Agenda: Innovation

For decades, artisans in Moradabad’s brass products cluster have breathed air laced with pollutants and toxic gases. Working mostly out of their backyards with traditional open melting furnaces that spew zinc vapours and other flue gases into the air, the cluster’s inhabitants are prey to asthma and tuberculosis. In mid-2012, three research scientists from the National Metallurgical Laboratory (NML) in Jamshedpur dropped in to observe their working methods. Visits from scientists and NGOs are fairly routine but this was the first time a CSIR (Council of Scientific & Industrial Research) network lab was getting involved. “We found that most of the artisans were reluctant to give up methods that previous generations had been using,” says KL Sahoo, principal scientist, CSIR-NML. Back in Jamshedpur, they came up with a few concepts based on improved technologies developed in-house and invited some of the artisans over to take a look. “They rejected our designs right away,” says Sahoo. “We had designed a standing furnace, while they were used to sitting and working.” It was clear that the new furnace would have to be a modification of the widely-used existing one. 

A year later, when NML delivered the upgraded furnace prototype, Moradabad’s artisans approved. With a closed top, the new furnace delivers a 70% drop in air pollution, 20% savings on coke consumption and 30% higher productivity by reducing the time cycle of each batch from 12 minutes to under eight. All this means a near doubling of average daily income, from Rs 700 to Rs 1,320, Sahoo estimates. While the new furnace comes for Rs 7,300 (Rs 14,500 with a training module), upgrading an older one costs only Rs 2,500. The project has also resulted in work being done for the development of cyanide-free electroplating and a simpler and more cost-effective lacquer.

The new furnace technology was transferred to the Moradabad Industrial Development Corporation (Midco) in June 2013. But the additional cost and loss of work for a few days due to installation mean none of the 180,000 artisans in the cluster has switched to the new design. Gaurav Ohri, head of the Moradabad Cluster Inclusive Development Society (MCIDS), the nodal body for this exercise, says Midco is trying to arrange for direct government subsidies to them to upgrade their furnaces.

Moradabad’s brass cluster was one of seven industrial and artisanal clusters handpicked by the National Innovation Council (NInC) for a unique experiment — the innovation clusters programme — as part of the Decade of Innovation (2010-2020) project announced by UPA II prime minister Manmohan Singh. Instead of the usual grants and schemes announced regularly for MSMEs, the programme sought to tap into the existing pool of knowledge within the clusters and connect them to available experts within academia and research institutions. The objective — get some of India’s brightest minds to work on the challenges of India’s MSME units. “Thousands of scientists working for the Indian government have never visited a cluster,” says Satyanarayan Gangaram (Sam) Pitroda, former advisor to the PM on public information, infrastructure and innovation and former chairman, NInC. In the process, this programme also sought to stoke innovative thinking on regular business problems.

 “We said, ‘Let’s not worry about big companies’. The small guys have no access to universities and research labs,” says Pitroda. “Over a period of time we had created an ecosystem [for MSMEs]. But we needed to provide more training, VC funding and mentoring. Clusters became an important piece of this puzzle.” 

"We had created an ecosystem for MSMEs but needed to provide training, funding and mentoring" - Sam Pitroda, former chairman, National Innovation Council

Out of the 7,000-odd industrial and artisanal clusters in India, a shortlist of 30 or 40 was arrived at and from this, seven were chosen to represent a variety of sectors and geographical spread. Launched in November 2011, the innovation clusters project has been unique in many ways. “We are the first country in the world to adopt innovation as an agenda,” says Pitroda, but admits that seeding the idea was a challenge. “It took us quite some time to convince the PM to set up the National Innovation Council.” The programme has spent Rs 1.2 crore over its three-year period of pilots.

Making connections with the government and getting buy-in from small business units called for a massive effort. “We were in touch with various ministries — MSME, food processing, heavy industries, etc. I was on an Air India flight almost every day for the first year of activity,” says Keerthi Laal Kala, the project lead on this initiative. The idea was to create linkages and not go the way of previous programmes that were mainly funding-oriented. “Sam told us we’re not creating a grant programme,” he adds. However, there was provision for funding assistance if needed. “We had set a limit of Rs 20 lakh per cluster if we needed to invest in a project.” Still, in a couple of instances, the budget did exceed the limit. 

