SMEBusiness

Inside This IssueTOP STORY Pg5

Small Means Big: Finance Availability For MSMEs

TECHNOLOGY Pg13 Go For Growth

HUMAN CAPITAL Pg17 Time To Act

PlusSMALL WORLD Pg2

ROADMAP Pg4INTERNATIONAL Pg11

CURTAIN RAISER Pg19

Journal of Small Business and Enterprise Vol 6, No. 2, November 2009

FROM THE CHAIRMAN’S DESK

Salil SinghalChairman

CII National MSME Council The last few months have been full of ac-tivities and your National MSME Council has been able to take some qualitative steps to help the development of the MSME sector in India.

Representing your Council in the meeting with the Hon'ble Prime Minister Dr Manmohan Singh in New Delhi on August 26, 2009, I called for ap-pointing a Taskforce to look at the various issues concerning the SME sector.

I am very pleased to report that our dynamic Prime Minister announced the appointment of such a Taskforce the very next day. The Task Force has been divided into seven sub-groups to look into specific issues covering labour laws, taxation, credit, exit policy, initiatives in the North East & J&K, marketing, infrastructure, technology and skill development.

I was nominated on the sub-groups pertaining to the Simplification of Labour Laws and Direct/ Indi-rect Taxation Laws. These Committees are headed by the respective Secretaries to the Government of India and the sub-group reports have been submit-ted to the Prime Minister's Office (PMO).

Let me add here that the discussions within the sub-groups had been tough, and needed a lot of persuasion and efforts. The issues raised by us have now been sent to the PMO for further action.

The CII National MSME Council is committed to work with the Government of India and create syn-ergies to sustain the momentum for the growth, development and promotion of this sector. The Conference on Finance Availability for MSMEs in New Delhi, organised by CII ensured a collective approach involving all key stakeholders, such as the Reserve Bank of India (RBI), National Small

Industries Corporation (NSIC), private and public banks, venture capitalists/private equity funds, financial service providers and the Ministry of MSME, for discussing the key issues. At the same time CII is also providing the Indian Banks Associa-tion (IBA), with suggestions and recommendations to alleviate the credit problems that MSMEs face.

I do believe that given the Indian entrepreneur-ial mettle, a great future beckons our MSMEs. The CII MSME Outlook Survey for the second quarter of 2009-10 (July-September) reveals that 45% of the respondents have registered an increase in turn-over, 42% registered an increase in production, and 38% registered an increase in order booking vis-a-vis the first quarter of 2009- 2010. This is ex-pected to carry forward into the third and fourth quarters of the current fiscal.

The Council has taken the initiative to introduce a journal that provides key perspectives on the developments in the MSME sector. SME Business has been developed to fulfil this objective. This ini-tiative is a reiteration of the importance that we attach to the growth and development of MSMEs. As our readers, we seek your valued engagement through contribution of your thoughts, ideas and suggestions for this journal and also your support and participation in the various CII MSME initia-tives and activities.

I would be really pleased to be posted with your views and suggestions on Chairman.MSMEcouncil@cii.in

The study highlighted that this positive sentiment is expected to carry forward into the second half of the fiscal as well. It appears that the worst of the crisis is over and a turnaround seems within sight for most of the industry, said CII National MSME Council Chairman Salil Singhal.

The positive shift in demand and turn-over in the second quarter could be at-tributed to the trickle down affect of the various measures announced as part of the stimulus packages introduced by the government and RBI, the Survey said. This includes measures such as reduc-tion in CENVAT, interest rate cut of 0.5% for small and 1% for micro enterprises by PSU banks, besides other initiatives.

rassment to the licensed and bonafide manufacturers.

A major concern of the industry is the lack of provisions to safeguard the inter-ests of the genuine drug manufacturers. There is no mention of definition on sub-standard drugs in the Bill. Hence, if any drug is found substandard the manufac-turer in question might be charged for manufacturing and selling of adulterated or spurious drugs. Though the govern-ment has come out with guidelines in this regard, the ministry did not notify it, so it is not binding on the authorities to follow.

On the CoPP issue also, the SMEs argue that a Uniform Format and not centrali-sation can be the best remedy in a vast country like India. Instead of centralisa-tion, the answer is creation of a common format which can be circulated to all states to which exporters have no objec-tions. Handling 35 states by a centralisa-tion office will always remain a challenge and delays are imminent.

wastage, reduce cycle time, sustain im-provements, become customer oriented, lower manufacturing costs, enhancing product or service quality and capture greater market share by improving their competitiveness. It not just identifies but also removes the cause of defects and variability in manufacturing and busi-ness processes. It brings about dramatic improvements in their bottom-line prof-itability.

Micro, small and medium enter-prises (MSMEs) have reported

increase in production, demand and overall turnover for the quarter ended September, as per a CII survey. The sur-vey revealed that 45% of the respon-dents registered an increase in turnover for September quarter, compared with 38% in previous quarter. Similarly, 42% of MSMEs registered an increase in their production in Q2, compared to 37% in the first quarter of the current fiscal. Also, a higher proportion of respondents reported an increase in order books over the previous quarter and a lower number of MSMEs registered a decline in turnover. About 22% of MSMEs sur-veyed also reported an increase in their exports, compared to only 17% for the previous quarter ended June.

The small and medium pharma enterprises plan to approach the

Task Force on SMEs constituted by Prime Minister Dr Manmohan Singh to reverse two decisions, namely: (i) notification of the Drugs and Cosmetics (Amendment) Act and (ii) centralisation of Certificate of Pharmaceutical Product (CoPP) by the Drugs Controller General of India (DCGI). The SME pharma firms view these changes as an attempt by certain vested interests to eliminate the around 5,000

pharma SMEs in the country. Recently, union health ministry

had notified the Drugs and Cos-metics (Amendment) Bill stipulating

stricter penalties for manufacturing and marketing spurious drugs. Besides, the offence has been made a non-bailable one. By amending the Act, the govern-ment was eager to clean the country's drug market of spurious drugs. But, the industry is wary of the unintended consequences and the resultant ha-

The Small & Medium Business De-velopment Chamber of India (SME

Chamber of India) has urged Indian SMEs to avail the multiple benefits that Six Sigma as an approach has on offer such that they become competitive and pro-ductive enough to not just face the re-cessionary times better but emerge as a winner. The chamber observed that lean Six Sigma, through its empirical meth-ods, can enable Indian SMEs to reduce

Sebi has exempted SMEs from the usual eligibility norms applicable for IPOs and follow-on public offerings. These norms include a minimum pre-

issue networth and profit-making track record. The regulator has ruled out the need for a separate SME exchange and said stocks can be listed on a separate trading platform of an existing exchange. For companies seeking to list on the SME exchange, the cut-off limit in terms of paid-up capital has been fixed at Rs 25 crore. An ET report says companies listed on the SME exchange/platform shall compulsorily migrate to an equity exchange/segment on exceeding the Rs 25 crore post issue paid-up capital limit. Further also, if follow-on offer/rights issue results in triggering of the above limit (of Rs 25 crore) then the company would have to migrate to the main board.

Turnaround within sight: CII Small pharma firms demand fair deal

The Ministry of Micro, Small and Medium Enter-

prises (MSME) has appointed Pune-based Venture Center to op-erate a funding support scheme for entrepreneurs and micro and small entrepreneurs. The centre will support technology commer-cialisation activities of MSMEs whose proposals are cleared by the Ministry.

