End of Project Report under the project ‘Support to Country Effort for SME Cluster Development’ of UNIDO (US/IND

/01/193) during 2002-05 National Science & Technology Entrepreneurship Development Board (NSTEDB) under Ministry of Science & Technology, GoI By: UNIDO Cluster Development Programme November 22, 2005 1. Introduction: The NSTEDB is a Board constituted under Department of Science & Technology (DST) within the framework of Ministry of S&T, Government of India. The current project ‘Support to Country Effort’ (SCE) in taking up cluster development provided scope for assistance to the NSTEDB as the recipient of the technical assistance of the project. The report herein provides an over-view of the structure of the partner organisation and the context in which cluster development fits into its framework of technology and technical entrepreneurship skills development. The report refers to the project duration for period 2002-05. The report marks the difference in the mandate, management structure and its relationship of the ‘Board’ with the main features of UNIDO cluster development methodology. The office of ‘Board’, very lean and centred in Delhi, relies on a large number of public and private institutions to operationalise its programmes and activities by way of funding and linking up with a set up of research & technical institutions. The report also provides an insight into the challenges that were faced in possible expansion of cluster initiatives with the ‘Board’. The report provides an insight into how cluster initiatives required re-orienting the systems in the implementing agencies and the ‘Board’ itself, that did not have to be taken up, since they would probably run counter to the continuation of the ongoing programs of the ‘Board’. It also provides the future scope of activities with the ‘Board’. For the readers interested in details, the report provides them in the annexe attached a report of outputs achieved in the two assisted clusters of ‘Heavy Engineering fabrication’ at Tiruchirapalli and Floriculture cluster in Pune. 2. About the partner: The National Science and Technology Entrepreneurship Development Board (NSTEDB) was established by the Government of India in 1982 "as an institutional mechanism to promote gainful self-employment in the country and to link idle S&T manpower with the under-utilised institutional credit facilities". The Board, which has a governmental structure, is serviced by the Department of Science and Technology (DST), within the framework of Ministry of Science & Technology, Government of India. It has representation from socio-economic and scientific Ministries/Departments. The primary objectives of the Board and the activities undertaken to meet the stated objectives are given as under: (i) To promote the growth of a 3-tier structure at the district, state and central levels for providing integrated assistance to S&T entrepreneurs: The

1

academicians. The gross annual developmental budget of the Board approximates Rs. (ii) To act as a technical consultancy organisation of the government for promotion of entrepreneurship and gainful self-employment. open learning programme in entrepreneurship undertaken by a national institute of entrepreneurship also leads to creation of awareness and training (iv) To promote group self-employment: Special programs like ‘Science & Technology Entrepreneurship Development Projects’. New linkages with some of the international agencies like UNDP have led to the broadening of the scope of programmes of assistance that are in line with current socio-economic framework of society. R&D labs. reports to the Board comprising of scientists. voluntary agencies. headed by a senior civil servant equivalent to the rank of Joint Secretary to the Government of India. b) Size and Structure: The executive secretariat of the Board is a small set up comprising of currently five professional officers based in Delhi that relies essentially on academic institutions. (iii) To organise employment camps in academic institutions and promote awareness on entrepreneurship: The Board supports almost a hundred institutions in the country to promote awareness through ‘Entrepreneurship Awareness Camps’ as also through the magazine and websites mentioned above. ‘Skill Development through Science & Technology’ as also other institutional mechanisms help to promote group self-employment in a given region (v) To promote national and regional institutions for training in entrepreneurship and management skills and re-training in technical skills: Vocational training skills. technical skills and business management skills are combined with entrepreneurship skills to devise special programs that are then financially supported through a range of state level agencies and local institutions to impart necessary skills.g.Board promotes setting up of autonomous institutions within the existing technical institutions (e. economists and social entrepreneurs across the country. entrepreneurship institutions and technical consultancy organisations. voluntary organisations) to reach out to the enterprises seeking science & technology based incubation services and industrial estate facilities integrated with knowledge & research infrastructure. Besides. all over the country. The secretariat. 20 crores taken up by almost hundred institutions for different programs and schemes. 2 . R&D institutions. and providing information on self-employment avenues and schemes to S&T persons on a "single window" basis: NSTEDB through its widely circulated magazine and a rich website system provides a very comprehensive range of information required by the S&T persons to undertake self-employment activities and seek necessary support from a wide range of schemes of the various government institutions. incubation centres and technical skills development. Technical consultancy organizations. engineering colleges. c) Major schemes of assistance and relevance of cluster initiative therein: from the Board pertain to provision of institutional assistance in the form of financial grants for technology parks.

