GOVERNMENT OF INDIA
MINISTRY OF MICRO, SMALL & MEDIUM ENTERPRISES
OFFICE OF THE DEVELOPMENT COMMISSIONER(MSME)
NIRMAN BHAWAN
NEW DELHI-110108
SCHEME
OF
“Support for Entrepreneurial and Managerial Development of SMEs:
Through Incubators” 2
INDEX
S.No. Subject Page No.
1 Background 3
2 Objective 3
3 Implementing Agencies 4
4 Targets 5
5 Expectation 5
6 Financial Assistance 6
7 Participation in a Public Private Partnership Mode 7
8 Financial Implications 7
9 Implementation of the Scheme 7
10 Mode of Finance Releases 8
10 Monitoring & Evaluation 9
11. Activities Identified (Annexure- I) 10
12. Illustrative List of Supporting Activities & the likely
expenditure for an incubatee (Annexure -II)
11 3
Scheme of
“Support for Entrepreneurial and Managerial Development of SMEs:
Through Incubators”
1. Background
World over, Micro and Small Enterprises (MSEs) are recognized as an important
constituent of the national economies, contributing significantly to employment
expansion and poverty alleviation. Recognizing the importance of micro and small
enterprises, which constitute an important segment of Indian economy in terms of their
contribution to country’s industrial production, exports, employment and creation of
entrepreneurial base, the Central and state Governments have been implementing several
schemes and programmes for promotion and development of these enterprises. Among
the six basic principles of governance underlying the National Common Minimum
Programme (NCMP) of the Government, “sustained economic growth in a manner that
generates employment” has a pride place. The NCMP also describes the MSEs as “the
most employment-intensive segment”.
Finance Minister’s Budget speech of 2005-06 specially mentions: “Worldwide, it is
manufacturing that has driven growth. In order to revive the manufacturing sector,
particularly small and medium enterprises and to enable them to adjust to the competitive
pressure caused by liberalization and moderation of tariff rates, new scheme is proposed
to be launched that will help them strengthen their operations and sharpen their
competitiveness. The design of the scheme will be worked out by the National
Manufacturing competitiveness Council (NMCC) in consultation with the industry.”
The Finance Minister’s speech of 2006-07 states “NMCC along with relevant stakeholders like the Ministry of MSME has conceptualized and finalized the components of
the programme incorporating suitable inputs from the stake-holders”.
This component-scheme of the NMCP envisages selection of a large number of
academic and training institutes and provision of financial support to set up at least 100
business incubators to host about 1000 micro and small enterprises.
2. Objective
2.1 The main objective of the scheme is to promote emerging technological
and knowledge-based innovative ventures that seek the nurturing of ideas from
professionals beyond the traditional activities of Micro, Small & Medium Enterprises 4
(MSMEs). Such entrepreneurial ideas have to be fostered and developed in a
supportive environment before they become attractive for venture capital. Hence the
need arises for incubation centres: to promote and support untapped creativity of
individual innovators and to assist them to become technology based entrepreneurs.
It also seeks to promote networking and forging of linkages with other constituents of
the innovation chain for commercialization of their developments. This initiative is
now being taken up by the Ministry of MSME – the nodal Ministry for the
development of entrepreneurship and creation of self-employment and more
employment avenues.
2.2 Under this scheme, 100 “Business Incubators” (BIs) are to be set up under
Technology (Host) Institutions over the next 4 years [@ say 25 per year] and each
BI is expected to help the incubation of about 10 new ideas or units. For this service,
which includes the provision of laboratory/workshop facilities and other
assistance/guidance to young innovators, each BI will be given between Rs.4 lakh
and Rs.8 lakh per idea/unit nurtured by them, limited to a total of Rs.62.5 lakh for
the ten. In addition, each BI or each Host Institution may get :
Items @ per BI
(a) Upgradation of infrastructure Rs. 2. 50 lakh
(b) Orientation/Training Rs. 1.28 lakh
© Administrative Expenses Rs. 0.22 lakh.
Thus the total assistance per BI - Rs. 66.50 lakhs.
3. Implementing Agencies
3.1 The incubational support will be provided by Host Institutions, like:
i) Indian Institutes of Technology (IITs)
ii) National Institutes of Technology ( NITs)
iii) Engineering Colleges
iv) Technology Development Centres, Tool Rooms, etc
v) Other recognised R&D&/or Technical Institutes/Centres, Development
Institutes of DIP&P in the field of Paper, Rubber, Machine Tools, etc.
