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COVER STORY

CLUSTERS ACROSS INDIA

Exclusive interview
Unido representative
in India Ayumi Fujino

Focus
Gujarat industries
Special
Tech solutions
 COVER STORY
Contents

Contents
EDITORIAL SUPPORT

‘SMEs are VERGHIS CHANDY

MONALISA SEN

unable to COVER PHOTOGRAPH BY

OINAM ANAND DESIGN
understand or SANTOSH PL

absorb many SPECIAL PROJECTS TEAM

G. SUBRAMANIAN
Mumbai Space Marketing
incentives’ g.subramanian@expressindia.com
POOJA RANA
■ AYUMI FUJINO Delhi Space Marketing
Unido representative in India and head of the pooja.rana@expressindia.com
South Asia regional office INTERVIEW P8 RATISH NAIR
Chennai Space Marketing
Drivers of Indian ratish.nair@expressindia.com
JAMEEL ADWAN & JUGAL MIRANI

manufacturing Gujarat Space Marketing

jameel.adwan@expressindia.com,
■ COVER STORY CLUSTERS P13 jugal.mirani@expressindia.com

PRODUCTION
Public procurement B.R. TIPNIS
General Manager
preferences for SMEs
■ P RAGHAVAN POLICY P4 Copyright: The Indian Express Limited. All
TECH SOLUTIONS rights reserved. Reproduction in any
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in part, without prior written permission is
bulk industrial sales “Nokia Tej offers businesses a speedy prohibited
■ SALONI ROY & JAYANTA KALITA online order management system”
TAXATION P20 ■ ANTTI-JUSSI SUOMINEN
A SPECIAL PROJECTS INITIATIVE
HOW TO REACH US
Head of commerce in corporate development, Nokia P26
We prefer to receive letters via email, without
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■ JYOTSNA BHATNAGAR to spread out their payments’ All letters must include an address and daytime and
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Vice-president, sales-west, Cisco India & Saarc P27
Customer satisfaction is monalisa.sen@expressindia.com
linked to relevant data ‘Data storage is no longer a backroom Email: sme@expressindia.com

■ MAHESH KIRAN IT issue’ FOCUS ON

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SMALL AND MEDIUM ENTERPRISE WORLD 4 August-October 2010 August-October 2010 5 SMALL AND MEDIUM ENTERPRISE WORLD
Policy

Public procurement
preferences for SMEs
Legal provisions alone cannot ensure that the small-scale industry
benefits from government procurement
■ P RAGHAVAN Public procurement can lend vital demand support
to specific segments of industry, whether they are pub-
KEY FEATURE of the MSME Development lic sector or small-scale units. This is because of the

A Act of 2006 has been the preferential treat-

ment given to small units in public procure-
ment. The Act stipulated that government
and public sector units will give preference
to goods and services from the SSI sector. Though provi-
sions regarding this are still to be formulated, the gov-
ernment has recently said the Cabinet will clear the
policy, which will make it binding on government de-
partments and PSUs to source at least 20% of their pur-
chases from small-scale units.
large share of public procurement in GDP. In developed
countries public procurement accounts for about 20% of
GDP, and in India the share is a visibly much higher
30%.
In India the use of public procurement as a policy
tool to support specific segments of industry has been
largely restricted to a 10% price preference for public
sector units. However, advanced economies like the
United States and the European Union, and some devel-
oping countries like Mexico, have used public procure-

SMALL AND MEDIUM ENTERPRISE WORLD 6 August-October 2010


Policy
ment as a tool to support small busi- Size remains a medium companies.
ness units. handicap for SSIs. Public procurement in India is
Though there are no common defi- highly decentralised with purchases
nitions of the small industry in the
The large size of being made by the Centre, the states
United States and the European government orders and public sector units. However,
Union, the available information sug- de facto excludes there are no national-level legal provi-
gests that small businesses supplied sions on public procurement and the
them from
23% of the federal prime contracts in quantum is generally decided by pub-
the US in 2005 while they accounted participation lic policy. However, the ministry of fi-
for half of the private sector employ- nance prepares a manual on pur-
ment and the value-add in the economy. In contrast, the chase of goods, services and works, and this acts as a
share of the small business in European public pro- guideline to the central government. Other arms of the
curement is estimated to be a much higher 42%. government, like the Central Vigilance Commissioner
But these figures relate only to public contracts above and the Directorate General of Supplies and Disposals,
the thresholds set by the public procurement directives have also issued guidelines, which are followed by other
and do not count subcontracts of all sizes awarded to departments.
SMEs. However the SMEs’ shares of public procure- Some states like Tamil Nadu and Karnataka have re-
ment above the EU thresholds varied sharply, ranging cently enacted legislation to ensure transparency in
from a high 78% and 77 % in Slovenia and Slovakia to a procurement. However, the Tamil Nadu government
low of 35% and 31% in France and the UK. has taken a step forward and extended marketing sup-
In the developing world, the most recent example of port to micro and small manufacturing enterprises by
government backing to small units through procure- giving domestic enterprises a 15% price preference in
ment polices comes from Mexico, where the stimulus purchase of goods, as provided in the Tamil Nadu
package to combat the recession required that at least Transparency in Tenders Act, 1998.
20% of government purchases be made from small and However, legal provisions alone cannot ensure that
SMALL AND MEDIUM ENTERPRISE WORLD 8 August-October 2010
the small-scale industry benefits from government pro-
curement. Globally public procurement has been asso-
ciated with corruption and the World Bank estimates
that bribes paid on this count will add up to $1 trillion
each year.
India’s government procurement practices and proce-
dures are not very conducive for the small industry as
they lack transparency. India is still not a signatory to
the WTO Agreement on Government Procurement
(GPA) but the country has obtained an “observer” status
August-October 2010
in the WTO Committee on Government Procurement
Policy
in February 2010. One way to curb the malpractices in
public sector procurement is the use of information
technology. The government has followed up on this
front and asked all procurers to switch to the e-procure-
ment regime.
But a small or medium unit has to overcome various
other generic constraints if it is to actively gain from
the new procurement policies. A recurring complaint
from small units involved with government procure-
ment is that their small size itself is a handicap as the
large size of the government orders de facto excludes
them from participation since they are unable to ten-
der for the whole contract. This handicap can be over-
come only if the government directives allow contracts
to be awarded in separate lots. France has adopted this
method to overcome the size constraints of small units.
Yet another major handicap of small units is their
limited access to information on government procure-
ment. This can be overcome to a large extent through
e-procurement. However, with a vast number of Web
portals catering to the government, only some units
will be able to tap the full potential of the policy even
after the introduction of e-procurement on a large
scale.
A suggestion made in this context is the use of cen-
tralised Websites for e-procurement in federal or large
countries. Electronic tendering facilities, which allow
authorities to invite bids online, would also improve
small units’ access to government procurement.
At the more general level, the introduction of a 20%
reservation for small units has to be accompanied by
guidance on tender procedures. Until that happens,
MSME units will find it hard to fully tap the public pro-
curement opportunities. ●
9 SMALL AND MEDIUM ENTERPRISE WORLD
 Ayumi Fujino, Unido India representative
Cover story Interview
‘SMEs are unable to
understand or absorb
many incentives’
Ms Ayumi Fujino has taken charge as the Unido repre-
sentative in India and head of the South Asia re-
gional office in July this year. Before this, Fujino was the
Unido representative in Thailand and head of the re-
gional office from 2006.
Fujino began her career with Unido in the 1980s, serv-
ing in various capacities. While at the Unido headquar-
ters in Vienna from 1997 to 2006, Fujino designed and im-
plemented various technical cooperation projects for the
development of MSMEs, especially in rural areas in select
industrial sector clusters like food processing, textiles and
leather, with the geographical focus on countries in Sub-
Saharan Africa, South Asia and Central America.
She was also closely involved in Unido programmes for
the promotion of entrepreneurship through local produc-
tion networks and market facilitation by linking rural/lo-
cal products with urban and export markets.
Throughout her career with Unido, Fujino has been in-
volved in inter-agency collaboration in programmes and
projects with organisations like the World Bank, ADB,
African Development Bank, Islamic Development Bank,
IFAD, UNDP, UNFPA, Unifem, UNHCR, FAO, ILO, Un-
esco, WHO as well as international NGOs like CARE and
World Vision.
Fujino shared, in an email interview, her vision for India
with FE SME World’s Monalisa Sen. Excerpts:
As a Unido representative in India, what are your
immediate priorities?
The United Nations Industrial Development Organisa-
tion (Unido) aspires to reduce poverty through sustain-
able industrial development. To this end, it focuses its
expertise and resources to support developing countries
and economies in transition in their efforts to promote
their industries---- especially their micro, small and
medium enterprises (MSMEs)---so that they have the
SMALL AND MEDIUM ENTERPRISE WORLD
fullest opportunity to develop a flourishing productive
sector, to increase their participation in international
trade and to safeguard their environment. Hence, my
priority as the Unido representative here will be to pur-
sue our essential long-term objectives of promoting the
growth of industry, in particular in the SME sector, and
combating climate change in the fight against poverty.
This core agenda will continue to drive our efforts to cre-
ate jobs, raise incomes and lift people out of poverty
through the sustainable development of industries.
It may be relevant to mention here a major new flag-
ship project–the integrated cluster development pro-
gramme (ICDP)–a five-year programme 2009-2014 --that Unido’s new
we will be implementing in cooperation with the depart- projects are
ment of industrial policy and promotion (DIPP), min-
istry of commerce and industry, government of India.
venturing into
This is intended to provide integrated, turnkey solutions innovative aspects
to a host of constraints affecting the performance of of cluster
SMEs in pre-selected clusters in several sectors by ad-
development such
dressing their technology, quality and environment-re-
lated needs. The programme will complement the assis- as CSR, energy
tance to the same clusters already being extended to efficiency and
them under DIPP’s industrial infrastructure upgrada- twinning among
tion scheme (IIUS). The programme is designed to im-
prove resource productivity and environmental perfor- clusters in
mance of SMEs, in particular in auto components, advanced and
leather, chemical and other sectors, and in doing so, it is developing
expected that it will help tackle poverty issues and con-
tribute to environmental sustainability.
countries
What do you see as the major challenges facing
SMEs in India?
As you know, small and medium enterprises play a key
role in the growth process, as they collectively account for
a substantial share of the country’s industrial employ-
PHOTOGRAPH BY
ment, output and exports. OINAM ANAND
10 August-October 2010 August-October 2010 11 SMALL AND MEDIUM ENTERPRISE WORLD
 The constraints impeding their development are also ber of projects since 1996. While the earlier cluster pro-
Cover story Interview

