End of Project Report under the project ‘Support to Country Effort for SME Cluster Development’ of UNIDO (US/IND/01/193) during 2002-05

The Office of Industries Commissionerate, Government of Gujarat

By: UNIDO Cluster Development Programme

November 22, 2005

1. Executive Summary:

The Office of Industries Commissionerate, Government of Gujarat is the counterpart institution for the UNIDO project on cluster development at the state level. The current project ‘Support to Country Effort’ (SCE) provided scope for technical to the industries office, Government of Gujarat. This report herein provides an over-view of the structure of the partner organisation, the context in which cluster development fits into its framework of SME development activities and the evolution of cluster development initiatives over the SCE project duration May 2002 to June 2005. The report marks the major turning points both with reference to internal support under the project and external macro factors that enabled the partner take up cluster development in a major way. The office of Industries Commissionerate is the policy making body, a funding institution and an implementing agency in its own right through a network of field based ‘District Industries Centres’ but most often relied on a range of specialised and technical agencies to implement cluster initiatives in the state. The state government has taken up cluster initiatives across 26 clusters in the state with encouraging results. These clusters are from among 83 product clusters that have been identified in the state that lay a strong emphasis on cluster approach as per Gujarat Industrial Policy 2003.

The report also provides an insight into the challenges faced in expanding cluster initiatives and the responses emerged as consequence. It also describes how the partner took up institutional and systemic corrective actions by getting the staff of implementing agencies trained at Entrepreneurship Development Institute of India (EDII), duly assisted by the SCE project. The range of methodological assistance provided under the project, the impact that it seems to have generated in terms of policy changes and perceived gaps that remain to be corrected in the medium to long term have been elaborated in the forthcoming sections.

2. About the partner

The Industries Commissinerate, Government of Gujarat is one of the 7 partner institutions of the UNIDO SCE project that has the mandate for industrial policy, promotion and development in the state. The Department is headed by the Principal Secretary, who is assisted by the Industries Commissioner –IC and Principal Chief Industrial Advisor, at state level. At the district level, there are ‘District Industries Centres’ (DICs) to carry out the various industrial development tasks, regulatory work and provide necessary information and feedback to the commissionerate on an ongoing basis. There are also several state level institutions like Gujarat Industrial Development Corporation (GIDC), Industrial Extension & Bureau (INDEXTb) and Gujarat Industrial & Technical Consultancy ltd (GITCO) that provide necessary support to the commissionerate.

Gujarat is one of the most industrialised states in the country and therefore industrial development has always received priority from the successive state governments. The industries department had identified 83 product specific industrial clusters in the state, which have predominant concentration of SMEs and account for significant share of industrial production, employment and export earnings in the country[1]. These identified 83 clusters account for around 40 % of all SSI units and 50 % of total industrial production and employment in the state. Realising the importance of these clusters, Gujarat Industrial Policy-2000 incorporated a scheme for strengthening the industrial clusters by way of creating common facilities and improving productivity. The cluster based approach for industrial development was further sharpened with the formulation of a specific Scheme for Assistance to Cluster Development, under Gujarat Industrial Policy 2003.

3. Principal turning points during the last 5 years preceding the SCE Project

It was in the year 1997 that a special committee set up by the then Union Ministry of SSI&ARI had recommended cluster development as the centre-piece of small & medium enterprise development. Several of the industrial clusters identified then by UNIDO Cluster Development Programme (CDP), belonged to Gujarat, thanks to the advanced level of industrialisation in the state. This fact enabled the state to carry out its own mapping of clusters in the state and having recognised the significance of industrial clusters to the state and the advantage of using cluster development approach, the state decided to provide a special focus on clusters in the year 2000 under its policy framework.

