4 Technology Upgrading and Productivity Enhancement of the Machine Tool Industry in India

8/10/2019 4 Technology Upgrading and Productivity Enhancement of the Machine Tool Industry in India

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Project title: Technology Upgradingand

Productivity

Enhancement

of the

Machine Tool Industry

in India


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A. CONTEXT

Background

Machine tool industry is the backbone of engineering sector in India and has reached a critical phase

of development. It started with the production of general purpose machine tools under technicalassistance from foreign collaborators in the 50s and has come a long way, particularly after itsliberalization in 1991. From a technologically point of view, the industry has built in-housecapabilities for R&D to facilitate development of new machine tools as well as improvements in theperformance of existing machine tools. There is a special focus on the production of more efficient andreliable machines to meet the growing needs of machine tools users.

To provide necessary drive for up-gradation and growth of machine tool industry in the era of post-economic reforms, the Government of India, UNIDO and the Indian Machine Tool Manufacturers

Association (IMTMA) jointly launched a National Programme for Development of Indian MachineTools Industry (NPDMI) in 2001, along with other stakeholders. This programme was initiallyconceptualized for a period of three years and helped create awareness on market and productionneeds of machine tool sector amongst the concerned industry and desired improvements in quality of

machine tools to be able to compete worldwide. The programme aimed also at strengthening thecompetitive position of the Indian machine tool industry by enhancing manufacturing capacities,strengthening its technological and market development capacity, as well as fostering strong linkageswith other SSI sectors giving a pivotal role of machine tools in the industrys drive to become a globalplayer.

The major objectives of the first phase of this national programme were to:

Ensure substantial growth by enhancing demand for machine tool.

Promote export of the Indian machine tool industry. Achieve quality level exceeding customer satisfaction and meet international requirements and

standards. Attain cost leadership.

Go on a technology over drive.

Leverage IT as an enabler for enhanced competitiveness.

Sustain business excellence.

Build up training capacity and develop programmes for sustained growth.

The programme was implemented by IMTMA at the field level and consisted of the following major

programme deliverables:

Select 20-25 companies to be benchmarked against best global players in technology,quality and cost by 2004.

Double exports of Indian machine tools in 3 years and treble in five.

Achieve high growth in CNC machine tool production.

Maintain and consolidate market share at a consumption rate of 50 %.

Establish strong international linkages with components and sub-system suppliers,technology sources and markets.


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Establish Made in India label in machine tools as the one achieved with softwarecompanies.

Utilize UNIDO expertise in building up world class industry.

Usher in an era of e-commerce in machine tool trade.

Build up capacities for becoming a global market supplier.

This programme facilitated significant achievements during the period 2001-07, which showed growthand development of the machine tool industry in India:

Increase in production of machine tools from US$115.0 million in 2001-2002 to US$438.0million in 2006-2007, representing a near 4 times increase in 5 years.

Rise in turnover of CNC machine tools from 1,235 in 2000-2001 to nearly 6,000 in 2006-2007.

The IMTEX 2007 machine tool show in Bangalore generated orders valued at US$ 250.0million.

Introduction of high speed machines, as well as machines with linear motors, so as tobridge the key technology gap.

Facilitation of the Bangalore machine tool cluster operation enabling to support membercompanies in technology up-gradation and market development. Replication of similarprogrammes in clusters underway in Batala, Ludhiana, Pune and Rajkot.

Technology development plan, namely, Perspective Plan, for 45 units in Ludhiana, Batala(Punjab), Rajkot (Gujarat) and Bangalore.

Enhanced visibility of the Made in India brand through participation in internationaloverseas machine tool exhibitions.

Building up and upgrading the unit level in-house capacities, institutional capabilities of IMTMA andsome other institutions such as Institute for Machine Tool Technology, Batala have generated amultiplier effect of development, leading to horizontal transfer of technology.

However, the industry needs to adopt a visionary approach and aim for a stretched goal of exponentialgrowth, which must be substantially export driven. In this way, the Indian machine tool could becomea real global player.

