In India, the medium, small and micro enterprise (MSME) sector has grown more than the average growth clocked by industry in general, but ‘peculiar’ problems continue to bog the sector down, be it credit flow or inadequate infrastructure, leading to slow job creation. But all these problems are controllable, says HP Kumar, Chairman and Managing Director, National Small Industries Corporation (NSIC). A professional banker, Kumar told Business Line that mere skilling is not enough and incubation models, such as those patented by NSIC, could hold the answer to the woes of the sector. Edited excerpts:
How are you dealing with the problem of slow job creation in the MSME sector?
Mere skilling of people is no solution to the employment problem in the sector. Skilled people will demand jobs, but where are the jobs? NSIC is not interested in only skilling and making people job-seekers. Instead, our incubation model makes them job-givers.
Our rapid incubation model addresses the basic needs of unemployment…we are not into reinventing the wheel, not into R&D, we work with existing technology and projects and try to incubate a large number of people so that they can set up enterprises. In three years, we have set up 72 such centres, and are now setting up such models in 12 countries.
Has any assessment been done about how many jobs have been created in three years?
One centre incubates about 300 people a year, who get on-the-job training, machines, marketing support, etc over a period of three months. The employment created depends on the size of the project, so I would say the success rate is almost 30 per cent. But these are only new enterprises. The remaining 70 per cent, too, doesn’t go waste, as the people get skilled.
Do you keep a database of a scheme to assess its success?
We keep a record. Our people keep a check on those trained over a period of nine months. By and large, 65-70 per cent of these people end up doing some job somewhere on the basis of their training.
What are the requirements for joining the scheme?
Basically, one should be reasonably qualified, say, a matriculate, and age is no bar. But you should have 20-25 per cent of the money needed to start the project. We then help you select a project. We have a list of 125 projects such as food processing, candle-making, beauty parlours or health centres for women. For labour-oriented people, we have brick and tile-making, etc. Once a project is selected, we give simulated training. We even help in arranging loans, for which we have a tied up with 26 banks.
What is the process of selecting people?
We advertise and have tie-ups with existing business organisations. We have also tied up with engineering and other colleges and bring the students to our incubation centres as part of our sponsored outreach programme.
Have you also tied up with private enterprises to run these centres?
Ours is a patented model. The technology, curriculum and funding are ours, but for opening and setting up a centre, we follow the franchisee model and involve private partners such as institutions, management colleges and NGOs. We charge a royalty for our services, machines and exam certificates.
What about the fees?
We approve the fees, not fix it. We ensure that the fee is viable for the centre owner so that he gets a 15-20 per cent return on his investment.
Moving to macro issues, what is your stance on FDI in retail?
It is apprehended that FDI might hurt the interest of small enterprises, which is why 30 per cent sourcing was made on the industry’s insistence. But foreign multi-brand retailers sought some relaxation. I understand that some dilution is likely in this provision now, which might bring back those apprehensions. Since we have not tested it, we have to see if these apprehensions are realistic, or does FDI give an opportunity to MSMEs to face the tiger and come up and defeat it. Only time will tell.
Do you feel the definition of small-scale needs to change?
Yes, definitely, it’s time to change the definition. I feel the definition should not be linked only to investment, but also include turnover and labour costs. In the rest of the world, these costs are taken into consideration, but in India, only plant and machinery costs are considered… The level of investment can be raised, too.
What is your view on items being de-reserved for small sector?
De-reservation has helped in opening up the sector. It’s not a big issue for the sector. As it is, imports have been opened up, so how does it matter? Where is the exclusivity now? Everything is coming from China. You reserve cycle parts for small units, but you import everything. The problem lies with dumping and imports, not with de-reservation. So, don’t stop de-reservation, stop imports. But then, we are WTO members and have to abide by certain norms. So, in the short term, this might affect the small industry, but in the long term, it will become competitive. The best will survive, the worst will vanish, and the consumer will benefit.
But what if China becomes the fittest? Shouldn’t there be some protection for our small units?
I feel there should be protection only for new enterprises, say, a five-year tax concession.