3.2 The geographical areas, the disciplines and the infrastructure-providers listed above
will be reviewed midway during the implementation, for any corrective action
needed to make the scheme more effective with better outcome. 5
4. Targets
It has been proposed that in each Business Incubator, efforts will be made
to reach the ratio of 4:1 between the incubated micro and small enterprises,
respectively i.e. efforts will be made to incubate 8 micro enterprises and 2 small
enterprises in each BI on an average in an ideal situation. However, flexibility on
this count would be permissible. There will also be flexibility in having more
than one BI in the same host Institution, and where required, there may be less
than 10 or more than 10 enterprises hosted in each BI.
5. Expectations
The term ‘innovation’ covers a very wide domain and in so far as micro and
small enterprises are concerned, it could signify any activity and new/ingenious
procedure or product that is likely to be of use to society (or to specific segments
thereof) and therefore marketable in the long run. The purpose of the small dose
of assistance proposed under the present scheme is to support students/ exstudents of science and technology and entrepreneurs try out their innovative
ideas (processes and products) at the laboratory or workshop stage and beyond
(to the extent possible) – to carry forward the idea from its mere conception to
‘know-how ‘ and then to ‘do how’ stage. Even Special Purpose Machine (SPM)
would clarify as ‘innovations’ under this low cost scheme as long as they lead to
better, more competitive and economical operations- and are marketable by the
small and medium enterprises that are to be formed by the successful innovators.
In the case of many Host Institutions, where other similar programmes for
enriching and incubating innovations are already on, this MSME assistance could
be dovetailed within them, by way of an additional encouragement/ sustenance,
without leading to duplications or unnecessary double benefits. It would be left to
each Host Institution or its BI to benchmark the expectations from its students
and entrepreneurs (and their ideas) at the level that is considered appropriate and
to provide the level of assistance that is actually required to operationalise ideas.
It is needless to mention that the level of success that each BI or Host Institution
achieves through this scheme would enhance its own reputation and vice versa in
case of repeated failures. 6
As explained, this scheme is designed for sustaining, at some basic or
introductory level, the incubation of ideas that would have otherwise been lost for
want of support. The expectations are that a sizeable percentage of the grantees/
incubates would be graduating to higher levels of operation, that would then
require other levels of support under other schemes/ organisations and from
Venture Capital or Angel Funding. Some indicative areas of operation have been
mentioned at Annexure.
6. Financial Assistance
6.1 As stated, 100 Business Incubators are to be set up to incubate about 1000
ideas, many of which are likely to lead to the setting up of Small and Micro
Enterprises at a cost of Rs 62.50 Crore in four years time period.. Financial
target in terms of expenditure has also been indicated to match the physical
target. Another Rs. 4 Crore are earmarked for minor components and the total
cost of the project is to be Rs. 66.5 Crore. BIs will maintain separate accounts
of the funds received and expenditure incurred on various activities. An audited
Statement of Accounts or the statement certified by the Chief Financial Officer of
the Host Institution will also be obtained.
6.2. Direct Expenditure on Business Incubators:
Table :Expenditure Details (Cost to Government)
Sl.
No.
No. of
Incubators
to be set up
No. of MSEs to be incubated in
each Business Incubator and the
cost implications.
Totalexpenditure
(cost to Govt.) per
year (Rs in crore)
1 100
incubators
@ 25 each
year for the
last four
years of XI
Plan
i)10 entrepreneurs to be supported @
Rs. 6.25 lakh per enterprise (cost
could vary between Rs.4.0 to Rs.8.0
lakh).(Details in Table A2)
ii) Cost of up-gradation or enhancing
of components of Infrastructure.
iii) Cost of Orientation & Training of
personnel.
iv) Administrative expenses
15.625
0.625
0.320
0.055
Total 16.625
Total for 4 years Rs. 66.50 crore (Cost to Government)
6.3 The cost may vary between Rs.4 -8 lakh for each incubatee/idea, subject to the
overall ceiling of Rs.62.5 lakh for each BI. An illustrative list of supporting
activities and the likely assistance for an incubatee is at Annexure II. 7
7. Participation in a Public Private Partnership Mode (PPP Mode)
To ensure the participation of the entrepreneurs in a PPP mode, it has been
proposed that 15% and 25%, as the case may be, of the cost of intervention, will be
borne by Micro and Small Enterprises respectively, wherever applicable. The proposal
is in the form of pointed interventions to demonstrate the efficiency of superior
technologies/procedures that are more conducive to the fast-changing environment in
industrial competitiveness. In other words, other innovative options are being
considered, with considerable degrees of private participation, in order to implement the
schemes that are proposed under the PPP mode. The traditional government driven,
government-managed, subsidy-oriented activities have to give way to user-driven and
user managed options – based on their felt needs and faced challenges of stakeholders.