Description of sector

Fall in imports of machine tools in recent times is partly attributed to the growing competitiveness ofIndian firms. However, the Indian market is relatively small and manufacturers, in order to stay in themarket, have to look at global market demand and to build up volumes. This issue is of greaterrelevance to a large number of enterprises in the sector as well as to tiny and small componentmanufacturing enterprises.

Besides the critical issue of building volumes, enterprises have also to upgrade their products andprocesses technologically and quality wise for remaining competitive. The machine tool industry isstill facing the dilemma of whether to remain as finished product supplier and face competition fromlarge volume producers or become sub-suppliers of components and/or sub-systems to Original


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The estimated consumption, production and import of machine tools are as follows:

Table 1: Consumption, production and import of machine tools in India

Although the industry has lost a considerable share of domestic consumption to imports during the last3 years, the absolute growth of the industry has been one of the highest in its history. This lendscredence to the belief that the Indian machine tool industry can become a significant global player andcarve a niche for itself in the high technology sunrise segment of NC/CNC machine tools.

Performance of Indian machine tool industry

According to the World Machine Tool Output and Consumption Survey (2007), the world output ofmachine tools increased 10% over last year to nearly US$60.0 billion. However, Asian countriesincreased their output faster than Europe or the USA pointing to a growing shift of machine toolproduction to Asian countries. The Republic of Korea and the Province of Taiwan, China occupy the5thand 6thrank in production and consumption.

The Indian machine tool industry, which dropped to 22ndplace in the world production, improved itsranking to the 18

th rank in 2006. In consumption, India ranked the 11

th showing a high demand for

machine tools. Considering the strong demand growth prospects over the next 3 years and investmentsplanned by the industry, the Indian machine tool market could jump up several places in the next fewyears. This period opens a golden chance for the industry to reach world leading.

Table 2: Industry performance pattern

Source: Indian Machine Tool Manufacturers Association (New Delhi).

0

10000

20000

30000

40000

50000

60000

70000

94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07

Consumption Import Production

03-04 7970 159,559 9650 193,193 550 11,011 17070 341,741 57

04-05 10940 219,019 18200 364,364 526 10,530 28567 571,911 64

05-06 13521 270,690 28986 580,300 501 10,030 42005 840,940 69

06-07 17315 346,646 46557 932,072 736 14,734 63137 1,264,004 74

Source: Indian Machine Tool Manufacturers Association (IMTMA), New

Delhi


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The above graphic presentation shows that there has been a marked growth of the industry productionover the last 3 years. The growth rate has been approximately 30% during this period, one of the

highest one recorded by the industry ever. Nevertheless, the growth in demand has been much higherleading to increased imports which is around twice domestic production now. In other words, there is a

great opportunity for the industry to invest in new capacities to meet strong domestic demand and, atthe same time, look to expanding its export market.

Table 3: Number of CNC machine tools produced


The most popular types of CNC machines produced now are CNC lathes, vertical and horizontal

machining centres, wire cut EDM, CNC external grinders and flexible CNC SPMs. In fact, in standalone CNC machine tools, the Indian machine tool industry is beginning to realize volume drivencompetitiveness. This substantial growth makes CNC machine tools as becoming a sunrise segment.

1367 1235 1300

2250

4250 4300

9600

0

2000

4000

6000

8000

10000

12000

00-01 `01-02 `02-03 `03-04 `04-05 05-06 06-07


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Table 4: Export of Indian machine tools


Export performance of Indian machine tool industry has not been noteworthy in the past. After 50

years of import substitution mindset, there was a need to look outwards in 2002 (BIMU-2002 andEMO-2003 participation in Italy) when the exponential growth in the domestic market started. Thishas put all machine tool manufacturers in a capacity crunch. Although the demand on machine tools,particularly in the European market, is increasing, there is simply no exportable surplus, at least for thetime being.. However, progressive companies have not lost site of export advantages and selectcompanies have even established operations in China and Europe. The principal reasons why exportshave not taken off are:

Indian machine tool industrys preoccupation about domestic market.

