Consortium of Electronics Industries of Karnataka (CLIK) is a not-for-profit organisation registered under the Societies Act. It has been around for nearly 40 years supporting the electronics MSME industry in India and chronicling a new and improved pathway for the same. President Madhav R. Badsheshi and vice president R. Srinivasan tell Yashasvini Razdan from Electronics For You what clicks for the industry and what needs to be done to empower it…
EFY: What is CLIK and what does it do?
Madhav R. Badsheshi: CLIK or Consortium of Electronic Industries of Karnataka represents all micro, small and medium enterprises in the electronics industry. Initially, it was purely electronics. Now, we have started adding members who manufacture products for the electronics industry such as battery makers. We consider ourselves the voice of electronics companies.
EFY: What benefits does a member get, when they become a part of CLIK?
Badsheshi: For more clarity on this you need to understand the history of CLIK which was formed nearly 40 years ago. At that time electronics was new to India and it was a neglected sector. If anyone wanted electronic components they’d have to import them because India did not have a proper manufacturing unit. So, all electronic material was imported from other countries. People had a lot of issues with importing those parts, getting them cleared from customs and getting approval from the Reserve Bank of India for foreign exchange. Compared to other states in India, Karnataka was very much forward as far as electronics were concerned, because the main PCB manufacturing units were all located here such as ITI, BEL etc. They wanted these components because of this entrepreneurs started setting up their industries here and wanted to import these components. That is how this consortium was formed. The basic idea of CLIK at that time was to work with the government and see that the procedures were simplified to import electronic components.
Today, as the industry is much more developed, the objective of CLIK is to act as an interface between the micro, small and medium industries, the government and other agencies or other associations, within and outside India. We work to educate the MSMEs to bring them to par with global standards. We utilise the government schemes and percolate that information to the MSMEs. We also train the MSME personnel to face industrial challenges. We give a lot of importance to training so that Indian MSMEs can come up to the level where they can start exporting their products. We also take MSME entrepreneurs as a delegation to domestic and international exhibitions to showcase their products and establish a customer base.
EFY: How does CLIK enable and support electronics startups?
Badsheshi: I think it’s a good question. You know, most startups have very few members, some even start with just one entrepreneur. Most of the MSME members of CLIK have a lot of scope for new and emerging startups. If members have an innovative product idea, they can break up from that mother unit, and start working on the innovation on their own, with the support of institutions associated with CLIK such as IISc Bengaluru or the IITs, or even some engineering colleges such as Ramaiah Institute or BMS Engineering College, Bengaluru, where they encourage entrepreneurs to be a part of the startups.
EFY: So what kind of facilities do you provide?
Badsheshi: We have very good collaboration with IISc and the global electronics trade association, IPC (Institute for Interconnecting and Packaging Electronic Circuits), that helps OEMs, EMS, PCB manufacturers, cable and wire harness manufacturers and electronics industry suppliers strengthen their bottom line and build better products. IPC provides training for new product development and talks to industries to brainstorm new product design ideas for development. So, these startups can either incubate with IISc or they can incubate with the same mother unit, and they will be aided and supported by the CLIK members. Once the startup starts earning, they segregate from the mother unit to become independent. The central government has a scheme called Nidhi Prayaas under which the government gives ₹10 lakhs and admission to fab labs. If the startup is by a student, every student will get a stipend of ₹18,000 for the next 30 months irrespective of the outcome of their efforts. The panel that approves the proposal comes to associations such as CLIK for verification of all the documents and proposals.
EFY: You mentioned that Karnataka was at the forefront when it came to electronics but today when we mention Bengaluru, why does everybody talk about the IT industry?
Badsheshi: The reason we lagged is that the central government policies for electronic hardware were not very strong. They did not focus on it and only had an idea to begin semiconductor manufacturing. We did have Semiconductor Complex Limited but a big fire closed down and stalled the process for a very long time. There were companies such as BEl which were still making basic components such as diodes and transistors but unfortunately, the raw material from China and Taiwan was far cheaper. To thrive and make profits in electronics manufacturing, it was almost impossible to source from India. Even in Pune, there was a semiconductor company which struggled to manufacture as the costs were very high. The government at that time was more focused on sectors such as textiles, chemicals and fertilisers, as bulk manufacturing was easy for them. Semiconductor manufacturing is a highly capital-intensive project and you need high-quality water for making semiconductors. These were the reasons that delayed the growth of the semiconductor industry. We had Matron in Maharashtra, Keltron in Trivandrum and Qualis in Karnataka. All these associations were striving to build electronics manufacturing, but unfortunately, it did not happen.
