Welcome Guest

Home Magazine December 2012 The Small Business Transformer

The Small Business Transformer

National Small Industries Corporation Limited (NSIC) has proactively contributed in reaching out to MSMEs while facilitating their requirements in various areas — marketing, finance, technology, etc. In an exclusive interaction with SMEntrepreneur, Dr HP Kumar, Chairman & MD, NSIC, talks about enabling this change.

BY Punita Sabharwal | COMMENTS ( 0 ) |

National Small Industries Corporation Limited (NSIC) has proactively contributed in reaching out to MSMEs while facilitating their requirements in various areas — marketing, finance, technology, etc. In an exclusive interaction with SMEntrepreneur, Dr HP Kumar, Chairman & MD, NSIC, talks about enabling this change.



Whether FDI is a threat or opportunity for the SME sector?


With FDI coming, I see more opportunities than threats as FDI is going to facilitate businesses that are finding difficulty in spreading their wings in the international markets. When I say international markets, it means the FDI is going to build a lot of infrastructure in the country and help the MSME sector in upgrading their capacities in order to become eligible for supplying to these FDI-provided retail chains.


MSMEs have to improve their capacities, capabilities, quality and price competitiveness. When they are able to do this for the domestic sector in order to be eligible for being the vendor for these retail chains, they would simultaneously become competitive in the international market. So they will have great opportunities, not only in domestic market but also in the international market. They can also improve their export that is quite low at this moment as compared to other countries.


The purpose of the provision of sourcing 30 per cent from the MSMEs is to help MSMEs so that the foreign retail chains should not start importing everything from other countries and selling it here.


What role is NSIC playing as the nodal agency for government procurement by MSMEs?


Recently, the government of India has modified and improved the government policy by making it compulsory for the central government departments and PSUs to procure at least 20 per cent of their annual purchases from the MSME sector. This is going to be compulsory from now onwards for the next three years. Three-year window has been given to enable them to prepare themselves.


As per the estimate, the annual procurement is Rs 7-8 lakh crore and over the period of next three years, it will increase. So if you are talking of annual purchases of around Rs 10 lakh crore by all ministries, departments and PSUs, it is going to be Rs 2 lakh crore, i.e. 20 per cent of the annual procurement from the MSME sector. At present, only five-six per cent of the government procurement is coming from the MSME sector. NSIC has been given a role of developing these vendors (MSMEs) on behalf of the government. What we are required to do is to assess the capacities of small industries and check their capability, financial condition, technical competence, quality, and then certify them as qualified vendors. 


What is the tender and consortia marketing?


In this scheme, we collate all tenders coming in from government and PSUs on a daily basis, which are relevant to the MSMEs. We collate all these tenders everyday electronically and forward it to the SMEs that are registered with us. Based on these tenders, if these SMEs are interested, they can approach us and we can help them in preparing the tender documents and filing it in the name of NSIC.


What is the present reach of NSIC, and how does it further help?


We have 150 offices in all major cities of all states. If small industries want funding support and raw materials, we give them raw materials at company prices. Our offices are mostly branches where we are helping MSMEs in terms of marketing support and financial intermediation with the help of banks to help MSME sector to get funding. Our raw material distribution scheme is a very unique scheme. We lift big chunk of quantities at company prices and book the materials with big suppliers like Steel Authority of India and Indian Oil. We supply these materials to small businesses in smaller quantities at the same company price. We also provide a 90-day credit period. Once the raw materials have been supplied and accepted, their bills are taken by us and discounted. We relieve MSMEs up to 70 per cent against those bills and help them in realising the payments.


Why are other countries adopting NSIC’s incubation programme?


The incubation programme is proving to be so attractive that every second day we are receiving a delegation from developing countries. It is becoming so popular in all the developing countries that everybody wants us to set-up this kind of incubation centre in their country. This is particularly true that creating self-employment opportunities for the poor strata of the society is a challenge everywhere. We found various models of incubation centres all over the world. Incubation is considered to be a model where any person having some idea can work for one or two years, develop the idea, prepare a project and then go for implementation (this will take three to four years). We are not into idea incubation, but into person’s incubation.


Incubation centres are limited to certain places where we have our technical centres, but incubation programmes are spread across the country. We have 65 incubation centres in the country. Sixty-two are with the private organisations. We have partnered with 30 countries and have already signed MoUs. There are 15-20 countries that are waiting for these MoUs to be signed.


What are the challenges Indian MSMEs are grappling with?


I don’t think there are challenges in terms of setting up an enterprise. But there are certain procedural difficulties that, I see, are proving to be hurdles in the growth that otherwise could take place. Even the present growth is 10 per cent in the MSME sector but it could be 20 or 25 per cent if those hurdles are removed. One of the hurdles is the compliance of labour laws, which is very tedious, time-taking, lengthy and full-of-hassles – this gives rise to the inspector raj era. Now these need to be looked into and simplified. Instead of having 10 returns to be filed by a small industry, you can have one consolidated return containing all the information. Instead of 10 people visiting them, only one person can visit them once in a quarter. If you ask an MSME to get all the books of accounts audited compulsorily from the chartered accountant and then file them, it becomes procedurally difficult. So these are some of the issues that need to be procedurally simplified.