Also, in many cases, the message didn’t get through easily. “In Moradabad, it took us 18 months to form an association. There were 13-14 entities working in the area on various cluster development programmes. We asked them to come together under one umbrella — the MCIDS. Now it has nine of those associations working together,” says Kala. Ohri agrees. “It took us time to understand the concept,” he says. “Moradabad isn’t an organised cluster. It has a number of micro units working from home. Everyone has a different level of education, skill and expectations.” 

 Crafting change

New products and smarter processes have emerged from the exercise. For instance, in the Ernakulam furniture cluster, around Rs 2.5-3 crore worth of orders have come in during FY14 for products that came out of the design interventions. “By 2017, we expect to create business worth Rs 1,000 crore per annum for Kerala’s furniture manufacturers through modern design,” says KP Raveendran, managing director, Kerala Furniture Consortium (Kefcon), the nodal body in Ernakulam. To begin with, the Ernakulam project was centred on the core challenge of improving the design capabilities of furniture makers in the region. Faced with competition from imports with more contemporary designs and modularity, the units needed to move beyond traditional designs and material. The National Institute of Design (NID) was already working as the nodal agency for implementing the MSME department’s Design Clinic scheme in industrial clusters and was roped in to bring in the design inputs. Raveendran says an in-principle agreement has been reached in the last fortnight to set up a furniture hub for the cluster with Rs 45 crore from the Centre, Rs 25 crore from the state and the land cost being borne by the units. “It will take two years for the centre to come up,” he adds.

"By 2017, we expect to create business worth Rs1,000 crore per annum for Kerala's furniture makers" - KP Raveendran, MD, Kerala Furniture Consortium

Manu T, an Ernakulam-based industrial design consultant who worked on the final designs that were handed over to Kefcon, says once the importance of the designs was explained, they were ready to move ahead. Of Kefcon’s 33 members, only five were hands-on with the project. Manu submitted nine furniture concepts — living room, bedroom and dining sets — that were prototyped in the cluster after much delay and teething issues in April. These have been put on display across Ernakulam’s furniture distributor showrooms and are being evaluated by its members. 

 The fruits of innovation

The Krishnagiri mango cluster in Tamil Nadu was perhaps the most effective in terms of demonstrable economic value. A naturally formed cluster employing over 250,000 people as direct and indirect labour (during mango harvest season) and spread over 40,100 hectare, it is the largest mango processing region in the state, with 340,000 mt production annually. Sathyamurthy HM, project head for the initiative, says business for the 73 units in India’s largest mango pulp producing cluster was always good. “But in the last four or five years, growth has been negative. Competition has increased and cost of production has gone up,” he says. “We needed to reduce cost of production and increase output through mechanisation. Waste had to be utilised and units realised they should make more value-added products from pulp.” 

Under NInC, the Krishmaa Cluster Development Society (KCDS) was formed in October 2011. Each year, during the May-July mango season, Krishnagiri’s units process 400,000 tonne of fruit, churning out nearly 1.2 million cans of pulp annually. A single unit processes 3,500-4,000 tonne of mango on average. Of this, 50-60% is pulp and the rest is solid waste (skin, fibre and kernel). In the process, 150,000-160,000 cubic metre of liquid waste and 60,000 tonne of dry waste was generated and dumped in the area. 

The National Institute of Interdisciplinary Science & Technology (NIIST), Thiruvananthapuram, under the CSIR, suggested using the solid waste to produce fuel briquettes and make mango kernel butter, which finds application in skin and hair products. “Briquetting is not a new technology but no one had tried doing it from mango waste,” says Sathyamurthy. A single plant could save an estimated Rs 44,000 per day by replacing firewood with briquettes and selling them for a profit. 

A model plant was set up in one of the units to demonstrate its viability and profitability. The unit has a production capacity of 1 tonne per hour of briquettes, and needs an investment of Rs 50 lakh. Expensive, but “You get back your money within one year,” says Sathyamurthy. “The other option is to spend Rs 10 lakh to carry and dump it somewhere.” KCDS also replicated the idea of generating biogas from liquid waste after visiting the sago (tapioca) cluster in nearby Salem. Around 800 cubic metre of biogas could be produced from 100 cubic metre of liquid waste. “The income from secondary products will be more than that from the primary product — mango.” 