EFY: Many countries are setting up their own domestic chip manufacturing fab labs. In India, we are relying on foreign companies such as Foxconn to help establish semiconductor manufacturing even though we produce 24,000 design engineers every year. Why does this fissure exist?
Badsheshi: See, many brilliant students go abroad for higher education and then work there. This happened twenty years ago as well. The difference between working here and going abroad is the kind of infrastructure that we have and the degree of freedom to work on new developments and innovation. We do have many schemes in place but the process of getting the money to the right people involves a lot of hurdles. It takes a lot of time to recognise innovative work. Unless we support our innovators properly, they will not be able to come up with good products or innovations. There are a lot of scopes. Indians in the US innovate, design and produce many patents because the industry as a whole is very advanced and developed.
EFY: So when it comes to the domestic semiconductor manufacturing ecosystem, how does the future look for India and how soon can we see that happening?
Badsheshi: Growing the semiconductor ecosystem, if done properly, shouldn’t be a problem because we have intellectuals, scholars and entrepreneurs as well. With proper access to funds and the same support that big conglomerates get, innovators will get to work on innovative products. It will take at least ten years in my opinion if we fast-track the process. If we go slower, it can take as many years as we want and by that time we would have missed a lot. There are more than 153 fabs worldwide — China, Taiwan, Europe, the US and Japan have the most fabs. In India, we have one fab lab but that is not for commercial use.
Srinivasan: Earlier most of the grants and loans required the company to have a gross turnover of ₹15 crores. This is where organisations such as CLIK come into the picture to represent the electronics industry and tell the government that this cap is not beneficial. Someone with a 15 crore turnover can easily go from 15 to 30 crores. MSMEs struggle to even get a gross turnover of two crore rupees! The one to five crore rupees bracket is the crucial segment where a lot of hand-holding, support and training is needed. So we speak to the government and put these points forward.
Badsheshi: CLIK is also responsible to get member companies a place for constructing their factories and offices. Recently CLIK ESDM got 11.5 acres of land in Doddaballapur Industrial Estate. More than 50 members have applied for land allocation and are ready to construct their factories and offices. We will have a common facility centre to help member industries. They can use the common centre for state testing, preparing designs, CAD centre, and 3D modelling, all those things can be in the common facility centre. So, this is a major achievement for CLIK. One or two companies have started constructing their offices. More will start soon. We are also looking at getting an office for CLIK itself in the same area. It will be a proper industrial area. Once we do that, we could attract other companies to be interested in what we are doing.
EFY: Have production-linked incentive schemes been beneficial to electronics manufacturing for MSMEs?
Badsheshi: Usually in our opinion, PLI schemes benefit big manufacturers. It’s not very applicable to small manufacturers. It is out of reach. PLI scheme offers an incentive which is based on your production. How can a domestic small mobile manufacturer compete with mass manufacturing giants such as Samsung? Small enterprises cannot get any benefits because their production output is very low.
EFY: Where should the policy be changed, so that small manufacturers also get benefits?
Srinivasan: A lot of handholding is required for companies whose revenue lies between ₹1 crore and ₹5 crores with a focus on finance, skill development and training.
Badsheshi: MSMEs need a lot of support from the government when it comes to marketing activities. A small company will hesitate to spend money to take part in any exhibition because they would have to spend at least one lakh rupees. There are instances where MSMEs hesitate to export or represent their industry and participate in exhibitions abroad because money is required. So, for these marketing activities for micro and small industries, the government has to support them wholeheartedly. They did it for the handicraft industry, the millet crop — they should do it for the electronics industry as well. With that kind of hand-holding, you’ll see that the MSME industry will gradually grow. For now, if an MSME or a startup wants a loan, banks will not entertain them because they ask for a balance sheet or a certain cut-off revenue. The government does announce so many things, but they’re seeing this from a ceiling level and not going down to the level of MSMEs. They don’t see the problems at the beginning stage.