could be scaled up significantly. The reasons for not taking up any further up-scaling of cluster initiatives are also elaborated under para (iii) below. The primary basis of cluster selection was undertaken keeping in mind the better track record of the implementing agencies in undertaking the regular range of initiatives on behalf of the Board. However based on mutual discussions. as per the parameters used by the Board. broad typology of programmes & activities.3. (i) Select better implementing agencies for cluster work and provide operational freedom: NSTEDB undertakes implementation through a large of institutions as described above. However.” 5. 4. Principal turning points of the partner during the last 5 years preceding the CDP in 2002: In terms of the overall mandate of the Board. It was hoped that the deputation of right agencies along with provision of operational freedom would ensure success of the pilot cluster initiatives for possible up-scaling. it is inferred that “the cluster development initiatives in 2 select clusters were taken up by NSTEDB on a pilot basis and if found useful and in line with the Board’s mandate. Vision of the Partner with respect to its relationship with cluster programme A vision of the Board in respect of the cluster programme was not formally discussed at the outset of the project and therefore never explicitly stated. Implementation strategy of partner’s CDP and evolution thereof on yearly basis: The strategy for implementation of the cluster programme in the two selected clusters may be described as under that did not go any substantive change during the 3-year duration of the SCE project. The other training initiatives in terms of entrepreneurship training remained largely same. in line with the perceived vision as stated above. The institutional systems of assistance for incubation of entrepreneurship and technology parks went in for expansion and efficiency improvements. Moreover. The information provision scope was widened beyond the print media to include website based systems and other audio-visual media such as television. the existing programmes with their primary mandate focussed on creation of awareness and provision of necessary training to induce potential entrepreneurs seemed to fit in with the expected outputs. Thus to conclude the extent of internal or external pressure on undertaking any major changes in the mandate. Some implementation agencies have a superior track record over others. Leave technical coordination and full backstopping to UNIDO CDP: The execution of cluster projects based on UNIDO methodology are highly process oriented where activities evolve as a result of constant dialogue (ii) 3 . there was no change during the said period. the scope of specific activities has been widened particularly in terms of skill based training where vocational training modules had been developed. greater involvement of industry associations & their consequential strengthening was not substantive enough to look for alternate routes for development where cluster development as a strategy could fit in to fill any void therein.

unlike several other sister organisations is a profitable institution that sets out to take up the organisation of number of training courses. MITCON.Role of UNIDO CDP The domain of a compatible administrative set-up for execution of cluster initiatives pertains to the two implementing agencies of the ‘Board’ and not discussed in context of the Board due to the context explained in section above. drafting of new schemes. biotechnology. and (ii) a technical consultancy organisation set up by Development Financial Institutions. no inputs on re-orientation of policy pertaining to clusters. the up-scaling of cluster initiatives in the Board was never in contemplation. giving them authority to implement most of the mutually agreed activities leads to a new learning and internal adjustments for the implementing agencies that are not quite familiar in dealing with such un-certainties. This essentially means going beyond technical training & regular methodological guidance that clearly fell in the domain of the project supported by UNIDO CDP. Both the above mentioned institutions have a commendable track record in the current domain of their primary focus where TREC-STEP organises an S&T entrepreneurship park where new enterprises are incubated by way of provision of infrastructure facilities and technical inputs to assist them become viable sustainably.(iii) and involvement with the local cluster stakeholders. provide consultancy services in certain thematic areas of agro-industry. export information provision to the SMEs and policy institutions largely in the state government of Maharashtra. Consequently therefore. as in case of a few other partner institutions of the project. It therefore puts additional responsibility on the funding institution like the Board to ensure that such lessons are learnt and imbibed through a time-consuming laborious system of regular monitoring. MITCON also manages a biotechnology park near Pune. technical coordination. On the other hand. Besides. 6. they also undertake to develop new programs for technical skill development in line with the objectives of the ‘Board’. 4 . Evolution of the administrative set-up of the partner for cluster programme management on yearly basis . Building trust with the local stakeholders to seek their concurrence on the activity plan. environment. backstopping and mutual learning. capacity building of the Board secretariat or other implementing agencies of the Board was required to be undertaken. banks and state government of Maharashtra called ‘Maharashtra Industrial & Technical Consultancy Organisation Ltd’ (MITCON) with is office based in Pune. (i) an autonomous body for Science & Technology Entrepreneurship Park (STEP) extended out from Tiruchirapalli Regional Engineering College (TREC) and therefore called TREC-STEP with its office based in Tiruchirapalli. Avoid up-scaling in terms of more number of clusters to be taken up by the Board: Considering that the SCE project neither had the mandate to specifically focus on issues pertaining to Science & Technology (S&T) in the pilot clusters nor had the capacity to provide special inputs customised for cluster up-gradation through S&T interventions. These two implementing agencies are. ensuring their financial contribution for the activities.