Waste management aside, the Krishmaa team also turned its attention to preserving mangoes while shipping over long distances, a common problem in the business. A new treatment was devised, the result of a Rs 9-lakh project that included buying mangoes from the participating farmers at market rates and cost of shipment. Of this, 80% was borne by NInC and 20% by KCDS. However, the first lot of fruit with the new treatment didn’t quite make it in good shape to the UK — over 90% of the product was damaged. “There were issues with how the protocol was being executed. There was nobody to check how the spraying was being done, for instance. We believe instructions were not followed,” defends Kala. 

 Natural solutions

A year-and-a-half into the programme, with 20-odd initiatives running simultaneously with a complex maze of partners, the NInC team decided to rope in a partner to keep track of the on-the-ground operations. Finally, IL&FS agreed to assign six of its staff to these clusters under its own Cluster Development Initiatives (CDI) programme. The integration and execution speed increased and results began to trickle in faster.

Among these was Agartala’s incense cluster, which mostly has women workers getting Rs 70-100 per day for making sticks for traders and manufacturers. The Tripura Bamboo Mission (TBM) and IL&FS introduced community ownership models with training, procurement and marketing inputs and connected the workers to buyer networks. Of a total revenue of Rs 124 crore last year, TBM generated Rs 86 crore revenue from the incense stick business alone, says director Pravin Agrawal. But the cluster, which contributes nearly 70% of agarbatti production in the country, has had its share of problems. 

Foremost was the dwindling supply of jigat, a natural adhesive that binds the charcoal and other ingredients in an agarbatti and doesn’t react with the perfumes and chemicals used. There has been no commercially sound substitute found for it and agarbatti makers often depend on Vietnam and Cambodia for supplies. 

CSIR’s Central Institute of Medicinal and Aromatic Plants (Cimap) took 11 months to come up with a bio-replacement formulation that involves cultivating a plant in Tripura that can reduce dependence on jigat. “Being an informal sector business, there has been no process standardisation for agarbatti making. We are asking Cimap to help us adopt the new formulation and teach us how to mix it,” says Kedar Panda, senior manager, TBM. NInC has asked the Tripura government for 10 acre of land to begin the pilot for growing the plant in local soil and weather conditions and testing its efficacy. 

The NInC programme also roped in the National Institute of Technology (NIT) in Agartala, where students took up projects on developing low-cost hand-operated machines for mechanising the slicing and polishing of agarbatti bamboo sticks. Four models have emerged from this and the prototypes are being tested. TBM has also signed an MoU with NIT Agartala for making machines that can directly produce agarbatti sticks from bamboo cylinders, as well as a polishing machine to remove fibres from the sticks. A lighter premix is also being tested to increase revenue by producing more sticks per kg. This could generate an additional 5-10% profit for the cluster. While NInC invested Rs 26 lakh during the pilot, the next round is being funded by various international agencies working on livelihood generation projects in the state. 

 No takers

Roping in the knowledge and expertise of local industry bodies was a smart move. Nudging them towards research institutions was the only logical step. At Faridabad’s industrial cluster, which houses over 20,000 units, much of the action was already underway by IamSMEofIndia, an SPV formed by the Faridabad Small Industries Association (FSIA) in 2008 to assist MSMEs across India. The new programme brought in a new kind of thinking, says Rajive Chawla, chairman IamSMEofIndia and president of FSIA: “NInC made us adolescents from children; it has brought us to a sustainable level.” 

"The National Innovation Council brought [small and medium enterprises] to a sustainable level" - Rajive Chawla, chairman, IamSMEofIndia

Chawla’s own unit, Jairaj Ancillaries, is a showcase for some of the innovations that emerged out of this programme. Among them is the development of a low-cost auto-loader that works with centre-less grinders — machines that polish and reduce the diameter of steel rods used in shock absorbers. This machine improves upon a fundamental job: feeding the rods into the grinder. The machine cost Rs 70,000 to prototype but could be sold for Rs 50,000 or less if commercialised, says Chawla, and save on the cost of one worker doing the job. In the open market, it could cost as much as Rs 2 lakh. The prototype is being used in Chawla’s own unit but there has been little interest by others in adopting this. “Most of the cluster members are reluctant to share their problems and don’t want us to come to their factories,” says Umesh Gulati, owner of Yuva Engineers and a core member of the project. 