well known, such as: access to factors (finance, technol- jects focused on economic issues – that is, enhancing the
ogy, skills, and supporting management processes) and competitiveness of under-performing clusters, the later
access to markets (logistics, compliance with standards, projects are venturing into innovative aspects of cluster
access to quality certification services, design, product development such as corporate social responsibility
range, packaging, branding, marketing and so on). (CSR) in MSME practices, improved energy efficiency
The vast majority of SMEs are in the lower end of sup- and twinning among clusters in advanced and developing
countries as well as trade facilitation.
ply chain. In the case of India, despite the fact that vari-
ous policies and economic incentive schemes exist, Unido cluster programmes include: the Chanderi
SMEs are in general not able to reach the schemes due handloom and Sindhudurg food processing clusters;
to their limited capacity for understanding and absorb- SME cluster development and CSR in the Jalandhar
ing such benefits. A lack of policy coherence for SME de- sports goods cluster; and the MSME cluster development
velopment at the central and regional levels also poses programme in Orissa---Barpalli (handlooms), Konark
the challenge to many SMEs. and Puri (stone carving), Rourkela (fabrication), and the
Sal leaves non-timber forest products
What are the Unido activities and clusters in Baripada.
programmes in India in relation to Thai authorities The cluster development approach
SMEs? have provided many is applied also to the national
Currently, the for Unido operations
in India is set by ‘the five-year country
support measures to programme for technology upgrada-
tion of brass and bell metal industry
programme of cooperation between SMEs in recent years. and artisanal enterprises in
the Republic of India and Unido 2008- The One Tambon One Khagra and other areas of West Ben-
2012.’ to SMEs through cluster-based
Product initiative has gal and neighbouring states as
approaches constitutes a cross-cutting well as the cane and bamboo net-
theme of the country programme. reached great working project.
In addition to the SME support, we success. The On the trade capacity building
also address the issues of raising com- initiative showcases side, the project, “Supporting small
petitiveness through the introduction and medium sized manufacturers in
of environment-friendly technologies traditional products the automotive component industry
and facilitating the participation for the local and in India –Unido partnership pro-
of developing countries in the global international markets gramme phase-II”, was successfully
economy through south-south cooper- completed in 2009. This project aimed
ation. Unido offers a range of services at strengthening the Indian SME au-
to private and public sector institutions engaged in SME tomotive component suppliers to meet the require-
cluster development which include: technical coopera- ments of vehicle and tier-1 automotive component
tion in the formulation and implementation of cluster manufacturers and facilitate their integration in the
development projects; and institutional capacity building global supply chain.
and policy advice for the dissemination of cluster devel- Another important ongoing project is the “consoli-
opment policies at regional and national scale. In addi- dated project for the development of SMEs in India”
tion, it offers tools such as cluster mapping; awareness which focuses on the “twinning” clusters as a new area
raising initiatives; training for policy makers, project of intervention. The project, launched in 2007, is the
managers and policy advisers involved in cluster develop- largest cluster development programme in India and is
ment; cluster twinning initiatives, including business- financed by the Italian government and working with
to-business networks, inter-institutional partnerships the development commissioner of MSMEs, ministry of
and alliances between cluster associations; development MSMEs, as its counterpart.
of horizontal and vertical networks and export consortia, Finally, in the area of energy and environment, the
and monitoring and evaluation of cluster development project on energy efficiency and quality standards in
programmes. the ceramic industry in India---covering ceramics clus-
Unido has been at the forefront of the SME cluster de- ters in Morbi and Thangadh in Gujarat and Khurja in
velopment in India and has implemented a large num- Uttar Pradesh– has been completed in June this year.

SMALL AND MEDIUM ENTERPRISE WORLD 12 August-October 2010

 What were Unido’s major contributions to SMEs in series of awareness-raising workshops on equity in- Clusters

Cover story
Cover story Interview

India in the spheres of trade, technology, policy, fi- vestors, including private equity funds and angel in-
nance and value-add ?
In keeping with its aims, strengthening of the compet-
itiveness of SMEs through technology-led intervention
vestors.