Badsheshi: The minimum range for all these schemes is 15 crores and not many electronics MSMEs will come in that category.
Srinivasan: If you visit Peenya industrial area, there are so many ancillary industries, struggling to stay between that ₹1 crore and ₹5 crore margin. Those are the companies that require aid, where capital needs to be injected.
EFY: Graduate engineers are not employable in the electronics industry, and most of them end up going for IT jobs. How can we change that?
Badsheshi: The difference between an MBBS degree and a BE degree, is that every person with an MBBS degree can start their practice after completing the course because they sit in the hospital for one and a half years and see all kinds of patients. This is missing in engineering colleges which have now become nothing but an extension of pre-University. If we look at electronics, there is no practical approach. Students sit in the labs, make a graph and go home. I believe students should do a four-year course, but for the next year or even six months, they should identify what industry they wish to join and compulsorily work there to get the required exposure. I used to encourage engineering students to intern at factories, but unfortunately, the colleges do not allow more than 30 or 45 days for an internship. A student can’t learn enough in that period!
EFY: What programs does CLIK incorporate to train electronics engineers to be at par with industry standards?
Badsheshi: We have signed MOUs with various engineering colleges for an extended R&D policy so that those students can work on our products and get industrial exposure. We also allow college students to be part of CLIK Pavilion where they can display their products and we allow them to intern with our member companies so that they have industry knowledge. We give them basic training on soldering and using and calibrating testing equipment.
EFY: We see a lot of electronics industry-based startups, but why do they only remain startups?
Badsheshi: I will give you an example of a startup from my own company. We worked with IISc and a master’s student and got a product. We formed the company in 2020. Unfortunately, with COVID we did not work for two years, but we had a business plan. All the facilities were provided, and everything was done. We had the prototype and now we wanted to commercialise the product. We needed money for that. Partly because of COVID and due to lack of funding we could not retain people. Startups are unable to pay their salaries. Once a startup falls, it will take months to recover.
EFY: So till which stage is the capital injection and help required?
Badsheshi: As far as institutions are concerned, they provide support for the initial projects to make prototypes. Schemes such as Nidhi Prayas provide a grant of 10 lakh rupees to startup companies or entrepreneurs. In the beginning, for making the initial prototype, this amount suffices but as you go up the ladder, you’ll need more funds. You’ll need a lot of money for a market survey alone! You’d need to study the market, and after getting the inputs, you’ll have to adjust your business plan. All those activities take time.
There are many schemes but our company startup is the smallest company among the big giants competing for the same grants. The MHRA has come up with a scheme where they are ready to fund our startup with ₹4-5 crores. The only issue is that we’ll have to invest the initial 20% which comes to around ₹80 lakhs. So bringing that kind of capital becomes an issue. The startup needs to work with someone who can put in that 20%. Those things are missing and that is where we suffer.
EFY: What expectations do you have from the budget regarding the electronics industry?
Badsheshi: The government has to speed up the semiconductor industry policy. The government should insist every state make investments in hardware because such is the demand. There should not be any lethargy in this. They must identify what imports we are doing and those items look at setting up the units for those in India. The government has to spend a lot of money on getting technology and people to fast-track this process. It shouldn’t be such that a policy is constituted and just remains a policy for years. We had a pre-budget interaction with Lok Sabha member Tejasvi Surya where we represented the electronics MSME sector. We requested that India must announce incentive schemes to encourage companies that are producing electronic products and accessories with more than 21% local value addition. So, they have to insist that big manufacturers have at least 25% local value addition. The government must extend OEM status to the accessories manufacturer. The government must create a separate cyber security ministry in India.
EFY: What changes do you propose in the existing schemes?
Badsheshi: If you look at the IoT draft policy and the products, the basic working is not defined. All cloud-based systems have no specifications. A lot is undefined. So that is the major issue. I think unless the government brings it on a fast track, we probably will not be building all of the IoT products like the US. Then there are also many cluster-to-cluster activities happening but not on a big scale. So that should be encouraged, where more than two companies get together to develop a product collectively with each spending money on a different aspect of the manufacturing and selling process.
(Note that this interview was taken prior to the announcement of the Union Budget 2023 and has been published at a later date.)