Among the other innovations that came up during this programme were the use of idle spinning of the flywheel in a power press machine to power other gadgets, such as the factory’s power inverter, and a crack-detecting machine made at Rs 1.5 lakh versus the Rs 20-lakh versions available in the open market. 

“With the programme, we started to think about innovation. Earlier, we used to think that it is something only large companies do and our job is only to make products for them,” says Rahat Bhatia, director, Raga Engineers. “Innovation was a one-off thing before this programme.” Bhatia has filed for a patent on a new cooling system for die casting moulds and pins that he developed using compressed air, which is readily available on a factory shopfloor. 

The Faridabad cluster introduced a new term to NInC’s workbook — Tod-Phod-Jod centres, essentially an industry-academia interface offering immersive and real-life learning experiences. The idea was to bring together students and faculty from engineering colleges as well as cluster members as experts to discover innovative and low-cost approaches to problem-solving. Tod-Phod-Jod (TPJ) refers to the process of dismantling and reconstructing a machine to gain practical knowledge on its workings. The NInC programme connected cluster members to nearby Manav Rachna University so that its students could work on live issues faced by the cluster and be more industry ready. The challenges were discussed with professors and students at Manav Rachna but were transferred to the Central Mechanical Engineering Research Institute (CMERI) since the cost was working out to be high, says Chawla. The philosophy behind TPJ has now been extended to a centre operated by Germany’s Steinbeis Foundation, which connects MSMEs globally to its own research team and university professors to solve their problems. 

  A new prescription

The programme ventures into some untested areas too. For instance, the ayurveda cluster in Kerala was chosen to address a long-standing need to provide a wider market access to ayurvedic medicines. Another CDI of IL&FS, the Confederation of Ayurvedic Renaissance Keralam (Care Keralam) was established by the Kerala State Industrial Infrastructure Corporation (Kinfra) with 38% equity participation and the government’s Department of Ayush with seed funding of Rs 10 crore and is a cluster of 160 companies engaged in manufacture of ayurvedic medicines. Spread over a 10-acre campus at Koratty’s Kinfra Park in Thrissur district, Care Keralam’s mandate is to scientifically validate the process and formulation of ayurvedic medicines and make them ready for export markets globally. NInC and CSIR offered to help.

Joy Verghese beams with joy as he recites some of the unique benefits that Nishaakathakaadhi kashayam (NKK) delivers to early-stage patients of diabetes mellitus. “This drug will not make the patient hypoglycaemic while giving the same effect as glibenclamide [an anti-diabetic sulfa drug],” declares the executive director of Care Keralam, a former practising ayurvedic doctor himself. The ayurvedic drug, made from eight naturally found ingredients, has been in existence for decades among Kerala’s ayurveda community and has proven to be effective in the treatment of diabetes without the side effects associated with allopathy. Yet, it hasn’t achieved the success it could have. Exporting it hasn’t been possible because its performance and effects haven’t been medically documented as per scientific norms. 

Bhagyanath Menon, CEO, Care Keralam, says there are 750 SMEs engaged in ayurvedic formulations in Kerala. Most of them are run by practising ayurveda doctors, who started small firms to cater to their patients. Over 25% of the units make this formulation. “There’s been no process validation so far and sales of NKK have been only in the domestic market, confined mainly to the state,” adds Verghese. The challenge has been to document it. The Drug Master File that was produced as a result of the innovation clusters programme contains detailed information about the formulation, method of production, quality assessment parameters, toxicity and animal efficacy study (on rodents). These help conform to drug licensing and other regulatory standards required for approvals in overseas markets. Importantly, it unlocks the estimated $70-billion herbal medicines market for Kerala’s ayurvedic drug makers. Menon points out that India’s contribution to this growing global business is a mere 1%, while China controls 85%. “The Chinese have a traditional medicine research unit in Shanghai that is funded by the government. Why can’t we do the same for ayurveda here?” he asks.

