End of Project Report under the project ‘Support to Country Effort for SME
Cluster Development’ of UNIDO (US/IND/01/193) during 2002-05
The State Bank of India – Project UPTECH
By: UNIDO Cluster Development Programme
November 22, 2005
1. Executive Summary
The State Bank of India (SBI) is India’s largest bank. Since 1989, the bank has
operated Project UPTECH that focuses on technology up gradation in few
selected firms availing loans from SBI in few locations (not called clusters in SBI
parlance). The project has not undergone any significant changes since
inception. However the number of clusters being worked upon has been
consistently increasing. The recent thinking in the bank is to expand at a rapid
pace by delegating the UPTECH responsibilities to zonal offices, where each
zonal office would be responsible for at least one cluster.
In terms of methodology, the bank sought to complement its own ongoing efforts
under the above mentioned project to augment technical support in thematic
areas such as marketing, association capacity building and consortia building for
improving the competitiveness of its client firms. The importance of strong
industry associations was successfully demonstrated in both the clusters under
project collaboration. Linkages with other local business development services
(BDS) providers in the area of exports, technology, training, management
strategy and financial consulting has been established and these BDS providers
are now being deployed in other clusters of SBI as well. At the cluster level the
holistic approach has been adopted with visible substantive changes
demonstrated more in one of the jointly assisted clusters. However at the policy
level few changes could be seen owing to the internal restructuring that the bank
has been undertaking over these years pertaining to development banking.
2. About the partner
The State Bank of India is the largest bank in India with a network of 9039
branches across the country and 54 overseas branches and a capital base of Rs.
407,815 crores (2003-04). The SBI has seven associate banks along with 10
non-banking subsidiaries/ joint ventures (JVs). All these non-banking
subsidiaries/ JVs operate in lines allied with the main functioning of the bank
such as insurance, capital markets and credit cards etc. The broad
categorizations of the services of the partner (as mentioned on the website) are
1. Personal banking
2. Gold Banking
3. NRI Banking
4. International banking
5. Corporate banking
6. SSI Banking
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7. Small Business Financing
8. Rural Banking
9. Services
3. Principal Turning Points of the Partner during the last 5 years preceding
the CDP
The partner initiated the project UPTECH program in 1988-89. Primarily the
objective of the UPTECH program was to extend consultancy services for
technology up gradation of small scale industries in cluster locations where the
exposure level of credit extended by SBI was high. Intrinsically this project was
seen as protecting the occurrence of non-performing assets (NPAs). A fairly
large budget of Rs 30- 40 lacs was allocated per cluster for developmental work
besides the allocation of its small team of officials to coordinate the work in each
cluster. The officer in charge was responsible for preparation of plans, activities
and making modernization plans for the select enterprises covered under the
programme. The approval of the central office was essential before execution.
The focus was largely on conducting firm level studies and undertaking
facilitation at firm level, supplemented by group meetings and workshops.
The division was headed by a Chief General Manager until the recent
restructuring. The UPTECH program and the development banking division had
not seen any significant changes in either the structure of the program or the
administrative setup since the beginning. The numbers of clusters currently being
assisted in the year 2005 is 16 with another 9 where the interventions in the past
have already been concluded. The bank had sponsored its technical officers for
the UNIDO CDA programs even prior to the collaboration under the SCE project
in an effort to pick up the best practices that could be used in the UPTECH
project. The ongoing UNIDO project initiatives prior to the collaboration had a
regular interaction with the central office of the Project UPTECH with a mutual
exchange of visits across clusters. Moreover, 2 senior officers of the SBI
UPTECH office had also participated in an international study tour to Italy during
the year 1998.
4. Vision of the Partner with respect to its relationship with Cluster
Programme
The initial focus of pursuing the development agenda with the assisted firms in
the clusters with UPTECH project has been undergoing a rethinking at the policy
level. Pressures of competitive banking with private banks entering the fray and
squeeze of profit margins has resulted in reduction of staff deputed for project
UPTECH, deputation of lesser staff in each of the clusters and selection of only
those clusters that have greater potential in terms of achieving the desired
objectives. The SBI is still in the middle of restructuring on the project UPTECH
and therefore it is unclear as to what may emerge in terms of the vision.
