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 DCSSI, Ministry of SSI, Govt. of India
(Small Industry Development Organisation – SIDO)
By: UNIDO Cluster Development Programme
November 22, 2005
1. Executive Summary:
The Office of Development Commissioner Small Scale Industry is the counterpart institution for various UNIDO projects on cluster development at the national level. The current project “Support to Country Effort (SCE) in taking up cluster development” provided scope for assistance to the office of DCSSI not only as the recipient of the technical assistance but also as the monitoring body of the overall project. The 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 2002-05. 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 DCSSI having the triple advantage of being the policy making body, a funding institution and an implementing agency in its own right through a network of field based ‘Small Industries Service Institutes’ provides a unique example of cluster initiative with a vision to reach out to all the industrial clusters within a period of 10 years from the year 2002.
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 setting up two national technical resource centres, duly assisted by the SCE project to take care of the long term requirements. The range of 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. Specific suggestions have been made on how the future challenges may be met by taking up a series of initiatives through a structured three tiered system of linkages, at international, national and state level.
2. About the partner
a) About the partner:
Small Industry Development Organisation (SIDO) was set up in 1954 as part of the Ministry of Industry, Government of India. Its primary functions are to formulate and oversee the implementation of the policies and schemes for Small Scale Industry (SSI) development. The office is headed by a senior Indian Administrative Services (IAS) officer of the rank of Additional Secretary, designated as Development Commissioner, SSI (DCSSI). SIDO’s primary functions are to:
(i) Implement and fund its cluster development programs: SIDO has taken up cluster development through its field based institutions called ‘Small Industries Service Institutes’ (SISIs) and by funding other external agencies such as consultancy organisations, research & development organisations. It also implements and coordinates the implementation of a national program for rural industrialisation for tiny industrial clusters.
(ii) Provide technical assistance to small industrial firms through a large variety of activities such as entrepreneurship training, skill up-gradation, dissemination of market information, technology development & promotion, financial consultancy, international trade facilitation, organisation of management development programs, facilitation of ancillarisation, provision of inputs in areas such as energy conservation, pollution control etc.
(iii) Coordinate and Implement employment generation scheme: SIDO coordinates the implementation of Prime Minister’s Rozgar (Employment) Yojana (Scheme) in collaboration with several banks.
(iv) Implement SSI Ministry’s schemes for individual firms to take up quality up-gradation, facilitate industry associations to set up testing laboratories on pubic private partnership (PPP) mode , assist setting up of sub-contacting exchanges by industry associations, provide funding support to state governments for setting up Integrated Infrastructure (1994, revised 2000)
(v) Coordinate with state government agencies, financial institutions, other ministries with relation to small industries
b) Organisational Structure: SIDO spread comprises of 30 Small Industry Service Institutes (SISIs), 28 branch SISIs, 4 Regional Testing Centres (In Metros), 10 Tool Rooms, 6 Product and Prototype Development Centres (in specific product areas), 2 Central Footwear Training Centres, 7 Field Testing Stations (in bigger towns with specific product focus), 2 Entrepreneurship training institutions and 3 Product specific training institutions (3) spread all over the country. It has gross staff strength of 3244 of which 1042 are officers. In terms of the field presence, 2221 out of present 2571 strength of SIDO are based in the field. The gross developmental budget of SIDO per annum currently is in the range of Rs 400 crores.
In terms of the organisational structure, the office is headed by the Development Commissioner, a senior level bureaucrat. With reference to cluster development initiatives, s/he is supported by a middle level administrative person of the rank of Director in his office. The Director coordinates all cluster related initiatives to be taken up directly by SISIs and/or funded by this office. The concerned Director has several other responsibilities and within the realm of clusters, is assisted by a junior officer in the headquarter office of SIDO, based in Delhi. The directly assisted clusters undertaken by SISIs choose the CDA from one of their local offices who reports to the SISI administrative head, also called ‘Director SISI’. The day to day monitoring of cluster work undertaken by Director SISI is then reported to the concerned Director in the head quarter office. In all those clusters that are financially supported by the office of DCSSI, the implementation and monitoring work is undertaken by the same implementing agency.
c) Major Schemes of assistance: that are currently operational are:
Ø ‘Credit linked subsidy scheme’ for individual units,
Ø Integrated Infrastructural Development (IID) scheme for state governments,
Ø UPTECH renamed as ‘Small Industry Cluster Development Programme’, applicable for any public or private institution,
Ø Quality Up-gradation assistance for ISO accreditation available to individual small firms ‘Promotion of Exports’ through subsidisation of participation in international fairs and training on export worthy packaging that is available for individual small firms and industry associations.
3. Principal turning points (1997-2002):
It is difficult to clearly determine the turning points that may have led SIDO to undertake significant changes in their cluster development activities. A series of bi-lateral and multi-lateral interactions with UNIDO CDP even prior to the launch of the current SCE project, is likely to have played a role in the office of DCSSI amenable to take up cluster related initiatives. The program of UNIDO CDP has been monitored by DCSSI by virtue of his being the chairperson of the National Steering Committee that monitors and approves all UNIDO cluster activities in the country ever since 1999The cluster visits by the Development Commissioner, SSI to ‘Ahmedabad & Baroda’ (Drugs & Pharmaceuticals) cluster and subsequently to Bangalore (Machine Tools Cluster) in January 2003 provided a very positive feedback from the cluster stakeholders (i.e. local entrepreneurs, local public/private institutions, regulatory agencies and academic institutions) and a rich understanding about the process involved in cluster development. The regular interactions of the office of DCSSI with UNIDO CDP through time, led to new proposals that have been taken up by SIDO with respect to cluster development.
