Suggestions for 10 Bold Reforms for Manufacturing in India

India’s Path to a 5 Trillion Economy goes via MSMEs. It will take a 8.1%Growth for at least a decade and Number of Big firms from around 450-500 to 2500. Where will these 2000 manufacturing firms come from? India has to move 2000 MSME companies to Large scale firms, hence impacting and encouraging scaling, productivity, efficiency of at least 10000-20,000 MSME firms, which needs to be environmentally and socially sustainable. Quality or “Uttamta” is the context which should lead the following proposed 10 Bold Reforms.

1. Uttam or Quality:

A panel under Quality Control of India should be constituted to set Quality benchmarks for each industry, process, product, environment and financial sustainability. It should match best World standards, if not better.

I. Uttam Ratings System: Further to encourage Industries a voluntary ratings system should be developed online and these firms should be awarded in form of
1) Fast tracked and easy Credits/working capitals
2) Preference in Government projects.

II. Matrix with equal weights to following parameters
1) Product Type
2) Uniqueness & Innovativeness
3) Scale
4) Labour Safety, Hygiene, Skilling and extra employment Benefits
5) Environment friendly Products and Processes
6) Energy saving measures

Q1 , Not L1 should be made the bench mark of procurement or project delivery by Government and its agencies. Discriminatory barriers such as Turnover and years of experience should be abolished to promote new technologies and Innovations, which maybe cost effective too.  

Conversely, Firms taking shortcuts or Undercutting with low Quality to  increase market share should be punished financially according to the rating system. Ratings system should be  annual.   

Agro-based and Environmentally Sustainable firms should be given extra star ratings.

2. Administrative Systems for Industries:

1) Single Window Clearance for all work from land to Execution of the Project/Plant.

2) All Systems must be online to truly be “ Digital India” with fixed time frame  and accountability of each official involved.

3) Healthy congenial equal partnership of bureaucrats and industrialists should be encouraged and rewarded. Hierarchical behavior by anyone should be discouraged. A forum for suggestions, complaints and redressal by Industries may be formed for quick and easy arbitration, without going to courts.

3. Finance, Liquidity, Banking Reforms:

1) Banking sector needs a major reform, this cannot be overstated. Checks and balances should be built in the banking system in a new format. More than 30/70 debt Equity ratio should be discouraged, specially for big firms.

2) Faceless Specialists from different fields should assess the firms, technologies and leverage. Open Communication from both sides can resolve the challenges. Today’s banking system is completely inept to recognize any innovation, process and future growth potential of any product or firm. Author’s great difficulty for innovative products is a case in example.

3) Low interest rate of 5% or below should be charged for loans. Qualifications, Potential of Promoters/Owners and Key employees should be gauged by the specialists online.

4) For 2020, Working capital should be increased by 25-30% and Innovative solutions for key sectors like Pharma, Medical Devices Nutrition, Agro based, Packaging , Plastics, Food companies should be prioritized.

5) Capital loans for R & D should have highest priority, besides the present tax rebate system.

6) Government can track any firm through our taxation system, so it can act like a venture capitalist and balance the risk of unsuccessful firms with future successful firms.

7) Bank Guarantees by every PSU and Government agency breeds corruption and Low Quality. It should be abolished.

8) Traders should be given credit to smoothen exports and domestic flow. A bank like SIDBI should be given with Ratings for each company.

4. Land and Factories:

Land cost is a major investment and barrier to setting up any plant, even for established companies. Each state has its own policies, most of which favours vested interests. Multiplicity of agencies and harassment at local level is the flavor of the day.

India has many industrial clusters and unused, barren land banks.

Scalability, Costs and Industrial Clusters:

1) Central Government and Respective state governments should look into providing/building basic infrastructure like Large sheds, electricity, water and sewage connections, ETP plants and rent them to firms with machines and inventory as collateral.

2) Capital intensiveness of any project will decrease and firms would be able to focus on technologies, machines, R & D, labour welfare, eco friendliness. The basic infrastructure provided will give a long term return to the financial system.

3) Unused or underused clusters should be tested first in this model. Under-industrialized BIMARU states’ land parcels can come next.        

4) Uniformity in rent pricing for one industry should be worked out with that industry. For example Plastic Parks in different states with different advantages and disadvantages have been priced ridiculously. Dahod plastic park  with easy access to Mundra port has low rentals and Greater Noida Cluster has at least trice the land cost without any Sea port accessibility . What is the reasoning?

5. Labour Reforms : 

Following criterions should be made mandatory and if not followed Punishable for the Firm promoters as workers are the base of production as is seen during the Covid Crisis.

India has many industrial clusters and unused, barren land banks.

Scalability, Costs and Industrial Clusters:

  1. Safety ( Physical and Mental )
  2. Insurance and Working Conditions like leaves
  3. Strict implementation of Minimum wages including safety Net for crisis with 5% of total Two months wages to be held separately. The government should reimburse the firms below 10 crores.
  4. Crisis shed in all Industrial clusters can be built by each state Government with comfortable living facilities.
  5. Workers database with the implementation of communication, tracking, and transport in conjunction with “ worker exporter” states like Bihar to be implemented immediately. Jharkhand already is using one since 1st April which has been developed by IIIT, Bangalore.

6. Skilling Centres under Skill India  

For 4-5 Clusters in same geographical areas across State boundaries within 200 square kilometers.  Continuous skilling should be integrated in the Rating system of the firms as mentioned in Point One above.

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