2
5. Implementation Strategy of the Partner and evolution thereof on yearly
basis
The collaborative project was housed in the Development Banking division of the
SBI and was headed by a Chief General Manager (CGM) and supported by a
Deputy General Manager and Assistant General Manager (AGM).
The initial interaction indicated the following:
1. The Cluster Development Agent (CDA) in each of the two clusters had to
report to AGM, Project UPTECH for financial sanctions and he/she would
report to the zonal dead for local administrative support. SBI also
nominated ‘Cluster Development Coordination Committee’ (CDCC)
comprising of members drawn from other local public institutions for both
the clusters.
2. On the unit level studies, once the consultant and the terms were
finalized, implementation progresses smoothly. However, on activities
other than unit level studies, financial clearance had to be taken from
central office implying a longer lead time in some cases. This time factor
was reduced by the CDA seeking verbal approvals telephonically and
then getting them endorsed in writing.
3. Technology remained one of the essential theme pieces of support under
the UPTECH methodology to help firms becoming competitive in the
market. Potential firm level capital investments generated was an
important desired outcome
The implementation strategy under the collaborative framework included
technical support in the 2 assisted clusters of Alleppy Coir and Rudrapur Rice
milling to demonstrate possible value addition to the ongoing initiatives of the
partner. Besides, policy level support in select areas was provided to draw
learnings from international experiences and other ongoing cluster projects. The
specific support services provided under the project framework are listed as
under:
1. Conducting a joint diagnostic study in both the clusters to bring out the
need to address issues other than technology such as marketing and
collective action
2. Assistance in initiating pilot activities in areas other than technology and
demonstrating results thereof for greater appreciation of the need for more
interventions in other areas for greater sustainability.
3. Organizing visits of the CDCC in their own clusters and organizing
meetings with entrepreneurs to give a direct feel of the needs of the
cluster. Other issues focused were participation by beneficiaries, other
stake holders and institutions.
4. Exposure visit of the CGM, Development Banking and another official of
SBI to more evolved clusters in Italy.
5. Undertaking modular workshops on international experiences on cluster
development with the senior policy makers and the support team in
Project at SBI Central office.
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6. Documenting case studies especially in the area of marketing support.
6. Evolution of the Administrative Setup of the partner for cluster
programme management - Role of UNIDO CDP
The sanctioning and final decision making was centered in the Central office of
SBI. Most of the proposals initiated by the CDAs were being approved. The
activities had to be planned with a lead time of around a month required for
sanctioning by the Central office. A portion of the budget meant for undertaking
developmental activities for the group of entrepreneurs includes capacity building
of networks and industry associations as per the information received from the
SME Business Unit, Corporate Centre. However, exposure visits or activities
necessarily focused on capacity building initiatives for groups and associations
did not actually take place on the ground.
7. Areas of hand holding assistance provided to CDAs and TAs and its
implications – Role of UNIDO CDP
1. Conduct of Diagnostic Study: Assistance in building a diagnostic study
that focused on finding issues in
 the value chain that has an impact on the cluster’s long term
economic sustainability
 mapping of support institutions and social capital
 strategy to be adopted and areas to be focused on
2. Sensitization of entrepreneurs and associations. Providing flexible support
that can stimulate the associations to take on larger responsibilities.
3. Facilitating linkages with BDS providers and local institutions. Enabling
participation by cluster firms. Match making needs of the cluster with
resources and expertise available.
4. Providing international linkages and facilitation for exposure visits and
participation in fairs abroad.
5. Getting international experts for technology and marketing support
6. Facilitating entry of cluster firms into export markets through visits and
participation (joint) in fairs.
7. Initiating joint action in small risk alleviating steps and profit making
ventures (such as raw material procurement)
8. Introducing learning mechanisms into the cluster (newsletter)
9. Integrating the cluster firms and gradual ownership transference to the
local stakeholders
10. Preparing case studies for wider dissemination
Areas of hand holding at policy level:
1. Defining the role and contribution of UNIDO in consultation with the bank.
2. Defining the nature of administrative support that needs to be provided by
senior management of SBI to the CDAs in the clusters.