Inadequate cost of accessing and developing export markets.

Strong competition from Asian countries such as the Taiwan Province (China) and theRepublic of Korea, among others.

Challenges

Although significant achievements have been visible in the machine tool sector during the last 3 years,the sector is facing new set of challenges:

Declining tariff barriers resulting in increased imports.

Pressures on profit margins due to keen competition.

Technology obsolescence. This is a relatively recent phenomenon arising from the rapiddevelopment of new technologies in materials, mechatronics and electronics as applied tomachine tools.

Many enterprises are concerned about the future due to increasing pressures of competition. Althoughthere is confidence for them to meet these challenges, there is some hesitation on their part to moveforward due to the large resources that they need to commit. The major areas of concerns are:

300

480

360

550526

501

736

0

100

200

300

400

500

600

700

800

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Rs.

inmillion


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Technology obsolescence: Technology obsolescence in machine tool business is extremelyrapid. Product lifecycles are declining and currently average life cycle is typically 3 years.Most of the products in the past have been a result of reverse engineering. Unlike theJapanese and Koreans, the Indian manufacturers have not graduated to the next level of

improvement, that is the technology of reverse engineered products. Thus, enterpriseswill have to face the emerging technology challenges.

Higher resource requirement: The restricted availability and the inability to raiseresources are common to all types of small businesses. However, the machine tool, by itsnature, is a high financial outlay driven business. Average product costs are greater,gestation period of investment is longer, time to market is higher and purchasing systemsare not yet fully matured. This means greater financial resource requirement than thesituation faced in other businesses. This, in turn, puts machine tool enterprises in a

particular disadvantage.

Vendor linkages: The machine tool industry requires a complex level of vendor linkagesfor materials, electronics, hydraulics, pneumatics, metallurgy, tribology, measurement,

controls, etc. The list of myriad technology linkages is endless. This requires exceptionalnetworking capabilities.

Diversity: The business has a very large diversity also. For example, it encompasses a verywide range of products from standard machines to very complicated special machines. This

highlights the unique complexity of the business, which is more heterogeneous in productsand technology.

WTO: The introduction of WTO regime has needed extensive changes in the approach ofthe Indian machine tool industry. As a result, the industry has been affected in some oftheir operations, namely:

Strict intellectual property rights, which means end to reverse engineering;enterprises will have to develop their own products.

Conformance to international standards requires system certification (i.e. ISO) andproduct certification (i.e. CE).

Enforcement of environment protection measures will impact heat treaters,foundries and similar segments.

Modified labor laws and new work culture mean that enterprises will need toimprove their management styles.

Dilution of the role of state enterprises supporting SSI sector (NSIC, SIDBI, SISI,etc.) and inability of government to intervene in international trade meansindividual companies have to stand on their own feet.

Early awareness about WTO and its impact on enterprises is necessary; therefore,awareness programmes will be needed.

Permanent monitoring mechanism is to be created, perhaps within the Secretariat ofthe Indian Machine Tool Manufacturers Association (IMTMA) to analyze theimpact of above mentioned provisions of WTO on regular basis and resultscirculated among all member companies.


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High cost of consultants.

High cost of inputs and production.

In 2000, after benchmarking the Indian industry against world markets, the gap in technology andperformance of the machine tool sector were substantial. The NPDM facilitated in identification ofgaps. Large efforts were however needed for bridging the gaps in technology in the machine toolssector for production of high quality and high performance machine tools in a cost-effective way.During the implementation of NPDMI, some improvements were visible. A few demonstration unitshave come up with production of high quality machines, based upon innovations. Some of theessential activities for the machine tool industry could not be implemented due to time constraint, inparticular:

Outbound tours for exposure and technology tie ups.

Best practices, studies, seminars and conferences on identified areas.

World market study and seminar on its status.

Demonstration activities and training courses on productivity.

Mechatronics programmes and capacity building in this area.

Technology book on industrial design.

Design courses at Rajkot and Ludhiana.

Marketing strategy study and seminar: DMG and Hass Model.

