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MSMEs have innate capability to align with the global value chain: Sanjay Bhatia

Interview with President, Confederation of Micro, Small and Medium Enterprises

Rajiv Shirali  |  New Delhi 

Sanjay Bhatia

The Confederation of Micro, Small and Medium Enterprises (CMSME), established in December 2013 under the umbrella of the Federation of Indian Chambers of Commerce and Industry (Ficci), has as its vision the empowerment of Indian MSMEs and improvements in their competitiveness. Sanjay Bhatia, President of CMSME and Managing Director of Hindustan Tinplate Works Limited, tells Rajiv Shirali that the confederation will connect Indian MSMEs with mentors, incubators and accelerators; assist them through capacity building programmes; help them take advantage of government schemes, and communicate their concerns to the Central and state governments as well as banks. Edited Excerpts:

What made Ficci set up a separate body for looking after the interests of India's micro, small and medium industries?

Ficci-CMSME endeavours to provide a one-stop organisation that will work closely with the MSME sector. Ficci through its strengths and outreach can add immense value to the MSME sector and get recognition as the apex organisation for MSMEs. Globally too, Ficci is actively pursuing partnerships with UK, Asean, etc., in the MSME space. We can ensure that the interest of our MSMEs synergises with the targeted countries and we are able to facilitate their alignment in the global value chain.

Micro and small enterprises constitute 95 per cent of total working enterprises. CMSME will help reach out to having a turnover of less than Rs 10 crore, including start-ups. We are expanding our outreach across states, and an umbrella body like CMSME will be able to aggregate resources better, provide an efficient grid in the production and service value chain, and provide greater depth to our services to the sector.

What would you consider as the main problems of Indian MSMEs?

The MSME sector confronts several challenges. Technological obsolescence and financing problems have long been associated with the sector. Also, constraints such as high cost of credit, low access to new technology, poor adaptability to changing trends, lack of access to national and international markets, lack of skilled manpower, inadequate infrastructure facilities, including power, water, roads, etc., and regulatory issues related to taxation (state and Central), labour laws, environmental issues etc., impede Indian MSMEs from realising their true potential.

MSMEs already contribute substantially to Indian industrial output, but how can we ensure that they add more value?

MSMEs have tremendous innate capability to align with the global value chain. We feel that concerted efforts of the private and public sector can provide the impetus to double MSME exports from the present 36 per cent of total exports, and this will ultimately lead to further increase in MSME contribution in industrial output.

Let me highlight some steps that can enhance MSME productivity. Many firms do not have the requisite organisational capacity for technological up-gradation. The mission should be to develop their capabilities to meet the challenge of establishing themselves in the global value chain and to accelerate the ICT culture, so that they become equipped with faster technology and gain a competitive edge in world markets.

MSMEs also need to develop a niche as reliable and efficient suppliers of goods and services. Several schemes have been devised especially for this sector. However their uptake is minimal. CMSME will work closely with government at the Centre and states to help MSMEs take advantage of such schemes. It is equally crucial to enhance market access for MSMEs.

MSMEs also need to keep abreast of the latest developments in global markets and take 'first-mover' advantage in areas where we have competitive edge. We need to provide a platform to MSMEs where they can develop B2B links. CMSME will play a critical role in opening new horizons of partnerships for MSMEs.

MSMEs depend almost entirely on bank funds. How can their access to risk capital be increased?

According to one of our surveys, only 36 per cent of firms seem to avail financial assistance, while 64 per cent refrain. The challenges faced by loan applicants are varied: bank formalities, ensuring collateral and lengthy documentation. There is a need to strengthen institutional capabilities of MSME credit evaluation, training of internal bank/ lending staff to handle SMEs.

MSMEs also need to be educated on the parameters they should keep in mind while approaching financial institutions. They should also maintain proper books of accounts. MSMEs need simple and clear policies to understand them and implement them. There are many schemes, for example Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), but most SMEs do not understand how they can benefit from them.

What can be done to increase the deployment of technology by MSMEs?

The government should look for foreign tie-ups to provide access to foreign technologies and involve large enterprises in the development of MSME clusters. Online mechanisms should be provided to MSMEs to carry out all necessary transactions for conducting business in the domestic and international markets. MSMEs should be facilitated in procuring low-cost ICT solutions to improve their capacity and productivity. Government-sector institutions that are at the cutting edge of research and innovation should be opened up for use by MSME innovators who are struggling to get funds and technology. And more tool rooms and technology centres must be set up for use by MSMEs.

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First Published: Mon, January 13 2014. 21:39 IST