Venture Center, an initiative of the Council for Scientific & Indus-trial Research (CSIR), is an inde-pendent not-for-profit company hosted by the National Chemical Laboratory (NCL) and funded by the Department of Science and Technology. "If technology entre-preneurs in the field of electron-ics, mechanical, chemical and material science, biotechnology among others want to transform their idea into a product, they will need Rs 10-15 lakh as there is a lot of experimentation involved. We will bridge the gap between the entrepreneurs and the govern-ment by seeking funds from vari-ous government agencies which are perfectly aimed at technology innovation and commercialisa-tion," said Kaushik Gala, Business Development Manager, Venture Center.

Besides, the Venture Center has created a database of vari-ous government schemes which are presently available for en-trepreneurs has listed several government funding schemes for entrepreneurs at various stages of technology commercialisation, ranging from proof-of-concept and prototyping to market tri-als and commercial production. The database can be accessed at http://www.venturecenter.co.in/funding/funding.php.

Kevin McCole, chief operat-ing officer, UK India Busi-

ness Council (UKIBC), was quot-ed in the media saying that UK firms are keen to invest in West Bengal, especially in the IT-SME sector. "This sector has highly skilled workforce with availabil-ity of top-quality commercial infrastructure in the state," said McCole. He said that UKIBC is working with its main agenda of promoting business opportuni-ties in India to the British com-panies as well as promoting UK as the business destination to the Indian companies. "We are put-ting a special emphasis on bring-ing British investments in India as well as in West Bengal in the field of IT & ITeS with a special thrust on SMEs," he said.

Venture Center armed fund MSMEs

UKIBC keen on IT-SMEs

‘Adopt Six Sigma for competitiveness’

IPO eligibility norms won’t apply to SMEs

icy, as it seeks to mitigate the adverse impacts of the global economic crisis. ADB's loan will support that goal by providing Exim Bank with longer term funds for SME development that it has been unable to source through normal commercial financing channels, such as bank loans. The loan facility can be expected to gen-erate employment for 50,000 or more people in strengthened SME export clusters, with an incremental trade volume of $1 billion or more over 10 years, says a media re-port.

The Asian Development Bank (ADB) is extending a $100 million loan facil-

ity to India's state-owned Export-Import Bank (Exim Bank) to boost the export potential of SMEs in poor and disadvantaged regions that have largely missed out on the country's trade boom. The non-sovereign facility will be used by Exim Bank to provide medium- and long-term loans to export oriented client SMEs. The terms of the loan include assurances that Exim Bank will target increased trade and competi-tiveness amongst small exporters in selected states such as Assam, Madhya Pradesh, Orissa and Uttar Pradesh.

India has made the expansion of SME ex-ports, employment and income in its poorest regions a key objective of its foreign trade pol-

ADB booster for SME exports

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Improve Finance Availability

Micro, small and me-dium enterprises (MSMEs) provide employment to over 42 million

people, account for about 45% of the domestic manufacturing out-put and nearly 35% of the country"s ex-ports. Underscoring the criticality of the sector, Prime Minister Manmohan Singh had said in his address at the presentation of National Awards to Micro, Small and Medium En-terprises last year that MSMEs have an important role to play in ensuring the processes of economic growth are inclusive, e m p l o y -

ment-friendly and lead to greater re-gional balance in development.

When such is the significance of the sector, there is every reason to wonder why over 90% of the MSMEs in the country face financial exclu-sion. The global economic slowdown only worsened the situation for many

MSMEs that were dependent on export earnings for their sustenance. As the world

markets contracted, demand fell and payments ceased, leav-

ing several domestic enterprises in financial distress. Many large In-dian companies, which are among the most important customers for MSMEs, too began to delay or de-fault on payments. The RBI-initiated bank rate cuts somewhat reduced the MSMEs burden of interest payments, but staying afloat in business contin-

The MSME sector is the biggest contributor to industrial output, employment and exports. Yet, credit flow to the sector is highly restrictive. Industry heads reflect upon the key imponderables. Read on

Do you see a forward movement on the MSME front?Not quite. The issues being talked about today are just the same as they were over the last five years. What is needed is a holistic approach and due recognition of the fact that MSMEs are part of the value chain of large enterprises. A piecemeal approach has not worked to the benefit of MSMEs.

What is a holistic approach in your view?The challenge lies in creating a robust eco-system for

MSMEs collectively. This eco-system will coalesce with individuals, society, supply-side players and regulatory environment and the solutions that emerge will be du-rable and equitable.

Where should it all come from?The policy matters are well addressed. Affirmative ac-tion from industry is also seen. But, on the supply-side, a lot needs to be done.

Deep Kapuria is Past Chairman, CII National MSME Council

‘We need a robust eco-system for MSMEs'Deep Kapuria

CII presented An Agenda for Development of Indian MSMEs' in a meeting of in-dustry bodies with Prime Minister Manmohan Singh

in New Delhi on August 26. It was cited that measures like reduction in CENVAT rate, interest rate cut, additional liquid-ity creation, export support through interest subvention, reduction in lock-in period under the Credit Guarantee Scheme, additional plan expenditure of Rs 20,000 crore, etc., had helped the MSME sector to tide over the difficult times. However, to sustain the MSME growth in the short to medium term, the following steps were recommended:

l Provide tax benefits to companies to source from MSMEs and adhere to the payment schedule as per the terms of the contract agreed upon with their vendors.

l Facilitate the establishment of an SME exchange without compromising the risk management. For this, SEBI would have to devise separate stan-dards of disclosure and compliance requirements to minimise the cost of listing and compliance.

l To encourage ICT use by MSMEs, there is a need for enhanced depre-ciation on IT products. Government should consider according 100% de-preciation, once in a block of three financial years, for an annual invest-ment in IT equipment and software up to a limit of Rs 25 lakh to the MSMEs. The ICT hardware/software equip-ment for which this depreciation is accorded should be excise duty paid/

cleared and the software is original (genuine)/duly licensed.

l Formulate a Purchase Preference Policy, as per Section 11 of Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, that enables the Central and state governments to no-tify from time to time, preference policies in respect of procurement of goods and services, produced and provided by MSEs, by its Ministries or Departments or its added institutions/public sector enterprises.

l The recommendations made by the Working Group or Labour Laws by the Planning Commission and referred in the Report of the 2nd National Labour Commission must be discussed with industry and the various labour regu-lations be suitably amended.

l The tedious process of land ac-quisition, land use change/conversion and very high cost of the same is a major deterrent for establishing/ex-panding MSME units. It is imperative to strengthen the infrastructure and increase the speed of facilitation for establishing an MSME unit, in line with the Chinese model of low initial capital investment on land and building.

l Effort should be made to adhere to a schedule of introduction of GST w.e.f April 1, 2010 and for this purpose, an-nounce time schedule for each impor-tant step. The most preferred option is a unified, single rate of 12% for GST. This would be the biggest stimulus package for economic revival and the first step towards unification of the Indian market.

l Revise the NPA norms for a pe-riod of 2-3 years to enable banks to restructure the financial facilities of-fered to this sector. There is also the need to revisit the margins required for working capital requirements: higher working capital ratios should be provided by banks with reduced margins from the industry.

l RBI could constitute a group along with the Indian Banks Association and the credit rating agencies to work out a uniform credit rating format and processes.

l Government should declare the possibility to offer differential rate of interest for MSMEs. In the past, to boost exports, differential rates of in-terest were made available.

l Earmark 15% for MSEs (Micro & Small Enterprises) within the overall priority sector lending, as recom-mended by the Working Group on Mi-cro & Small Scale Enterprises for the eleventh Five Year Plan (2007-12).

l All registered enterprises gradu-ating from Micro & Small category to Medium category be treated at par for the applicability of all promotional schemes announced and implement-ed by the Office of the Development Commissioner (MSME).

l Revise the definition of MSME in keeping with international practice. The definition should not be merely on the basis of investment, but also take into number of employees, annu-al turnover, and possibly location.