3. Outlining the cluster development methodology and involving the
stakeholders in collaboration with SBI local offices.
4. Conducting sensitization workshops for the team at Central office.
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5. Undertaking a repeat session of sensitization as the CGM had changed
6. Organizing the visits of the CGM and CDCC in one cluster for
demonstrating the need of participation by the local stakeholders and the
beneficiaries themselves
7. Introduction of the export BDS provider to the CDCC for introducing him
into other clusters of SBI.
8. Providing linkages with international service providers like NMCP, CBI and
BESO.
9. Sensitizing the need to converge government schemes to develop a
sustainable developmental model for the cluster.
8. Policy level changes in the partner with respect to cluster development
policy
The scheme and policy of supporting cluster firms was already in place and no
new scheme was devised or modifications undertaken in the existing ones.
However some of the good practices relevant for SBI clusters were picked up
from UNIDO methodology and tested in both partnership clusters as well as in
other clusters of SBI. Through a system of mutual learning among the SBI cluster
based CDA, a wider basket of cluster tools would be available for further
experimentation and implementation.
9. An assessment of the perceived gaps in original program formulation
and implementation of the program
1. One form of cluster development model developed and promoted by
UNIDO CDP focuses on the complete value chain while deciding on
activities ranging from marketing, technology to human resources. This
model has been well appreciated at both the cluster level and the policy
level. However explicit articulation as a key theme has not been effected
in cluster development policy.
2. Undertaking cluster level activities and providing funds for them such as
industry association building have not been attempted. Sustainability of
the interventions hence remains an issue as local stakeholders may not
take charge of the project after completion of the SBI initiative. In case of
Alleppy cluster, the SHGs and the federations have been assisted
significantly to help create local governance system.
3. The focus primarily remains on firm level diagnostic and technology
provision to loanees. Cluster level activities that raise the competitiveness
of the cluster at large have not been focused upon. Activities such as
awareness workshops, linking up with institutions for common support,
raising funds from other support institutions needs greater support from
the policy level of the bank.
4. Capacity building of CDAs and their exposure to new and emerging tools
is an area that needs lot of attention. Further most coordinators being
experienced bankers lack the wider perspective of the business and this
issue becomes still more aggravated since the exposure to marketing
tools and best practices has to potential to make a contribution.
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5. Use of private BDS has been limited in most clusters although tie ups with
public institutions have been encouraged in most clusters.
10. Scope for future work
In the current scenario, some of the banks have initiated cluster based
banking, especially among the private banks. SBI has a considerable
experience in clusters that may be usefully deployed in attracting new clients,
developing new financial products, using industry associations & other
vehicles to ensure better monitoring of on-going loans etc. There are certain
best practices such as mutual credit guarantee schemes where SBI has had
pilot experience to enhance the credit off-take as also ensure lower NPAs.
Second, the model of SHGs in case of Alleppy coir cluster as is detailed out in
the Annex 1 provides valuable learning on how SHGs could be used to
ensure greater off-take of sound credit while improving the competitiveness of
the micro enterprise firms. Several institutions can draw useful lessons from
this model, including SBI itself while taking similar initiatives in other microenterprise clusters.
11. Expectations from the Partner:
There has been little articulation by the SBI on their expectations from the project
beyond the spelt out activities under the framework.
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Annex 1
Coir cluster of Alleppey1
1. Evolution of the Cluster
The Coir Industry Act 1953 was enacted and the Government assumed a significant role
in operations in the sector. The State Government of Kerala also launched many
developmental schemes. A Minimum Export Price (MEP) as well as a Minimum
Purchase Price (MPP) was enforced in the 1960s and in 1976 respectively, to ensure
that workers and sub-contractors were receiving adequate earnings. By the early 2000s,
both MEP and MPP were removed and market forces started determining prices.