Technology upgrading SME Cluster at Pune and Surendernagar.

Applied economics: study and seminar.

For small and medium enterprises, it is apparently difficult to meet the technological up-gradation

needs independently due to economic and other constraints. This issue has acquired greaterimplications due to WTO challenges. A structured intervention is therefore warranted to facilitatetransfer and absorption of technology to meet the machine tool requirements in the next 5 to 10 years.Thus, much more needs are to be fulfilled for the machine tool industry to mitigate the effects oftechnology obsolescence and remain competitive in the market. The earlier programme established

that:

a. The Indian machine tool industry has the potential to grow to global levels.b. The market potential and avenues in different world markets such as Europe, the United

States and South-East Asia have been established.c. The industry has created the desired network for growth and after sales service to further

build up confidence of machine tool users.

Technology gaps and upgrading required

The technology gaps have been identified during implementation of NPDMI. The machine toolindustry now needs to upgrade its products having into account the five cardinal requirements of P-Q-R-S-T, e.g. Productivity-Quality-Reliability-Service-Technology. The industry must focus on

building machines with the following characteristics:

Productivity:


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High speed machining and high RPM spindles.

Fast turrets, linear motors (to minimize non-machining time).

Single hit machining.

MT for lean and cellular manufacturing.

Rapid tool change.

Cost effective automation.

Quality:

Increased accuracy in production (CPK, CPM, etc.).

Reliability:

Enhanced reliability in operation (MTBF and MTTR).

Low maintenance requirements (TPM).

Service:

Remote diagnostics.

Autonomous condition monitoring.

Technology:

Higher level of IT application and integration.

Reconfigurable machining systems and machines.

The machine tool designs need to adopt the latest concepts and technologies to bring out machines ofinternational standards:

a. Dry machining/minimum quantity lubrication: Reduction or elimination of coolants inmachining in order to reduce environmental and cost burdens.

b. Hard machining: Machines capable of turning, milling and otherwise machiningcomponents in the hardened state. Such machines are becoming the vogue ininternational practice.

c. Complete machining: Integration of various machining processes such as turning,

milling, drilling/boring, gear cutting and grinding in a single machine to finish the workpiece in one set-up. They are often called multi-tasking machines.

d. Micro-machining: Metal- and non-metal-cutting processes for generation ofminiaturized components partially having geometric dimensions in the sub-millimeteror micron range.

e. Linear direct drives: Replacing conventional ball screw drives; these incorporate linearmotors directly moving machine members. It results in higher dynamic response andaccuracy.

f. Rapid prototyping: Rapid realization of prototypes and pre-production series of newproducts for geometrical and functional testing.


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g. Internal high-pressure forming: Generation of complex geometries from a single work

piece by using high hydraulic pressure.h. Near-net shape forming: Generation of the final contour of a work piece as to shape,

dimensional accuracy and surface quality, in a single forming process. This reducesmachining considerably and results in material savings and cost reduction.

i. Lasers in material processing: Laser machining, welding and heat treatment arebringing new flexibility to part design and construction. Laser machining also providesfast production rates and avoids costly tooling.

j. Improved operations resulting from more capable CNC that can download instructions,use remote diagnostics, show cycle progress at the machine visually, contour moreaccurately and manage the entire machining process with little intervention. ModernCNC systems can trouble shoot, self correct and alert operators to unusual conditions tokeep the machining process going.

k. Metal-forming machines: Some modern technologies include die less forming, hydro

forming and magnetic pulse forming, among others.

Supporting technologies and inputs: The up-gradation of machine tools can only be done if theindustry adopts the latest technologies supporting product design and development.

a. The design and development process should simultaneously be upgraded to adopt: Latest 3D CAD/CAE techniques. Digital prototyping and testing. New materials for machine tool construction.