Agenda For DevelopmentCII presents key recommendations to enhance the competitiveness of the MSME sector

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SEBI to usher in a transparent trading platform, while adding that innovative financing is neces-sary for equitable growth.

Referring to some of the bottle-necks in the finance availability for MSMEs, Mr H P Kumar, Chair-man and Managing Director, The National Small Industries Corp Ltd (NSIC), said that as banks are called upon to be increasingly competitive, the focus on priority sector lending is getting diluted. This conflict has to be managed,

ued to be a major challenge with little or no credit coming their way.

Limited access to capital and credit has indeed been the bane of Indian MSMEs for long. The CII Conference on Finance Availability for MSMEs, held in New Delhi on October 10, addressed the key is-sues that underpin the financing options for the sector.

Stating that the MSME sector is a priority area for CII, Mr Salil Singhal, Chairman, CII National MSME Council, said in his welcome address that suggestions put forth by CII have been taken up for consideration by the 11-member Prime Minister's Task Force on MSME headed by Prime Minister's Principal Secretary T K A Nair.

He said the key imponderables for the sector are:l Limited access to institutional fundingl Limited access to additional

he said.However, some banks have taken

strident steps to enhance credit flow to MSMEs. State Bank of Hyderabad, for instance, is reportedly targeting to increase advances to SMEs by al-most Rs 1,600 crore in the current fis-cal. The banks Managing Director Ms Renu Challu told Business Standard that `our current exposure to the SME sector stands at Rs 6,490 crore and we are looking at a growth of 20-25% in this segment'.

She stated that last year the seg-ment grew by 22% and collateral was not required for loans up to Rs

capital for expansionl Absence of a primary market for MSME companiesl Negligible access to private eq-uity (PE) / venture capital fundsl Absence of a BIFR-like mechanism to address the recovery of sick MSME unitsl Lack of access to external com-mercial borrowing (ECBs) / foreign currency convertible bonds (FCCBs).

1 crore as per RBI guidelines. We have restructured and rescheduled Rs 4,000-crore loans to the SME sec-tor till June 2009 to enable them to cope with the economic downturn, she said.

Similarly, Bank of India has opened SME hubs in many zones, and plans to open them in all 48 districts where it is the lead bank. The bank is setting up credit counseling centres in differ-ent parts of the country to assist peo-ple who have borrowed beyond their means of income, create awareness about financial management, counsel those who are struggling with current

Stating that MSMEs are heavily de-pendent on banks for financing, he said the strangulation of NBFCs over the years has dried up alternative funding sources for the sector.

Apart from bank credit, MSMEs need easy access to risk capital to finance both start-up and expansion activities.

The fund requirement was partially addressed by the Government with the setting up of a Rs 2,000-crore fund under SIDBI, provided by Budget 2009-10, but its impact on the sector is not ascertained yet.

At the core of MSME financing is the need for an efficient rating system. While most banks have developed their own rating system, Mr Singhal said there is a need for a common ap-proach to credit rating of MSMEs.

Noting that procurements and de-layed payments are key concerns for MSMEs, he said a governance code on procurements and payments has been developed by CII which is cur-rently under review.

He said that the CII National Com-mittee on MSME has also approached

What kind of leadership is CII expected to provide to MSMEs?CII plays an active role in providing critical inputs and ideas for the sector's growth and development. We also take up advo-cacy on behalf of industry on issues linked to policies, etc. At the same time, we urge MSMEs to think out of the box to forge ahead in business.

As risk capital is not forthcoming for most MSMEs, what is the way out?As such, SIDBI has a Rs 2,000 crore fund. On similar lines, there

could a Rs 5,000 crore fund in the form of venture capital to fi-nance entrepreneurs with bankable ideas. The resources could go in as capex, to be paid back as repayment for loan when the business breaks even. Such a hybrid system might work well for Indian MSMEs. The returns could be set to PLR plus 2-3%. This could be modeled on the lines of the Department of Science (DST) providing 50% funding for promoting new ideas. What are the other imperatives?All approved schemes announced by the government should be implemented in right earnest.

What are the imperatives for MSME growth?The present legal system allows misuse of facilities. Some MSMEs befriend bankers and obtain credit on the basis of fic-titious businesses. Hence, scams and frauds galore. There is unfortunately no fear of law.

Do you think a rating system will improve matters?The rating system is a cumbersome process. First, the micro enterprises need to be educated on the processes. Besides, clarity is needed on the evaluation process and the param-eters for the same. The entrepreneurs have to be groomed for taking calculated risk, and to make them credit worthy. The focus should be on how to quality for credit and how to develop progressive business models.

Entrepreneurs need to know which window to knock on and figure out documentation.

Above all, both lendee and lendor should have fear of law.Unfortunately, there is no BIFR for small enterprises. There are more casualties for MSMEs due to limited access to capi-tal. It is important to institute a robust mechanism here.

What was your journey like?We entered the fray as an auto component manufacturer in 1978 addressing a limited market. We looked at the export market up-front and became a JV partner to tap the German market. Then, India's brand reputation was low and the domestic supply base limited. We told our buyers to pay only after we met their accept-ed standards. This led to confidence building. Now we propagate the potential for MSME exports. India is a global player today. Even China is a buyer now. We produce at 60% of global average cost. The cost arbitrage will work to our advantage.

What are the show-stoppers?There is a plethora of paperwork and compliances. Meeting the archaic laws is unproductive work.

What advise would you give upcoming entrepreneurs?Simple. Know your product. Know your markets. Understand technology. Reach out to global markets. In terms of technol-ogy, IT should be used not only for administrative purposes but also for manufacturing.

Salil Singhal is Chairman, CII National MSME CouncilKiron Chopra is Chairman, CII Northern Region MSME Subcommittee

‘Develop a hybrid funding model'Salil Singhal

‘Rule of law should prevail'Kiron Chopra

Apart from bank credit, MSMEs need

easy access to risk capital to finance both start-up and expansion activities

(L-R): Mr H P Kumar, CMD, NSIC; Mr K C Chakarbarty, Dy. Governor, RBI; Mr Salil Singhal, Chairman, CII National MSME Council; and Mr Marut Sengupta, Senior Director, CII

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turing is another key concern for MSMEs, Mr Kumar said the prime lending rate (PLR) is too high and diverse (14-17%) and financing to MSMEs is going at a high 9-10%. The PLR is too high and there is confusion between banks on rates. Some benchmarks are needed in this regard, he said.

Credit rating is yet another con-cern area for MSMEs. As such, RBI has prescribed that all unrated ex-posures of banks over Rs 50 crore migrating to BASEL II w.e.f. March 31, 2008 would carry a 150% risk weight for the financial year 2008-09. The threshold was brought down to Rs 10 crore w.e.f. April 1, 2009. This level too can come down further, said Mr Kumar.

