IMPACT SHEET • SWITCH-ASIA PROJECT SCALING UP SUSTAINABLE DEVELOPMENT OF MSME CLUSTERS IN INDIA

The project enabled energy efficiency interventions in 474 enterprises leading to a cut in carbon emissions by 36 000 tonnes annually

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Promoting sustainable business practice in India’s foundry MSME clusters

The Challenge

Objective

The Indian economy owes a major part of its growth to the 48 million micro, small and medium-sized enterprises (MSMEs) that provide employment to an estimated 60 million people. 70% of these MSMEs are estimated to be concentrated in around 1 100 industrial and 3 500 artisanal clusters. A sector mapping (2010) of industrial clusters, identified the foundry sector, having 5 500 enterprises in 47 clusters, as an environ-mentally challenging and a highly energy-intensive industry. 90% of India’s foundry enterprises are micro and small enter-prises, which use obsolete and inefficient melting technolo-gies. Despite several initiatives addressing the problems, their reach has been limited to not more than 200 enterprises.

The MSME Clusters project in India had the following objectives:• adoption of sustainable environment and social business

practices across selected foundry MSME clusters; • up-scaling of SCP practices through capacity building of

business membership organisations (BMOs);• introduction of aggregate reporting;• establishment of financial linkages; • support of the creation of a conducive policy environment.

Activities / Strategy

Fostering Sustainable Production With the introduction of technical and non-technical measures, the project improved energy efficiency

in about 500 foundry enterprises and also enabled improved workplace conditions in 375 foundry enterprises, benefitting more than 5 000 workers.

Building Capacities of Business Membership Organisations (BMOs) BMOs were involved as an integral part through

two training the trainer programmes, and another two training programmes for BMO office bearers and executives.

Introducing Aggregate Sustainability Reporting With aggregate sustainability reporting, the project sought to enable the MSMEs to measure and moni-

tor their sustainability impacts, disclosed them to stakeholders and therefore improved their access to potential business opportunities and public support schemes.

Enhancing MSMEs’ Access to FinanceThe project strengthened existing financial products to enable MSMEs to upgrade their technology, to

facilitate the development of new financial products by FIs, and to link 100 MSMEs to both FIs and public funding options.

Undertaking Policy Advocacy The project worked with policymakers to develop guidelines, resources and implementation instru-

ments for adoption by MSMEs to enhance their sustainable production.

TARGET GROUPS

• 500 MSMEs as direct bene-ficiaries and 460 as indirect beneficiaries in the four target clusters

• 2 000 contractual and permanent employees (directly) and 8 000 (indirectly)

• Local BMOs, Business Develop-ment Service Providers (BDSPs), fabricators, those providing technical support and/or public funding

• Local public authorities• Banks/financial institutions

(FIs), national government institutions providing technical support and/or public funding

IMPACT SHEET | SWITCH-Asia project Scaling Up Sustainable Development of MSME Clusters in India

Convincing BMO executives to adopt SCP measures

Conducting OHS training for MSME workers to increase safety in the workplace

Scaling-up Strategy

Demonstrating Business Case to Adopt SCP Increased awareness among MSMEs regarding return on investment from adopting sustainable

production practices ensures scaling up. Collaborating with the YES Bank, specifically in a project activity themed “Say Yes to Sustainable MSMEs in India,” the project shared and implemented the learning from the foundry sector (e.g. smart alignments, retrofitting, upgrading of skill level of labour) in new sectors and areas1. This activity covered energy efficiency and OHS implementation measures across 11 sectors (casting and forgings, wet grinding, rice mills, electronics goods, foundry, rubber, plastic, dyeing, transformer and hosiery) and nine states (Punjab, Rajasthan, Gujarat, Madhya Pradesh, Tamil Nadu, Andhra Pradesh, Haryana, Delhi-NCR and West Bengal).

Strengthening BMO Capacity to Coordinate Similar Actions across Clusters To strengthen the institutional framework at the

national level, cluster-level BMOs will replicate the project’s outputs beyond the targeted foundry sector. Capacity build-ing was conducted using a two-level multiplier approach: a) group discussions, exposure visits to benchmark clusters and mutual interaction for capacity building among entre-preneurs, and b) intensive classroom training, exposure and support to implement SCP initiatives.

Enhancing MSME Access to Credit 92% of MSMEs do not have access to institutional finance, and availability of finance for implement-

ing sustainability measures is still scarce. Challenges are present on both sides; borrowers lack pertinent documen-tation, collateral security and familiarity with the process of availing loans, while banks prefer to design standard financial products and prioritise larger loans to reduce transaction costs. The project capacitated BMOs and other intermediaries to build awareness on how to access formal credit.