This was incompatible with the on-going administrative set up and management systems of the two implementing agencies and the ‘Board’.’ Tiruchirapalli in TamilNadu and ‘Floriculture cluster’ in Pune. In the case of the ‘Board’. common marketing of flowers. 7. The focus of assistance was in assisting the units to reduce their energy costs and place quality systems in place through their industry associations that would also improve the local designing capabilities of the enterprises to help them diversify into manufacturing more profitable non-ancillary self designed products. Any changes undertaken to comply with implementation of the cluster program by the two implementing agencies. the areas of assistance by UNIDO CDP pertained to the following: (i) (ii) (iii) Training of implementing agency staff. The successful outcome of the project assistance in both these clusters did not lead to greater interest in the partner to expand the number of clusters to be assisted. ‘floriculture cluster’ lacked the critical size in terms of number of firms and scale of operation and therefore the thrust of the cluster project was to induce small & marginal farmers to take up more profitable floriculture activities. to which most of the units are ancillaries locally.Without going into further details of their activities. (i) (ii) Assistance to 2 clusters undertaken for implementation by the partner organisation. deputation of a middle-level management person as a CDA to take care of cluster development initiatives with high degree of self-responsibility. On the other hand. both formally and regularly through hand-holding assistance (2002. it was felt. buying of technical BDS services and ensuring mutually profitable linkages with larger firms. The SCE project assisted MITCON in preparing such proposals while stating the kind of management structure within MITCON that could possibly sustain similar initiatives on the scaled up basis. would adversely affect the existing mainstream programs with the partner. In order to assist the sustainability of such development initiatives a few cooperative societies were assisted to undertake common procurement of inputs. it is analysed that the requirements of the cluster development methodology required seeking private sector domain for development assistance in most of the activities. The Tiruchirapalli cluster is a fast growing cluster riding on the boom in the power sector. be accountable to the local industry associations for chalking out action plans and a strong degree of commitment to develop the competence of cluster based private sector institutions. On the other hand. MITCON driven by the desire to seek more funding opportunities from the schemes of assistance for cluster development has been contemplating to undertake a few more clusters for similar attention. the two selected clusters were ‘Heavy engineering fabrication cluster. Maharashtra. 2002-05) Diagnostic study preparation (2002) Drawing up of cluster action plans (2002-05) (iii) (iv) (v) (vi) 5 . skill up-gradation. Areas of handholding assistance provided to CDAs and TAs and its implication – Role of UNIDO CDP The SCE project provided scope for assisting all the 7 partner institutions including the NSTED Board at two levels viz. For the 2 select clusters in Tiruchirapalli and Pune.

it is envisaged that UNIDO CDP’s own 6 . despite their success locally. leads to the conclusion that the current methodological approach of cluster development of UNIDO is not compatible with the existing mandate of the ‘Board. the experience of undertaking development work in 2 pilot clusters. Thus the customised policy level assistance to the partner directly has been minimal and only limited to experience sharing among different partner institutions. In fact.’ b. In the original program design of the SCE project.(vii) (viii) (ix) (x) (xi) (xii) (xiii) (xiv) (xv) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) Preparation of revised collaborative cluster vision in collaboration with the industry association and the implementing agency in Tiruchirapalli (2003) Directly interacting with the local industry associations to help them draw up their chart of activities and draw up strategic action plans (2002-05) Resolution of conflict and providing inputs on the basic principles of cluster development within the local office of SISI (2002-05) Assist in linking up with local public and private sector service institutions and funding from state agencies for some of the local initiatives (2002-05) Technical assistance and exposure visits for the industry associations to other clusters (2003-04) Regular monitoring. it was not envisaged to undertake a diagnosis of the partner’s mandate. (2003-05) Provide funding to the local industry associations for their capacity building (2004) Provide the implementing agency assistance in monitoring the progress in the cluster work (2002-05) However. Policy level changes in the partner with respect to cluster development policy It is difficult to envisage any substantive policy level changes in the partner with respect to cluster development policy. no layer of technical advisors (TAs) could be developed to ensure institutional sustainability for taking up similar initiatives in future. it was envisaged that all the 7 partner institutions including the ‘Board’ would adopt the standard UNIDO CDP model on ‘as it is basis. In the project formulation. at the level of senior supervisory level both in the implementing agencies and the ‘Board’. An assessment of the perceived gaps in original program formulation and implementation of programme a. 8. study tour to Italy and provision of some documentation relevant to cluster development. Even if a special focus on ‘technology’ and its implications in clusters would have been known. review and providing corrective actions during the project duration (2002-05) Development of common project proposals on behalf of the industry for seeking funding and technical support etc.’ 9. structure and management systems to assess their compatibility to take up cluster development initiative that had a broader multi-thematic focus beyond technology and special thrust on building local private sector led participatory governance system.