From the bankers perspective, with the introduction of Basel II norms stipulating that funding of firms by banks must be linked to ratings by independent agencies, banks can now justifiably claim to have a well-researched rule of thumb for initial filtering of SME loan-seekers. Many bankers can even insist that those small enter-prises that do not necessarily come under the purview of Basel-II must also get their ratings. Considering

financial problems, and spread fi-nancial literacy amongst farmers/weaker sections of society, prone to problems in managing credit.

Private banks too are gravitating towards the MSMEs. For instance, ICICI Bank, expects to increase revenues from its SME business segment by 15-20% in the current financial year.

the fact that credit accessibility is the sore point of the SME sector, the im-pact of compulsory rating on credit deserves careful scrutiny.

However, for SMEs, mostly operat-ing under hard budget constraints, credit rating imposes additional costs and hence must bring tangible ben-efits to the firms. Logically, a high credit score improves the chances of securing external finance and also boost the confidence of the entrepre-neur since a high score essentially confirms the soundness of the firm's internal systems and processes. In ad-dition, a good score helps in building reputation among buyers, suppliers and other stakeholders and thus en-hances the firm's brand value.

Though Basel-II can potentially as-sist the banks to increase their finan-cial and operational risks-mitigating ability by providing better information on the SMEs, there is also a real dan-ger that it may end up reducing credit flow to SMEs, cautions, Mr Abhijit Bhattacharya, Dean, Globsyn Business School and director, Asian Institute of Family Business, Gandhinagar.

In an article published in The Eco-nomic Times, Mr Bhattacharya wrote: A good rating by itself does not en-sure investment, because rating is not

The banks SME loan book increased marginally to Rs 7,924 crore in the quarter ended June 30, 2009, from Rs 7,845 crore in the April-June 2008 quarter.

Nevertheless, Mr Kumar said at the conference that reduction in the share of credit flow to MSMEs is a concern to be addressed. As such, banks have met the government tar-get of directing 20% credit flow to

a recommendation to invest. Actual investment decision depends upon the combination of various factors including credit history, pricing, in-novation, market volatility, etc., and both the creditor and the borrower must come to an agreement regard-ing structuring, monitoring or enforc-ing the exchange. It is quite possible that even after securing a high score (say, AAA) a borrower still may not be able to access cheap credit. The situation can be much worse for firms with low credit rating, particularly for those firms whose low score is not always a reflection of their actual po-tential.

He noted that many of these firms come with their innovative projects with associated high uncertainties and ambiguities. A low credit rating can instantly goad an average risk-averse banker to look at the entre-preneur with a much higher level of suspicion from the very beginning and thus impose a very difficult hur-dle criteria.

Expressing his apprehension on the current credit rating of MSMEs, Mr Kumar said the RBI has so far recog-nised only four credit rating agencies to rate thousands of MSMEs. It would help if more credit rating agencies

the MSMEs, but the percentage of to-tal credit flow has declined, he said, adding that there should be a sub-target for the micro segment.

He observed that while 40% of all credit is going into housing, banks seldom advertise the credit facilities available for MSMEs which indicates the general reluctance to provide credit to the sector.

Stating that interest rate restruc-

What initiatives have you taken to address the credit needs of MSMEs?IDBI has been pro-active in meeting the credit needs of MSMEs. In two years, we have disbursed Rs 13,000 crore to SMEs. Further, we maintain dedicated SME branches in several cities across the country. This will go up to 40 by the year-end. Also, our SME credit products are very client-friendly. Notably, it takes mere 10 days from loan sanction to disbursement.

How is the question of risk capital for MSMEs to be addressed?As the recession ends, VCs will resurface to provide a fil-lip to MSMEs’ risk capital needs. IDBI has set up a Rs 10 crore fund. The repayment terms are: 1% surcharge in the first year; repayment at PLR in the second year onwards.

Which are the promising sectors in the MSME universe?At the outset, auto ancillary, pharma, chemicals, light engineering, cement, constructions, educational institu-tions, and hotels look promising.

How do you reach out to MSME's?A relationship based approach should work. SMEs have not taken benefit from the credit guarantee scheme.

What advise would you give both lenders and en-terprises?A pro-active approach from both sides, trust-based cli-ent-vendor relationship, prudence in lending, shorter turnaround time, and friendly hand-holding.

‘VCs will surface to provide a fillip to MSMEs’ risk capital needs’ T R Bajalia

T R Bajalia is Executive Director, IDBI Bank

A buyer seller need in progress at the conference of finance availability for MSMEs

The government has a lot of schemes for innovators and entrepreneurs but not many know about i t . Kaushik Gala, Business Development Manager, Venture Center, Pune

There are many avenues avai lable for MSMEs to borrow funds from, including commercial banks, but they often f ind i t diff icult to borrow at short notice, and particularly col lateral-free loans. It i s even more diff icult for f irms without a proper credit history.

Suresh K Krishna, Managing Director, Grameen Koota

Entrepreneurs should look to completely e l iminate wastage in their manufacturing process . They should implement high standards of quality control measures, in which trade bodies could extend valuable ass istance.

D. Rajendran, Chairman and Managing Director, Tamil Nadu Small Industries Development Corporation (TANSIDCO)

Exporters in the small and medium sector are not gett ing dol lar credit , and if made avai lable, the same is much above the RBI's f ixed rate of 3 per cent plus benchmark global interest rate (LIBOR).

A Sakthivel, President, FIEO

It i s the government's duty to create infrastructure and not sole ly depend on Public Private Partnership (PPP) models . Besides, a s ingle-window clearance system in approving projects i s the cal l of the hour.

Irshad Mirza, Chairman, Mirza International

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are empanelled for this.He also focused attention on

the credit guarantee mechanism which has not been fully tapped by MSMEs. The Credit Guarantee Fund Trust for Micro and Small Enterpris-es (CGTMSE) was set up by Ministry of Micro, Small & Medium Enter-prises (MSME) and Small Industries Development Bank of India (SIDBI) in August 2000."The Government and SIDBI as settlors of the Trust have committed to raise a corpus of Rs 2,500 crore in the ratio of 4:1 to provide CGTMSE a sound financial base. CGTMSE operates the "Credit Guarantee Scheme" (CGS) which fa-cilitates provision of collateral-free and/or third party guarantee-free credit facilities to units in the micro and small enterprises sector. Yet, banks are reluctant to lend. What is required is greater awareness re-garding this facility, said Mr Kumar.

He also said that while venture capital funding is in vogue for over 15 years, only 5-10% of this is go-ing into MSME sector. The majority of such funding goes towards exist-ing companies and barely anything for new ventures. In his view, the key show-stoppers are: (i) high perceived risk (ii) lack of under-standing of MSME sector (iii) lack of a defined exit route (iv) absence of an MSME trading platform (cost of listing on national exchanges is prohibitive) (v) and high cost of fund raising.

On a different tack, Reserve Bank of India (RBI) Deputy Gover-nor KC Chakrabarty said despite the global financial crisis, there was enough liquidity in the Indian banking system and banks were willing to extend credit to viable projects. There is no dearth of money in the system, he said.