What’s the SME scenario in Thailand? How it is dif-

Drivers of Indian manufacturing
has often been cited as one of the most successful compo- ferent from India, especially in terms of technol-
nents of Unido programmes so far. As an evaluation of ogy, scale and government support? India has 388 documented SME clusters, besides about
the ‘country service framework’ (2007) noted: “The clus- As in many countries, in Thailand too SMEs play a
ter development programme (CDP), developed over the critical role in economic development. In fact, accord-
2,000 rural- and artisan-based clusters
past decade, is Unido’s flagship programme in India, ing to estimates, SMEs account for almost 95% of indus-
which has also significantly shaped the policy environ- trial entities in the country and over 20% of the coun- ■ GOPAKUMAR WARRIER and sometimes even centuries.
ment towards the MSMEs”. try’s total industrial workforce. The constraints facing According to a study of the Indian Institute of Pub-
Its contribution has evolved over a period of time – the SMEs in Thailand are similar to those faced by SMEs NDIA has over 1.55 million MSME units. Of these, lic Administration, there are 388 documented SME
from initially awareness raising of the potential and
structuring of the methods and tools,
then policy advice and now, interven-
tions in several new areas where clus-
tering also becomes a tool to achieve
other objectives such as poverty re-
duction, CSR, energy efficiency and
in most other developing countries---namely, issues re-
lating to utilisation of advanced tech-
nologies in production processes; ac-
cess to credit especially access to
formal sector financing; quality stan-
dards; marketing; and management
related constraints, particularly in the
I micro units comprise 95.05% and small-scale units
4.74%. Only 0.21% falls in the medium-sized category.
Among the MSME units, 66.67% is categorised as
manufacturing enterprises, according to quick re-
sults of the fourth all-India census of MSMEs, 2006-07.
With a contribution of 50% to the country’s indus-
trial output and 35% to direct exports, the SME sector
clusters in India. Besides that, there are about 2,000
rural- and artisan-based clusters. It is estimated that
these clusters contribute 60% of the manufactured ex-
ports from India. The SME clusters in India are esti-
mated to have a significantly high share in employment
generation compared to clusters in other countries.
Some Indian SSE clusters are so big that they account
better coordination of various ser- context of the need to enhance com- has achieved significant milestones for India’s indus- for 90% of India’s total production output in selected
vices offered to the SME clusters like petitiveness of the enterprises. trial development. Within the SME sector, a key role is products. For example, the knitwear cluster of Ludhi-
finance, investment and trade promo- In recent years these constraints played by clusters that have come up across the coun- ana. Almost the entire gems & jewellery exports are
tion etc. Programmes in Tamil Nadu, have been exacerbated by the global try, some of which have been in existence for decades from the clusters of Surat and Mumbai. Similarly, the
Maharashtra, NCR, West Bengal and economic downturn, creating a tough
Karnataka have been using the clus- business climate. In order to help SME CLUSTERS ACROSS INDIA
ter methodologies for the further de- SMEs, the Thai authorities have pro-
velopment of Indian companies. vided many support measures for the ANDHRA PRADESH
As an example of concrete out- promotion and development of SMEs, District Location Product District Location Product
comes for trade promotion for Indian including a ‘promotion plan for SMEs
Anantpur Rayadurg Readymade Garments Karimnagar Sirsilla Powerloom
SMEs, Unido has created subcontracting and partner- in Thailand’ coinciding with the five-year ‘national eco-
ship exchange (SPX) centres in Delhi, Pune and Chen- nomic and social development plan,’ an Office of Small Anantpur Chitradurg Jeans Garments Krishna Machilipatnam Gold Plating & Imitation
Chittoor Nagari Powerloom Jewellery
nai in the footwear, leather and automotive sectors for and Medium Enterprises Promotion and also a national
connecting mainly small enterprises to the foreign mar- competitiveness committee. Further, the One Tambon Chittoor Ventimalta, Brass Utensils Krishna Vijayawada Rice Mills
Srikalahasti, Chundur Krishna Chundur, Kavadiguda, Steel Furniture
kets. Actions have been taken at the internal level One Product (OTOP) initiative, based on Japan’s One Vil-
East Godavari East Godavari Rice Mills Charminar,Vijayawada
through the development of their competitiveness and lage One Product (OVOP), has reached great success in
East Godavari Rajahmundry Graphite Crucibles Kurnool Adoni Oil Mills
quality up gradation and at the external level by enhanc- Thailand. The initiative showcases local traditional
East Godavari East Godavari Coir & Coir Products Kurnool Kurnool Artificial Diamonds
ing their possibilities to be included in global value products for the local and international markets through
East Godavari Rajahmundry Aluminium Utensils Kurnool & Kurnool Polished Slabs
chain and as main suppliers for big players in India and clever packaging and marketing strategies coupled with Cuddapah (Banaganapalle,
abroad. effective government facilitation of the buy and sell East Godavari & East Godavari(EG) &
Bethamcheria,Kolimigundla)
West Godavari West Godavari Refractory Products
Another tangible intervention of Unido cluster devel- process. OTOP also facilitates the exchange of informa- Cuddapah
Guntur Guntur Powerloom
opment programmes is the development of a mutual tion and ideas for innovation at the rural level ensuring Prakasam Markapuram Stone Slate
Guntur Guntur Lime Calcination
credit guarantee (MCG) in order to address the issue of improved communication across various Tambons in Ranga Reddy Balanagar, Jeedimetla Machine Tools
Guntur Macherla Wooden Furniture & Kukatpally
limited access to finance for SMEs due to the lack of col- Thailand. While the cluster development approach per se
Hyderabad Hyderabad Ceilling Fan Srikakulam Palasa Cashew Processing
lateral. This is based on the mechanism being estab- does not yet find the niche in the SME sector in Thailand,
Hyderabad Hyderabad Electronic Goods Visakhapatnam & Visakhapatnam, Marine Foods
lished based on the best practices from Italy, by replicat- unlike in India, village/community-level business ini-
Hyderabad Hyderabad Pharmaceuticals East Godavari Kakinada
ing the successful Italian experience of mutual tiatives are being integrated into the regional and na-
Hyderabad Musheerabad Leather Tanning Warangal Warangal Powerloom
guarantee associations into the Indian context. Unido, tional supply chain through a very vibrant promotion of
Hyderabad Hyderabad Hand Pumpsets Warangal Warangal Brassware
together with the Indian Venture Capital Association produce- and sector-based associations nationwide, led by
(IVCA) and Indian Angel Network (IAN), is organising a both government and private sector associations. ● Hyderabad Hyderabad Foundry West Godavari West Godavari Rice Mills

SMALL AND MEDIUM ENTERPRISE WORLD 14 August-October 2010 August-October 2010 15 SMALL AND MEDIUM ENTERPRISE WORLD
 clusters of Chennai, Agra and Global experience Global experience shows industrial GUJARAT

Cover story
Cover story

Kolkata are well known for leather shows industrial clusters create a conducive ground
District Location Product District Location Product
and leather products. for the development of inter-firm
However, according to the ministry
clusters create a cooperation and specialisation
Ahmedabad Ahmedabad Pharmaceuticals Jamnagar Jamnagar Brass Parts

of MSMEs, the majority of Indian conducive ground and facilitates cooperation among Ahmedabad Ahmedabad Dyes & Intermediates Jamnagar Jamnagar Wood Product &
Furniture
Ahmedabad Ahmedabad Moulded Plastic
clusters, especially in the handicrafts for the development public and private local institutions Products Mahesana Vijapur Cotton Cloth Weaving
sector, are very small with no more to promote local production, innova-
of inter-firm Ahmedabad Ahmedabad Readymade Garments Rajkot Dhoraji, Gondal, Rajkot Oil Mills
than a 100 workers, who are so spe- tion and collective learning. Clusters
cialised that no other place in the cooperation and also give rise to external economies
Ahmedabad Ahmedabad Textile Machinery Parts Rajkot Jetpur Textile Printing
Ahmedabad Ahmedabad, Dhanduka Diamond Processing Rajkot Morvi & Wankaner Flooring Tiles(Clay)
world matches their skills and the specialisation (like specialised suppliers of raw
Ahmedabad Ahmedabad Machine Tools Rajkot Morvi Wall Clocks
quality of their output. This is the materials, components & machinery,
Ahmedabad Ahmedabad Castings & Forging Rajkot Rajkot Diesel Engines
case, for example, of the Paithani sarees cluster in Ma- and sector-specific skills) and favour the emer-
Ahmedabad Ahmedabad Steel Utensils Rajkot Rajkot Electric Motors
harashtra. However, only a tiny minority of such arti- gence of specialised technical, administrative and
Ahmedabad Ahmedabad Wood Product & Rajkot Rajkot Castings & Forging
san clusters are globally competitive. financial services.
Furniture
The formidable challenges created for the SME sec- Gopakumar.warrier@expressindia.com Rajkot Rajkot Machine Tools
Ahmedabad Ahmedabad Paper Products
tor bv the liberalisation of the Indian economy, as well Rajkot Rajkot Diamond Processing
Ahmedabad Ahmedabad Leather Footware
as its closer integration within the global economy, BIHAR Surat Surat, Choryasi Diamond Processing
Ahmedabad Ahmedabad Washing Powder & Soap
have generated a great deal of interest within India on Surat Surat Powerloom
District Location Product Ahmedabad Ahmedabad Marble Slabs
novel approaches to SME development. As a result, Surat Surat Wood Product &
Begusarai Barauni Engineering & Ahmedabad Ahmedabad Power Driven Pumps Furniture
both private and public sector institutions at the cen-
Fabrication Ahmedabad Ahmedabad Electronic Goods Surat Surat Textile Machinery
tral as well as the state levels are increasingly under-
Muzzafarpur Muzzafarpur Food Products Ahmedabad Ahmedabad Auto Parts Surendranagar Surendranagar & Thangadh Ceramics
taking cluster development initiatives.
Patna Patna Brass and German Amreli Savarkundla Weights & Measures Surendranagar Chotila Sanitary Fittings
Several institutions have taken up cluster projects, Silver Utensils
complementing various government initiatives. Amrelli, Juna Amrelli Juna Garh Oil Mills Machinery Vadodara Vadodara Pharmaceuticals-
Garh, Rajkot Rajkot belt Bulk Drugs
The state governments that have started cluster de- CHHATTISGARH Bhavnagar Alang Ship Breaking Vadodara Vadodara Plastic Processing
velopment initiatives are Andhra Pradesh, Gujarat,
Bhavnagar Bhavnagar Steel Re-rolling Vadodara Vadodara Wood Product &
Kerala, Madhya Pradesh and Tamil Nadu. District Location Product
Bhavnagar Bhavnagar Machine Tools Furniture
Non-governmental initiatives have been launched Durg, Raipur & Durg, Raipur & Steel Re-rolling
Bhavnagar Bhavnagar Plastic Processing Valsad Pardi Dyes & Intermediates
by developmental NGO Grameen Development Rajnandgaon, Rajnandgaon
Bhavnagar Bhavnagar Diamond Processing Valsad/Bharuch Vapi/Ankleshwar Chemicals
Services (GDS) and the Rajasthan Chamber of Durg, Raipur Durg, Raipur Castings & Metal
Fabrication Gandhinagar Kalol Powerloom Valsad/Bharuch Vapi/Ankleshwar Pharma- Bulk Drugs
Commerce and Industry.