The existing schemes of the ‘Board’ such as STEP. industry associations for new technology development & diffusion and private BDS providers in context of a few clusters with possible greater degree of scope and effectiveness. 10. the significance of a specially designated and trained technical advisor (TA) within the CDCC emerged. It is not possible to take up cluster development in general with the ‘Board’. iii. However this has only emerged in the hindsight after a year’s project work went into implementation. ii. mutual expectations between the UNIDO CDP and the partner were outlined in the form of a road-map. if any and reasons thereof: It is difficult to envisage the areas that were expected to have been covered under the framework of SCE project. after a year of project implementation. public-private partnership mode of working and intensity of management involvement as a consequence may have led to greater convergence of aims & objectives. Unmet expectations of the partner NSTEDB. c.understanding and experience base in providing a special focus on technology for its infusion in the clusters is rather weak and limited. but could not be covered. In the hindsight. Scope for future work and capacity of partner i. The strong linkage of the ‘Board’ with a range of technical institutions along with their financial support can however help to infuse technical modernisation in the clusters that have been taken up for integrated development by several other institutions. 7 . Pilot initiatives in select clusters that have high scope of technical inputs in the form of technology. A clearer anticipation of the likely response of the partner and its implementing agencies to the focus on private sector capacity building. Taking up of technology status mapping of clusters. incubation system and technical training may be suitably studied in their current systems of operationalisation and compared with options to institute the same through consortia approach. skills and innovation may be tried up. As per the project document.

technical and management expertise available at the NIT are yet to be adequately or appropriately synergised by cluster SMEs. 1 Trichy is situated in district Tiruchirapalli in the State of Tamil Nadu. The initiative for development at the engineering cluster of Trichy was started in the year -2003 by TREC – STEP under a project sponsored by DST. 2. Its role had been earlier largely restricted to liaisoning and resolving issues with BHEL. The cluster of 300 largely small-scale industrial units (SSI) had a turnover of about Rs 200 crores (USD 45.REC). Established in 1980 BHELSSIA today has about 130 members. this customer category is now turning out to be significant.Annex 1 Engineering Fabrication Cluster of Trichy1 1. is a prominent institution located at the cluster. testing and training facilities. The Trichy District Tiny and Small Scale Industries Association (TIDITSSIA) representing all SSI units in the district. to pursue such work on a contractual basis. The BHEL. Around the mid-90s Wind Energy Generator (WEG) companies establishing their facilities in nearby locations. Here cluster structure has been largely skewed in favour of fabricators. SIDCO is a critical player. encouraged technical entrepreneurs such as fabricators and machinists.5 million) in 2002 and created jobs for about 8000 people. is today taking the lead in pursuing several interventions for industry. Certifying and inspection agencies such as Lloyds Register of Industrial services and the Indian Institute of Quality Assurance also provide strategic services to the industry. However. Evolution of the Cluster The cluster was essentially promoted by the Bharat Heavy Electricals Limited (BHEL) and its Trichirappalli (Trichy) operations. 8 . The Welding Research Institute (WRI) established at BHEL premises with UNDP assistance. The Cluster and its Major Stakeholders The engineering (fabrication) cluster at (Trichy) largely caters for the sub–contracting requirements of the power industry. constituted as a section 25 company. The high fabrication content in boiler manufacturing is labour intensive and also design related. plays the critical role of policy advocacy on behalf of cluster SMEs in the context of sales tax imposition on fabricators. Trichy. The Trichy unit commenced operations in 1965 and focused primarily on the manufacture of high-pressure boilers. The National Institute of Technology .NIT (earlier known as the Regional Engineering College . In the 1990s BHEL’s orders plummeted. BHEL Small Scale Industries Association (BHELSSIA) comprising those on the BHEL vendor list. therefore. While the WEG did not provide a stable demand over the years. A critical contribution of BHELSSIA over the years has been the evolution of the BHEL Industrial Development and Service Society (BIDASS). discovered the fabrication strength of cluster units. The State Industrial Development Corporation (SIDCO) of Tamil Nadu progressively established several industrial estates contributing to the birth of the cluster. offers research and development (R&D). with specialised competence in heavy fabrication and machining. most of whom were Bharat Heavy Electrials Limited (BHEL) jobbers. which adversely affected the jobbers. BIDASS sources a number of consumables by way of bulk input purchase.

