Modernisation of SMEs will be the focus of discussion with the new govt
Leading export promotion councils — EEPC (Engineering Export Promotion Council) India and Plexconcil (Plastic Export Promotion Council) among others — are planning to take up the issue of technological upgradation of India’s small and medium sized enterprises (SMEs) with the newly elected government, to keep them afloat and competitive in the wake of the downturn.
EEPC India is planning to submit a draft proposal to the new government asking for a corpus of Rs 500 crore to be distributed among individual units or engineering clusters at a subsidised rate of interest, which can then be used for technology upgradation. Similarly, Plexconcil is preparing a detailed project report (DPR) for building a common service centre with high-end technology for its members.
Rajan Kalyanpur, executive director, Plexconcil said, “About 80 per cent of plastic processing units are SMEs and only a handful gets access to high-end technology because of lack of awareness and finance. We are therefore preparing a DPR to build a common facility centre, near Mumbai, with high-end machines and work stations for our members. We will ask the government for part funding under the Market Access Initiative. The total cost of the project will be Rs 65-70 lakh.”
Lack of access to improved technology is considered a major factor holding back the growth of Indian SMEs. According to a study published by the Society for Economic and Social Transition (SEST), last month, more than 85 per cent of SMEs in India lack access to technology, making them both less competitive and loss-making. The most important barrier to the adoption of improved technology, the report says, is lack of financial resources.
Rakesh Shah, chairman, special task force of EEPC India pointed out, “Although more than 60-70 per cent of the total engineering export turnover comes from SMEs, the engineering and manufacturing sector in India is still very primitive and lacks modern high-end testing equipment. Only 10 per cent might be using high-end technology because many of these technologies and laboratories for testing are expensive.”
India’s engineering exports account for about two per cent of the world’s engineering export basket, but this could be increased to 10-15 per cent, provided the units got the right technology in place and climbed up the value chain, he added. It is being seen that more and more individual SMEs are adopting technology in order to improve product quality, cut operational costs and remain globally competitive and profitable in this crisis situation.
Vikas Khanvelkar, managing director of DesignTech, a Mumbai-based software solutions provider, pointed out, “We have seen a spurt in demand. We are adding close to 150 new clients every year on an average to our existing customer base.” The company’s average order size last year was Rs 3.5 lakh, and this year it is Rs 6 lakh.
The company did business worth Rs 37 crore in 2008-09, almost 25 per cent more than in the previous financial year. “This fiscal we hope to touch Rs 60 crore on the back of robust demand from the western and northern states, the traditional hubs of SME clusters,” said Khanvelkar.
Use of technology has become all the more crucial for SMEs in the wake of the current downturn, in order to maintain cost efficiency and reduce design and production cycle time, thereby reducing production cost.
The SEST study pointed out that in the states of Maharashtra, Delhi, Haryana and Rajasthan, over 70 per cent of small units using improved technology have shown a substantial improvement in quality. Around 46 per cent indicated reduction in cost of production and more than 20 per cent indicated higher competitiveness in both domestic and international markets. Overall output per worker increased to Rs 5 lakh in units using improved technology, while in those without it output was only Rs 3.2 lakh per worker.