DELHI HARYANA
District Location Product District Location Product
District Location Product District Location Product
Ambala Ambala Mixies & Grinders Karnal Karnal Agricultural
North West Delhi Wazirpur, Badli Stainless Steel Utensils West, South, Naraina,Okhla,Shivaji Rubber Products Implements
& Cutlery North West Marg, Najafgarh Road Ambala Ambala Scientific Instruments
Karnal, Karnal, Rice Mills
South & West Delhi Okhla, Mayapuri Chemicals Bhiwani Bhiwani Powerloom
North East Delhi Shahadara & Wire Drawing Panipat & Panipat &
West & South Naraina & Okhla Electrical Engineering Vishwasnagar Bhiwani Bhiwani Stone Crushing Kurukshetra, Kurukshetra,
Equipment Faridabad Faridabad Auto Components Panchkula Pinjore Engineering
West & North West Mayapuri & Wazirpur Metal Fabrication
West & South Naraina & Okhla Electronic Goods Equipment
West & North East Kirtinagar & Tilak Nagar Furniture Faridabad Faridabad Engineering Cluster
North Delhi Lawrence Road Food Products Panchkula Panchkula Stone Crushing
North West Delhi Wazirpur Electro Plating Faridabad Faridabad Stone Crushing
South Delhi Okhla, Wazirpur flatted Leather Products Panipat Panipat Powerloom
South,West, Okhla, Mayapuri, Auto Components Gurgaon Gurgaon Auto Components
factories complex Panipat Panipat Shoddy Yarn
North West Naraina, Wazirpur Gurgaon Gurgaon Electronic Goods
South, West Delhi Okhla,Mayapuri, Mechanical Badli & G.T. Karnal Road Panipat Samalkha Foundry
Anand Parbat Engineering Equipment Gurgaon Gurgaon Electrical Engineering
North East Delhi, Shahdara, Hosiery Equipment Panipat Panipat Cotton Spinning
West,South, Naraina,Okhla, Packaging Material East Delhi & South Gandhinagar,
East Delhi Patparganj Okhla & Maidangari Gurgaon Gurgaon Readymade Garments Rohtak Rohtak Nuts/ Bolts

West & South Naraina & Okhla Paper Products South & Okhla & Readymade Garments Gurgaon Gurgaon Mechanical Yamuna Nagar Yamuna Nagar Plywood/Board/
North East Shahdara Engineering Equipment Blackboard
West & South Naraina Udyog Nagar Plastic Products
& Okhla South Delhi Okhla Sanitary Fittings Kaithal Kaithal Rice Mills Yamunanagar Jagadhri Utensils

SMALL AND MEDIUM ENTERPRISE WORLD 16 August-October 2010 August-October 2010 17 SMALL AND MEDIUM ENTERPRISE WORLD
 KARNATAKA UTTAR PRADESH

Cover story
Cover story

State/District Location Product State/District Location Product District Location Product District Location Product
Bangalore Bangalore Machine Tools Dharwad Hubli, Dharwad Agriculture Implements Agra Agra Foundry Gautam Buddha Nagar Noida Plastic Products
and Tractor Trailer
Bangalore Bangalore Powerloom Agra Agra Leather Footwear Ghaziabad Ghaziabad Chemicals
Bangalore Bangalore Electronic Goods Gadag Gadag Betgeri Powerloom
Agra Agra Mechanical Ghaziabad Ghaziabad Mechanical
Bangalore Bangalore Readymade Garments Gulburga Gulburga Gadagh belt Dal Mills Engineering
Engg Equipment
Hassan Arasikara Coir & Coir Products Equipment
Bangalore Bangalore Light Engineering Ghaziabad Ghaziabad Packaging Material
Mysore Mysore Food Products Aligarh Aligarh Brass & Gunmetal
Bangalore Bangalore Leather Products Statues Gorakhpur Gorakhpur Powerloom
Belgaum Belgaum Foundry Mysore Mysore Silk
Aligarh Aligarh Locks Hathras Hathras Sheetwork
Belgaum Belgaum Powerloom Raichur Raichur Leather Products
Aligarh Aligarh Building Hardware (Globe, Lamp)
Bellary Bellary Jeans Garments Shimoga Shimoga Rice Mills
Allahabad Mau Powerloom Jhansi Jhansi Powerloom
Bijapur Bijapur Oil Mills South Kannada Mangalore Food Products Allahabad Mau Aima Leather Products Kannauj Kannauj Perfumery &
Essential Oils
Banda Banda Powerloom
MAHARASHTRA Kanpur Kanpur Saddlery
Bulandshahr Khurja Ceramics
Kanpur Kanpur Cotton Hosiery
Firozabad Firozabad Glass Products
District Location Product District Location Product Kanpur Kanpur Leather Products
Gautam Noida Electronic Goods
Ahmednagar Ahmednagar Auto Components Nagpur Nagpur Engineering & Buddha Nagar Meerut Meerut Sports Goods
Fabrication Gautam Buddha Nagar Noida Toys Meerut Meerut Scissors
Akola Akola Oil Mills (Cotton seed)
Nagpur Nagpur Steel Furniture Gautam Buddha Nagar Noida Chemicals Moradabad Moradabad Brassware
Akola Akola Dal Mills
Aurangabad Aurangabad Auto Components Nagpur Nagpur(Butibori) Readymade Garments Gautam Buddha Nagar Noida Electrical Muzaffarnagar Muzaffarnagar Rice Mills
Nagpur Nagpur Handtools Engineering
Aurangabad Aurangabad Pharmaceuticals- Saharanpur Saharanpur Rice Mills
Bulk Drugs Nagpur Nagpur Food Processing Equipment
Saharanpur Saharanpur Woodwork
Bhandara Bhandara Rice Mills Nanded Nanded Dal Mills Gautam Buddha Nagar Noida Garments
Varanasi Varanasi Sheetwork (Globe, Lamp)
Chandrapur Chandrapur Roofing Tiles Gautam Buddha Nagar Noida Mechanical
Nashik Malegaon Powerloom Varanasi Varanasi Powerloom
Engineering
Chandrapur Chandrapur Rice Mills Nashik Nashik Steel Furniture Equipment Varanasi Varanasi Agricultural Implements
Dhule Dhule Chilly Powder Pune Pune Auto Components Gautam Buddha Nagar Noida Packaging Material Varanasi Varanasi Electric Fan
Gadchiroli Gadchiroli Castings & Forging Pune Pune Electronic Goods
Gadchiroli Gadchiroli Rice Mills Pune Pune Food Products
Gondia Gondiya Rice Mills Pune Pune Readymade Garments
PUNJAB
Jalgaon Jalgaon Dal Mills Pune Pune Pharmaceuticals- District Location Product District Location Product
Jalgaon Jalgaon Agriculture Implements Bulk Drugs
Amritsar Amritsar Rice Mills Ludhiana Ludhiana Bicycle Parts
Jalna Jalna Engineering Equipment Pune Pune Fibre Glass
Amritsar Amritsar Shoddy Yarn Ludhiana Ludhiana Hosiery
Kolhapur Kolhapur Diesel Engines Ratnagiri Ratnagiri Canned & Amritsar Amritsar Powerloom Ludhiana Ludhiana Sewing M/C
Kolhapur Kolhapur Foundry Processed Fish Components
Fatehgarh Sahib Mandi Govindgarh Steel Re-rolling
Kolhapur Ichalkaranji Powerloom Sangli Sangli M S Rods Ludhiana Ludhiana Industrial Fastners
Gurdaspur Batala Machine Tools
Mumbai Mumbai Electronic Goods Sangli Madhavanagar Powerloom Ludhiana Ludhiana Handtools
Gurdaspur Batala,Gurdaspur Rice Mills
Mumbai Mumbai Pharmaceutical - Satara Satara Leather Tanning Ludhiana Ludhiana Machine Tools
Gurdaspur Batala Castings & Forging
Basic Drugs Sholapur Sholapur Powerloom Ludhiana Ludhiana Forging
Jalandhar Jalandhar Sports Goods
Mumbai Mumbai Toys (Plastic) Sindhudurg Sindhudurg Cashew Processing Ludhiana Ludhiana Electroplating
Jalandhar Jalandhar Agricultural Implements
Mumbai Mumbai Readymade Garments Sindhudurg Sindhudurg Copper Coated Wires Moga Moga Wheat Threshers
Jalandhar Jalandhar Handtools
Mumbai Mumbai Hosiery Thane Bhiwandi Powerloom Patiala Patiala Agricultural Implements
Jalandhar Jalandhar Rubber Goods
Mumbai Mumbai Machine Tools Thane Kalyan Confectionery Patiala Patiala Cutting Tools
Jalandhar Kartarpur Wooden Furniture
Mumbai Mumbai Engineering Equipment Thane Vashind Chemicals Sangrur Sangrur Rice Mills
Jalandhar Jalandhar Leather Tanning
Mumbai Mumbai Chemicals Thane Tarapur, Thane & Pharmaceuticals-
Belapur Bulk Drugs Jalandhar Jalandhar Leather Footwear
Mumbai Mumbai Packaging Material
Thane Thane Sea Food Jalandhar Jalandhar Surgical Instruments GOA
Mumbai Mumbai Handtools
Wardha Wardha Solvent Oil Kapurthala Kapurthala Rice Mills District Location Product
Mumbai Mumbai Plastic Products
Yavatmal Yavatmal Dal Mills Kapurthala Phagwara Diesel Engines
Nagpur Nagpur Powerloom South Goa Margao Pharmaceutical
Ludhiana Ludhiana Auto Components