On a broader context, outside the scope of SCE project, some macro factors played concurrently a positive role. In order to give a bigger thrust to the promotion of small industries, the Government of India created a new ‘Ministry of SSI & ARI’ in October 1999, under an independent Minister of State. Subsequently, in order to analyse this sector’s key problem areas and find appropriate policy thrust to redress them, a ‘Group of Ministers’ was constituted in June 2000.
The comprehensive Policy package for SSI and Tiny Sector announced by the Prime Minister on the 30th August 2000 mentioned the need to follow cluster approach as one of the important ways for SSI development. During the year 1999-2000, the union budget announced by the Finance Minister of India, contained a paragraph about the need to take up cluster development initiatives for rural clusters through ‘National Program for Rural Industrialisation’ (NPRI) covering 100 clusters by several national institutions to be coordinated by SIDO. Subsequently, the new Union Government under its ‘National Common Minimum Programme’ announced in May 2004 further stated “ Infrastructure up-gradation in major industrial clusters will receive urgent attention”.
In order to improve the outreach of the services, there was also an increasing recognition of the potential role of the civil society organisations such as Industry associations. It was felt that the industry associations should be able to reach out to larger number of firms for skill up-gradation and technology dissemination. With a view to ensure sustainability of SIDO’s institutions, accountability in terms of revenue generation has been emphasised strongly in several policy directives. The changed focus of the SISIs from working with individual firms to groups of firms through cluster based approach is likely to help achieve SISIs reach out to larger numbers with greater effectiveness and market their technical services better.
4. Vision of the Partner with respect to its relationship with cluster programme
There is no stated version of the vision of DCSSI office, pertaining to cluster development. However, during the course of discussions and dialogues in the year 2002, the concerned officers stated the need to cover all the 388 UNIDO identified SME clusters in the country over the next 10 years. Second, they expressed the need to follow multi-thematic, multi-stakeholder, integrated approach that not only helps to build the capacities of local civil societies in the clusters, but also seek firm level quantifiable results in the given time frame. Such an approach, they believed, would lead to sectoral development, wherein each sector would essentially be comprised of several clusters, chalking out their independent development initiatives and yet be knit together at sectoral level to address macro economic and policy level issues that cut across several clusters of the same kind.
5. Implementation strategy of partner’s CDP and evolution thereof on yearly basis
One may visualise the change over 3 years (2002-05) in terms of implementation strategy at the cluster level, number of clusters assisted and allocation of funds. In the year 2002, the focus of the cluster oriented scheme started in 1998 as UPTECH, was shifted from firm specific demonstration of technology up-gradation and modernisation to system based cluster development approach, as stated above. Diagnosis of clusters, trust building with cluster partners thereafter, formation of networks and Industry association capacity building became an integral part of cluster development in most of the clusters assisted under the new scheme.
The UPTECH scheme was launched with an allocated budget of Rs. 6.25 crores ($1.5 million) in 1998 for 11 identified clusters/‘groups of clusters’ across 5-year plan period. The number of clusters taken up by December 2003, directly through SISIs and indirectly through external institutions was 51 which has further increased to 74 in almost all the sectors and geographically covering the entire country by December 2004 with an estimated development outlay of more than Rs. 30 crores for all the clusters. The listing of these clusters is provided on the ministry’s website www.smallindustryindia.com. For each of the clusters to be assisted, it was considered essential to get a formally trained Cluster Development Agent (CDA) who would undertake a detailed diagnostic study and prepare a ‘cluster action plan’ that would encompass a wide range of activities leading to development of the cluster.
6. Evolution of the administrative set-up of the partner for cluster programme management on yearly basis - Role of UNIDO CDP
The quick growth in the number of clusters to be assisted posed several challenges in terms of lack of systems available for program designing, training of human resources and monitoring of programs. The DCSSI office responded to this problem in the year 2003 by designating and strengthening the capacities of a national training institution called National Institute of Small Industries & Extension Training (NISIET) based in Hyderabad to take up the role of National Resource Centre (NRC) for cluster development. It was agreed that with the initial assistance provided by UNIDO CDP under the framework of SCE project, the NRC would eventually undertake the following tasks:
(i) Training of potential CDAs from SISIs and external institutions
(ii) Provision of technical advisory services to the CDAs through the project duration for effective implementation of the cluster program. This included field reviews, conflict resolution at the cluster level, provision of institutional linkages at national/international level and providing references for private consultants.
(iii) Provide an administratively flexible base to ensure reimbursement of communication and mobility expenses that would otherwise not be possible in the available accounting rules/procedures. Also to enable reimbursement of expenses for the use of business development services (BDS), not amenable to the given rules/ procedures
(iv) To review the administrative constraints & bottlenecks besides the need for refresher training to plug the gaps, as they emerge
(v) Transfer the technical advisory competencies to the administrative heads of the CDAs viz. SISI Directors in SIDO and heads of external institutions that were provided funding assistance by the office of DCSSI
The growth in the number of clusters assisted and the quantum of work involved outpaced the capacities built in NISIET that had by then begun to technically assist 20 clusters across the country. It therefore required a second national institution called Entrepreneurship Development Institute of India (EDII) based in Ahmedabad to act as the second National Resource Centre from the year 2004 that would build upon the cluster development methodology and framework developed with UNIDO CDP under the SCE project. EDII began to technically assist in 11 of the clusters being assisted by DCSSI office. By the year 2005, it became clear that with several states and other national institutions launching their own cluster development initiatives, the need to have regional resource centres will be essential and therefore proposals emanating from Kerala and Orissa states were being considered for their capacity building which would enable them provide necessary technical assistance on a regional basis.