Enabling a Conducive Policy EnvironmentThe project provided inputs to the government through policy recommendations, sharing a reposi-

tory of experiences in the form of case studies, learning docu-ments, videos and analytical papers. This provided inputs for strengthening the policy framework through dialogue and dissemination. Public support schemes for MSMEs from various ministries were presented on an online portal, and based on this compilation, the National Institute for MSME (NIMSME) of the Ministry of MSME created a booklet to inform entrepreneurs about the available support.

Improving MSME Cluster Positions in the Market through Aggregate ReportingSectoral guidelines and cluster benchmarks about

productivity levels, energy efficiency, natural resource usage and occupational health & safety practices can help owners relate more constructively and stimulate positive competi-tion for adopting change. When aggregated at the cluster level, aggregate reporting can not only help improve business performance, but also enhance cluster reputation, improve market position and access to public funds.

1) Financing sustainable production among MSME clusters: Experiential Learnings and Policy Recommendations (http://www.switch-asia.eu/fileadmin/user_upload/Project%20news/MSME/Financing_sustainable_production.pdf )

A project visit to a foundry Conducting MSME workshop at an innovation expo

Providing health/eye check for MSME workers

Increased Local Capacity BMOs are the most trusted vehicle for up-scaling sustainable production among MSMEs, so building

their capacity ensures sustainable provision of technical expertise and institutional linkages. 54 BMOs were trained on understanding and adopting SCP.

Adopted SCP Best Practice and OHS Measures474 enterprises received training and support in adopting SCP measures at their factory sites. Most

MSMEs implemented the proposed improvements, which led to a reduction in their annual coke consumption of 13 000 metric tonnes. Both preventive and curative aspects of Occu- pational Health and Safety (OHS) measures (e.g. personal protective equipment (PPE), trolleys for movement of goods, setting of coal charging equipment; and first aid boxes (FABs)) were adopted by 375 MSMEs, and an OHS manual was also disseminated during various workshops.

Enhanced MSMEs’ Access to Institutional CreditBy linking MSMEs to banks and FIs, the project im-proved lending practices based on MSME-friendly

Triple Bottom Line approach focusing on sustainable practices (such as cleaner production and energy/resource efficient technologies). 101 enterprises were linked to banks, and EUR 4 million of loans were provided. Thirty supported enterprises had implemented energy efficiency measures, with a cumu-lative investment of INR 23 900 000 million (EUR 320 000), which leads to an annual saving of INR 199 500 000 (EUR 2.73 million). With the new technology, MSMEs reduce their greenhouse gas (GHG) emissions. This investment included equipment change (e.g. divided blast cupola), retrofitting (making small changes in the equipment) and adopting sus-tainable practices. The project enhanced MSMEs’ capacity to apply for loans by building documentation records, enabling interactions with local banks, and creation of FAQs entitled

Results

“Training Manual: 51 FAQs for easy access to loans through schemes of Govt. of India.”2 The project also provided inputs to SIDBI that resulted in a new financing product “Financing End to End Energy Efficiency Investment in MSMEs (4E Financing Scheme).” The financing scheme provides concessional loans to MSMEs undertaking implementation of energy conserva-tion measures identified during a detailed energy audit.

Enabled Policy Environment The project engaged with local, regional and national public policy institutions to promote

SCP policy formulation by organising visits to the clusters, seminars and workshops, as well as development of case studies, learning documents and analytical papers. These inputs enable informed debate and helped modify public assistance schemes, and contributed to the development of sector guidelines for MSMEs ensuring wider replication of similar initiatives. The revamped Scheme of Fund for Regen-eration of Traditional Industries (SFURTI), being implemented in 71 clusters in India, is to be scaled up to 800 clusters and received various project inputs to make it more inclusive and streamlined. The Ministry of Environment, Forest and Climate Change (MoEF & CC) accepted the recommendation to improve the categorisation system to promote greening of in-dustries. The project also submitted policy recommendations on financing sustainable production among MSME clusters and on promoting sustainable development of MSMEs.

2) Available at: http://www.switch-asia.eu/fileadmin/user_upload/Project%20news/MSME/Training_manual.pdf

The project's major publications

Introducing OHS measures among MSME workers

Impact in Numbers

EconomicImpact

Environmental Impact

SocialImpacts

ClimateBenefits

GreenFinance

Target GroupEngagement

Policy Development

• Achieved savings of INR 195 million (EUR 2.6 million) per annum due to a reduced consumption of coke as fuel.

• 30 MSMEs invested INR 23 900 000 million (EUR 320 000) in higher efficient technol-ogy which leads to recurring saving of INR 199 500 000 (EUR 2.73 million) per annum.

• Reduced consumption of coke as fuel by 13 000 tonnes per annum.

• The project contributed to solving the issue of foundry waste disposal by promoting the use of foundry slag to make paver blocks, in cooperation with the Develop-ment Alternative (DA) which developed the technology. It identified 6 enterprises in Punjab that would join the Indian gov-ernment’s project in the making of paver blocks/bricks.