SMALL AND MEDIUM ENTERPRISE WORLD 18 August-October 2010 August-October 2010 19 SMALL AND MEDIUM ENTERPRISE WORLD
 TAMIL NADU KERALA
Cover story

Cover story
District Location Product District Location Product District Location Product

Chennai Chennai Auto components Namakkal Thiruchengode Rigs Alappuzha Alappuzha Coir & Coir Products

Chennai Chennai Leather Products Salem Salem Readymade Garments Ernakulam Ernakulam Rubber Products

Chennai Chennai Electroplating Salem Salem Starch & Sago Ernakulam Ernakulam Powerloom

Coimbatore Coimbatore Diesel Engines Thanjavur Thanjavur Rice Mills Ernakulam Kochi Sea Food Processing

Coimbatore Coimbatore Agricultural Implements Tiruchirappalli Tiruchirappalli Engineering Kannur Kannur Powerloom
Equipment Kollam Kollam Coir & Coir Products
Coimbatore Tirupur Hosiery
Tiruchirappalli Tiruchirapalli (Rural) Artificial Diamonds Kottayam Kottayam Rubber Products
Coimbatore Coimbatore Machine Tools
Tuticorin Kovilpathi Safety Matches Malappuram Malappuram Powerloom
Coimbatore Coimbatore Castings & Forging
Vellore Ambur,Vaniyambadi, Leather Tanning Palakkad Palakkad Powerloom
Coimbatore Coimbatore, Powerloom
Pallar Valley
Palladam,Kannam Palayam Faizlure Powerloom
Virdhunagar Rajapalayam Cotton Mills
Coimbatore Coimbatore Wet Grinding Machines
(Gauge Cloth)
Erode Surampatti Powerloom
Virudhunagar Virudhunagar Tin Container MADHYA PRADESH
Karur Karur Powerloom
Virudhunagar Sivakasi Printing District Location Product
Madurai Madurai Readymade Garments
Virudhunagar Sivakasi Safety Matches &
ORISSA
Bhopal Bhopal Engineering Equipment
Madurai Madurai Rice Mills Fire Works
District Location Product Dewas Dewas Electrical Goods
Madurai Madurai Dal Mills Virudhunagar Srivilliputhur Toilet Soap
Ujjain Ujjain Powerloom East Nimar Burhanpur Powerloom
Balangir Balangir Rice Mills Indore Indore Pharmaceuticals-
WEST BENGAL Bulk Drugs
Balasore Balasore Rice Mills
District Location Product District Location Product Balasore Balasore Powerloom Indore Indore Readymade Garments
Cuttack Cuttack Rice Mills Indore Indore Food Processing
Bankura Barjora Fishing Hooks Kolkata Tiljala, Topsia,Phoolbagan Leather Goods
Cuttack Cuttack Chemicals & Indore Pithampur Auto Components
HMC & Bally Howrah Foundry Kolkata Daspara(Ultadanga), Ahiritola Dal Mills
Municipal area Pharmaceuticals Jabalpur Jabalpur Readymade Garments
Kolkata Taltala, Lenin, Sarani Mechanical
Howrah Bargachia,Mansinghapur, Locks Engineering Cuttack Cuttack(Jagatpur) Engineering &
Fabrication Jabalpur Jabalpur Powerloom
Hantal, Sahadatpur & Jagatballavpur Equipment
Cuttack Cuttack Spices
Howrah HMC & Bally Municipal Steel Re-rolling Kolkata Bowbazar, Kalighat Wood Products
area Sevok Rd Dhenkanal Dhenkanal Powerloom
Nadia Matiary,Dharmada,Nabadwip Bell/Metal Ganjam Ganjam Powerloom
Howrah Domjur Artificial & Utensils
Real Jewellery Ganjam Ganjam Rice Mills
Nadia Ranaghat Powerloom
Cooch Bihar Cooch Bihar-I, Tufanganj, Sitalpati/ Koraput Koraput Rice Mills
Mathabangha, Mekhliganj Furniture Purulia Jhalda Proper, Purulia, Handtools Puri Puri Rice Mills
Begunkodar & Tanasi
Kolkata Wellington, Khanpur Electric Fans Sambhalpur Sambhalpur Rice Mills
Kolkata Sovabazar, Cossipur Hosiery South Kalyanpur, Surgical
24 Parganas Purandarpur & Instruments JAMMU & KASHMIR
Kolkata Metiaburuj Readymade Garments Dhopagachi JHARKHAND
District Location Product
Anantnag Anantnag Cricket Bat District Location Product
RAJASTHAN
Jammu Jammu Steel Re-rolling Sarikela-Kharsawan Adityapur Auto Components
District Location Product District Location Product Jammu/ Kathua Jammu/ Kathua Oil Mills East Singhbhum Jamshedpur Engineering &
Fabrication
Alwar,S. Madhopur, Alwar,S. Madhopur Oil Mills Jaipur Jaipur Ball Bearing Jammu/ Kathua Jammu/ Kathua Rice Mills
Bharatpur Bharatpur belt Bokaro Bokaro Engineering &
Jaipur Jaipur Electrical Engg Equipment Srinagar Srinagar Timber Joinery/ Fabrication
Ajmer Kishangarh Marbe Slabs Jaipur Jaipur Food Products Furniture
Ajmer Kishangarh Powerloom Jaipur Jaipur Garments
Alwar Alwar Chemicals Jaipur Jaipur Lime HIMACHAL PRADESH UTTARANCHAL
RBikaner Bikaner Papad Mangodi, Namkin Jaipur Jaipur Mechanical Engg Equipment
Bikaner Bikaner Plaster of Paris District Location Product District Location Product
Jhalawar Jhalawar Marble Slabs
Dausa Mahuwa Sand Stone Kullu & Sirmaur Kullu & Sirmaur Food Processing Dehradun Dehradun Miniature Vacuum Bulb
Nagaur Nagaur Handtools
Gaganagar Ganganagar Food Processing Kangra Damtal Stone Crushing Haridwar Roorkee Survey Instruments
Sikar Shikhawati Wooden Furniture
Jaipur Jaipur Gems & Jewellery Solan Parwanoo Engineering Equipment Udham Singh Nagar Rudrapur Rice Mills
Sirohi Sirohi Marble Slabs

SMALL AND MEDIUM ENTERPRISE WORLD 20 August-October 2010 August-October 2010 21 SMALL AND MEDIUM ENTERPRISE WORLD