These inputs will improve product performance and reduce development cycle time.b. Components: The industry depends entirely on imports for all critical components:

linear guide ways, spindles, motors, controllers and CNC systems. This is a potentialweakness, as these components constitute a substantial input. There is a need to developenterprises which will manufacture these components. This requires technology inputsand development support.

c. Manpower: Like other industries, the Indian machine tool industry is facing difficultiesin attracting manpower. This is mainly due to the opportunities available to diploma

and degree holders in the IT and ITES industries. There is also a high attrition rate inthe industry.One of the primary focus areas in NMPDI 2 is to develop a programme to attractmanpower to the machine tool industry and then to train, retain and develop them as

they grow.

A career in machine tools has to be structured and sold to potential employees and followed up withappropriate training programmes covering all functions from design to dispatch, in particular:

Design using latest CAD/CAE techniques. CNC programming and operation. Fixturing and tooling. Instrumentation and testing. Mechatronics technology and training. IT enabled troubleshooting and servicing. IT in manufacturing: from shop floor to top management.


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The SWOT analysis of the Indian machine tool sector has indicated opportunities and also helped inpinpointing the weaknesses to be addressed. There are several improvements/new developments that

have to be made by the Indian machine tool industry. Fortunately, the technology trends are clear and,therefore, it should not be difficult to achieve these targets in a specific time frame. However, one

current trend is unmistakable and acknowledged that the competition at global markets can beachieved through application of new technologies and innovations and won through technologicalnetworks and cooperation partnerships, instead of individual efforts of enterprises.

Strategy

If the Indian machine tool industry is to continue its growth path, it has to formulate and implementthe strategy based on the application and diffusion of new technologies and innovations and bestinternational management and practices into product and market development. Given the large

diversity of the industry, it may be advisable to select the areas, in which the industry will concentrateits efforts. Having done so, the effort should concentrate on developing and marketing products, whichare suitable for both export and domestic markets with some changes dictated by local conditions andneeds. The technology level and product standards should not differentiate between domestic and

export markets. The P-Q-R-S-T content should be internationally benchmarked and serve all markets.

With these objectives in view, the industry may lay greater focus on the production and marketing ofthe following product groups and machines:

a) Metal cutting group

CNC lathes, turning and turn-mill centres. Vertical and horizontal machining centres.

Grinding machines (conventional & CNC).

Sawing and cut off machines.

Electric discharge machines (EDMs).

b) Metal forming group

Forming and deep drawing presses.

Punching, notching and nibbling presses.

Bending and shearing (press brakes).

c) Accessories

Chucks and work holding devices.

Cutting tools, tool holders and tooling.

Fixturing.

Multi-tool heads, angle heads, etc.

Index and rotary tables, etc.


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As a part of the strategy, information was disseminated amongst the industry to understand the

emerging trends and needs of machine tool users during implementation of NPDMI. The industry hasrealized the following aspects with a fair degree of clarity:

a. General purpose machines (GPMs)do not seem to be items of major imports into the

target markets. Being of low price and technology, these may not be viable in the long-run. At the same time, simple items like sawing and cutting off machines have highpotential in world markets but the Indian manufacturers have not focused on thisproduct.

b. Metal forming machines: They form a very significant group in world machine tooltrade. The Indian machine tool industry seems to have totally ignored this marketsegment.

c. CNC turning and machining centres: These are fundamentally volume driven andprice sensitive in their s tandard versions. Economies of scale can be achieved only by

volume manufacture of these machines. There is a large target market for thesemachines, provided Indian producers manufacture these machines in volumes.

d. The area of grinding machines is fundamentally technology driven with many sub-elements that constitute overall product performance. However, these machines do not

have a high volume and are not so price sensitive. Performance overrides all otherconsiderations. The proposed technology is very advanced.

e. Special purpose machines (SPM):There is a substantial market for SPMs, which arehighly engineered products and are component specific (auto parts). The Indianmachine tool industry has acknowledged strengths and capabilities in this field. TheIndian made SPMs can be highly price competitive compared to those produced in theUnited States and Europe. There is no competition from Asian countries. The current

technology of SPMs uses machining centre modules in many applications and is,therefore, easier to engineer and build. This is an untapped area and holds highpotential for the export market.

