BY KAMLESH TRIPATHI: FORMER GENERAL MANAGER MAHINDRA & MAHINDRA LTD, HEAD-OPERATIONS MAHINDRA SHUBH LABH SERVICES LTD., HEAD-AGRI AND ENGINES ESCORTS LTD. AND VICE PRESIDENT RELIANCE RETAIL. (WRITER AND AUTHOR)

DEFINITION OF MSME:
It would be worthwhile to first define these enterprises in accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006. The MSMED are classified in two classes:

(a) Manufacturing Enterprises: The enterprises engaged in manufacture or production of goods pertaining to any industry specified in the first schedule of the industries act, 1951 or employing plant and machinery in the process of value addition to the final product having a distant name or character or use. The Manufacturing is therefore defined in terms of investment in Plant & Machinery.

(b) Service Enterprises: The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.

INVESTMENT PLATFORM OF MSME:
The limit for investment in plant and machinery/ equipment for manufacturing/ service enterprises, as notified, vide S.O. 1642(E) dtd.29-09-2006 are as under:

Manufacturing Sector
Enterprises Investment in plant & machinery
Micro Enterprises Does not exceed twenty five lakh rupees

Small Enterprises More than twenty five lakh rupees but does not exceed five crore rupees

Medium Enterprises More than five crore rupees but does not exceed ten crore rupees

Service Sector
Enterprises Investment in equipments

Micro Enterprises Does not exceed ten lakh rupees:

Small Enterprises
Medium Enterprises More than two crore rupees but does not exceed five core rupees

SOME RELEVANT STATISTICS
MSMEs contribute nearly 8 percent of the country’s GDP, 45 percent of the manufacturing output and 40 percent of exports. They provide the largest share of employment after agriculture. They are our nurseries for entrepreneurship and innovation and are widely dispersed across the country and produce a diverse range of products and services to meet the needs of the local markets, the global market and the national and international value chains. Back bone of the Indian economy, employs close to 40% of India’s workforce. Play a critical role in generating millions of jobs, especially at low-skilled level. Country’s 1.3 million MSMEs account for 40% of India’s total exports

MSME ROLE IN AUTO AND FARM MECHANIZATION

MSME has played a key role in developing the Auto and Farm sector in India. In fact big players manufacture only 30-40% in house; and rest of the components are developed by MSMEs and the pattern is similar, even abroad, as this required to be cost efficient. Apart from the manufacturer, MSMEs also manufacture for the retail spare parts markets. On a more realistic note, every, foreign collaboration is gradually indigenised; and people who generously delve in this are the MSMEs. And that goes to show they are not frugal and have the R&D capability but may lack financial muscle. And within the given business matrix they have developed many products in rural transportation, farm implements and operations and many of them have even given a good fight to products from Continent and the US. But due to lack of resources these innovators have not been unable to take their innovation to the next level and provide employment to many.

MSME REQUIRES A MORE LEVEL PLAYING FIELD:

Firstly, we need to realise, the sector that employs 40% of our workforce, and is the second largest employer after agriculture is a force to reckon with. Most of their innovations have sprung out of independent thought processes, individual initiatives and efforts; many a times referred as Jugad technology, later refined into durable PAN Indian and global products. MSMEs have evolved locally and have their ears to the ground; unlike big players who have collaborated with global players for products to adapt to Indian conditions. But both are complementary and have to co-exist rather can’t exist without each other.

And for this to happen MSME requires a more level playing field as far as their interface with the Government and big players is concerned. It is therefore imperative in all policy matters thinkers of MSME are also included to forge a more cohesive and complaint policy, taking into account limitations of MSMEs, says a medium enterprise owner who doesn’t want to be named. In the manner China has supported their MSMEs India should also follow suit. It would not be out of place to mention that we need to revisit the emission norms for Gensets, Power Tillers and engine operated irrigation pumps. Also cost and time taken for testing thwarts grass-root level innovations, and this needs to be looked into. These are some of the feedbacks received from enterprise owners who prefer to be silent.

After all when most consumer requirements are contracting to ‘compact’ versions and ‘small’ is becoming the ‘in-word’ I see no reason why MSMEs should not be invited to the applecart of industry thinkers.

Government through its hierarchy and battery of bureaucrats should ensure MSMEs don’t face any road blocks and get a voice in each forum of decision and policy making. It is a Management saying if you keep taking the same action and expect a different results you are only fooling yourself and I feel Modi Government has no intention of doing that and they would overhaul policy making committees for a fair play and encourage MSMEs offering simple frugally engineered solution to problems being faced by Agriculture, Rural Transportation and affordable and optimized transportation of agriculture produce.