Udaipur Udaipur Marble Slabs

 MRP-based valuation and
Taxation
bulk industrial sales
■ SALONI ROY & JAYANTA KALITA
Our company is based outside India. We recently
set up a paint unit in India and we sell our products
in the retail market. We understand that we are re-
quired to adopt MRP-based valuation for the pay-
ment of excise duty on our products. Very often we
get orders from industrial buyers, who buy in bulk.
We were told the duty computation on MRP is not
applicable for industrial sales. Please advise.
MRP-based valuation for levy of excise duty is gov-
erned by Section 4A of the Central Excise Act, 1944. The
primary requirement for attracting MRP-based valua-
tion of goods is that the goods should be notified under
Section 4A of the Excise Act and on which the retail sale
price should be declared under the Standards of
Weights & Measures Act (SWMA). The requirement to
declare the retail price on goods is governed by the provi-
sions of SWMA and the Standards of Weights & Mea-
sures (Packaged Commodities) Rules, 1977 (PCR) and is
applicable on products intended for retail sale
Under the PCR, certain exemptions have been made.
One is that ‘any product specially packed for exclusive
use of any industry as raw material shall or for the pur-
pose of servicing any industry’ would not be consid-
ered as product intended for retail sale. Therefore, the
sale of bulk products to any industrial consumer that is
not intended for retail sale should be outside
the purview of the PCR and should not attract MRP-
based valuation.
Ours is a newly set up company constructing a
manufacturing facility. We pay service tax to our
vendors on various services in this connection.
Can we take credit for the service tax paid?
As per Cenvat Credit Rules, the primary condition for
availing of credit is that the service for which the credit
is sought should qualify as an ‘input service’. The defin-
ition of input service includes services used by the
manufacturer in relation to setting up, modernisation,
renovation or repairs of a factory. Therefore, you may
avail of Cenvat credit for the service tax paid on ‘input
SMALL AND MEDIUM ENTERPRISE WORLD
Where small industries bloom
focus: Gujarat
The state, home to over three lakh MSMEs, boasts of more than
50 thriving industrial clusters
services’ used for setting up the factory. ■ JYOTSNA BHATNAGAR & intermediates at Ahmedabad; ship-breaking at
However, we would like to highlight that in Circular Alang; re-rolling mills at Bhavnagar/ Shior; plastic in-
No 98/1/2008-ST dated January 4, 2008, the CBEC has N GUJARAT, arguably the country’s most industri- dustry at Dhoraji; brass parts at Jamnagar; wall clocks
clarified that Cenvat credit of input services (such as
‘commercial or industrial construction service’ and
‘works contract service’) used in the construction of
immovable property cannot be availed of. The reason-
ing given is that those services are in the nature of input
services towards the creation of an immovable prop-
erty, which is subject to neither central excise duty nor
I alised state, small is beautiful. That’s evident from
the fact that it’s not only the Goliaths of corporate In-
dia, including Reliance, Essar, Adani and Torrent,
which are prospering but thousands of Davids of the
industrial sector, too, are thriving and mushrooming
in all parts of the state.
According to latest industrial surveys, Gujarat is
at Morbi; chemicals at Nandesari, Vapi & Ankleshwar;
diesel engines, electric motors, ferrous castings, gold
& silver ornaments, machine tools, wrist watch & com-
ponents at Rajkot; Powerlooms, diamonds, gems & jew-
ellery, jari at Surat; pottery & ceramics at Surendrana-
gar (Than) & Wankaner; ceramic products at Thangadh
and petrochemicals at Vadodara.
service tax. Though the circular was issued in the con- home to over three lakh micro, small and medium While SMEs are spread all over the state, it is Ahmed-
text of construction of an immovable property that is units. Some important SME clusters in Gujarat include abad that tops the MSME sweepstakes, accounting for
rented out, the authorities could use this for restrict- readymade garments, drugs & pharmaceuticals, dyes 21% of the total MSMEs followed by Surat and Rajkot.
ing Cenvat credit of services used for construction of
factories also.
In our view, the circular seeks to lay down a provision
that is clearly contradictory to the law as enumerated in
the credit rules. In the presence of a clear law on the
subject matter, a contrary provision (by way of a circu-
lar) would clearly be inapplicable. However, the view
expressed in the circular does create a dispute and may
entail litigation.
We are an EPC contractor and have recently been
awarded a contract for the construction of an SEZ
unit. We understand that supply of goods and ser-
vices to an SEZ unit is exempt from taxes and du-
ties. Will such exemption be available if we pro-
cure goods from third parties?
Rule 27 of the SEZ Rules, 2006 provides that exemp-
tions, drawbacks and concessions and other benefits on
goods and services allowed to a SEZ unit for setting up
and maintenance of factory building is also allowed to
the contractors appointed by such a unit. To enjoy
these benefits, procurements should be made jointly by
the contractor and the unit. All documents should bear
the name of the unit and the contractor and should be
filed jointly in their name. Hence, the benefits shall also
be available to you if they are procured jointly.
The authors work with Ernst & Young. Replies here
do not constitute professional advice
22 August-October 2010 August-October 2010 23 SMALL AND MEDIUM ENTERPRISE WORLD
 The 2003 industrial policy also While SMEs ically and has been making alter-
focus: Gujarat

focus: Gujarat
made it easy for MSMEs to avail of fi- are spread all ations in view of the changing mar-
nancial assistance for quality upgra- ket paradigm. Only recently, the pol-
dation, including obtaining ISO 9000
over the state, icy has once again been re-touched.
and ISO 14000 certification, as also three cities— Terming the SME sectors as the
assistance for filing patents. Ahmedabad, Surat backbone of industries in Gujarat,
The 2003 policy was followed up by the government is also drafting a re-
and Rajkot—
the Gujarat government with yet an- habilitation package that would in-
other water-shed step–the enactment account for 51% clude revival of or allowance of exit
of the the Micro, Small and Medium of the units for sick units. Support will also be
Enterprises Development Bill in given for market development, in-
2006. The Act aimed to facilitate promotion and develop- cluding initiatives for creating the ‘Made in Gujarat’
ment of micro, small and medium enterprises in a sus- brand by the SMEs.
tainable way. Furthermore, it also empowered the state Industry observers say the policy and the Act have
government with several discretionary measures to fa- largely been instrumental in the exponential growth of
cilitate and help such enterprises graduate themselves the SME sector. Between 1996 to 2006, the MSME sector
to new levels of growth. One of its primary objectives has seen an average investment of Rs 500 crore annu-
was to make provisions for ensuring timely and smooth ally and has led to the creation of over 7 lakh jobs. SMEs
flow of credit to SMEs and to help them mitigate busi- have a vibrant manufacturing base in Gujarat. Here
ness risks to effectively achieve a greater success rate. again, the state government is taking initiatives to em-
Gujarat has been reviewing the industrial policy period- power industrial clusters to take on the challenges of

Between them, the three cities account for 51% of the

MSMEs. In terms of investment, the MSMEs account
for over Rs 80 million while production is pegged at well
Major SME clusters
over Rs 100 million. in Gujarat
The burgeoning number of SMEs in Gujarat is a Ahmedabad: Readymade garments, drugs &
telling testimony of the innate entrepreneurial spirit pharmaceuticals, dyes & intermediates
of the Gujaratis. SMEs in Gujarat have been on a roll,
Surat: Powerlooms, diamonds, gems
particularly in the past few years, thanks largely to the & jewellery, jari
proactive support of the state government. Realising
the immense potential of the SME sector in contribut- Rajkot: Diesel engines, electric motors, ferrous
castings, gold & silver ornaments, machine tools,
ing to the overall growth of the state, the Gujarat gov-
wrist watch & components
ernment has put in place a game-changer Gujarat In-
dustrial Policy in 2003, which focused specially on Vadodara: Petrochemicals
promoting the growth of MSMEs. Alang: Ship-breaking
The policy was comprehensive in its reach and gave Bhavnagar/ Shior: Re-rolling mills
top priority to labour reforms in a bid to facilitate in-
dustrial investment both for employment generation
Dhoraji: Plastic industry
and productivity. It also gave an impetus to creation of Jamnagar: Brass parts
urban and industrial infrastructure and simultane- Morbi: Wall clocks
ously ushered in power reforms and port-led develop-
Nandesari, Vapi & Ankleshwar: Chemicals
ment. But most importantly, the policy gave tangible in-
centives for setting up MSMEs, including interest Surendranagar (Than) & Wankaner: Pottery &
subsidies at 5% for setting up new units as well as ex- ceramics
pansion and modernisation of existing ones, and an in- Thangadh: Ceramic products
terest subsidy of 3% for technological upgradation.

SMALL AND MEDIUM ENTERPRISE WORLD 24 August-October 2010 August-October 2010 25 SMALL AND MEDIUM ENTERPRISE WORLD
 partment of one of the largest public sector banks, “The ment been that countries like Seoul and Japan are evinc-
focus: Gujarat

MSME sector in Gujarat is extremely robust, owing
largely to the environment of the state, the absence of
labour unrest and government support and incentives. In
the last fiscal itself, the sector posted a growth of 20-25%
in non-seasonal segments.”
The banker, however, gives much credit to the state
government’s biennial Vibrant Gujarat investment
melas for the spurt in investment in Gujarat. So success-
ful has the hardsell of the state by the Gujarat govern-
focus: Gujarat
ing interest in making forays into the MSME sector of
the state. Recently, South Korea has expressed interest
in involving itself with the SME sector of Gujarat in a
major way and has plans to set up a world class innova-
tion centre in the state.
Jyotsna.Bhatnagar@expressindia.com

economies of scale and quality in the international
markets. Equal consideration is being given to manage-
rial and financial aspects by the state while supporting
them. In a major initiative to check closure of small
units, the Gujarat government has drawn up a “credit
against performance” scheme, which is eliciting rave
reviews from the industry.
The state government has also decided to recognise
clusters with a critical mass of minimum 50 units
within a 10-km radius and is providing common facility
centres and assistance to cluster associations for activ-
ities leading to strengthening of clusters.
Today, Gujarat has several institutions that are en-
gaged in catering for the growing demands and chal-
lenges of the SME sector given the fact that with rapid
globalisation, it has become crucial for SMEs to miti-
gate business risks and acquire a nimble outlook. In the
wake of economic slowdown in the US and the Euro-
pean Union, coupled with severe manufacturing compe-
tition from China, SMEs in Gujarat are quickly adapt-
ing to the changing environment with capacity
building, infrastructure augmentation, innovative fi-
nancing options, technology upgradation, investment in
research & development, enhanced quality standards,
and by fine tuning marketing strategies.
Notable among the institutions doing a sterling job for
the empowerment of the SME sector is Small Industries
Service Institute (Sisi). In Gujarat, Sisi helps small-scale
industries meet various needs of planning, assessment
and implementation by offering services in technical
consultancy, industrial management, training and work-
shops. Gujarat Institute of Development Research
(GIDR), an autonomous research body, undertakes study
on sectoral development. Most studies undertaken by
the institute have focused on the development of small-
scale rural industries.
Further, the Industries Commissionerate, along with
the District Industries Centres (DICs), implements state-
level schemes for SMEs on an ongoing basis.
In the backdrop of such impressive growth, industry
watchers are bullish about the prospects of MSME
growth in Gujarat. Says a banker heading the MSME de-