Addressing the industry's con-cerns that banks were not lending to the MSME sector, he said credit flow to MSMEs had doubled from Rs 1,27,000 crore in 2006-07 to Rs 2,57,000 crore in 2008-09. In 2007-08, credit flow to the sector was Rs 2,13,000 crore. Today, there is no bank in this country that will refuse

money. `Your problem is you do not re-quire credit, you require money. Credit has to be self-liquidating on a viable project and has a cost', he said.

On the question, who will give risk capital, he said some industry heads should emerge as angel investors for MSMEs, adding that banks give debt finance and cannot give market risk linked finance. If it is too risky for you, why will banks burn fingers, he asked.

Equity will eventually come about but the MSMEs need to be groomed for it, he said.

Regarding credit rating of MSMEs, he said that 90% of the MSMEs can-not be rated due to lack of informa-tion base. As such, the credibility of rating agencies is also at a new low. There is instead a need to develop a scoring model.

However, he said that with rating or scoring models in place, banks will still do their own assessment though the process can be simplified.

Responding to the issue of interest rate restricting, he wondered why in-dustry is talking about PLR being high as the rates have been liberalised and cannot be regulated by RBI. Competi-tion alone will not bring down cost of funds, he said, adding that the cost of alternative funds is in fact double. RBI will nevertheless ensure the rates are not exorbitant, he said.

Mr Chakrabarty said that MSMEs

should collectively ensure self-regu-lation in repaying credit.

Responding to Mr Kumar's com-ments, he said that credit flow to MSMEs in percentage terms is not an issue as banks are lending more to infrastructure and retail sectors. The question is, is credit flow to MSMEs increasing.

He said what is necessary to know is, what is the credit requirement of MSMEs. He said he would welcome a proposal in this regard.

Mr Chakrabarty suggested to banks that they should not be as aggressive as venture capitalists and must do their own assessment before advanc-ing loans without depending on the credit rating agencies.

He added the country needs a ro-bust MSME sector to grow at a rate of 10% for the next 20 years. There are 30 million MSMEs in the country. The SME sector has showed an av-erage growth of 18% in the last five years. About 98% of the manufactur-ing units are in the SME sector.

He said that MSMEs are the basis of MNCs. To go global, MSME is the route to take. The spirit of entre-preneurship can only be sustained through MSMEs.

We need to create local demand in times of global economic slowdown, This can be done by MSMEs, he said.

He also said that 96% of the MSMEs are faced with financial exclusion. For example, a vegetable vendor pays 3,600% annual interest for do-ing business. But, he manages to do business as his returns are 10,800%. 95% of the villages in India have no bank branches. This financial exclu-sion needs to be addressed, he said.

Mr Singhal said the future lies in good governance, even as the risk capital challenge continues. If Rs 60,000 farm credit could be waived, why not create a risk capital fund for MSMEs which can be managed by a designated NGO, he asked.

Finance availability to MSMEs is a multi-pronged issue no silver bullet can resolve. All stakeholders will have to come on a common platform and cre-ate a robust eco-system that runs ef-ficiently and according to rule of law.

There is a perceptible increase in global interest in Indian MSMEs evidenced by the re-cent India visit of a high-pow-ered Romanian delegation to

promote collaborations between Roma-nian and Indian SMEs. Senior officials from the Romanian ministries of SME, commerce and business environment and economy and industry leaders from the metallurgy, central power plant, en-vironment protection, material handling equipment, infrastructure, oilfield equip-ment and hydro power equipment sector were in New Delhi to hold B2B meetings with their Indian counterparts.

Coinciding with the delegation's visit, CII organised an interactive session in New Delhi on October 26. Addressing the gathering, Mr Radu Zaharia, Direc-tor General, Romanian Ministry of SME's, Trade and Business Environment (Foreign Trade Department), said that there are five strong reasons to invest in Roma-nia, namely, strong market potential, a functional market economy, high skilled labour force, significant economic growth and a competitive tax policy.

Mr Zaharia pointed to Romania's im-proved physical infrastructure as a ral-lying point for foreign investments. This

includes a well-developed networks of mobile telecommunications in GSM sys-tems, highly developed industrial infra-structure, including oil and petrochemi-cals, branch offices and representatives of various well-known international banks, newly developed highway infra-structure, commitment to improve the highway infrastructure to EU standards, and extensive maritime and river naviga-tion facilities.

The potential areas for investment were cited as manufacturing, automotive parts, IT and communication, electric and electronics, wood processing, construc-tion materials, textile, food processing, infrastructure, and outsourcing and lo-gistics.

Mr Salil Singhal, Chairman, CII National MSME Council & Chairman, Secure Me-ters Limited, and Ms Amelia Popescu, Director International Relations, The General Confederation of the Romanian Industrial Employers (UGIR-1903) also ad-dressed the session.

Among the Romanian companies look-ing for collaborations with Indian MSMEs, Uzinsider Techno SA, a leading private manufacturer with activities related to projecting, manufacturing and trading auto spare parts for the Romanian af-

termarket, first-assembly auto parts for Dacia Group Renault and parts for rolling stock, and oil equipment for internal and external customers, is looking enter into a joint venture with an Indian manufac-turer of agricultural equipment and parts for the opening of an assembling factory in Romania.

Likewise, UTI Systems SA, with its ex-pertise in general contracting for civil works, electro-mechanical and sanitary installations, development of intelligent traffic systems, traffic management and automation projects, turn-key security sys-tems solutions for critical infrastructure, emergency management, border security and defense systems, and complex IT & C systems and solutions, advanced tech-nologies, and hi-tech products, is looking for potential customers in the transport sector (airports, ports, railways, highways, roads and public transport), power (power stations, substations and transmission net-work), oil and gas (refineries storage, tank farms, gas stations, pipelines and pump stations), and administration and govern-ment (local administration , Central gov-ernment development programs for min-istries, national companies and national distributed infrastructure).

Further details on investment oppor-tunities in Romania may be obtained from the: l Ministry for SMEs, Trade, Tourism and Liberal (Foreign Trade Dept), Bucha-rest, 16, Campineanu St., Ph: 00-40-21-4010560, e-mail: dao@dce.gov.ro; web-site: www.dce.gov.ro

l Romanian Center for Trade Promotion, Bucharest, 17, Apolodor St., Ph: 00-40-21-3185067, e-mail: office@traderom.ro, website: www.traderom.ro

l General Confederation of the Romanian Industrial Employers (UGIR-1903), Bucha-rest, 27-29, George Enescu St., Ph: 00-40-21-3100027, e-mail: presedinte@ugir-1903.ro, website: www.ugir-1903.ro

Destination RomaniaRomanian industry looks to enter into JVs with Indian MSMEs

‘Despite the global financial crisis, there is

enough liquidi-ty in the Indian

banking sys-tem and banks

are willing to extend ex-

tend for viable projects.’

(L-R) : Her Excellency Valerica Epure, Ambassador of Romania in India addressing the seminar on Opportunities in Romania for MSMEs, (Seated) Ms Dorin Stefan Refca, Counsellor (Asia-Oceania Division), Government of Romania, Ministry of SME, Trade and Business Environment, Ms Amelia Popescu, Executive Director, Employers' Organization of Romanian Oil Industry, Mr Salil Singhal, Chairman, CII National MSME Council, and Mr Radu Zaharia, Director General, Romanian Ministry of SMEs, Trade and Business Environment (Foreign Trade Department).

