Entrepreneurial & managerial support for SMEs through incubators

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PIB Features | 14 Jun, 2011
Recognizing the importance of micro and small enterprises, which constitute an important segment of Indian economy in terms of their contribution to countryâs industrial production, exports, employment and creation of entrepreneurial base, the Central and state Governments have been implementing several schemes and programmes for promotion and development of these enterprises.

Among the six basic principles of governance underlying the National Common Minimum Programme (NCMP) of the Government, "sustained economic growth in a manner that generates employment" has a pride place. The NCMP also describes the MSEs as "the most employment-intensive segment".

This component-scheme of the NMCP envisages selection of a large number of academic and training institutes and provision of financial support to set up at least 100 business incubators to host about 1,000 micro and small enterprises.

Objective

The main objective of the scheme is to promote emerging technological and knowledge-based innovative ventures that seek the nurturing of ideas from professionals beyond the traditional activities of Micro, Small & Medium Enterprises (MSMEs). Such entrepreneurial ideas have to be fostered and developed in a supportive environment before they become attractive for venture capital. Hence the need arises for incubation centres: to promote and support untapped creativity of individual innovators and to assist them to become technology based entrepreneurs. It also seeks to promote networking and forging of linkages with other constituents of the innovation chain for commercialization of their developments. This initiative is being taken up by the Ministry of MSME â the nodal Ministry for the development of entrepreneurship and creation of selfemployment and more employment avenues.

Under this scheme, 100 âBusiness Incubatorsâ (BIs) are to be set up under Technology (Host) Institutions over the next 4 years and each BI is expected to help the incubation of about 10 new ideas or units. For this service, which includes the provision of laboratory/workshop facilities and other assistance/guidance to young innovators, each BI will be given between Rs.4 lakh and Rs. 8 lakh per idea/unit nurtured by them, limited to a total of Rs. 62.5 lakh for the ten units.

Implementing Agencies

The incubational support will be provided by Host Institutions, like: Indian Institutes of Technology (IITs); National Institutes of Technology ( NITs); Engineering Colleges; Technology Development Centres, Tool Rooms, etc.; and Other recognised R&D and / or Technical Institutes/Centres, Development Institutes of DIP&P in the field of Paper, Rubber, Machine Tools, etc.

The geographical areas, the disciplines and the infrastructure-providers listed above will be reviewed midway during the implementation, for any corrective action needed to make the scheme more effective with better outcome.

Targets

It has been proposed that in each Business Incubator, efforts will be made to reach the ratio of 4:1 between the incubated micro and small enterprises, respectively i.e., efforts will be made to incubate 8 micro enterprises and 2 small enterprises in each BI on an average in an ideal situation. However, flexibility on this count would be permissible. There will also be flexibility in having more than one BI in the same host Institution, and where required, there may be less than 10 or more than 10 enterprises hosted in each BI.

Expectations

The term âinnovationâ covers a very wide domain and in so far as micro and small enterprises are concerned, it could signify any activity and new/ingenious procedure or product that is likely to be of use to society (or to specific segments thereof) and therefore marketable in the long run. The purpose of the small dose of assistance proposed under the present scheme is to support students/ex-students of science and technology and entrepreneurs try out their innovative ideas (processes and products) at the laboratory or workshop stage and beyond (to the extent possible) â to carry forward the idea from its mere conception to âknow-how â and then to âdo howâ stage. Even Special Purpose Machine (SPM) would clarify as âinnovationsâ under this low cost scheme as long as they lead to better, more competitive and economical operations and are marketable by the small and medium enterprises that are to be formed by the successful innovators. In the case of many Host Institutions, where other similar programmes for enriching and incubating innovations are already on, this MSME assistance could be dovetailed within them, by way of an additional encouragement/sustenance, without leading to duplications or unnecessary double benefits.

It would be left to each Host Institution or its BI to benchmark the expectations from its students and entrepreneurs (and their ideas) at the level that is considered appropriate and to provide the level of assistance that is actually required to operationalize ideas. It is needless to mention that the level of success that each BI or Host Institution achieves through this scheme would enhance its own reputation and vice versa in case of repeated failures.

This scheme is designed for sustaining, at some basic or introductory level, the incubation of ideas that would have otherwise been lost for want of support. The expectations are that a sizeable percentage of the grantees/incubatees would be graduating to higher levels of operation, that would then require other levels of support under other schemes/organizations and from Venture Capital or Angel Funding.

Financial Assistance

As stated, 100 Business Incubators are to be set up to incubate about 1,000 ideas, many of which are likely to lead to the setting up of Small and Micro Enterprises at a cost of Rs. 62.50 crore in four years time period. Financial target in terms of expenditure has also been indicated to match the physical target. Another Rs. 4 crore are earmarked for minor components and the total cost of the project is to be Rs. 66.5 crore. BIs will maintain separate accounts of the funds received and expenditure incurred on various activities. An audited Statement of Accounts or the statement certified by the Chief Financial Officer of the Host Institution will also be obtained.

Participation In A Public Private Partnership Mode (PPP Mode)

To ensure the participation of the entrepreneurs in a PPP mode, it has been proposed that 15% and 25%, as the case may be, of the cost of intervention, will be borne by Micro and Small Enterprises respectively, wherever applicable. The proposal is in the form of pointed interventions to demonstrate the efficiency of superior technologies/procedures that are more conducive to the fast-changing environment in industrial competitiveness. In other words, other innovative options are being considered, with considerable degrees of private participation, in order to implement the schemes that are proposed under the PPP mode. The traditional government-driven, government-managed, subsidy-oriented activities have to give way to userdriven and user-managed options â based on their felt needs and faced challenges of stakeholders.

The innovative options ensuring that private participation in the programme is on a proportionate basis and Government contribution of 75% to 85% towards the project cost will be utilized for technology fee, common facilities and hiring/lease of machinery, etc. The incubatee will deposit his/her share to the Host Institute after completing the formalities of Tripartite Agreement, to be signed between the Government, the Host Institute (operationalizing the incubator) and the aspiring incubatee, clearly laying down the obligations from and expectations of each of the three signatories (Annexure-III). The approach has been framed in such a manner that the stakeholders/Micro and Small Enterprises are in a position to carry on these activities after the incubation period is phased out.

*Inputs from the Development Commissioner(MSME), Ministry of Micro, Small & Medium Enterprises, New Delhi
* The views expressed by the author in this feature are entirely his/her own and do not necessarily reflect the views of SME Times.