SMALL AND MEDIUM ENTERPRISE WORLD 26 August-October 2010 August-October 2010 27 SMALL AND MEDIUM ENTERPRISE WORLD
 Antti-Jussi Suominen, Patrick Mathias,
Tech solutions

Tech solutions
Head of commerce in corporate development, Nokia Vice-president, sales-west,
Cisco India & Saarc
“Nokia Tej offers businesses
‘Cisco Capital
a speedy online enables our
order management system” customers to
Antti-Jussi Suominen, head of commerce in corporate
development, Nokia, tells SME World’s Monalisa Sen
Can you mention specific industries that would
benefit from this service?
spread out
about the concept of Nokia’s new service for small and
medium businesses in India, called Nokia Tej.
We believe that Nokia Tej is the ideal service for any
SMBs owner who wants to improve his/her productiv-
ity and profitability. It is particularly effective for busi-
their payments’
Can you elaborate how Nokia Tej works for SMBs? nesses with complex supply chains, such as manufac-
Nokia Tej is a unique mobile productivity service. It is turing, textiles or fast moving consumer goods. Nokia is Patrick Mathias, vice-president, sales-west, Cisco In-
a hosted mobile order management service that lets currently offering Nokia Tej services commercially to dia & Saarc, tells SME World’s Monalisa Sen about
small and medium businesses (SMBs) various FMCG, textile/apparel, con- the company’s technology solutions for SMBs and the fi-
place orders and access order-related sumer durables, ready-made gar- nancing scheme it has to make the products affordable.
information via their Nokia handsets. Nokia Tej is ments as well as pharmaceutical
Nokia Tej offers businesses an online particularly effective companies with sales and distribu- What are the solutions Cisco has for SMBs?
order management system that can tion channels spread across the Cisco now has the complete range of products to of-
process nearly all business proce-
for businesses with country. fer end-to-end technology solutions for SMBs. Comple-
dures, and provide their supply chain complex supply menting the existing range of ‘plug & play’ products
partners relevant information re- chains, such as What would be the average cost of like the UC500 and ISR series for SMBs, WebEx and the
motely and instantly. It can be de- adopting Nokia Tej, including the managed services offerings, our new storage solution
manufacturing,
ployed on mobile handsets of users, al- handset cost per employee? makes Cisco a one-stop-shop for SMB-targeted technol-
lowing them to send and receive textiles or fast Nokia charges a nominal fee of Rs ogy infrastructure.
orders, confirm and review orders, moving consumer 1,250 per month for portal access and
dispatch details, view sales reports goods Rs 550 per user per month for en- What is the latest offering? How different is it from
and inventory status, among others. hanced productivity and automation the earlier one?
Nokia Tej can be integrated to the of an SMB. The cost of the Nokia The most recent addition to the SMB portfolio from
user’s back-end system for invoicing and accounting; handset & data cost (dependent on the operator/net- Cisco is the Smart Storage solution, which significantly
and by integrating the mobile payment solution for work provider of choice) is separate and is only re- expands the portfolio and addresses the specific con-
business payments and related information flow, al- quired if the employees don’t already have a compatible cern area of storage. The Cisco NSS 300 Series Smart
most the whole business process can be automated and Nokia GPRS enabled handset. Storage is a new family of affordable, easy-to-use desk-
made much more efficient. top network storage solutions, which allows small busi-
Nokia Tej is simple to configure, easy to use. It is com- How safe is the data transmitted through Nokia nesses to secure and store critical business data, share
patible with all GPRS-enabled Nokia devices and does Tej from virus and abuses? information and run their business better. This is the
not require additional investment in expensive and Nokia Tej is a secure hosted service. It ensures that first SMB-focused storage solution from Cisco.
cumbersome IT systems, and can be customised as per only an SMB and its defined network have access to or-
the organisation’s requirement. der related data. ● How affordable is the product for Indian SMEs?