Subsequently, under the ongoing programmes prior to the SCE project, UNIDO had taken a directly assisted cluster project in Ahmedabad/ Vadodara (Gujarat) on drugs & pharmaceutical products with funding assistance drawn from Swiss Agency for Development & Cooperation (SDC) during the years 1999-2003. This provided scope for further interaction and cooperation on that UNIDO project with the state government. The office of Industries Commissionerate then not only monitored the drugs & pharmaceutical cluster work on behalf of the state government, but also provided valuable support to that project. In the year 2001, the previous project also provided a study tour visit of the Principal Secretary (I&M) and the Principal Chief Industrial Advisor to Tirupur giving valuable insights into the role of industrial associations in cluster development and how the policy support could significantly foster the growth of clusters. The project then also provided scope for a study tour to Italy to one of the state government key official thus reflecting the key role of local support institutions in fostering cluster development there.

These series of interactions thus built up a strong foundation for the collaboration under the current project of UNIDO called as ‘Support to Country Effort’ (SCE) for the period May 2002 to June 2005.


4. Vision of the partner in relationship with cluster development

The Industries Department, by the time of launching this Project, had a fairly good understanding about the importance of cluster-based approach for development of SMEs. The state government therefore decided to initiate cluster initiative across all the clusters over different phases. Although the state had focussed on the industrial and artisan clusters both, the scope of this project and report is limited to the state government’s thrust on the industrial clusters. The state government decided therefore to reflect its emphasis on clusters by recognising their key role in the ‘State Industrial Policy 2000’ and provide special support to foster common facilities in the clusters provided industry associations come forward to take up the challenge of setting up such facilities and running them professionally.

5. Implementation strategy of partner’s CDP and evolution thereof on yearly basis

In terms of governance of cluster initiatives, there are two models that have emerged over the project period. On the one hand, some of the partner institutions have tried to use their existing government staff by their re-orientation so as to make use of the available human resources for new areas of work such as cluster development and to provide them an understanding of changing role of the government from provision to facilitation. On the other hand, a few partners decided to rely on external institutions engaged in the areas of research & development, training, education and technology provision. The state Government of Gujarat has adopted a strategy for cluster development in which the implementation responsibility is assigned to a competent national level/ state level technical institution. Once the cluster is selected, a technical institution present in Gujarat is identified and asked to submit a proposal for cluster development after carrying out a detailed study. Such a proposal is examined by the office of the Industries Commissioner and based on its recommendation, the State Level Committee accords approval. Funds for the CDP, as estimated in the proposal, are released to the Implementing Agency, also on the basis of the progress in implementation. The Industries Commissioner and the Principal Chief Industry Advisor review the progress, on periodical basis. Within this broad framework, a total of 26 clusters have been taken up for implementation from the period 2000-01 to 2004-05, as per the following details:

Year / Name of the cluster / Implementing Agency
2000-01 / Ceramic Cluster at Morvi and Thangadh / Central Glass & Ceramic Research Institute (CGCRI), Ahmedabad
Powerloom cluster of Ahmedabad / Ahmedabad Textile Research Association (ATIRA)
Sunmersible Pumps clusters of Ahmedabad and Visnagar / ERDA
2001-02 / Ceramic Clusters of Himat Nagar and Ahmedabad / CGCRI
Brass Parts cluster of Jamnagar / Entrepreneurship Development Institute (EDI)
Jewellery cluster of Ahmedabad / National Institute of Fashion Technology (NIFT)
Garment cluster of Ahmedabad / National Institute of Fashion Technology (NIFT)
2002-03 / Salt cluster of Little Ran of Kutch / Central Salt & Marine C Research Institute (CSMCRI) and Self Employed Women’s Association (SEWA)
Fish Processing cluster of Veraval / Central Environmental Planning & Technology (CEPT)
Rerolling mill industry cluster of Bhavnagar / Gujarat Industrial & Technical Consultancy Organisation (GITCO)
2003-04 / Chalk industry cluster of Porbandar / GITCO
Cotton ginning industry cluster / Ahmedabad Textile Research Association (ATIRA)
Gold and silver jewellery cluster of Rajkot / National Institute of Fashion Technology (NIFT)
2004-05 / Dye stuff manufacturing cluster of Naroda ( Ahmedabad) / Gujarat Cleaner Production Centre (GCPC)
2005 / Foundry Cluster, Ahmedabad / GITCO
Salt Industry Cluster Maliya Region, Rajkot / CSMCRI & ANANDI
Training programme for pharma cluster in Ahmedabad / PERD
Training programme for Plastic processing cluster in Ahmedabad / CIPET, Ahmedabad
Training programme for fishermen in fish processing cluster, Veraval / CEPT
Infrastructure facilities for Thangadh Ceramic Cluster / Panchal Ceramic Association
Setting up of trade centre in jewellery cluster / Sauaranakar Audyogik Utpadka Sahakari Mandali Ltd
Centre of excellence for foundry cluster / Foundry Industry Cluster, Ahmedabad