led to fostering mutual trust and understanding. transporters were pressing for a rise in charges when BHELSSIA negotiated a reduction in the rate of about 20 per cent. Manpower rationalisation was also made possible. The cluster enterprises also evolved small informal networks to pursue cost reduction. Moreover. Each firm used to send representatives to BHEL with vehicles to collect inputs and also deliver them back. TREC-STEP initially facilitated conduct of an energy survey. 5. Here the need for creating appropriate support facilities to back up this progression towards independence was also felt. such as the machine tool cluster at Bangalore and the knitwear cluster at Tirupur were facilitated.e. Thus. using our core competency in the field of fabrication and machining developed in the course of the past 25 years by more than 300 entrepreneurs”. including two MDPs that involved about 50 entrepreneurs. Many of the interventions being pursued till date are led by participants of the MDPs. Such pilot activities.g. Implementation Strategy It is evident that the cluster had several capable implanting agencies already in place. The total number of vehicles used was also reduced from 90 to 40 by cluster SMEs. The transport consortium worked out an optimum transportation matrix for collection of raw material from BHEL and delivery of finished goods to BHEL. The Petroleum Conservation Research Association (PCRA) helped conduct energy awareness seminar followed by hiring BDS providers on grouped basis under the banner of local industry association (BHELSSIA). i. from about Rs 140 per tonne to Rs 100 per tonne.000) per annum range. 9 . A ‘BHELSSIA transport consortium’ was created to curb rising transportation charges by transporters. 6. input cost reduction). Hence the implementation strategy was to initiate activities by providing exposure and conducting a series of brainstorming sessions to further promote a culture of business cooperation among the units. This was followed by creating trust of the units in the newlycreated process by ensuring unit level benefits on areas of immediate needs (e. The initial power costs for units were as high as about Rs 128 lakhs (USD 291. pilot activities by way of exposure visits to other clusters.’ The mission of cluster enterprise was “To achieve a turnover of Rs 900 crore (USD 205 million) by the year 2007. Major Problems Identified Some of the major problems identified were: • Relatively high input cost in the form of cost of energy and transport • Lack of quality certification that restricts independent growth.3.000) per annum with many in the Rs 50 lakh (USD 114. Major Interventions (i) Cost optimisation: Pilot activities in terms of power consumption study and energy audit of a small sample of enterprises were initiated. Vision for the cluster The vision that progressively evolved in the cluster was ‘To emerge as a world class cluster in engineering and fabrication in the global market by the year 2007. growth beyond BHEL • Critical infrastructure gaps including ‘designing’ facilities which are required to help move towards large projects and markets • Lack of infrastructure upgradation of estates on which cluster enterprises are housed 4. Management Development Programmes (MDPs) were conducted for owner-managers. by working through appropriate intermediaries – existing or newly created and moving strongly towards a ‘beyond BHEL syndrome’ by working towards creating alternate markets for the units.

In 2002. BHELSSIA targeted the development of new markets and process industries. DST is supporting the training of about 300 welders and BHELSSIA contributes to about 50 per cent of the expenditure. Further. Enterprise savings have been to the tune of about Rs. about 40 enterprises pooled in about Rs 15. Interventions by stakeholders on developing cluster infrastructure: BIDASS. reduced consultancy fee to Rs 20. With BHEL encouraging them. 2 Source: Office-bearers of industry associations and BHELSSIA respectively 10 . • Over 64 enterprises have been certified under ISO 9001 over the intervention period. This turnover was largely contributed by two medium-sized companies. WRI services for upgrading skills of welders on-the-job are also being availed of. while by 2005 the same is estimated to be at about Rs 20 crores (USD 4.(ii) Quality upgradation for new markets: Certification under ISO 9001:2000 related initiatives were launched by TREC–STEP jointly with BHELSSIA and the quality department of BHEL. Further. BHELSSIA negotiated with a few BDS providers. is now being finalised. BHEL could reduce inspection costs of material received from vendors if they are certified. BHEL and also medium-sized enterprises in the cluster have their own facilities but not smaller units in the cluster.5 million). A proposal seeking support under the Industrial Infrastructure Upgradation Scheme (IIUS) of the Department for Industrial Policy and Promotion (DIPP).5 lakhs (US $ 3400) per annum or more. progressed to establishing an oxygen plant so as to ensure uninterrupted oxygen supply cylinders to firms at reasonable prices.000 each to establish basic design facilities in the cluster. Employment levels in the cluster today stand at about 15. Certification is on in several more enterprises.000. Common negotiation. export turnover is believed by industry representatives to have been negligible. While this prepared the job working units to become quality producers and search for independent job work. 600 crores (USD 136 million)2. Consolidated Results At the firm level: The number of cluster enterprises and their turnover in 2005 stands at 300 and at about Rs. Hence. Again this drive to independence from BHEL (both for product designs and order) needed to be addressed by developing own design capabilities.000. 7.000 per enterprise from the usual Rs 45.1. Welders training interventions are being pursued at the Government Polytechnic with faculty support from the WRI. upgradation of vendors was part of BHEL’s Total Quality Management (TQM) drive. that had been commonly sourcing and supplying welding materials to cluster enterprises. BHELSSIA and TIDITSSIA are now considering filling up other infrastructural gaps by way of quality roads in the Thuvakudi estate and a developed design centre amongst others. (iii) Increasing scope for new market: A ‘BHELSSIA product cluster’ was also initiated to pursue various initiatives with regard to exploring new markets and products. the option of group training and the offer of a large number of clients. A quality manual template was circulated amongst BHELSSIA members. access to ‘volume’ customers was made possible by initiatives such as common negotiation and sale to the Koodamkulam power project. The turnover has doubled over the intervention period largely propelled by BHEL job works. it also helped reduce BHEL’s investment in terms of time and money on the inspection front and also prompted exploring on-site fabrication possibilities. As a means of resolving logistical constraints affecting the scope for reaching out to markets in far away regions in India.