The innovative options ensuring that private participation in the programme is on
a proportionate basis and govt. contribution of 75% to 85% towards the project cost will
be utilized for technology fee, common facilities and hiring/lease of machinery etc. The
incubatee will deposit his / her share to the host institute after completing the formalities
of Tripartite Agreement, to be signed between the Government, the host Institute
(operationalising the incubator) and the aspiring incubatee, clearly laying down the
obligations from and expectations of each of the three signatories. The approach has
been framed in such a manner that the stakeholders / Micro and Small Enterprises are in
a position to carry on these activities after the incubation period is phased out.
8. Financial Implications for the XI Plan
Cost Details Per Year
Sl.No. (Rs. in crore)
250 entrepreneurs 1. @ Rs.6.25 lakh each 15.625
Cost of up 2 -gradation or enhancing of components of
infrastructure
0.625
3 Cost of Orientation Training 0.320
Administrative expe 4 nses 0.55
Total (for 25 BIs 5 each year) 16.625
Total (For 4 years) 66.50
9. Implementation of the scheme
9.1The scheme is proposed to be implemented from financial year 2008-09. 8
9.2 The Selection Committee headed by DC(MSME) shall comprise of –
1. Representative from DST/DSIR
2. CEO, SVCL(SIDBI Venture Capital Ltd.)
3. CMD, NSIC
4. Economic Adviser, MoMSME
5. FA of MoMSME
6. Representative from DIPP
9.3 The request for proposals from the Institutes / Implementing agencies will be
invited by the selection committee through advertisements in News Papers and
web sites, Letters to Implementing agencies, etc., to select the host institutes for
setting up of BIs.
9.4 The Selection Committee will be entitled to constitute sub-committees for
specific product groups to vet the feasibility of ideas and proof of concepts,
option of the entrepreneur for host institute , access to workshop & laboratory,
etc., and to lay down the procedure to release the fund directly to the host
institutions as also to formalize the tripartite agreements to this effect. A subcommittee headed by IA of DC (MSME) (i/c of the specific product group
promotion) shall comprise of-
1. Director of Apex Scientific / Industrial Research Institute in respective field
or his representative
2. Incubation Executive nominated by Director , MSME-DI in the area of
Incubation Center .
3. Representative of Lead Bank in the area of Incubation Centre
4. Representative of Host Institute.
10. Mode of Finance Releases
As would be laid down in the tripartite agreement between the Government, the host
institution and the aspiring entrepreneur, the Government would release finances to the
Host Institution. Initially, the host institution would be released 30 per cent of the
expenditure expected to be incurred in the establishment and operation of the
incubators during the ensuing financial year. The balance would be released to the
host institution in one or more instalment, once the earlier amount is reported to have
been utilised by the host institution. 9
11. Monitoring & Evaluation
11.1 The project would be monitored and guided by the Ministry of MSME.
Emphasis needs to be given to ensure continuation of the scheme through
documentation in monitoring of the implementation. A monitoring and advisory
committee headed by Additional Secretary and Development Commissioner
(MSME) comprising of
1.Representative of NMCC,
2.Representative of Technology Information Forecasting and Assessment
Council (TIFAC)
3.Representative of the Lead Bank of the State where the incubator is
established.
4. Representative of Industries Associations represented on the Advisory
Committee constituted under the MSMED Act 2006
would be constituted to review and guide the implementation of the programme
periodically. Necessary mid-term corrections arrived at by the Committee will be
applied to make the programme more effective). 10
Indicative Areas
Annexure – I
The indicative areas of operation for innovative projects could be in the
following fields:
Hi-tech Activities
i) Bio-technology
ii) Pharmaceuticals
iii) Information Technology
iv) Nano-technology
v) Polymer Products
Other Possible Areas-1 .
vi) Fruit Processing
vii) Ceramics Industry
viii) Glass Industry
ix) Herbal Medicines
x) General Stores
xi) Auto Components
xii) Electrical appliances
Other Possible Areas-2 .
xiii) Ready-made Garments
xiv) Sports Goods
xv) Wet Grinders
xvi) Metal Utensils
xvii) Surgical Instruments
xviii) Agriculture Implements
xix) Cane and Bamboo Products
xx) Leather Goods
xxi) Engineering Industries 11
Annexure- II
Table: Illustrative list of Supporting activities & the likely expenditure for
an incubatee (cited in Column 3 (i) of Table : Expenditure Details-
Cost to Government)
Sl.
No.
Items Likely
expenditure per
annum
(Rs. in lakh)
1 Technology fee 2.00
2 Telephone, Fax, Computer facility, etc. 0.25
3 Machinery hiring or leasing from outside 1.00
4 Guidance fee per annum for mentors/ handholding
persons, etc.
2.00
5 Electricity, accommodation charges , etc. 1.00
Total 6.25
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