HP Kumar, chairman-cum-managing director of National Small Industries Corporation Ltd, is passionate about creating self-employment opportunities for India’s youth. him, NSIC has devised an innovative low-cost scheme for incubating entrepreneurs through a public-private partnership model. The model has created a buzz in international circuits that he now gets enquiries from African, CIS and LatAm countries for replicating the model.

Kumar has also crafted NSIC as a self-sustaining public enterprise, putting in place efficient service delivery mechanisms and performance management systems. A cost accountant and a banker, Kumar holds a doctorate in rural industrialisation. He tells the turnaround tale to FE?s Verghis Chandy and Monalisa Sen. Excerpts:

What is new at NSIC?

The latest at NSIC is an incubation programme; incubating people, not ideas. Incubation of an idea is time-consuming and risky; may be five out of ten ideas succeed. But it will not address the larger problem of unemployment. We would like to convert the unemployed to entrepreneurs in the shortest time. I call it ?rapid incubation? of the unemployed.

We have around 200 projects in the incubation programme. The selected candidates are given hand-on training on ‘working projects’ in our centres. After a month-long training, the learners are put on entrepreneurial training for a fortnight. Another one-and-a-half month is spent on making project report and follow up. The course fee is only R5,000 for general candidates and R500 for women and backward classes.

How many have been trained so far?

In one batch there are 25 students. In a year there are 100 projects per centre. We have opened 37 centres; our plan is to open 200 centres in three years. The rest will be opened in the next two years. We are not getting any government funding for these. We’re doing it on our own. That is why it is innovative. The centres are run on a public-private partnership model devised by us. Private companies run the NSIC centres, and pay us a royalty. We telecast lessons from our head office studio to maintain theoretical uniformity in training. We have standardised the course curricula, which are sent electronically from our office and taken down through the Web.

Is it a profitable venture for you?

I would say it is a self-sustaining model. Let me tell you, NSIC is a commercial enterprise. It is a profit-making, dividend paying corporation. At the same time, our goal is not to maximise profits. Our goal is to maximise the reach of our services and cover as many micro and small enterprises as possible. The government stand is that you cannot be a promotional body at the cost of government, because as you know that PSUs have been told be self-sustaining. We are happy with that, and we have been doing it successfully. Let me also add, a number of developing countries are coming to us for replicating this model. I got 11 projects, through the ministry of external affairs, from ten African countries under the bilateral assistance programme. Every foreign visitor to NSIC would like to have a similar model in their country.

What are the other initiatives?

Another innovative that NSIC has taken is the credit rating programme. In 2005 we introduced the performance and credit rating scheme, following a Budget announcement to start credit rating for MSMEs. We empanelled all reputed credit rating agencies, such as Crisil, Dun & Bradstreet, Icra, Fitch. We also got this scheme approved from the Indian Banks Association. We have added performance rating to the programme so that it will instill confidence in foreign buyers. The combined rating helps MSMEs in dealing with both banks and foreign buyers. It greatly reduces the transaction time for all.

In credit rating, the government subsidises 70% of the costs. We are just a channellising agency. Last year we provided 10,700 ratings,.against a target of 9,500. For this year, we have a target of 18,000 ratings. We have brought down the rating charges, which were R2-3 lakh earlier, to the level of R 25,000-30,000 now. After subsidy, the actual expense for an MSME is about R10,000. Imagine, for R10,000, you become an internationally rated firm, and that is where, I feel, NSIC can take credit for.

Another service we provide is countrywide distribution of raw materials. Between 50,000-100, 000 companies benefit from this a month. We have signed bulk procurement contracts with manufacturers of steel, aluminium, coal etc. Then we sell these materials at procurement prices to the buyer. Our margin comes from the producer.

Consortia marketing is another innovative programme. We form a consortium for bidding for big tenders, grouping together manufacturers. We also give raw material on credit in such cases.

What was NSIC’s business turnover for 2010-11?

It was almost R7,700 crore. Net profit was R35 crore, approximately. Last year, the turnover was R4,300 crore.

We can see a big jump in NSIC’s turnover. There was a four-fold rise in net profit in 2009-10 .Which initiatives contributed to these?

The programmes that we have implemented for the last three-four years have started showing results. More people are getting associated with us. As a service organisation, we have created an efficient service delivery mechanism. I paid much attention to the training of mangers in making this company ISO (9000: 2008) certified. We are doing 800 roadshows and campaigns in a year to attract customers.

As per the MOU for FY2012, NSIC’s business volumes and profitability are projected to go up by 40 to 50%. What is the context of such optimism?

Our momentum is increasing. I monitor the performance of each branch on a weekly basis. We have an MIS (management information system). Monthly monitoring is also done. We keep travelling, visiting branches. There are about 2,500 MSME clusters in India. We have signed MOU with 58 industry associations in the last three years, thereby, taking on board almost 60-70% the MSME sector with us.

What kind of guidance have you got from the new minister for MSMEs?

He is a five-time chief minister. So he’s familiar with the issues of the sector. His main concern is that the credit flow to the sector should be improved. He has been working with Sidbi on this. A policy regarding public procurement for the small industry has also been put on the fast track. NSIC should expand its reach and cover more and more units, that’s what he wants from us.

MSME is a very diverse sector. How do you ensure every segment is taken care of?

All units are welcome to contact us. Based on demand, we can open more offices. We keep monitoring our performance. We have signed an MOU with every branch. Every branch has fixed allocations. It has to meet the targets on a weekly basis. At NSIC, a part of the salary is linked to performance. We have applied some part of the performance management training that I got in the US.

How do you promote ICT in the MSME sector?

We have created incubation facilities for people to come and develop software. We have two software technology parks, one in Delhi and another in Chennai. We are expanding further in Chennai. We are developing a software for the SME sector. It’s a micro ERP (enterprise resource planning) system priced reasonably.

We are also working on upgrading our B2B portal on a par with Alibaba.com. Around 250,000 companies are there in our portal as a database. Our charges are substantially cheaper than Alibaba’s. Our portal is available in 10 languages?Indian and foreign? and has 80,000 hits in a month.