5 million) Another Rs 5 crores worth of orders is expected. Raw material is commonly collected from BHEL and finished goods similarly delivered. design. TREC–STEP transformed its responsibilities to BHELSSIA in order to play a supportive rather than a lead role. Capacity building of existing manpower is also being pursued. The sustainability of interventions is also evident from the fact that with regard to financing of inverters. Strong institutional linkages have been established in terms of the Government polytechnic pursuing training initiatives in association with the WRI. and inverter purchase amongst others. The association has also been retaining a common manager. Cluster level: • • • Own designing capabilities are being developed by enterprises. Nevertheless. Sustainability of Interventions Most interventions were association-led. one lakh per annum for enterprises is envisaged.• • • • • About 36 enterprises operate the transport cluster. Capacity building of industrial associations has taken place in terms of independently pursuing QMS. transport. A multi-pronged approach to develop the supply and also skills of the labour pool has resulted in a series of welder training programmes for fresh trainees. NSIC had progressively withdrawn support for debt financing purchase due to changes in internal policy regarding financing. training/ITRD and product development initiatives. and exploiting opportunities. 8. Industry progressively assumed greater responsibility for intervention. A trained pool of 50 persons will soon be available for cluster enterprises. About 300 inverters have been installed resulting in energy saving of several crore rupees per annum for cluster enterprises. cluster actors jointly approached other institutions such as the Technology Investment Capital Corporation (TIIC) and the installation spree of inverters has continued. transportation. 11 . Savings to the tune of about Rs. The ties with the Koodamkulam Atomic power plant for bulk orders have already generated orders worth about Rs 2 crores (USD 4. BHELSSIA is progressively evolving ‘governance’ on various fronts in terms of commonly and efficiently resolving various threats. The association progressed towards common negotiation in terms of BDS provision (for QMS accreditation). The design centre established independently by about 40 enterprises remains at the infancy stage.

affects price realisation.7. The Corporate units are largely export oriented. They have also ensured that a cold storage has been established at the airport with assistance from the Agriculture and Processed Food Export Development Authority (APEDA). Sangli and Satara. set up by large Indian enterprises from across the country. Dutch. input costs are on the higher side.4. The region is nationally reputed for flower cultivation in terms of ‘hi-tech green or polyhouse floriculture than mere open flower cultivation.80 crores and they employ around 1600 persons.10 per unit. They are working in about 65 hectares (average farm size of 2 . They launched operations in the area in the early and mid-90s.1. and Israeli breeders offering planting material. Enterprises sell to smaller importers and dealers. The Project was concluded in 2005. This. water and temperature conditions) as well as factor conducive infrastructural and transport facilities in tandem with conducive Government schemes encouraged development of the cluster at Pune. All varieties are patented. However. They mainly supply to the national market. The cluster had a single industry association `Western India Floriculture Association’ (WIFA). as also irregular and erratic power supply affected performance of enterprises. In addition to such core `farming’ enterprises there are several enterprises supplying plants to farmers either upon doing tissue culture or on importing those varieties. Agro–climatic (soil. in turn. Further. Status of the Cluster In the year 2002. The association is small with just about 16 members. They have ensured that cost of power is only about Rs. This. Evolution of the cluster The floriculture industry in India is only a couple of decades old. Nasik. New Zealand. Their total turnover is estimated at about Rs. 1.5 hectares) and largely cultivating Dutch roses. the relatively smaller scale of operations (of even large units) for the auction markets worldwide affected competitiveness. Besides there are 16 corporate units.Annexe 2 Farmers’ co-operatives for competitiveness: Case study of the floriculture cluster at Pune The initiative for development at the floriculture cluster of Kannur was started in the year 2002 by MITCON under a DST supported initiative. The association plays a significant role in the context of policy advocacy. Support institutions include the Department of Horticulture which operates under the Agricultural Department of the State. Moreover. In Maharashtra. from late 1990s onwards foreign technical collaborators led to a far higher price realisation than the large farmers.50 per unit across conventional manufacturing units in the country. Transport and power infrastructure and costs: Advocacy fructified The WIFA has been successful in some critical advocacy related fronts. metres). The cost though double the rates levied on the agricultural sector is far less than industrial charges that are in the range of about Rs. around 100 (small greenhouse operating) farmers were cultivating gerberas and carnations in about 25 hectare (average farm size of 500 – 4000 sq. They have established medium sized operations in the cluster. Exporters pay a royalty for cropping particular exportable varieties. with an estimated turnover of about Rs. Many enterprises who pursued export oriented `farming’ did well. the floriculture industry encompasses the belt of Kolhapur. 2. This State Department often subsidises to the 12 . There are German.12 crores and employing around 500 persons. Soon Pune evolved into a leading floriculture cluster of the country following Bangalore. The cost of cold storage and refrigerated vans added to the burden of larger units in particular.