Mechanisation developed slowly, presumably, as a result of the ‘strong labour pressure
in the State’. Hence, unlike enterprises in other southern states, today Alleppey does not
have large modern factories. However, technical advancements since the 1960s
facilitated elimination of drudgery in certain processes and led to the modernisation of
looms. Since the 1980s semi-automatic looms were introduced and simultaneously
product diversification took place. Today, the cluster manufactures and exports a wide
range of products such as mats, mattings etcetera. Some of the new applications of coir
include `geo-textiles’ to make dykes and prevent soil erosion, coir blends with other
natural fibres and material for use as Venetian blinds, false ceilings and partitions etc.
2. The Cluster and its Major Stakeholders
The coir cluster at Alleppey provides jobs to over 80,000 artisans and has a turnover of
Rs 1,500 crores (USD 340 million). The network based approach as demonstrated by
the Coir Board and EDI in the cluster was innovatively utilised by the State Bank of India
for providing finance for input availability and marketing. This led to traditional collateral
free financing of over 223 networks of 4470 tiny and small units to the tune of Rs 4.6
crores (USD 1 million). The smaller networks were also jointly formalised into larger
networks for better marketing linkages.
The principal stakeholders include the spinners (normally women operators), weavers
and exporters. The cluster has about 45,000 spinners and about 35,000 weavers (and
also thousands of workers who are involved in related enterprises involved in spooling,
dyeing etc.) The spinners use about 15,000 ratts (spinning machines). As on 2002 the
total turnover of the cluster was about Rs.1200 crores (USD 273 million) with an export
turnover of about Rs 370 crores (USD 84 million).
Over 700 cooperative societies have been formed in the region. The societies collect
orders from exporters and distribute these amongst members. As these societies are
`firm’ on securing appropriate realisation to labour for members their labour and
production charges are sometimes not that attractive from the point of view of exporters
who may outsource manufacture to other units in the informal sector. The performance
of societies by and large is, therefore, not very encouraging.
1
The coir cluster of Alleppey is situated in the state of Kerala. The initiative for development of
this cluster commenced in the year 2002-03 by the Sate Bank of India. The Project is still under
implementation. This article has been written by Mr V Padmanand, Consultant, Chennai.
7
There are several associations representing the interests of small-scale manufacturers
in the cluster. These include the Kerala State Small Scale Coir Manufacturers
Federation (involving a large number of small weavers and cooperative societies) and
the Kerala State Cherukida Manufacturers Association, amongst others. Besides, there
are four exporters’ associations, with a total membership base of about 100 exporters.
The associations of both manufacturers and exporters have a critical mandate in terms
of negotiation and resolving disputes with input suppliers and workers. Technological
developments are either developed or standardised by the Central Coir Research
Institute (CCRI). The Coir Board, through various related bodies such as the CCRI,
facilitates technology upgradation, standardisation and dissemination. It also acts as a
kind of Export Promotion Council. The Directorate of Coir Development is involved in
several developmental activities such as facilitating up-gradation of skills and `raats’
(spinning machines) establishment of defibreing (extraction of fibre from husk) units, etc.
The Coir Workers Welfare Board works on related areas and provides valuable services
to workers in the cluster in terms of facilitating insurance and other services. The cluster
has several commercial financial institutions, such as the SBI, in its midst.
3. Major Problems
The major problems identified included:
 A large number of units based in households-or in the highly sub-contracted
cluster, suffered from an acute dearth of formal institutional finance.
 Technological issues in terms of adequate defibreing units, effluent treatment
plants for dyeing units as well as `motorisation’ of traditional raats as a means to
enhance productivity, were not fully developed.
 Market development and marketing: Inadequacies in the context of accessing a
large number of buyers by small exporters who constitute the majority of
enterprises in this segment was also evident. Relative dearth of market-led
diversification initiatives was also identified.
4. Vision for the Cluster
The cluster vision that progressively evolved was ‘The coir cluster of Alleppey will
become a globally preferred sub-contraction pocket for various coir fibre-related value
added products by the year 2005’.
5. Implementation Strategy
The Coir Board and the EDII had pursued an initiative over a period of a few months of
evolving networks (for purchase, export and common facilities) along the supply chain.