One more challenge is competitiveness. Technology upgradation, in order to improve the quality and become competitive, is a challenge that small industries in India have already started facing from the global economies particularly China, Korea and other South-East Asian countries. If we are neither able to upgrade poor technical competence nor scale up our operations to become competitive and quality conscious, we are going to lag behind these economies.


Do you think NSE and BSE’s SME Exchange will help SMEs?


Raising cheaper resources from the Indian market and public and foreign sources, involve unlocking your value that requires going for a public issue. Thus, the help of exchange is required. The government has already put in place some mechanism of listing of SMEs on NSE and BSE, but in the last one year, since the exchanges have come in, success has not been visible. I find there are certain conditions imposed by SEBI in the exchanges that are prohibiting its growth. Like a minimum investment of Rs 1 lakh by any investor is required.


Why should we have prohibitive conditions that others who want to invest only Rs 25,000 cannot subscribe to SME IPO? Then there is a market making requirement that all merchant bankers, who are advisors, will do the market making compulsorily for three years. The reason behind this is that liquidity should be available to the potential investors and if they want to exit they should be able to exit. But it puts an onus or compulsory obligation on the merchant bankers and they do not come forward to take that responsibility. If all merchant bankers want a guarantee from the promoter, and if an SME can provide guarantee for the entire sum to be raised, why will SMEs go to BSE or NSE to raise the money as they can invest their money, in case they have the resources.


Related Articles

Start-ups Speeding Up

BY Sandeep Soni

A breed of seed investors, mentors and advisors – called accelerators – has already made a splash globally to give start-ups a leg...

Enablers Accelerating SME Growth

BY Punita Sabharwal

Creating an enabling environment of growth for SMEs will add towards nation’s growth and development. Here are some enablers who a...

Creating a Unique Marketplace – Indiamart

BY Punita Sabharwal

Indiamart is not just a story of how buyers and sellers were made to share a common platform and communicate. It is also about how...

Global Support to Start-ups in India

BY Sandeep Soni

In an interaction with SMEntrepreneur, Dave McClure, Founding Partner, 500 Startups, a California-based seedfund and start-up acce...

The New Breed of IIT-preneurs

BY Saniya Seth

Their simple ideas and super active brain polished in the renowned IIT campus provide a unique value proposition that makes a powe...

Women Entrepreneurs at par with the Best

BY Saniya Seth

\'A woman is like a tea bag; you never know how strong it is until it is in hot water,’ quoted Eleanor Roosevelt. Fitting quote in...

Virtual Panoramic Tour

BY Saniya Seth

This genius brings you the experience of any place in the world while you’re on the couch in the living room. That’s Vineet Devaia...

The micro Maximum impact

BY Sandeep Soni

The growth that Micromax has seen in just four years after entering into the handset market is second to none. The company is alre...

Entrepreneur Ecosystem

BY Punita Sabharwal

In a candid chat with SMEntrepreneur, Ajit Balakrishnan, Founder, Chairman & CEO, Rediff.com, and author of the book The Wave Ride...

Father and Son's Eco-friendly Venture

BY Sandeep Soni

Kamat Hotels first brought the concept of eco-friendly hotels in India and Asia. The one-man-army who fired this innovative concep...

An Umbrella for SMEs

BY Sandeep Soni

There are many bottlenecks that Indian SMEs face. Cluster development brings them the needed relief. How is it? ...

New Manufacturing Policy 'To be or not to be'

BY Think Tanks

New manufacturing policy brings in a new mandate for SMEs operating in manufacturing sector promising infrastructure, technology s...

Does an MBA Build Entrepreneurship?

BY Saniya Seth

What attracts one to do an MBA: A plum job, fat pay packet and a golden ticket to the world of professional success? But will this...

Obtaining Trade License in the Northeast

BY Sandeep Soni

In the fourth part of the SMEentrepreneur survey series, states of the northeast region are examined for their procedures in obtai...

Professionals on Contract

BY Think Tanks

Moving beyond the MNCs and government-run corporate units, contracting is making inroads into small businesses. While more and mor...

5 Tips to Make SMEs a Great Place to Work

BY Prasenjit Bhattacharya

“This company has been in my family for two generations and I am supposed to focus on long-term strategic issues. However, all my ...

Bright Prospects for SMEs

BY test

In an interaction with SMEntrepreneur, D Mozumder, Chief General Manager-SME business unit, State Bank of India, shares his views ...

SME Outsourcing Social Media

BY Rajiv Dingra

There was a time when SMEs could handle social media themselves as they could better define objectives for their start-ups. The sc...

Windows 8: A Boon or Bane for Entrepreneurs?

BY Sandeep Soni

In the wake of the technological shift that SMEs are going through, the software giant Microsoft is betting on its latest baby, Wi...

Getting an Investor Aboard Needs a Win-win Approach

BY test

Even when two parties agree to a VC deal, the nitty-gritty of negotiation could take a toll on their partnership. There could be m...

Business of Beauty

BY Think Tanks

Will franchising become an ideal business plan for the beauty service industry? ...

Please add your comment

Not readable? Change text.
Enter the characters as seen on the image (case insensitive)
  Notify me of followup comments via e-mail   Subscribe for daily newsletter