Again farmers secure low price realisation due to inadequate access to markets and high costs of production. gaps in technical information were evident. 3. and diesel costs. product diversification and developing institutional linkages. Yet another major problem is the poor quality of flowers due to attack by pests and disease. Pune. Monthly brainstorming meetings helped 13 . NGOs such as the ‘Rose society’ organises exhibitions amongst other activities. improvement in infrastructure. insecticides and irrigation and electricity charges. Implementation strategy The broad objectives of intervention was increasing the area under cultivation. The strategy for doing the same was worked out by first targeting the the farmers’ segment as discussion revealed that they were more responsive to explore joint initiatives. Major problems The specific problems in the context of small and large farmers were as follows: • Low value realization by farmers due to high cost of production and weak marketing linkages: Green house floriculture is capital intensive agri–business. 4. The Maharashtra State Agriculture Marketing Board (MSAMB) has established a National post harvesting technology training centre. They are also encouraging their graduates to proceed into green (or ‘poly’ house) related entrepreneurship. Cost of production is also high due to high costs in terms of water–soluble fertilizers. 5. The National Horticulture Board (NHB) offers upto 20% subsidy of project cost upto a limit of about Rs. capacity building of farmers.70. This was followed up by meetings and it was found that the farmers were willing to cooperate for higher bargaining power. Even in the case of large growers. Inappropriate agricultural practices. inadequate cold chain as also relatively poor linkages between farmers and R&D / training and support institutions was obvious. The Agriculture College. Exogenous (to enterprise operations) factors are believed to contribute significantly to problems of this category of actors.000 per green or polyhouse facility (with full temperature and humidity control). • Gaps in quality and related issues amongst small and large farmers: Production of quality flower warrants usage of quality inputs. Vision of the cluster The vision of the cluster as worked out by the implementing agency was to enhance the business potential of the cluster by increasing area under cultivation by 20 percent by 2005 by (means of) networking. • Exogenous challenges to large units: Even large growers face relatively higher cost of production in terms of international freight as also (in future) power tariffs. pesticides. The National Chemical Laboratory operates a tissue culture laboratory. The training centre established by the college also offers post harvest and cold chain facility.25 lakh for floriculture. Low margins are also due to inadequate direct access to consumers by these larger firms. developing market and institutional linkages and by building capacity of growers (farmers) for sustainable development. The MIDC is involved in establishing a floriculture park. This implies high operating costs. also offers training and R&D support for farmers.maximum (approximately) Rs. exploring new markets. They also experience severe quality and cost competition from countries like Kenya. Exposure visits of farmers were organised from Pune to benchmark enterprises and co-operatives in The interactions and travel to different locations also helped evolve greater levels of mutual understanding and trust amongst the small farmers.