In the same spirit, as finance was one of the major issues of the cluster, and SBI being a
financing institution per se, the implementation process started by financing such small
enterprise (weavers’) networks without collateral. Thereafter the `household’ units
(spinners) were organized into Consortia and SHGs for group financing. Having
delivered on this front, these networks were provided training, and empowered into
marketing and better input sourcing linkages. For marketing, the consortia of weavers
were networked with exporters as to offer volumes and thereby avoid the non-productive
middlemen. The empowered (household units’) consortia (who may also be referred to
as SHGs) as also weavers were thereafter federated into associations.
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6. Major Interventions
Financing of tiny units: It all started off with the Coir Board and the EDI evolving
several networks of manufacturers and exporters over a project. The SBI took the
initiative of contributing towards financing these small networks of mats as also matting
manufacturers on a Mutual Credit Guarantee Fund Scheme (MCGFS2) as also a `cash
deposit based advance’ mode. Such groups served as amongst the first institutionally
financed input purchase networks in the cluster. Thereafter hundreds of consortia
evolved across different segments along the supply chain. In total about 223 consortia
comprising around 4,700 tiny and small ‘enterprises’ (spinners and weavers), were
provided finance linkages and were also catalysed to pursue various common business
plans.
The print media served to help disseminate information, as did rounds of meetings with
small enterprises. This led to a virtual exploitation of consortiums in the cluster that
thereafter pursued numerous joint activities. So far the State Bank of India has provided
credit linkages to 223 consortia (directly) amounting to about Rs 4.60 crore (USD 1
million) by way of this unique financial intervention in the region. Different segments
along the supply chain have benefited from this. The mattings group includes about 11
groups that have had assistance by way of cash credit or term loan from SBI amounting
to about Rs 10 lakh (USD 22700) each. Mats group members have on an average
received support in the range of Rs. 2 to Rs 4 lakh (USD 4545 to USD 9090) per group
and the spinning segment has received amounts less than this.
Finance for Securing Raw Material
The cluster experiences severe crises on the ‘fibre’ front, which is a seasonal and
periodic phenomenon. Various measures have been explored, such as the import of
fibre from Sri Lanka. As a unique option, SBI served as the lending agency to finance
`Kudumbashree’3 groups to pursue the collection of husk from different locations in
Kerala. On a trial basis about 118 groups have been supported. The zila panchayat and
Kudumbashree are key stakeholders. Appropriate recovery of husk is expected to
alleviate recurring shortages. These networks have been financed @ about Rs 50,000
(USD 1,100) per group to recover husk from different locations. A total of Rs. 59 lakh
(USD 134,000) has been contributed by the SBI towards this initiative.
Infrastructure and technology upgradation: Most defibreing units were based in
Tamil Nadu. Poor infrastructure in the region in the context of defibreing mills had been
contributing to higher cost of production, which in turn made it difficult for the units to
ward off competition.
Under the Integrated Infrastructure Upgradation Scheme (IIUS) several defibreing mills
are being established. This will give greater bargaining power to the product
manufacturers and also exporting SMEs in the cluster vis-à-vis suppliers of inputs
outside. Common facilities evolved included shearing and finishing, glueing and
defibreing units. A small training institute to facilitate the upgradation of raats has been
established by the Women Spinners’ Association.
2
A somewhat similar product was tried out successfully for a few groups in the hand block printed textiles cluster of Jaipur
under a UNIDO cluster development programme. In Alleppy too the scheme took off with the support of the same
institutions viz. SIDBI, SBI and thereafter the KVIB.
3
A movement of women SHGs
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As part of technology upgradation initiatives amotorised spinning raat has been
conceived with the help of an international BDS provider - SES, which is yet to be
commercialised. Simple equipment for better sorting of coir fibre before spinning has
been designed. In the case of women spinners networked as consortia, incomes in
terms of per diem earnings increased by about 25 per cent by virtue of utilising upgraded
raats and also due to the procurement of inputs from their own working capital. The
Board of Director’s meeting under the IIUS held on September 2005 has offered support
to set up 121 coir spinning units with motorised traditional raats.