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The majority of the thirteen million MSMEs in India employing over 31 million people are embattled with technological obsolescence that seriously undermine their com-

petitiveness in the domestic and global mar-kets. The Government has focused attention on promoting the technological upgradation of MSMEs by setting up dedicated funds and schemes and through assistance for obtain-ing quality certifications. However, the onus rests of technology adoption clearly rests on the individual enterprises.

The Sub-Group of the MSME Task Force has urged the Government to facilitate, in-centivise and support technology transfer to the MSMEs. Government research and development (R&D) institutes have also been invoked to channel appropriate and afford-able technologies to the MSMEs. It has been suggested that a cluster approach would

The US Small Business Ad-ministration (SBA) is pro-posing increases in the size definitions for three broad commercial sectors. The

proposed increases cover size stan-dards for 71 different types of busi-nesses, two-thirds of them in retail trade sectors. The rest are in accom-modations and food services, and other services.

The changes, if adopted, will ex-pand eligibility to small businesses and help them gain access to SBA's financial assistance, contracting and other programmes.

"SBA has undertaken a comprehen-sive review of our size standards to ensure they are current and reflect changes in the economy and the mar-ketplace," SBA Administrator Karen

help many MSMEs to manage the relatively high cost of technology upgradation. Also, the existing mechanism of providing training through industrial training institutes (ITIs) and polytechnics needs to be strengthened. Along side, the MSMEs themselves are testing tech-nologies that will help them to move up the value chain.

Going onlineRecent trends indicate that MSMEs are indeed warming up to new technologies, especially in the IT spectrum, to boost business. They are interested to leverage the Web technologies to reach people and markets beyond their immediate circle but quite often they are unaware of how to go about it. Country Man-ager of VeriSign India, Mr Shekhar Kirani was recently quoted in the media saying, ’They are not interested in finding out how they can establish an online presence, instead lament

Mills has said. "SBA's lending and government contracting programmes provide effective opportunities for small businesses to help them ex-pand and create jobs, especially dur-ing these tough economic times. This review and proposed changes will help make these critical programmes available to more small businesses and ensure SBA is in a position to be a real partner in helping our nation's entrepreneurs and small business owners succeed."

SBA recognises that in some in-dustries, existing size standards have been affected by changes in industry structure, market conditions and busi-ness models. SBA is therefore con-ducting a comprehensive review of all its small business size standards, and these three proposed rules are

that no one has reached out to them.The Hindu Business Line recently quoted

Mr Kirani as saying that most MSME profes-sionals use the Net to access mails. They have still not moved from email to Web, whereas the market dynamics is witnessing a sea change, particularly in the way products are consumed or sold on the Web. It is time the SMEs took the online route to generate leads, at least from an efficiency perspective. They may not be interested to grow, but if they do not grow, they will not be able to sustain in business in the long run, he said.

The business daily reported that there are an estimated 7.6 million registered SMEs in India but only around 1.2 million websites, in-dicating poor penetration online in the sector.

IT spendYet, a greater number of MSMEs are report-edly entertaining thoughts of adopting IT

the first in the series. The body is ex-amining every industry to ensure that existing size standards are based on current economic data and SBA will propose to revise those where it be-lieves it is necessary. The newly pro-posed rules give the public an oppor-tunity to review and comment on SBA's proposed standards as well as on the data and methodology that SBA uses to evaluate and revise size standards.

Before this comprehensive review, the last overall review of size stan-dards occurred more than 25 years ago. Since then, most reviews of size standards have been limited to in-depth analyses of specific industries requested by the public and federal agencies. SBA also makes periodic inflation adjustments to its dollar-de-nominated size standards.

“There’s only one corner of the Universe you can be certain of improving, and that’s your own self.” -- Aldous Huxley, Novelist

More The MerrierUS SBA proposes revision of size standards to expand opportunities for small biz

Go for GrowthAdoption of appropriate technologies is central to MSMEs’ long-term growth and sustainability

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tools to improve their productivity levels and quality standards. The Economic Times recently reported that SMEs in the country are trim-ming flab accumulated over the years to become more efficient and competitive. The daily quoted Mr Ramesh Narasimhan, director, general business, IBM India/South Asia saying that midsize companies are investing in the future. They are making changes and taking risks to survive, compete and thrive when the economy improves.

IT service vendors are hence making the most of the opportunity by educating small businesses about the potential benefits of a robust IT system. Mr Thomas Abraham, Managing Director, Sage Software India, a company which provides CRM, ERP, sales force automation, payroll and lead management services, was quoted saying the SMEs are wiser now. They want to know if a new ERP or CRM would work for them.

Encouraged by this trend, IT majors like IBM and Cisco are moving rapidly in the direction of SME clusters and cities and towns where small businesses sprout. For instance, Cisco is expanding its presence in Tirupur through its WebEx collaborative software that allows com-panies in this textiles cluster to showcase their products, talk to clients and importantly, com-municate between themselves in real time over video-conferencing.

The Economic Times reported that the Tiru-pur cluster companies, which had exports of about Rs 11,000 crore last year, spend about Rs 200 crore on IT every year, which mostly includes ERP systems. The collaboration soft-ware, which comes for Rs 3,500 for a monthly subscription, can be accessed over mobile phones as well.

RoboticsRobotics and automation is also becoming somewhat visible in the MSME sector. Many SMEs are seen to be gearing up to invest in ro-botics to increase their global competitiveness. The increasing demand for quality from cus-tomers, especially global customers, also justi-fies the use of robots. In two prominent indus-tries in the SME sector’forging and diamonds, the use of robotics can provide a major boost. The Economic Times reported that SMEs form a major chunk of the Rs 10,000-crore forg-ing industry in India and exports account for about 10’15% of the total output. Robots can contribute substantially towards rationalising

cost-effective automation solutions in all areas of the forging industry.

Robotics can be especially useful for applica-tions in harsh ambient conditions, as these appli-cations are unsafe for human beings to perform.

Trends suggest that the diamond industry is moving towards high-precision workmanship. Robots can play a critical role in this industry as well. The diamond industry is pegged at Rs 60,000 crore and SMEs represent over 25% of the pie, says The Economic Times.

The report also says that technological im-provements in communications (remote op-eration and optimised human-machine data-processing interfaces) will lead to increased user-friendliness and meet the requirements of a much wider group of customers.

SchemesAs stated earlier, the Government introduced various schemes to promote the adoption of technology in the MSME sector. The notable schemes underway and on the anvil are:l Technology and Quality Upgradation Support to MSMEs (TEQUP): The National Manufacturing Competitiveness Council (NMCC) developed a National Manufacturing Competi-tiveness Programme (NMCP) to support MSMEs in their endeavour to become globally competi-tive. TEQUP has been conceptualised as a com-ponent of NMCP. The objective of the scheme is to sensitise the MSMEs in the manufacturing sector to upgrade their technologies, use en-ergy efficient technologies to reduce emissions of greenhouse gases, improve their quality and reduce cost of production etc. towards becom-ing globally competitive.l Promotion of Information & Communi-cation Technology (ICT) in Indian MSME Sector: This programme is currently under consideration. Under this, MSME clusters with

high quality production and export potential shall be identified, encour-aged and assisted in adopting ICT ap-plication to achieve competitiveness in the national and global markets. The broad activities planned under the scheme include identifying tar-get clusters for ICT intervention, set-ting up of e-readiness infrastructure, developing web portals for clusters, skill development of MSME staff in ICT application, preparation of lo-cal software solution for MSMEs to enhance their competitiveness, construction of e-catalogue, e-com-merce etc., and networking MSME cluster portal with a national level