By Kamlesh Tripathi- Positions held: General Manager-Mahindra & Mahindra Ltd., Head Operations Mahindra Shubh Labh Services Ltd., Head Agri and Head Engines Escorts Ltd., Vice President Reliance Retail. (Writer and Author)

Before we discuss Rural Marketing and look for a solution in e-commerce let us also understand the complexity and demanding physical features of India as you need to strap the rural marketing to the physical features of India as it won’t work in a vacuum.

India happens to be 10th largest economy of the world in terms of nominal GDP and 3rd largest in consumption or (PPP) purchase power parity and therefore a huge market even domestically. 60% of our population lives in the rural areas. Our population density is 380/sq km and we are the 7th largest country by area, 2nd most populous country after China with over 1.2 billion people. Our per capita income by PPP is 5777$ and by income it is 1626$.

Let us also understand the geographical spread where our supply chain has to deliver. It has 656 districts, 5379 taluks an over 6 lakh villages and a land area of 33 lakh sq km which is five time of Pakistan and one third of China approximately. The terrain is an an assortment of both plains and snow peaked mountains.
Though we talk of one India the divide is deep that makes it two in terms of habitat, requirements, challenges and even family cash flows. And, last but not the least the literacy rate has grown to 74.04% with a decadal growth of 9.21%. And this is something to cheer about.

CURRENT SCENARIO OF RURAL MARKETING

In the current scenario most products, be it FMCG, Engineering, Industrial, Farm Machinery or Farm inputs are all sold through a network of distributors, dealers and retailers who share the channel margin. While they do provide peripheral and ancillary services to the rural folks especially farmers; they make better profits than rural folks and therefore the cost of goods to the end user increases accordingly. And a majority of them are more sales oriented than concern for after-sales-service; which is more because of lack of skill. Net-net this is not a very cheering situation. Even distribution costs rake up, because the goods are first sent to the resellers godown and then to the final user; instead of despatching it straight to the end user.

WHAT IS E-COMMERCE?

In very simple terminology e-commerce is selling through internet; as many global and Indian companies are doing such as Amazon, Flipkart, Snadeal to name a few. And, it has been extremely successful in the cities and with that rationale there is no reason why it shouldn’t be a success in the rural areas.

SO HOW WILL RURAL MARKETING THROUGH E-COMMERCE HOLD OUT?

With the increase in literacy levels especially of females going up to 65% and males to 80%, e-commerce in rural markets appear to be at arm’s length now. But, literacy needs to be converted in to skill of handling computers and operating INTERNET to enter the domain of e-commerce and this should not be difficult. Even in the arena of connectivity much has been achieved barring the speed of the INTERNET and availability of power. Some other major deterrents in ramping up e-commerce could be as follows:

• Current purchase system of farm machinery through subsidy has many leaks and only a fraction of what is spent by the Government actually reaches the beneficiary. This problem can be arrested by making DBT (Direct Bank Transfers) through Jan Dhan Scheme of the Prime Minister.

• Major sustenance of livelihood in rural areas is through farming, and therefore the government should promote e-commerce for purchase both farm machinery and inputs. But it won’t happen unless there is a monetary push by the government in providing cash incentives for orders through INTERNET out of the subsidy amount.

• Marketers will soon have to open INTERNET kiosks for selling their products at rural centres as some companies are already planning. These centres can either be managed by companies themselves or they could out source it.

• And after e-commerce catches up as a concept in Rural Marketing, companies will have to plan for service dealers aggressively for product demonstration, installation and after-sales-service. As one can only procrastinate e-commerce for a while and not reject it.

By Kamlesh Tripathi, positions held : former General Manager, Mahindra &Mahindta Ltd., Head Operations, Mahindra Shubh Labh Services Ltd., Head- Agri & Engines, Escorts Ltd., Vice President Reliance Retail (Writer and Author)

Yes it is; and may be for some more time to come, till the takeover of ‘farm mechanization’ is complete from end-to-end. And while reminiscing, admiring and complimenting the age old traditional asset of Indian agriculture- the devoted farm labour that worked generation after generation in the farmland, but is now scaling down the path let us understand the table below, etched out of the latest Indian Agriculture Census 2011 report. While the table is simple the message is all about a paradigm change.

CENSUS 2011 REPORT

PERCENTAGE SHARE OF DIFFERENT FARM POWER SOURCES IN INDIAN AGRICULTURE
YEAR AGRICULTURE WORKERS DRAUGHT ANIMALS TRACTORS POWER TILLERS DIESEL ENGINES ELECTRIC MOTORS POWER/KW/HA
1971-72 10.64 52.86 8.45 0.11 17.16 10.79 0.424
1981-82 9.2 33.55 18.46 0.11 22.85 15.82 0.592
1991-92 7.22 20.5 26.14 0.16 21.14 24.84 0.907
2005-06 5.39 9.97 38.45 0.44 20.09 25.66 1.498
2009-10 5.12 8.55 41.65 0.52 19.01 25.13 1.658

• Since 1971-72 the percentage share of agriculture work force has gone down from 10.64 to 5.12% which means a big chunk of 50% has moved away to either cities and or employment in other sectors. The figures, post 2010 are not out and therefore ascertaining the impact of MNREGA may be a miscalculation as of now. And the major impact however, has been between 1981 and 2005.