• Implemented occupational health and safety (OHS) measures in 375 MSMEs, posi- tively impacting more than 5 000 workers.

• Trained 79 MSMEs in Global Reporting Initiative (GRI) to promote aggregated reporting which will enhance a cluster's market position and access to public funding.

• 474 MSMEs reduced their greenhouse gas (GHG) emissions by 35 750 metric tonnes per annum.

• Leveraged green finance for 101 MSMEs amounting to INR 295 000 000 (EUR 4 million) from banks, e.g. Punjab National Bank, Oriental Bank of Commerce, Axis Bank, SIDBI, State Bank of India, and State Bank of Patiala.

• Trained 474 MSMEs to adopt SCP measures in their factories.

• Increased the awareness of SCP concept and measures among 54 business membership organisations (BMOs).

• Conducted regular meetings with the local, regional and national public policy institutions. The state governments consulted the project on various policy related issues pertaining to MSME devel-opment, and engaged the Foundation for MSME Clusters (FMC) on contractual and non-contractual basis to initiate many activities in support of MSMEs.

Europe-AsiaCooperation

• The project also conducted dialogues with ministries of the Central Government, such as the Ministry of MSME, Department of Industrial Policy and Promotion (DIPP), Mini- stry of Environment Forest & Climate Change (MoEF & CC), Information Technology (IT).

• The project submitted policy recommenda-tions contributing to MSME-related policies: • MSME Support Schemes: A compendium

of 205 schemes of various ministries/departments were compiled and made available for public review.

• Sectoral Guidelines: The Ministry of Environment and Forest (MoEF) approved the proposal for formulating sector-level guidelines for SCP standards and agreed to provide funding support.

• Slag Recycling and Usage: The Depart-ment of Science and Technology accepted the proposal to set up enterprises for commercial usage of foundry waste (paver blocks) by the FMC and Technology and Action for Rural Advancement (TARA).

• Usage of IT in designing moulds: The Ministry of IT accepted initiatives to promote the use of IT in designing moulds. MSME-Technology Development Centre in Agra has taken up the work in 3 clusters in Coimbatore, Ludhiana and Jaipur.

• BMO Accreditation System: The Quality Council of India (QCI), with support from the office of Development Commissioner MSME, Ministry of MSME, SIDBI and GIZ, developed accreditation criteria for BMOs in India which is aligned to international best practice. These accreditation criteria set the benchmarks and promote healthy competition among BMOs leading to improved business operations.

• Policy process engaged in: policy dialogues to promote SCP by sharing project tools and results; creation of an enabling policy environment for SCP implementation at cluster level; seminars and workshops; development of case studies and analytical papers.

• The project created platforms for knowledge dissemination through all project partners’ websites. It also cooperated with the SWITCH-Asia Network Facility for regional and international dissemination (e.g. through SWITCH-Asia Roundtables and Networking Events and publications) to create awareness about the effectiveness of the MSME cluster-based approach for systematically integrating SCP practices in various industrial sectors.

CO2

IMPACT SHEET | SWITCH-Asia project Scaling Up Sustainable Development of MSME Clusters in India

asia

PROJECT CONTACT

Foundation for MSME Clusters (FMC)USO House, 2nd Floor, USO Road, Off Shaheed Jeet Singh Marg, 6, Special Institutional Area,New Delhi – 110067

Dr. Tamal Sarkar, Project DirectorTel.: +91-11-26 60 28 85/86Email: tamal@msmefoundation.org

OBJECTIVES

The project enabled the adoption of sustainable environment and social business practices across selected foundry SME clusters. It also aimed to scale-up the capacity of business membership organisations, introduce aggregate reporting, establish financial linkages and support the creation of a conducive policy environment.

DURATION

PROJECT TOTAL BUDGET

EUR 2 070 491 (EU contribution: 80%)

PARTNERS

Published in December 2016.This publication is printed on 100% recycled paper using an eco-friendly process. Photo source: MSME Clusters project

20082009

20102011

20122013

20142015

20162017

2018

05/2012 – 04/2016

Legend

EligiblecountriesfortheSWITCH-AsiaProgramme

Non-eligibleAsiancountriesfortheSWITCH-AsiaProgramme

Projectimplementationarea

City Region Country

TheboundariesshownonthismapdonotimplyonthepartoftheEuropeanUnionanyjudgmentonthelegalstatusofanyterritoryortheendorsementoracceptanceofsuchboundaries.

Foundation for MSME Clusters (FMC), India

Indian Institute of Corporate Affairs (IICA), India

United Nations Industrial Development Organisa-tion (UNIDO), Austria

Global Reporting Initiative (GRI), The Netherlands

Deutsche Gesellschaft fuer Internationale Zusammenarbeit (GIZ), Germany

India

BatalaJalandhar

Jaipur

Howrah