The Hindu Business Line : Industrial clusters: Kerala adopts the Italian model

THE development of industrial clusters as a tool for increasing production, triggering economic growth, alleviating poverty and removing regional economic imbalances is gaining momentum in both the developed and developing countries. The concept was introduced in India in the Ninth Plan with the assistance of United Nations Industrial Development Organisation (UNIDO). It was pursued with purpose in Kerala only in the last couple of years but has since evolved as a unique model.

Unlike elsewhere in the country, Kerala lacks the "critical mass" of sector-specific units in one location and this has come in the way of development of specialised infrastructure as also private and public service providers (PPSPs) taking an active role in catering to the needs of the clusters. This has led the Industries Department to adopt a customised master plan with the technical support of UNIDO for cluster development in the region. Under this plan, the State itself serves as a cluster with some PPSP linkages, thereby resolving the problem of the lack of critical mass.

According to Mr P. H. Kurien, Managing Director, Kerala State Industrial Development Corporation, the small enterprises in the State have been following the Italian model of co-operation on some fronts such common facility centres in rubber (Kottayam), coir (Alappuzha) and plywood (Perumbavoor) clusters; common purchase centres as in the case of the raw material bank, supported by State Bank of Travancore, in the rubber cluster; mutual guaranteeing of each other's financial requirements from institutions, and common marketing in some cases. Clusters are a distinctive feature of Italy's industrial scene and the estimated 199 clusters there employ 2.2 million people. More important, these clusters account for more than a third of Italian exports.

Mr Kurien says the clusters in Italy were able to establish a strong presence in world markets in a number of traditional products such as shoes, leather handbags, knitwear, furniture, tiles, musical instruments and food-processing. In fact, these clusters dealing in traditional products were able to expand production and exports in the 1970s and the 1980s at a time when large enterprises in the UK and Germany were finding the going tough.

In Kerala, the programme was initiated with two officials of the Industries Department being sent for training at the Entrepreneurship Development Institute of India, Ahmedabad. However, their efforts back home in 2001 to develop clusters in the rubber sector in Ernakulam and Kottayam districts did not succeed as the financial institutions were not fully convinced of the concept. But continuous intervention with the cluster members for more than a year finally resulted in the establishment of the first professionally and legally constituted sustainable consortium in the country — the Natural Rubber and Fibre Product Manufacturing Consortium Private Ltd. It became operational in mid-2003 with 50 SSI units as members. The establishment of a common raw material bank with the support of State Bank of Travancore gave impetus to the project.

Some of the proactive steps initiated by the consortium include development of new products, arrangement of wide network for export, establishment of cluster-to-cluster linkages, sub-contract exchange with the assistance of the Centre and building linkages with research institutions for continuous upgradation of technology and for new product mix.

According to Mr Kurien, the uniqueness of the Kerala model is the creation of consortia at the initial stage of cluster development. Also, the thrust has been on consortia of tiny, small and medium enterprises in order to ensure their attaining economies of scale. These consortia are different from those functioning in large clusters such as Tiruppur and Salem where each member has turnover of Rs 20 - 40 crore. Over the last couple of years, several consortia have evolved in Kannur focussing on establishment of common marketing outlets, participation in fairs abroad and on brand promotion with the assistance of Indian Institute of Management, Kozhikode.

A large cadre of trained cluster development agents (CDAs) has been involved in identifying and conducting studies on clusters as also holding common training programmes, while PPSPs like Rubber Board are preparing proposals for banks and for setting up common facility centres. The Handloom Department, Coir Board, State Bank of India and the Textiles Committee, apart from the Industries Department, have taken the lead in grooming a hundred of their officials into CDAs who are now working at different clusters. The Entrepreneurship Development Institute of India, UNIDO and the Kerala Institute of Entrepreneurship Development have been extending support and guidance.

The Industries Department has identified 44 clusters for development in the State and the CDAs have completed diagnostic studies for 18. Studies have been done on plywood cluster (at Kannur), agriculture implements (Shoranur), rubber (Malappuram), food processing (Pathanamthitta and Kozhikode), cane craft (Thiruvananthapuram), bell metal (Alappuzha), leather (Kottayam), garments (Wayanad) and clay tiles (Thrissur). Based on these diagnostic studies, 10 consortia have been formed and are expected to attain sustainability at the end of this year.

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