Market development and marketing
The networks that were created for common sourcing were also encouraged to
participate in national and international trade fairs. Networks also attended the B2B
meets organised by the Kerala Bureau of Industrial Promotion (K-BIP) at Kochi, which
led to new market linkages for SMEs. The services of international BDS providers SES,
Germany, are also being used to facilitate relevant options.
Upon pursuing ‘advocacy’ over a period of time, the Coir Board has decided to take up
the preparation of a case for registration of Alleppey coir under the Geographical
Indications Act of the Government of India.
Several workshops were conducted involving the trade desks of Korea, Britain and
Netherlands, fair trade organisations and private service providers such as the Dun and
Bradstreet. These had targeted information gaps for exporters.
The Coir Board has tied up with institutions such as the Building Material Technology
Promotion Council (BMTPC) for low cost housing technologies using coir-related inputs.
The Board has also been exploring the use of natural dyes to increase the ecofriendliness of coir home furnishings in association with IIT, as part of its constant search
for value-added production.
7. Consolidated Results
 About 223 consortia comprising around 4700 tiny and small `enterprises’
(spinners and weavers) were evolved and catalysed to pursue various common
business plans such as common cash purchase of inputs thereby facilitating
operations even during periods of raw material shortage, secure inputs in bulk
and cash and thereby realise discounts on procurement, some used a part for
sourcing inputs and a part for securing motorised traditional raats, etc.
 For tiny women spinners, networked as consortia, incomes in terms of per diem
earnings increased by about 25 percent by virtue of utilising upgraded raats as
also procurement of inputs with own working capital (than remain as jobbers).
 State Bank of India provided credit linkages to 323 consortia amounting to about
Rs. 4.60 crores (USD 1 million) by way of a unique financial intervention in the
region.
 118 women consortia have been financed for husk collection in collaboration with
district panchayat for Rs. 59 lakhs (USD 134,000) by SBI.
 Several interventions were pursued in close collaboration with the Coir Board,
the Department for Coir and Industries Departments (Government of Kerala).
Other institutions like SES, CII, NMCP, KVIC have been networked with.
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8. Sustainability of Interventions
The consortium has evolved into three associations, specific to each of the three major
production segments in the cluster, so as to pursue advocacy and also progressively
work on association strengthening activities. The Alappuzha Coir Cluster Development
society (ACCDS) serves as the apex implementing SPV with a Coir Board official playing
the role of Executive Director. A Cluster Development Coordination Committee (CDCC)
has been created for the smooth and efficient functioning of the cluster. Its members
include associations that have been evolved over interventions, the Coir Board, KSIDC,
Coir Department, SISI, SBI, SIDBI, etc. The CDCC is, however, at a relative stage of
infancy. Above all, the State Government (Coir Department and Coir Welfare Board) is
seriously pursuing the methodology and has already trained over 20 officers as
promoters of this cluster development programme.
9. Future Direction
In addition to strengthening the various associations that have evolved, various
initiatives are being progressively considered by cluster actors:
Registration of Alleppey coir products under the Geographical Indications (GI) Act: GI
could be secured on the basis of skill on the spinning front and weaving. Thereafter,
common brand building initiatives may be explored in terms of promotion of the Alleppey
coir brand.
Effective implementation of the project under the IIUS: Effective implementation of the
large project under the IIUS scheme is accorded top priority as part of future
interventions.
In addition various options to enhance competitiveness are being explored by
stakeholders in terms of bio-gas options to optimise power costs in defibreing units
amongst others.
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Annex 2
Rudrapur Rice Milling Cluster:
1. Background:
Rudrapur is a rice-milling cluster in the state of Uttranchal. There are about 60 mills
in Rudrapur and its twin city of Kichha. There are about 20 firms at Gadarpur and 30
firms at Khatima at a distance of 20 km and 60 km respectively. Inclusion of these
two far off clusters was essential since the more progressive lot is based at
Gadarpur, while the President of the state level association (elected after the start of
the programme), was based in Khatima. The state level association had to be picked
up for partnership as the local association primarily was confined to a small group
from one community, while the state level association (also infested by community
based politics) had a much broader base. The programme was launched 5 months
after the start of the SCE project (July 2002). No activity was initiated till the formal
launch, as the required financial sanctions were not in place. The CDA nominated for
this cluster was a senior person, who had been trained in the first CDA programme.