The focus of most of the interventions pertained to improving the competitiveness of the SMEs in the clusters by way of providing common facilities and technical interventions. The importance of creating and strengthening the local governance framework was not felt to be an important component of the cluster development programme where UNIDO CDP has the necessary competence to share under the project framework.

6. Evolution of the administrative set-up of the partner for cluster programme management on a yearly basis – Role of UNIDO CDP

The state government had set up its administrative structure to implement the cluster initiatives as per the details provided in the section above. Considering that the key focus of UNIDO CDP that lay emphasis on building up networks of small firms, industry associations and taking up initiatives on public private partnership was not a part of the cluster development strategy, there was not felt any need to change the administrative structure. In light of the objectives and operational strategy chosen by the state government, the administrative structure has worked to the satisfaction of the government.

7. Areas of handholding assistance provided to CDAs and TAs and its implication

Under this project partnership framework, technical assistance was provided to two clusters-namely viz. Brass Parts cluster of Jamnagar and Ceramic cluster of Morbi, in addition to need based policy level technical support to the Industries Commissioner. As it can be seen from the above table, cluster development programme in both these clusters was underway, by the time the partnership of the state government with the designated implementing institutions had already commenced with clear indicators to measure the outcomes. Entrepreneurship Development Institute of India (EDII) was the implementing agency in Jamnagar brass parts cluster and Central Glass & Ceramic Research Institute (CGCRI) was the implementing body in the Morbi ceramic cluster.

The mode of implementation has been as per the framework on technological, process and quality improvements in line with the state government strategy. The activities under the project framework were aimed at firm level improvements through technology related interventions. Both these Institutions based in Ahmedabad, have identified suitable professionals with in their organisations to conduct diagnostic studies, prepare action plans and implement the identified activities that will lead to process and technology improvements. The responsibility of the designated CDAs among the implementing agencies was to provide the technical improvement solution to the local cluster actors on a regular basis that required frequent visits by them to the cluster.

The inputs that have been requested by the partner institution have been in two specific areas, viz. to help build up the technology related competence of the implementing agencies by linking them up with international institutions abroad and to provide market linkages for the assisted clusters, particularly in the international arena. UNIDO CDP has neither the competence in both the areas nor the project mandate. It would require undertaking strategic research, experimentation with alternate options and exposure visits that are difficult to come by in the current public policy system.

It however does not however undermine the assistance provided to the cluster work under the project framework. The project assistance to Industries Commissioner and the Implementing Agencies of the clusters of Jamnagar and Morbi included the following:

·  Sensitisation of key stakeholders about the importance of creating sustainable model for cluster development by way of strengthening the capacity of local governance framework. For this purpose several meetings were held at state level as well as cluster level. In case of Morbi, an export consortium was formed to undertake joint export marketing after assistance from a BDS provider.

·  Advise on how to create and nurture networks for common business operations. It led to a better appreciation of alternate models of local economic development

·  Sharing of successful experiences of Indian clusters like Tirupur, where the industry associations played a key role in initiating and owning the cluster development interventions

·  Exposure visit for the officials of EDI and four representatives of Jamnagar brass parts industry association to Tirupur cluster in order to sensitise them about the lead role played by TEA in development of the cluster and also to models of PPP (public private partnership) in common infrastructure. This led to an expression of interest in Jamnagar to set up a common facility for testing.

·  Exposure visit for the Industries Commissioner and the Scientist-in-charge of CGCRI, Ahmedabad to successful Italian clusters giving valuable insights not only to how clusters can work with multi-stakeholder linkages but also how a specific ceramic tile cluster operates in Italy, drawing parallels with Morbi cluster.