Sustainable Development in Clusters - Learning so far and the way ahead

1. Sustainable Development in Clusters -Learning so far and the way ahead By MukeshGulati Foundation for MSME Clusters New Delhi

2. Batala Goraya Jalandhar Kaithal Samalkha Narwana Gurgaon Faridabad Agra Bhiwadi Jaipur Bhopal Ahmedabad Indore Uttarpara Jamshedpur Howrah Dewas Rajkot Vadodara Kharagpore Calcutta Diamond Harbour Road Raipur Nagpur Aurangabad Cuttack Kirloskarvadi Pune Liluah Satara Sholapur Kolhapur Sangli Ranchi Hyderabad Belgaum Nellore Gudur Shimoga Renigunta Ponneri Ennore Mysore Bangalore Chennai Tiruchirapalli Sholingur Foundry Cluster Sriperumbudur Coimbatore Foundry units with capacity – 50,000 tones per year and above Dindigul

3. 70,000 tonnes of coke can be saved per annum worth Rs. 100 crores ~ 16 million USD Which equals 7000 trucks load of Coke HOW??? ENERGY EFFICIENCY MEASURES Foundation for MSME Clusters

4. Foundry industry Scenario • India is the second largest producer of casting products after China 5,500 units • Clustered in 45 clusters ranging from 30-500 units. • 95 % of the foundry units are small; 5% are medium/large units • Energy cost is 30% of production cost (70% in melting) • Through coke, furnace oil, natural gas and electricity • One MT of coke often melts 4-8 MTs of metal (Best 10-12 MT) Foundation for MSME Clusters

5. Scaling up to 500 more in 4 years (2012-15) • Through 80% EU funding under Switch Asia Facility • That targets 18,000 Tons of coke savings p.a. in 500 enterprises • With GIZ, GRI, IICA, SIDBI and UNIDO as partners • 250 Cupolas to upgrade and another 250 enterprise to change operational practices • Industry Association Capacity building; • Aggregate reporting initiative; (GRI) • Building new financial products & financial linkages; (SIDBI) • Supporting govt. for access to public schemes of assistance (IICA, UNIDO, GIZ) Foundation for MSME Clusters

6. Conventional cold blast cupola Divided Blast Cupola

7. Molten Metal Pouring in a bucket Molten Metal to Moulds Process Mould Preparation Casted and Machined Parts

8. A Question arises …… Why does it not self spread when business case exists? Reasons Lack of consultants willing to work with MSMEs

9. Not all clusters have equal scope for change • Scope for improvements varies significantly across different clusters thus requiring customized approach for every cluster even if is in the same sector Foundation for MSME Clusters

10. Economics of change in the short term is the main driver for the owner • Customization of solutions • Low investment options • Criticality of technical inputs • Every enterprise requires customization of solutions suiting to its specific requirements of the varieties of raw materials & fuel used, output flow required, quality specifications of output, size of equipment used, age of existing equipment to be replaced etc. • Low investment options with higher gains in the short run are preferred. If it leads to downscaling of best available technology in the market, let it be Foundation for MSME Clusters

11. Change in practices is a bigger factor of change than equipment & technology • The Technology acceptance barrier and the Awareness barrier are harder to cross than the Investment barrier. • Adoption of simple operational methods, often has far more scope for energy efficiency when compared to capital intensive equipment change

12. Seeing is believing and relying on key opinion makers • A positive word from local trusted industry leader, equipment provider, a production supervisor or a local consultant is more effective than seminars, books and advertisements put together • Exposure Visits and Trust Building • Spread of positive word locally • The rate of adoption of change will therefore be very slow initially and then pick up fast, following an S-shape curve “When the technical expert explained us the usefulness of DBC during the seminar, it sounded just right, but I wanted to see for myself and talk to the owner and supervisor of a company that had actually adopted this technology before saying yes. Others waited for many more to adopt the changes before taking the plunge. It has therefore been a slow start in our cluster but took off once the number reached a critical mass”-Mukul Gupta (Vikrant Foundry, Phagwara)

13. Quick and low transaction cost of financing is the key “I needed only Rs 6 Lacs for the cupola upgradation but did not want to wait for a few months before getting the loan disbursed. Once the potential gain was clear to me, I preferred to go ahead with internal resources and some borrowings from friends. I would have preferred if there was a pay-as-you-earn system of financing where I could have paid out of the savings generated “, YashpalGosai, Owner Gosai Foundry, Phagwara • Internal or informal sources of financing are therefore more preferred routes • Availability of low ticket financing and ‘pay-as-you-earn’ systems of financing are perceived to potential winners. Foundation for MSME Clusters

14. Other responsibility agenda follows once economics is taken care of "We have been doing something or the other for our labour, but in bits and pieces. The project has heralded a proper diagnosis about what is critical and what can be done about it through a systematic approach. We have been able to pool resources to get good local expertise to do factory cleaning, undertake layout changes, selective mechanizations and organize health camps. These have not only helped improve the work environment, but also ensured direct business gains. It gives a nice feeling and the workers are likely to stay on" AnkitMadhogaria, Owner, Noble MarketiersPvt Ltd, Biradingi, Howrah • Adoption of occupational health and safety (OHS) practices, organizing of health camps, contributing to social security and investing into better working conditions is adopted following economic gains Foundation for MSME Clusters

15. Empowering Key local stakeholders is the route to scaling up On-Job training for all the Fabricators and Production Supervisors • Business case and empowerment for local stakeholders including fabricators, equipment suppliers, industry associations, production supervisors and consultants is the way to scale up “I generally make 20 new cupola furnaces every year in my area. I also design the furnaces myself with so many years of experience at my back. I have now learnt basic elements of a proper design based on process requirements and the need for a design sheet. The project offers technical support and helps me in fabricating as per the required specifications. I am sure this will help many new cupolas with better efficiency and longer life” , Joginder Singh, Owner, MS Fabricator, Ludhiana Foundation for MSME Clusters

16. Paver Blocks developed out of solid waste

17. Indian Cluster Scenario • Scale: Industries-11; Total clusters–196; Energy consumption- 30-35% of the manufacturing cost. Huge potential for intervention • Better Designed Products:Product innovation is very limitedacross most sub-sectors • Improved production methods: Several pilot initiatives in the past that need to be up scaled • Waste Management: Mainly undertaken as end-of-pipe treatment under the pressure of regulatory authorities, media and community Foundation for MSME Clusters

18. Other Unexplored Sustainability Measures • Product redesigning and quality inputs • New ways of waste utilisation and recycling are required • Use of renewable energy • Application of ICT to measure and change • Schemes redesigns and strengthening knowledge backbone Foundation for MSME Clusters

19. Way forward - Up scaling • Set up benchmarking/reporting systems at aggregate levels • Continue developing new pilots to refine methodologies • Initiate regional/ national missions on key sub-sectors • Picking low hanging options first • Using integrated holistic approach • Provide appropriate acceptable & commercially viable solutions • Strengthen local industry associations and spread awareness • Create nation wide cadre of specialised consultants and equipment providers • Recognise and reward enterprises, associations, institutions and banks • National study of industrial symbiosis • Create new financial products and ensure reach out

20. Thank You Foundation for MSME Clusters