products and lowers costs which are essential for competing in national and international markets. The total Government contribution is stipulated as Rs.28.60 crore for this scheme. The broad activities planned include Total Productive Maintenance (TPM), 5S, Visual Control, Standard Operation Procedures, Just in Time, Kanban System, Cellular Layout, Poka Yoke, TPM, etc. The Scheme has been approved as a pilot project for Lean Techniques interventions in 100 Mini Clusters.

The remaining four components of NMCP seek to address issues of Information and Communication Technology (ICT), Marketing and Energy Efficiency relating to the MSME sector and are at various stages of approval. The Ministry of MSME is making all efforts to operationalise them during the current fiscal year. The salient features of these components:

• The component on "Promotion of Information & Communication Tools (ICT)” in Indian MSME sector envisages identifying some of those clusters of SMEs, which have quality production and export potential, and assist them in adopting ICT applications to achieve competitiveness in the national and international markets. The broad activities planned under the scheme include, identifying target clusters for ICT intervention, setting up of e-readiness infrastructure, developing web portals for clusters, skill development of MSME staff in ICT applications, preparation of local software solutions for MSMEs to enhance their competitiveness, construction of e-catalogue, e-commerce, etc. and networking MSME cluster portals on the National Level Portals in order to outreach MSMEs into global markets.

• The main objective of "Design Clinics Scheme for MSMEs” is to bring the MSME sector and design expertise on to a common platform and to provide expert advice and solutions on real time design problems, resulting in continuous improvement and value-addition for existing products. It also aims at value-added cost effective solutions. The broad activities planned under the scheme include creation of Design Clinics Secretariat along with regional centres for intervention on the design needs of the MSME sector.

• The "Marketing Assistance and Technology Upgradation Scheme for MSMEs” aims at improving the marketing competitiveness of MSME sector by improving their techniques and technology for promotion of exports. The broad activities planned under the scheme include technology upgradation in packaging, development of modern marketing techniques, competition studies, etc.

• The objective of "Technology and Quality Upgradation Support to MSMEs” is to sensitize the manufacturing MSME sector in India to upgrade their technologies, usage of energy efficient technologies to reduce emissions of Green House Gases, adoption of other technologies mandated as per the global standards, improve their quality and reduce cost of production, etc., towards becoming globally competitive. The major activities planned under the scheme include Capacity Building of MSME Clusters for Energy Efficiency/Clean Development Interventions, Implementation of Energy Efficient Technologies in MSME sector, Setting up of Carbon credit aggregation centres and encouraging MSMEs to acquire product certification licences from National/International bodies.

The various components of NMCP envisage providing competitive edge to the MSMEs in the long run by focusing on cost reduction and efficiency improvement. This is expected to not only help in achieving a higher growth rate for the MSME sector but would also provide considerable opportunities to them in expanding their markets, both at the domestic and global level.

With these initiatives, it is expected that the MSME sector will be able to achieve new heights and also become more competitive. It will be in a position to provide more jobs and employment throughout the country.

Note:

* Dinesh Rai is the Secretary, Ministry of Micro, Small and Medium Enterprises
* The views expressed by the author in this feature are entirely his own and do not necessarily reflect the views of SME Times.