• And, similarly, but with a more aggressive intensity the percentage of draught animals has also come down from 52.86% to 8.55%. Most draught-animal farmers are small and marginal in the <2ha category or maximum medium. Therefore, maintaining these animals without proper land holding is becoming an extremely expensive proposition. For the cost of animal feed is constant or only going up but the work is seasonal and so the proposition is becoming less remunerative. And therefore the above table points to the reality of draught animals being gradually replaced by mechanization of the small and micro variety.

• And so the moot point that emanates out of the Indian Agriculture scenario is of coming down of life factors and up trending of mechanization.

• The usage of tractors has also gone up but the figure doesn’t talk of horse power trends where, 60, 45 and 35 HP category markets have largely been replaced by smaller HP categories such as 25 and 16. In fact states with high HP category industry such as Punjab, Gujarat, Maharastra, AP, TN, Karnataka and Kerala have also taken a switch to smaller HP category on account of reduction in land holding sizes. But where you have black cotton, clay soil that requires extra lugging power, the markets have continued in the domain of 35 HP and above. And also where you have sugar mills, and tractors are required for pulling double trolleys loaded with sugar cane; 35, 45 and 60 HP still rule the roost.

• The trends are also upward in case of Power tillers, which has grown quite insignificantly from 0.11% to 0.52%. The restricted growth has primarily been due to conservative marketing by small and medium players, no precise farmer training on farm economics and availability of alternative products, lack of industry cartel and even lack of focussed Government promotion to encourage micro equipment. But with the changing farm-profit trends this will catapult into a major industry by grabbing industry share from the tractor industry.

BUT WHERE IS THE WORK FORCE HEADING TO:

The major chunk of farm labour are the land less peasants who do menial yet critical farm operations such as weeding, transplanting, pesticide spraying, fertilizer application in row crops and are paid in kind.

With the percentage share of Indian agriculture declining in Indian GDP to fifteen percent, the ongoing high pressure of population’s dependence on agriculture and increasing fragmentation of land holdings leading to decreasing availability of cultivated land area per household; the availability of such seasonal jobs is becoming more and more, scarce.

Job opportunities in factories, infrastructure projects and services are becoming more lucrative. And also the advent of MNREGA that guarantees 100 days of work per annum has smothered the charm of working as a farm labourer.

India still spends almost half of her/his total expenditure on food while roughly half of India’s work force is still engaged in agriculture for its livelihood. Being both a source of livelihood and food security for a vast majority of low income, poor and vulnerable sections of society, its performance assumes greater significance in view of the proposed National Food Security Bill and the ongoing act of MGNREGA. And with this decrease in the availability of farm labour the cost of labour has also gone up. And also the cross country movement of labour for example from Bihar to other states such as Punjab has dried down.

The decrease in agriculture’s contribution to GDP has not been accompanied by a matching reduction in the share of agriculture in employment. About 52% of the total workforce is still employed by the farm sector which makes more than half of the Indian population dependant on agriculture for sustenance but the trend may change in times to come. However, within the rural economy, the share of income from non-farm activities has increased.

65% of India’s population is below 35 years of age: Knowledgeable and ambitious. They do not have the wherewithal to do donkeys work in the farm as their ancestors did. They, therefore, would like self- operated micro farm mechanization and would like status tag to be added to agriculture as an industry and end-to-end mechanization.

Trained labour shortage also encourages use of excessive weedicides and herbicides by farmers less trained in the activity that gets into the food chain resulting in increased health issues, like in some districts in Punjab groundwater is no more potable and cases of cancer rampant.

THE WAY FORWARD

The inevitable pressures of the Indian agriculture are only going to increase and the government needs to have a four cornered policy that takes care of the environment, farming viability, farm labour and productivity

• There is immediate need to have a cropwise, areawise farm profitability review. In this review each cost should be ascertained for the marginal and medium farmer.
• There is need to introduce micro cropping equipment to marginal and medium farmers for diversified critical cropping activities, more for self-farming, cost control and increase in productivity.
• Environment concerns should be addressed forthwith even it requires changing of cropping pattern. Like paddy in Punjab which requires heavy water consumption should be replaced with some other crop requiring less water and farmer profitability should accordingly be addressed
• Skill training to be imparted to farm labour for better farm economics, environmental concerns and certainty of employment for farm labourer.