Till a few years ago, a giant model of a microscope used to welcome you at the gateway of Ambala city. Not anymore. While the winds of change have made the iconic landmark vanish, there is a more disturbing parallel. What the giant microscope stood for - the celebrated scientific instrument manufacturing industry of Ambala is on the wane in the changing economic scenario.
While financial constraints, inability to innovate, lack of institutional support for providing new technology, credit and marketing mechanism are some of the factors responsible for the decline of this scientific instrument manufacturing cluster housing about 600 units, it's the influx of imports from China which is now heavily influencing the dynamics of this enterprise.
Ambala's scientific instrument manufacturing industry is probably the oldest and biggest conglomeration of scientific instrument manufacturing units in the country. The industry manufactures a range of products from microscopes and rheostats to devices used in laboratory experiments on heat, sound, magnetism, plant physiology, biology and pharmacy.
The industry caters to the requirements of educational institutions in a big way, though their contribution to diagnostic centres and medical practitioners remains minimal. Though many firms serve as vendors to high-end multi-national brands such as Nikon and Zeiss, the strength of this cluster remains low-end instruments sought by schools and colleges.
The Dragon threat
While obsolete technology had already rendered this cluster incapable of competing in the high-end equipment market, the penetration of superior-quality made-in-China equipment in the low-end market segment threatens to destroy indigenous manufacturers completely. In fact, imports from China have brought a turnaround in the profile of manufacturers, who have now become merchants.
A diagnostic study report (DSR) prepared on the scientific instrument cluster by a consultancy firm, Grant Thornton, says that the profitability of scientific instrument manufacturing units have taken a hit in recent years. "The burden of rising raw material costs, manpower and even energy costs are also eating into the already thinning margins of cluster firms," the report says.
As per industry experts, what the scientific instrument manufacturing industry needs right now is new technology, innovation and improvement in quality to ward off the Chinese threat.
The DSR, which has been prepared on the initiative of the Haryana industries department, says that the scientific instruments sector should be technology-intensive and fuelled by innovation. "Innovation requires considerable investment in research and development (R&D). Unfortunately, till date, inadequate deployment of resources and efforts in innovation and R&D have been affecting the performance potential of enterprises in this sector.
Firms in Ambala largely continue to cater to school and college requirements (about 95% of the cluster turnover) and not as much to the needs of medical colleges, medical practitioners, diagnostic facilities and hospitals or for R&D institutions and the industry. Much of the equipment for such professional use continues to be imported from the European Union (EU), the US and not to forget, China. Nevertheless, there is a degree of competitiveness that is yet to be adequately harnessed in the Indian industry," the report says.
Former president of Ambala Scientific Instruments Manufacturers Association (ASIMA) Ashwani Goel says that trading appears to be a lucrative proposition for entrepreneurs as compared to manufacturing, which is full of hassles.
"Also, manufacturers in Ambala did not innovate. Financial constraints, technology gaps and lack of vision, too, have contributed to the decline. We are in a vicious circle of low volumes, low technology and low margins," he adds. Goel, however, is convinced that they would not survive for long as traders.
Consultants Grant Thornton, in its SWOT (strengths, weaknesses, opportunities and threats) analysis of the cluster said resource constraints have limited capabilities of manufacturers in terms of investing in quality cutting and advanced fabrication and machining equipment. Besides, these cluster firms are at the mercy of raw-material traders.
"As there are resource constraints, the way to upgrade technology is through collective action in a public-private partnership (PPP) mode. The industry can graduate into high value-added production by establishing raw-material primary processing, advanced and quality optics component, tool development, finishing and testing facilities," the consultants suggested.
They also suggested that strong market development efforts would have to be made if cluster firms are to penetrate premium markets related to scientific instruments for professional use. Also, market development initiatives will have to be coupled with activities targeting technology upgrading particularly by way of common facilities. In the light of resource constraints among typical cluster firms, assistance from the government is most critical, without which the performance of cluster firms may continue to deteriorate, it said.
The director, industries and commerce, Haryana, TL Satyaprakash says there is a pressing need for synergised intervention. "Every little intervention will mean cutting down costs and improving competitiveness.
In fact, this cluster needs some major intervention such as the establishment of a common facility centre (CFC). The CFC will help in primary processing, design, finishing, testing and enable cluster firms to move up the value-chain,'' Satyaprakash said. The director said the Ambala Cluster Association has already evolved a special purpose vehicle (SPV) for implementing this intervention.
Ray of hope
Grant Thornton expects a sharp rise in the expected turnover of the cluster - from Rs 387 crore in 2012-13 to Rs 760 crore in 2016-17, once the CFC becomes a reality. "The envisaged CFC will help existing micro and small enterprises move up the value chain to penetrate the professional use segment.
"The CFC could help cluster firms double capacity utilisation and profitability and competitively substitute imports as well as enable increase in employment by about 1,000 persons directly. The contribution of cluster exports in cluster turnover could also double from Rs 40 crore to about Rs 60 crore in five years. The profit margin may also double from 10 to 20%," the projection says.
What do experts say?
Manufacturers in Ambala are in slumber. They need to wake up. It would be entirely up to us as to how much we can gain from the proposed common facility centre (CFC).
(Dr Ashawant Gupta, executive director, Advanced Microdevices Pvt Ltd)
We are in a vicious circle of low volumes, low technology and low margins. I am quite convinced that we would not survive for long as traders.
(Ashwani Goel, Amarsons Industries)
There is a bankruptcy of technology. The CFC can help demonstrate modern technology, provide exposure and allow us to buy it. There are many machines which are expensive but are used only for low-volume jobs. Those can be accessed only in a government backed CFC.
(Gaurav Awasthi, Gaurav Manufacturing Enterprise)
Micro, small and medium enterprises
These enterprises have been classified into two categories in accordance with provisions of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006
(1) Manufacturing enterprise: An enterprise engaged in the manufacture of goods pertaining to industries specified in the first schedule to the Industries (Development and Regulation) Act, 1951. A manufacturing enterprise is defined in terms of investment in plant and machinery.
(2) Service enterprise: An enterprise engaged in providing or rendering services defined in terms of investment in equipment.
Classification in terms of investment in plant and machinery
Micro enterprises: Up to Rs 25 lakh
Small enterprises: Rs 25 lakh to Rs 5 crore
Medium enterprises: Rs 5-10 crore
Micro enterprises: Up to Rs 10 lakh
Small enterprises: Rs 10 lakh to Rs 2 crore
Medium enterprises: Rs 2-5 crore
Numbers and trends
Ambala's scientific instrument manufacturing industry has about 570 micro and 30 small-sized units
Provides direct employment to about 6,000 people
Average annual turnover per unit: Micro - Rs 60 lakh; small - Rs 1.5 crore. Total turnover in 2012-13 was Rs 387 crore
Turnover of the cluster has shown an increasing trend over the years but margins of firms have been falling
Enterprises in the cluster essentially cater to the domestic market
Steeped in history
By the end of the 19th century, institutions in the Ambala region were importing instruments from the UK, US, Germany and France. Hargo Lal established a unit which was into importing and supplying equipment. In 1919, Nand Lal established the Oriental Science Apparatus workshop.
By the 1930s, the region started exporting to Sri Lanka and Myanmar. By Independence, a wide range of apparatus and instruments supplied to colleges and schools were getting manufactured in Ambala.
The 1970s witnessed the introduction of electronics and digital instruments. Since the 1970s, innovation through reverse engineering of imported products enabled cluster firms to produce a range of higher-end products for educational use.