2. Diagnosis:
The CDA had conducted a diagnostic study during the CDA training, wherein
breakage of rice was mentioned as the only articulated concern of the firms.
Marketing was not seen as an important issue since the entire production was being
pushed into the state procurement, circumventing the rules of levy. Other significant
issues highlighted were decline in availability of local raw material, which resulted in
payment of mandi tax at the procurement site, additional mandi tax of Uttranchal and
entry tax levied by the state adding 4% to the cost of raw material. This additional tax
made the firms uncompetitive in open market.
Further, there were the issues of decline in processing of basmati due to market
uncertainty and higher breakage losses. Few units had shown an inclination towards
exports. Small and fragmented capacities were seen as a major hindrance in the
export venture as commodity trading takes place in huge volumes.
Initial discussions in the cluster indicated that massive technological change was not
feasible, as profits had been declining over last few years and very few firms were
keen on technological up gradation. This was being further hindered by the fact that
the entire produce was being sold to the state agency and breakage was being
managed well in procurement process. Globalization apparently offered no threat as
national market was seen as huge opportunity even if the state procurement
withdrew, which was anyways seen as a remote possibility.
3. Implementation Strategy:
The focus of the CDA (in accordance with the given mandate) was to undertake firm
level techno-managerial studies. However through discussions with CDA and CDCC,
the mandate was broadened to incorporate cluster level initiatives. Initial discussions
with the industry clearly indicated that even though breakage was being highlighted
as a significant issue, it would be difficult to initiate as there were no incentives and
cost advantages.
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Export marketing appeared to be the entry point into the cluster, since export
marketing was identified as an aspiration of a large group. This intervention also
appeared as a good leveraging point for joint-action as the entrepreneurs were
aware that no single unit could tackle even the average size orders. Exposure visit to
firms having best practices was seen as an essential component, considering that
the actual demand for technical initiatives was low. Furthermore, exposure visits for
demonstrating the role of associations in development were also planned.
4. Initiation of activities and major activities:
In the initial stages there was a little divergence in thought of the CDA and the TA. In
line with the mandate given by the bank to the CDA, the latter wanted to pursue firm
level activities with focus only on technology-based interventions. The CDA managed
to get about 15 firms empanelled for firm level studies in a very short period. All the
units that had signed up were existing loanees. However at this stage, there were no
BDS providers known to the CDA, who could actually undertake the firm level
studies. The Central Food Technology and Research Institute (CFTRI) and the
Paddy Processing and Research Center (PPRC) were requested to visit the cluster
for initial diagnosis of technical problems.
After about six months of effort with the partners and the industry, the first activity on
“Exports” was initiated. This was immediately followed by a seminar and hands on
assistance on “Business Development Strategies through Networks” and a seminar
on “Quality requirements for exports of Rice”.
To leverage the interest generated by the above activities, technical interventions
were initiated. Two BDS were simultaneously hired to prepare roadmap for two firms.
The idea given to them was to break the entire milling process into as many smaller
activities as possible, and to identify areas within the smaller activities that could be
undertaken in an independent manner. The purpose was to show that even with very
small investments, the process could be controlled and breakage could be reduced,
and then move on to higher level of interventions. The objective was to break the
psychological barrier towards technical interventions and develop a keen interest
towards the same. Gradually newer areas such as energy, new equipment, QMS
were added to the portfolio of activities.
5. Vision:
There is no articulated and explicit vision stated by the stakeholders. The cluster
today only desires to retain its current level of production and then wishes to attempt
to recreate its glorious past, where it was known for basmati rice.