portal to outreach MSMEs into global markets.l Design Clinics Scheme: The main objec-tive of the Design Clinic would be to bring the MSME sector and design expertise on a com-mon platform, to provide expert advice and so-lutions on real time design problems, resulting in continuous improvement and value addition for existing products. It also aims at value add-ed cost effective solutions. The broad activities planned under the scheme include creation of design clinics centre along with four regional centres for intervention on the design needs of the MSME sector. Further, these centres will have linkages with engineering, management, design institutes of the country. The scheme will be implemented in a Public Private Part-nership (PPP) Mode. The scheme is under final stage of approval. l Marketing Assistance and Technol-ogy Upgradation Scheme for MSMEs: The broad activities planned under the scheme include technology upgradation in packaging, skills upgradation/development for modern marketing techniques, competition studies of threatened products, special components for North Eastern Region (NER), identification of new markets through state/district level, local exhibitions/trade fairs, corporate governance practices, marketing hubs and reimbursement to ISO 18000/22000/27000 certification. The scheme will be implemented in a Public Pri-vate Partnership (PPP) Mode. The scheme is under final stage of approval.

The MSME sector has a key role cut out in the current process of economic recovery. The adoption of appropriate and affordable technologies will en-able the manufacturing MSMEs to scale up their competitiveness in the world markets and develop into large indus-trial houses.

What do you most identify Indian suc-cess with? Cricket? Bollywood? Fashion queens? We often find

ourselves asking this question dur-ing our outreach to small and medium business customers. And the unequivo-cal answer - undoubtedly Indians love cricket, Bollywood; there are success-ful fashion queens. But if there is one thing that has put India on the global map, it is business success.

It is the passion, commitment and perseverance of Indian entrepreneurs, big and small, that has transformed In-dia into the success story it is today. This is not just about the marquee names that dominate the media with their global acquisitions but about many unsung heroes in far-flung parts of the country, doing business quite

successfully and profitably across dif-ferent parts of India and even across countries.

Besides their entrepreneurial spirit, a common denominator is the use of technology as a key driver for busi-ness development and growth - to drive economies of scale by looking for growth beyond geographical boundar-ies.

SMBs are the hidden engine of the Indian economy. According to AMI-partners, a third of the global SMBs are located in Asia Pacific out of which Chinese, Korean and Indian SMBs make up more than 50% of the Asia Pacific spending. India has about 7.6 million SMBs that are propelling India towards economic and social development. Ad-ditionally, more than 500 million new businesses will set up shop over the next five years (ICSB). Many of these

new enterprises will come from fast-growing economies such as the BRIC countries (Brazil, Russia, India and Chi-na), and others including Israel, Tur-key, Indonesia, Vietnam, Poland and countries throughout Latin America.

Technology and the way it is used is proving to be a key differentiator to-day. However, it is absolutely impera-tive that the SMB owners are able to use technology in a way that is simple and easily managed, offering clear ROI and can be seamlessly scaled up as business grows. This means:

l Technology solutions that Do Not demand huge cash investments, recog-nise cash flow constraintsl Technology that offers open stan-dards that Do Not lock in the company with one vendor with proprietary tech-nology

Innovation & IT – Propelling SMBs To New Heights

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Manufacturing MSMEs in the country are gov-erned by several labour laws and regulations purported to protect the

interests of workers. However, many of these labour laws have become archaic and detrimental to the interests of all stakeholders in the sector. CII has put together certain suggestions for sim-plification of labour laws governing the MSMEs, which are presented below:

The Factories Act, 1948: (i) For in-dustries not involving hazardous pro-cess as defined in Section 2(cb) of the Act, the term "Factory" should mean any premises including the precincts thereof (a) whereon 50 or more work-

ers are working, or were working on any day of the preceding twelve months, and in any part of which a manufactur-ing process is being carried on with the aid of power, or is ordinarily so carried on, or (b) whereon 100 or more work-ers are working, or were working on any day of the preceding twelve months , and in any part of which a manufac-turing process is being carried on with-out the aid of power, or is ordinarily so carried on; (ii) For industries involving hazardous process as defined in the Act, the term "Factory" should means any premises including the precincts there-of (a) whereon 25 or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing

process is being carried on with the aid of power, or is ordinarily so carried on, or (ii) whereon 50 or more workers are working, or were working on any day of the preceding twelve months , and in any part of which a manufacturing pro-cess is being carried on without the aid of power, or is ordinarily so carried on.

However, CII has maintained that em-ployers in such cases should take care of the health, safety and welfare of the workers working in their unit and sub-mit a declaration to the effect to the Government.

Further, to address the issue of fab-ricated over-time charges, CII has sug-gested a revision of Section 59 Clause (I) under the Factories Act 1948 to the effect that a worker working in a factory

Time to ActArchaic labour laws are seen to fetter the growth and competitiveness of most manufacturing MSMEs in the country. CII recommends simplification of several labour laws governing the sector

l Technology that offers low total cost of ownership from manageability and service options right down to efficient power management. l A company that partners with you as an IT consultant, offers great service and does not cost as high as a consul-tant.

Dell, as a company, had modest be-ginnings when Michael Dell started it in a college dorm. The humble beginnings helped realise the limitless potential of small businesses across the world. Ful-ly aware of the challenges that small and medium sized business face, Dell recognises the relevance of technol-ogy solutions that are simple, reliable, affordable, scalable and focused on helping small businesses keep their customers happy.

`Take your own path', a campaign launched first in India in October 2008, is aimed to reach out to the Indian SMBs with role models, offerings and an online portal on how technology can help. Prominent business person-alities - entrepreneurs like the pioneer of India's BPO industry, Raman Roy, CEO of Quatrro, P Rajendran, Co-found-er and CEO of NIIT, Neeraj Roy, CEO & MD of Hungama, India's premier digi-tal and mobile entertainment company to name a few - have done something different and heroic and have made a

mark for themselves. The campaign not only recognises these heroes but also celebrates the spirit of entrepre-neurship across the country.

An ever increasing number of SMBs are realising the value that technology adoption has to offer. However, more often than not they don't always know how to go about it. www.takeyourown-path.com, an online community por-tal for the SMBs not only offers small businesses a comprehensive portfolio of products and services but a way to access and optimise these.

There is no dearth of innovation in a country like India. Innovative use of technology is what will take Indian businesses to their pinnacle. Small businesses, in India and across the world, are increasingly leveraging technology in innovative ways to reach out to their customers effectively. A simple tool like social media platforms are being used to tap and communi-cate with consumers and potential customers. The spirit of innovation is the backbone of any business. It gives impetus and ignites enthusiasm.

Wiggly Wigglers, 2008 global and U.K. national winner of the Dell small business excellence awards, is a natu-ral gardening supply company. They earned recognition for using social media to grow beyond the borders of

their small town to ultimately serve 90,000 customers worldwide. Technol-ogy powered their marketing strategy and helped them reduce their adver-tising budget by 80%. This is a main-stream business using technology in innovative ways to engage customers and grow.

The Small Business Excellence awards recognise and honour small businesses for their innovative use of technology and how technology is helping them better serve their cus-tomers. Indian businesses too can showcase innovation and technology best practices. Open to small business in India with 100 employees or less, the awards give small business own-ers a chance to win up to US$50,000 in Dell solutions and a meeting with Dell Chairman and CEO, Michael Dell. Small business owners can log on to www.dell.co.in/ceaward to register.