With world production increasing and product zones shifting, India is positioned to export thesemachines provided they are manufactured with focus on export markets rather than domestic markets

alone.

Based upon the above analysis, the machine tool industry in India needs further support for thedevelopment and production of following group of products for both domestic and international

markets:

a. General purpose machines and plastic processing machinery for domestic market as well asfor targeted developing countries.

b. Stand-alone NC/CNC turning machines with targets on Indian, the United States andEuropean markets.

c. Machining centers. Focus should be on building up production volumes in order to boostexports.

d. Grinding machines for India and targeted European and Asian markets.e. Presses and metal forming equipment for India and Asian markets.


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The duty on the machine tools has been consistently reduced from 110% to 7.5% in consonance with

WTO obligations. Thus, no QRs (quantitative restrictions) are applied to machine tools and, therefore,it is not an issue of significance in this industry. The industrial policy for investment and technology

up-gradation has been generally liberalized since 1991. Avenues for free investment without priorapproval have been created.

Machine tool industry is completely free from any controls. Foreign companies can set up a plantanywhere (outside urban limits) with 100% equity and managerial control without having to obtainpermission for it. With introduction of VAT from 01/04/2005, a large part of multiplicity of taxproblem may be solved making cross border trade within India without hassles and excessive taxburden. A comprehensive bill the Indian patents act has been promulgated conforming withrequirements under TRIPS (Trade-Related Aspects of Intellectual Property Rights) of WTO.

There is abundance of skilled manpower, availability of basic raw materials, rising class of technical

entrepreneurs and component manufacturing capabilities (foundry castings) tooled upmachines/complex custom built machines in India. Therefore, by addressing issues concerning lowvolume operations, process capability and the five cardinal principles of P-Q-R-S-T, the performanceof Indian machine tools enterprises can be greatly improved. In this efforts, a greater focus on

increased exports is needed for the long-term viability of the expanded industry.

B. REASONS FOR ASSISTANCE FROM UNIDO

UNIDO, the only one specialized agency for industrial development in the UN system, has beenworking with governments, business associations and individual companies to solve industrial

problems for more than 40 years. Within these years, it has become the worlds most experiencedindustrial problem solver. In many fields, it has rightly earned a reputation as a neutral, honest brokerplaying a vital role in building up partnership, cooperation and coordination. This is particularlyimportant in the rapidly changing global economic and highly competitive environment.

The reputation as an honest broker has been won through:

More than 40 years experience of bringing together eminent experts, governments,institutions and industry to find solutions for problems in technology transfer and investment.

Identification of technology sources and investors and mobilization of funds for projects andindustries.

Transfer, acquisition and adaptation of new technology and innovations.

Matching needs of donors and recipients with benefits for both sides.

Its services are customized and have been designed to be easily integrated into packages that willaddress specific country needs.

In the technology area, UNIDO is transferring its rich global experience in building up awarenessconcerning new technologies and innovations and providing the countries with access to technology


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sources and relevant technical support services to manage technological change for enhanced

productivity and competitiveness of local manufacturing industry. Today, such assistance hasincreasingly been focused on bridging the technological advances with investment and other funding

sources at the industrial marketplace as well as with fast growing market and consumer demand onnew products and services.

Its assistance aims also at strengthening technological capability and technology transfer mechanismsfor further sustainable development, advising on ways and means to manage the technological change,providing support to networking arrangements and fostering international cooperation and partnership.It includes the formulation and implementation of national policy and strategy so that to provide theseprocesses with friendly environment, fiscal incentives and relevant policy regulations.

In all such projects and programmes, UNIDO has demonstrated its experience, competence andcapacity enabling to develop and implement concrete activities with main focus on industrial

knowledge-based development. This particular project is expected to lead to further activities callingfor independent advice on technical assistance, investment promotion, technology transfer, acquisitionand adaptation as well as on the development and application of new technologies and other relatedsupport services.