6. Outreach and impact:
The bank has an outreach of over 80%. Gradually the bank has started inviting firms
that hold account with other banks, in its seminars. As a result of the effort by Project
Up tech and with support from a team of dedicated officers nominated by the bank
for business development, the Rudrapur branch has been able to increase its
portfolio by over Rs 10 crores. This increase has stemmed an otherwise decline in
the offtake. Overall a new investment of over Rs 5 crores has been made in the
cluster.
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In two main units almost 10% reduction in breakage has been achieved. Through
technical papers prepared by the CDA, the message has been disseminated to all
the units in the cluster. The multi yard drying instrument introduced by the project is
in used in almost 30-40% units in the cluster.
In the area of exports one unit has been able to do a business of over Rs 20 crores,
marking an increase of 10 times since the start of the programme. Five more units
have ventured into exports by forming a consortium (not registered but informal). For
the first time ever the cluster has exported to South Africa, South East Asia and
Canada.
7. Sustainability:
The sustainability index for the cluster is very low. While linkages have been
established with all relevant institutions in the country, interventions have been
restricted with few. PPRC, Thanjavur was the leading service provider, while the
project failed to converge to a common understanding with the local university at
Pantanagar (which a leading university in the field). Similarly, tangible association
could not be forged with IIT, Kharagpur, which is the apex institution in rice milling in
the country. Linkages were established with CFTRI and Rice Research Institute,
Bhopal, but without any intervention being facilitated by these support institutions.
The local associations failed to pick up even the small pieces of responsibility. The
ineffectiveness may be largely attributed to no immediate market challenges being
faced by the cluster. One new association was formed at Gadarpur named
“Progressive Rice millers Association” and the technical interventions were steered
by this association. This association went into sudden slumber when the President
was forced out of business due to a split in the family and business.
Even today, the initiation and implementation of activities relies completely on the
CDA. The CDA has an excellent rapport with the industry and gradually the level of
response is increasing, but the initiative of the bank is still far from being called
sustainable.
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List of policies
The State Bank of India has a fully drawn programme for development of SMEs. The
programme is called Project Uptech, launched by SBI in 1989.
In this programme SBI picks up clusters where their portfolio is strong (and the bank has
a large consumer base). The underlying objective is to keep the SMEs in the selected
location in good health. For this purpose firm level analysis of loanee firms is undertaken
and a technical up gradation plan is drawn. The bank charges a nominal fee varying
between Rs 5000 to Rs 15000 per unit, depending on the size and turnover of the unit. In
case the beneficiary decides to implement the suggestions given by the bank, the bank
gives Rs 1 lac free of interest and the balance amount at a reduced rate of interest.
A budget for each location/ cluster is drawn by the bank before the project is launched.
Normally a budget of Rs 30-Rs 40 lacs per cluster is earmarked for interventions. The
normal duration of each project is 3-4 years. A dedicated person is posted into the cluster
to look after the project related activities. This dedicated person has an independent office
and infrastructure, the cost of which is separately budgeted by the bank.
List of clusters under implementation by the bank:
Serial
no
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Location
State
Product
Howrah
Salem
Gondia
Shimla
Bhopal
Jamshedpur
Ludhiana
Nasik
Jalgaon
Hajo
Jalandhar
West Bengal
Tamil Nadu
Maharashtra
Himachal Pradesh
Madhya Pradesh
Jharkhand
Punjab
Maharashtra
Maharashtra
Assam
Punjab
Foundry industry
Sago and Starch Industry
Rice Milling Industry
Apple Orchards
Machine fabrication
Auto component
Hosiery
Grape
Dal Mills
Brass
Hand Tools
List of clusters where work has been completed
1
2
3
4
5
6
7
8
9
Belgaum
Samalkot
Coimbatore
Palakkad
Kolhapur
Pune
Bangalore
Firozabad
Agra
Maharashtra
Tamil Nadu
Tamil Nadu
Kerala
Maharashtra
Maharashtra
Karnataka
Uttar Pradesh
Uttar Pradesh
Foundry Industry
Sago Industry
Pumpsets
Rice Mills
Auto Components
Auto Components
Auto Components
Glass
Foundry
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