gaps between farmers and R&D and training institutions were addressed by catalyzing training programmes for product diversification and skill upgradation for members of networks. In total over a 100 enterprises were networked. most are progressing into entrepreneurship. With the support of SIDBI and various other institutions. Meetings with bankers and support institutions were organised to smoothen the flow of debt capital as well as subsidy leading to new enterprise creation in the cluster.1 crore. 6. Major interventions The major interventions that were undertaken in the light of identified problems were as under: 6. The total area under floriculture (green / poly house) cultivation has enhanced by about 5 hectares after intervention. These projects have been largely financed by the Bank of Baroda and the Central Bank of India. Common marketing initiatives in distant domestic markets have already resulted in sales of about Rs. A common testing laboratory commenced operations as to reduce testing costs (in comparison to availing services of private laboratories) as also understanding PH and electrical conductivity levels of soil for application of appropriate dosage of fertilizers. to train new and existing growers. About 10 new units were established with an investment of Rs. Three of these networks have been commonly purchasing inputs. 14 . linkages to new market segments were also facilitated.the Horticulture Training Centre. further initiatives such as establishment of testing laboratories and diversification to export oriented flowers were pursued. 2 Quality and related issues Taking the networks of farmers as the base units. The input supply centers purchase about Rs. A savings on cost of fertilizers and perticides of about 10 percent is realised. They have invested more in operations in terms of both debt and equity finance. Of the 50 odd trainees trained. Over a dozen farmers diversified production towards cultivation of Dutch roses from gerbera and carnations. interactions with larger enterprises were taken up at a later point of time.identify different activities as part of an action plan. Meetings were arranged between farmers and some large enterprises and annual contracts were finalised between the two stakeholders. Talegaon. The visits involved presentation of samples to traders as also negotiation for direct sale. Common marketing to large EOUs as also distant domestic markets has resulted in considerable direct sales earning a higher price realisation by about 15 percent. Several visits were organized to explore markets for Co-operative Societies. Seventy-five percent of enterprises in 4 blocks networked in the form of Co-operative Societies. This led to creation of networks to reduce input cost.2 lakh worth of inputs every year. This society in under process of formal registration. 6. In total about 35 new enterprises were established. Thereafter. One more society involving over 30 members are evolving in yet another block. training programmes were organised by roping in a relatively new but specialised institution . The visits were to Hyderabad. Having delivered with the small farmers. 15 lakh. Other than direct market linkages in different geographical markets. Indore and Ahmedabad. This helped optimize fertilizer use and relevant costs.1 Enhanced value realization by small farmers Farmer meetings helped share ‘best’ practices amongst themselves.

the commercial benefits of the joint activities provide revenue and also imperative to the networks to continue to explore similar joint initiatives in the future. The Talegaon Floriculture Park (TFP) has been created by the MIDC under the Agri–Export Zone scheme of the Department of Commerce (Ministry of Commerce and industry). The co-operative Societies are expected to take a lead on initiatives themselves. Temperatives are low and the pesticide remains in the plant for more time than if sprayed when the sun is hotter and temperatures up ! Similarly. This will facilitate moves towards playing an advocacy role in the context of interest of small farmers. some Bangalore based entrepreneurs are believed working on a consortium mode. Such 15 . For instance. Enterprises could share containers. However.6. 7. and various adversities to operations as indicated earlier. some of the larger stakeholders feel that a consortium for freight optimization can also be evoloved. wherein.3 Other issues The Technical Manager’s meets enabled identifying as also disseminating best practices amongst larger enterprises. Some units have thereafter established operations – understanding that regardless of export markets even the domestic market has scope. The networks also avail the services of Network Development Agents (or NDAs-who are salaried staff) to pursue administrative work. metre in ‘poly’ house from members to pursue various developmental activities. For instance. Christmas and such `DDays’ are seasons when prices realised shoots up several times over! Local production in these regions is low during those periods. Exodus is a chemical (pesticide) that seemed preferred by some while others were not very impressed by its effectiveness. Pune has a seasonal comparative advantage. But then. A judicious market mix could serve as an ideal option. In fact the networks have also started collecting a fund @ about Rs. 8. The airway bill is raised by one individual of a `network’ and all share the benefits. The WIFA understands that there are several advantages that India has in the context of European markets. Successful implementation of a flower auction centre is being considered by the Maharashtra State Agriculture Marketing Board/MAIDC and is a priority for all actors. high cost of plants (royalty to international breeders). Future scope for development of the cluster As part of future interventions a federation of block level Co-operative Societies is expected to be evolved. Discussions helped narrow down upon the deviations in performance in different farms. Valentine’s day. Similarly. In this context. Best results are when plants are sprayed in the mornings. There is a freight subsidy of 20-25 percent available on exports. The ability to offer volumes in those periods by encoraging small farmers to diversify into such crops during such seasons is an option to encourage. while plots have been sold few units had established themselves in the park due to various reasons such as uncertainty in export potential.100 per sq. However optimization of storage space has not been achieved. Sustainability of interventions The sustainability of the intervention beyond 2005 is guaranteed because of the business models created in the newly formed co-operative societies. During the winter seasons demand in Europe shoots up viz. the question is in whose name will the airway bill be raised to claim subsidy? Hence. right specifications and source for instruments employed for cutting operations and so on were evolved 4. the Agency has organized meetings of potential park based ‘enterprises’ as to resolve issues and encourage establishment.

Upon return the delegates (Co-operative Societies) took up the issue with the authorities. The implementing agency facilitated an exposure visit to Bangalore for networks who participated in the visit to understand the importance of an auction centre amongst other options for competitiveness. Such projects are fiscally supported by the Agriculture and Processed Food Export Development Authority (APEDA). Support institutions were already into the mould.options may have to be explored to a greater degree in addition to advocacy for `support’ on relevant areas. A likely Centre at Pune is expected to involve a capital outlay of about Rs. 16 .22 crores. This project may be implemented by agencies such as MSAMB / MAIDC.