SMALL AND MEDIUM ENTERPRISE WORLD 28 August-October 2010 August-October 2010 29 SMALL AND MEDIUM ENTERPRISE WORLD
 Indian SMBs, while price-sensitive, are also aware of
Tech solutions
the value and competitive advantage that good technol-
ogy infrastructure can bring to their business. Cisco’s
small business products We also have support mecha-
nisms through our financing arm, Cisco Capital, which
enables our customers to spread out their payments
over a certain time-frame when choosing Cisco gear.
How do you justify the investment in this product
by an SME?
Technology infrastructure is a core business require-
ment for many SMBs today. Our storage solution is de-
signed so that businesses that invest in the technology
not only have their storage needs fulfilled, but they are
also able to enjoy a wide range of features that make it
easy to install and maintain. Our storage solution cus-
tomers can also tap into a range of add-on applications
like an integrated WordPress publishing platform,
iTunes server, and FTP server.
What are the major challenges that the SMB mar-
ket faces in India?
The most significant challenge that SMBs face in In-
dia is to do with finances available for investments in
technology. They also often have to make-do with
scaled-down versions of enterprise-
class products, which mean that
they probably pay for features that For every business,
they may never use. The propensity there is an ideal
of Indian SMEs being in clusters
also proves challenging, especially
technology solution just
for the vendor or integrator who is waiting to be tapped.
tasked with installing and maintain- We recommend that
ing the SMBs infrastructure.
SMBs evaluate every
What is the level of IT adoption aspect of their business
in Indian SMEs? and identify areas that
This is highly subjective based on could be improved
the industry vertical within which
the business operates. Typically, through automation
businesses with the need for more
connectivity would have slightly more advanced IT re-
quirements than a business that uses basic IT for office
automation. However, on a global scale, when compared
alongside similar economies, Indian SMBs definitely
are close to the median.
What are the hindrances to IT adoption?
The primary hindrance is the mindset. Many busi-
SMALL AND MEDIUM ENTERPRISE WORLD 30
ness owners may feel that investing
in technology is non-essential and
so delay it until all other expendi-
tures are covered.
However, more technologically
aware individuals and process-ori-
ented organisations would quickly
realise the value added to the
business through an effective
IT network.
What is your advice to Indian
SMBs?
Our advice to SMBs would be
that for every business, there is an ideal technology so-
lution just waiting to be tapped. We recommend that all
SMBs evaluate every aspect of their business, with ex-
perts if necessary, and identify areas that could be im-
proved through automation. The resulting human re-
source bandwidth that is freed up can be directly
ploughed back into the business, leading to break-out
growth for the business. ●
August-October 2010
Satyen Vyas, director ASG in SMB division, Dell India
Tech solutions
‘Data storage is no longer
a backroom IT issue’
As technology adoption and data storage emerge as new
challenges for small and medium-sized businesses (SMBs)
of the country, Dell India sees opportunities for it to help the
segment and thrive in the marketplace. Satyen Vyas, di-
rector, Advanced Solutions Group in the SMB division of
Dell India, who manages the Dell enterprise products and
solutions business, shared his thoughts on the subject with
SME World’s Monalisa Sen. Excerpts:
Data storage has become an issue of concern for in-
dustry today. What are your views on it?
One of the biggest challenges faced by companies today
is the exponential growth in data and the most effective
ways of managing that data. Given issues such as data
archiving, data security, disaster recovery & storing and
managing the information continuously streaming in,
companies recognise that this is no longer just a back-
room IT issue but really among the key CXO
concerns–the way this information is used makes it a ogy adoption?
business-driver. The challenge most SMBs face is access to skills–for
At Dell, a key focus area for is Intelligent Data Man- instance, Gartner says that Asia-Pacific mid-sized busi-
agement solutions, that is, automated data management nesses are slower to adopt server virtualisation tech-
of predictable, scalable open data storage. Dell is also nologies compared to their European and North Ameri-
among the leaders on the iSCSI storage – the rise of can counterparts, and it cites training and skills as the
10GbE is changing the dynamics of storage systems, al- reason. This is a challenge that we, at Dell, look to ad-
lowing companies to have robust yet affordable, highly dress. We believe technology must be affordable, simple
scalable storage systems on the IP SAN protocol. ISCSI to buy and easy to use. With simplicity designed within
SAN is of particular interest to medium-sized busi- our offerings, we believe we can help Indian SMBs adopt
nesses that require the flexibility of larger enterprises, technology easily.
but have limited IT resources to deploy.
Lastly, in the coming years, how do you see the stor-
How is the storage market placed now? What is the age market developing for SMBs?
size of the SMB segment? SMBs are steadily realising the power of technology in
According to AMI-Partners, the storage hardware boosting their enterprise. More and more businesses are
market is estimated at Rs 1,583 crore–31% of this share using technology in innovative ways to enhance their
this attributed to SMBs. The storage hardware market competitiveness. Technology is being seen more as an
for SMBs is Rs 484.80 crore--SAN constitutes 55% of the enabler rather than as a cost. India is one of the grow-
market, Tape 17%, DAS 18% and NAS 10%. ing markets for storage and Indian SMBs represent an
attractive opportunity for storage hardware, software
What are the challenges SMBs face in technol- and services vendors. ●
August-October 2010 31 SMALL AND MEDIUM ENTERPRISE WORLD
 ‘Internet is a great medium to
Tech solutions
build visibility for business’
■ MANISH DALAL keywords that your potential customers would use to
find what you offer. By using SEO, businesses can help
LOBALISATION has changed the way improve their chances of being found on the Internet.
G business is conducted the world over. Its ef-
fect can be seen in how businesses, big and
small, compete with each other in the local
and global markets. The Internet has fu-
elled and enabled this change by making access to infor-
mation and services easy and communication instant.
The web offers a wealth of opportunities to businesses
■ List your company on local web directories: Web di-
rectories are websites on which companies can get their
names listed for free.
■ Choose a simple domain name: Select a domain name
with care, one that directly refers to your line of busi-
ness. Registering multiple domain names increases your
chances of being found on the Internet.
irrespective of size. Over 81 million Indians now have ■ Use a business email address: Your business email
access to the Internet and over 1.73 billion Internet users address can serve as a powerful tool to drive traffic to
exist worldwide, making it a rich and your website. It serves as a constant re-
powerful media to create awareness of minder of who you are whenever you
your business. While creating aware- Over 81 million send anyone an e-mail from your pro-
ness is one of the key benefits, an In- Indians now have fessional email id.
ternet presence when used strategi- ■ Make regular updates: Consider
cally can help a business increase
access to the making frequent changes to the con-
inquiries for its products and services. Internet, making tent posted on your website (once a
To be present on the web, an impor- it a powerful media quarter can be a good start) and pro-
tant first step for a business is to select vide recent updates on information or
to create
and register a domain name. Selecting services related to your line of busi-
the right domain name increases a awareness of one s ness to encourage visitors to come
business’s visibility on the net. A .com business back repeatedly.
domain name is appropriate for busi- ■ Build traffic by exchanging links:
nesses of all sizes and it is one of the most widely used do- Increasing your visibility in a crowded online market
main name extensions around the world. may be achieved by building partnerships to gain refer-
While it is key to pay attention to the design of one’s rals. Working with other websites to place links to your
website, it is perhaps more important to make the web- website can bring in more traffic to you. Doing so, may
site searchable. Here are a few practical tips to help you also increase your page ranking with search engines.
reach more potential customers cost-effectively. ■ Acquire on-line advertising space: Aim to be visible in
■ Promote your domain name on all communication the places where people look for the services you pro-
and marketing collaterals: Put your web address on busi- vide. For example if you supply handicrafts it may be
ness cards and all your stationery to make customers useful to buy online banner advertisements on appropri-
aware of where they can find you on the Internet. Notify ate websites that will link to your website.
your current customers of your new website. Use the The Internet is a great medium to build visibility for
phrase-visit our website at www.yourbusiness.com on your business. For a small business it could be a powerful
your advertisements and publicity materials. Use an e- and cost-effective marketing tool. With a little strategic
mail signature of your website domain name on all planning, you can help boost your business inquiries.
email correspondence. Welcome to the Internet World!
■ Use search engine optimisation: Search engine optimi-
sation, or SEO, is the process of researching and selecting The author is vice-president-Apac, VeriSign
SMALL AND MEDIUM ENTERPRISE WORLD 32 August-October 2010
Customer satisfaction is
View
linked to relevant data
■ MAHESH KIRAN
ICRO, small and
M medium enterprises
are categorised ac-
cording investments
made in plant and
machinery. The current invest-
ment limits are Rs 25 lakh for mi-
cro, Rs 5 crore for small and Rs 10
crore for medium enterprises. If an
enterprise is engaged in providing
services, the investment limit in
plant and machinery is relaxed to
Rs 10 lakh, Rs 2 crore and Rs 5
crore, respectively.
SMEs currently contributes to
around 8% to Indian GDP. This ra-
tio is projected to touch 10% in the
near future.
Every SME is aware that ‘to suc-
ceed in an environment of ever-
growing competition coupled with severe margin pres- ance--- multiple government departments require data
sure’ it has to follow the dictum, customer comes first. on regular intervals. Be it VAT / service tax / excise / in-
And an SME should ensure that the customer is always come tax.
happy doing business with it. However, customer satis- To manage these challenges, SMEs need to ensure
faction is a product of right management decisions. To that timely data is captured in the right format. Vari-
arrive at the right decisions, the management must be ous surveys show when computers are put in use, most
provided with updated relevant data from time to time SMEs begin by computerising their accounting data.
for analysis. The current IT adaptation level in SMEs is very en-
Let’s take some common issues--most SMEs are bat- couraging, with maximum penetration in terms of per-
tling ‘cash flow.’ SMEs operate with limited liquid capi- sonal computers and laptops, followed by printer and
tal with the customer always wanting the material on accounting applications (like Tally). IT adoption is ex-
credit but the supplier is always demanding advance or pected to grow at a very rapid pace in the next two-three
on-delivery payments for supplies. So it’s critical that years. Another revolution in SMEs is the adoption of
SMEs plan and ensure materials are available just-in- Internet as their default means of communication.
time, so no excess stock is stored blocking the capital This will significantly change the way SMEs carry out
and at the same time production does not suffer for their business. Still very negligible part of transactions
want of raw materials. This requires a clear under- takes place online. This will also change over time.
standing of the orders in hand, the stock position and
the re-order level. The author works with Tally Solutions. He can be
Another critical requirement is statutory compli- reached at mahesh.kiran@tallysolutions.com
August-October 2010 33 SMALL AND MEDIUM ENTERPRISE WORLD
 Optimum investment for
Indipreneur
start-up enterprises
Every business needs a threshold level of investment in talent
■ SANJAY ANANDARAM
DON’T think we can afford him” is what I heard the
I founder and CEO of a start-up say last week. He was
referring to a potential head of engineering’s resume
that had been sent across by a friend. The profile was
terrific and seemed like the start-up could certainly
benefit enormously from having the individual on
board. The CEO, though, was very apprehensive that the
candidate would be unaffordable. Being cost conscious
and frugal was a practiced way with this CEO and his
founding team. So, what is the CEO to do when he now
needs experienced and specialised talent to help the or-
ganisation grow? While it is extremely hard to find a
company that collapsed because it cut too much cost too
fast, it is also hard to find a company that starved itself to
anorexic success.
Every business needs a certain threshold level of in-
vestment to first establish itself (these could include
building technology, acquiring facilities and infrastruc-
ture, acquiring customer, a certain market presence and
so on) and then another injection of investment to grow
and scale. The initial threshold level required by a com-
pany is a function of the market, competition and the
quality of the initial team. To establish the initial value
proposition in the market, the company has to be care-
ful with its money and smart about how to deploy it. It
must be frugal and leverage its relationships and re-
sources to the maximum . As the company establishes
its value proposition, the technology and infrastructure
need revamping to handle growth, additions have to be
made to the management team, increase in marketing
spends and so on.
It is at this stage that the mindset of the CEO has to ad-
just to the changed circumstances of his/her company.
“Do I continue with the frugal approach and work my re-
sources to the bone or do I spend money on aspects of my
business that affect growth?” “Do I spend money and
make that business trip to meet customers and business
SMALL AND MEDIUM ENTERPRISE WORLD
partners or do I stay with email?” “Do I spend money on
hiring the best or do I make do with the less than satisfac-
tory senior management?” “Do I spend money on a mar-
keting campaign or do I hope for ‘viral’ messaging to
take place?” Investors do not invest in a company so that
you can return their money unspent after two years. In-
vestors invest because they want to extract value out of
the company they’ve invested in. Value is created
through value-generating activities. Value-generating
activities include first and foremost, profitable sales and
an increasing number of such sales. Whatever is neces-
sary to achieve this end result must be invested in.
For example, investing in creating a top-notch sales
team but being smart in their incentives is certainly a
good idea. Being generous with stock options coupled
with operational freedom and involvement in company
decision-making can help attract a class of executives.
In some cases, top-class talent can be lured by the vision of
creating (without interference) the next great company;
The CEO’s passion, ability and vision to get the best for
his company is put to test in such cases.
Sometimes, it becomes imperative to pay the individ-
ual higher than market rates. In such cases, there are
trade-offs to be considered. What would be the incremen-
tal gain to the company by having such individuals on
board? What would be the downside of not having heavy
hitting talent on your side? What is gained as sales, mar-
ket presence, ability to hire others, time and so on?
If the incremental gains are more than incremental
costs, then the decision must be taken in favour of in-
vesting. Mistakes will happen but the decision-making
process must not change. There are far more examples of
companies, especially in India, that have under-invested
themselves to oblivion than there are of companies that
have splurged and collapsed. What do you think?
Sanjay Anandaram is an advocate of entrepreneurship.
He’s involved with Nasscom, TiE, IIM-B and INSEAD
business school
34 August-October 2010