In the current economic slowdown, SMBs will propel global economy. The current times stress on an effec-tive adoption of technology solutions among SMBs in India and across the world which means going beyond the routine investment in PCs and laptops. It is a combination of innovation and technology that will catapult Indian entrepreneurship and economy to its pinnacle.

Charting own pathDell's has made serious inroads into the SME sector. In October last year, its market share in the segment was just 3.2 per cent. A year later, the figure has im-proved to 5.2 percent a creditable performance con-sidering that PC sales have been hit in this period. Dell says the credit goes to its campaign -- Take Your Own Path -- launched in October, 2008. It was the first such campaign by Dell anywhere in the world as the company mainly relied on direct marketing earlier. Mr P Krishnakumar, SMB Product Marketing for Dell Asia-Pacific Japan (APJ) told Business Standard re-cently that enterprise clients plan at least six to eight months in advance for their IT requirements, but sell-ing to SMEs was a challenge as they usually follow an unstructured buying pattern.

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India Global Summit on MSMEs 2009

The 2009 edition of the India Global Summit on MSMEs will get underway at The Lalit in New Delhi on November 21. The two-

day event will see the presence of decision makers and planners from international, national and state gov-ernments, NRIs and PIOs, industry leaders, potential investors and en-trepreneurs, financial institutions, banks, consultants, academia, media, diplomats, bureaucrats and represen-tatives of MSMEs Associations in India and abroad.

The Summit's with its main theme being Building the next generation

MSMEs will see focused discussions on themes such as:l Integrating with Global Value Chainl Investing with Technology upgrada-tion ICT adoption and R&Dl Dealing with Economic Cycles: How to adapt the changed economic cy-cles?l Capital Requirement: What is the right mix of credit and risk capital?l Developing people power: Challeng-es and solutions.

The Summit will also have one-to-one Buyer Seller Meets between MSMEs and OEMs, large corporations, and PSUs.

An MSME Mart will be set up at the

venue to showcase new and innova-tive products, technologies, machines, equipment and tools. The Mart will also give the exhibitors the opportunity to display their competitive strengths and capabilities in providing business solu-tions to SMEs in various fields.

Overseas participants are expected from the US, China, Japan, Singapore, Korea, Taiwan, Russia, Italy, the UK, Germany, and CIS, ASEAN, West Asian, Latin American, African and European countries.

Last year's summit saw participa-tion of around 300 delegates from 30 different countries and 234 business meetings were held at the venue.

Published by: The SME Division, Confederation of Indian IndustryThe Mantosh Sondhi Centre, 23, Institutional Area, Lodi Road, New Delhi-110 003, IndiaTel: +91-11-2462 9994-7 Fax: +91-11-2463 3168, Email: marut.sengupta@cii.in, Website: www.cii.in

for more than 48 hours in any week be entitled to overtime wages at the rate of one and half times (instead of double the rate) his ordinary rate of wages.

To make available skilled and trained manpower over a longer period, the permissible number of hours of overtime under Section 64 sub-section (4) clause (IV) be raised from 50 to 120 a quarter. This will help the firms to meet their time-bound commitments and also help the workers to earn extra income.

Employees working in a su-pervisory or managerial cat-egory should be out of the purview with regard to the provisions under Section 59

The Employees Provident Funds and Miscellaneous Provisions Act, 1952: Under Section 1 sub-section 3(A), the Act may be applicable to a factory engaged in any industry specified in Schedule I and in which 50 (as against 20 now) or more persons are em-ployed.

Also, under Para 26 of Employees PF Scheme 1952, an employee (including part-time workers and those employed by or through contractors) shall be enti-tled to become a member of the scheme after six months of service from the date of joining the factory or the other establishment. At present an employee becomes the member of Provident Fund on the day when he entered into em-ployment, even on casual basis.

SMEs having less than fifty employees should be exempted from the application of this act. This would help SMEs to focus more on the core activities without wor-rying about such hassles of regulations.

Mode of payment of contribu-tion (Para 38 OF EPF Scheme 1952, EP Scheme,1995 & Para 8 OF EDLI Scheme): Instead of multiple deposits under different heads on account of EPF, EPS, EDLI and admin charges, the details under different heads should be kept by the department and the employer shall only require to pay a certain percentage of wages through a single challan as employer and employ-

reinstatement of the workman on such terms and conditions, if any, as it thinks fit, or give such other relief to the workman in-cluding the award of any lesser punishment in lieu of discharge or dismissal as the circumstanc-es of the case may require.

It is suggested that suitable amendment be made for SMEs in Section 11-A pinpointing the misconducts where such pow-ers can be used by the Tribu-nal and misconducts relat-ing to theft, riotous behavior, manhandling, refusal to obey lawful orders, drinking while on duty should not attract the powers given in Section 11A.

The labour court should have the right to reinstate the

dismissed workman if and only if it is a case of human rights violation by the employer. Also the disciplinary proceed-ings for termination of employment are so elaborate, complex and technical in nature that SME unit is unable to cope up with the same. As a result the manage-ment is either unable to or avoids taking action against an indisciplined worker or is forced to punish guilty person without following the laid down procedures.

The Contract Labour (Regulation and Abolition) Act, 1970: Section 10 of the Act empowering the appropriate Gov-ernment to prohibit employment of con-tract labour in any industry should be re-drafted to exclude SME sector from this prohibition clause and to cover employment of contract labour in core and non core activities. Suitable amend-ments to the Act are needed to widen the scope of engagement of contract labour to cover employment of contract labour in core and non-core activities.

The Industrial Employment (Standing Order) Act, 1946: Workmen apart from being classified as permanent, probationers, badlis, tem-porary, casual and apprentices, should also be classified as fixed term employ-ment. The provision of Fixed Term Em-ployment provides greater flexibility to SMEs and encourages employment on fixed term basis with the benefits of regular employees.

ee contribution. The employer shall be required to submit a copy of the paid up challan along with a statement of con-tribution every month.

To avoid any hardship to new SME establishments, a provision should be made for exempting them for a period of three years.

The Employees State Insurance Act, 1948: This may be applicable to (i) fac-tories using power in the manufactur-ing process and employing 50 or more persons (10 at present) and (ii) non-power using factories or establishments employing 100 (20 at present) or more persons for wages.

Definition of wage: It is also suggested that the definition of wage, under ESI Act. should be same as given in Employ-ees Provident Funds and Misc. Provi-sions Act, 1952 (basic wages with dear-ness allowance).

The Industrial Disputes Act, 1947: Under Section 11A, where an industrial dispute relating to the discharge or dis-missal of a workman has been referred to a Labour Court, Tribunal or National Tri-bunal for adjudication and, in the course of the adjudication proceedings, the La-bour Court, Tribunal or National Tribunal, as the case may be, is satisfied that the order of discharge or dismissal was not justified, it may, by its award, set aside the order of discharge or dismissal and direct

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To advertise with us, contact Marut Sengupta, Confederation of Indian Industry, 23 Institutional Area , Lodi Road - 110 003, New Delhi; Ph: 9350800950, Direct Tel: 91-11-24653006; Tel: +91-11–24629994–97 Ext 407; Fax: +91-11–24682229; Email: marut.sengupta@cii.in

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