"India's contribution to the global herbal medicines market is a mere 1%, while China controls 85%" - Bhagyanath Menon, CEO, Care Keralam

It took 15 months to create the NKK scientific dossier, says Verghese. Of the total expenditure of Rs 35 lakh, NInC part funded the project with Rs 18 lakh. Now, he adds, NInC has given an in-principle go-ahead to extend this to 10 more ayurvedic formulations. “128 of the 500-odd classical ayurvedic formulations with us generate 85% of sales for the industry in India. The commercial market is mainly for these,” adds Menon. 

 Stumbling blocks

Barring Kerala and Krishnagiri, the results in most clusters haven’t been exactly encouraging, with cluster members yet to wholeheartedly adopt the innovations worked upon in the pilot projects. The problem with the Ahmedabad life sciences cluster, though, was different. Two of the existing pharma bodies said they didn’t quite understand what NInC was trying to do — connect entrepreneurs with exciting innovations already created in the biotech space and help them seed businesses around these. 

With the Gujarat State Biotechnology Mission, the local partner, NInC narrowed down the search to the MSME Foundation’s biotech entrepreneur training programme. The Foundation connected the council to CSIR for the list of technologies in the biotech space that could be commercially viable. It took eight months but NInC finally got a list of 20 such technologies. Four students have identified topics that emerged out CSIR’s Chennai and Lucknow labs. One of the innovations is a skin-coloured patch with embedded medication. 

“We have been trying to get CSIR to license these technologies at a nominal price,” says Kala. For the patch, CSIR quoted a price of Rs 8.5 crore, which was obviously too steep a cost for an entrepreneur. NInC is working to get that price lowered. “There has to be a policy shift. You cannot work the way you do with big companies. The idea is to take a developmental view,” he points out.

"There has to be a policy shift. You cannot work the way you do with big companies" - Keerthi Laal Kala, project leader

The Ahmedabad programme has also instituted the Innovation Research Reward for biotech projects in universities. This is to help potential entrepreneurs in the space take their research to the next level, seek funding and get help with the patent process. So far, 20 such interested entrepreneurs have presented their ideas to a panel comprising IP lawyers, angel investors and pharma companies.

There were other challenges and learnings from the pilots in other places, too. For instance, while the training programmes were conducted fully in only three clusters, Kala admits that they could have been less theoretical. “Some were premature, such as the one on innovation management,” says Kala. He adds that the idea of a CIC (Cluster Innovation Centre) didn’t exactly work out the way it was intended to but took different forms that eventually got the job done. “As long as the services are provided, we felt it was fine.”

Anil Gupta, a professor at IIM Ahmedabad and vice-chair, National Innovation Foundation, is among the members of NInC that ran the clusters initiative. Upset with the way the programme was rolled out, Gupta says he often voiced his protest during NInC meetings. “I’m very unhappy that a great idea wasn’t executed properly. For instance, why did Moradabad not go beyond one furnace? Why couldn’t they do 10?” Gupta asks. Disagreeing with Ohri’s argument that the cost of adoption is the main reason why the artisans haven’t gone in for the new design furnace, he says, “There was no mechanism created for demand through demonstration beyond a single prototype. What would have been the cost of creating 10 hotspots of creativity within the cluster? Not much.”

The trouble, according to Gupta, is that the innovation clusters programme was done in a “top-down manner”. A long-time proponent of local and grassroots innovation through Sristi and the Honey Bee Network, he contends that while the involvement of national-level scientific research bodies under CSIR was a step in the right direction, the effectiveness of the exercise was limited due to non-involvement of local institutions. “You must link local institutions with local challenges,” he says. “Incremental/adaptive research can only be local.” The proximity makes exchange of ideas and the innovation process more operationally feasible, he adds.

"The programme was done in a top-down manner. It was destined to fail and it failed" - Anil Gupta, vice-chair, National Innovation Foundation

Gupta says he had a three-year “running battle” with Pitroda on the functioning of NInC and the clusters programme. “Somehow, they had closed their minds. Sam would not understand,” he says. “It was destined to fail and it failed.”

The criticism notwithstanding, NInC has recommended to the programme’s state and sectoral councils to replicate this exercise in more clusters in every state. Of these, Haryana has been the first off the block, identifying five more clusters for the programme, with Karnataka and Maharashtra, too, embarking on a similar exercise. “We have energised people. We have taken the genie out of the bottle,” says Pitroda. Will this continue with the new government? “It is for the new government to decide what they should do. But the innovation agenda of the country must continue.”