While implementing the projects/programmes, UNIDO also makes available its tools, methodologies,manuals, guidelines and training kits, which allow the counterparts to apply the best internationalpractices in different areas of investment and technology promotion and transfer enabling to managetechnological change in global economic environment and rapid technological pace. In addition, italso uses the services of its other International Technology Centres (ITCs), Investment andTechnology Promotion Offices (ITPOs) and newly established Centres for South-South Industrial

Cooperation (UCSSIC) as a new global mechanism for building up partnerships with other institutionsand enterprises in both public and private sectors worldwide.

UNIDO Integrated Programme of Cooperation between the Republic of India and UNIDO (2008-

2012)

The UNIDOs Country Service Framework (CSF), finalized in 2002, in cooperation with theGovernment of India, specified the industrial sectors, functional areas, and states of India where futureUNIDO activities should be focused. The on-going Country Programme of cooperation between the

Republic of India and UNIDO (2008-2012) has also identified investment and technology promotion

as one of UNIDOs priority area. It includes the support to technology upgrading and rehabilitation ofsmall scale enterprises, human resource development and skills upgrading, environmentalsustainability of industries and attraction of foreign direct investment as key focused areas for theimplementation of the above-mentioned large country programme.

C. THE PROJECT

Introduction


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The machine tool industry is now making huge investments to expand their production base for

meeting the growing domestic and overseas market. Sizable orders received during internationalmachine tool exhibitions in Italy and Germany in recent years have provided the much needed impetus

for tapping the export potential. The general growth in economy has opened new ways for furthertechnological development of machine tool enterprises. Machine tool industry is also critical for the

industrial development of the country.

This sector is on the threshold to channel flows of technology into the engineering sector. The growthof over 30% experienced in the past 3 years makes feasible a continued growth of at least 20% duringthe next 5 years, this is subject to the strengthening of the existing institutional framework fordevelopment and up-gradation of manufacturing enterprises. According to WTO compatibleenvironment, the manufacturing units do not have the option of reverse engineering due to WTOobligations and have necessarily to adopt innovative developments to keep pace with technology.

The programme intervention is needed for further strengthening the Indian machine tool industry insuch areas as: volume operations, process capability, quality and reliability, cost cutting and R&Dbase. This 2nd phase project will particularly aim at enabling enterprises in adopting technologicaladvancements identified during the 1stphase. Some of the issues emerging out of the 1stphase outputs

need to be pursued on priorities, which include the following:

Production of identified machines for targeted markets.

Improved specifications of the machines to facilitate rapid rates of metal removal, lowertool change time, higher spindle speeds, etc.

Improved aesthetics of the machine tools, including effective chip evacuation for removalof chips.

Reduced mean time between failures and mean time to repair.

Reduction or elimination of coolants in machining.

Adoption of new and improved machine tool features for enhanced productivity.

Integration of various machining processes for single hit machining.

Adoption of linear direct drivers.

Use of lasers in material processing.

Adoption of the latest IT practices in the complete production process.

The adoption of these technological aspects necessarily requires structured exposure, training,expertise, handholding and other support leading to appropriate investments for production of machine

tools based upon technological innovations. The enterprises are in no position to individually accessthe technologies for availing the benefits of technological developments to remain competitive. Theexport of machine tools invariably requires a team approach to reduce the marketing cost. Theenterprises normally operate on rather low volumes and would, therefore, require technology-ledinterventions to assist in their development and growth.

The proposed machine tool programme is necessarily required for commercial adoption oftechnological advancements identified during the 1stphase to ensure accrual of benefits to enterprisesto be able to face global competition in the machine tools sector.

C.1 Objective of the project


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To further strengthen the competitiveness of Indian machine tool industry, particularly its SME sector,in order to achieve cost-effective production of high quality machine tools through technological up-

gradation of manufacturing base and market development. This would lead to the development,growth and increase of world market share of the Indian machine tool industry and help the Indian

Government achieve sustainable growth of this sector.

Target Beneficiaries

The target beneficiaries are facing problems due to obsolete technology and lack of institutionalsupport for new product and market development, testing, managing technological change and othertechnical support services on continuing basis. Therefore, the target beneficiaries for thisdemonstration project will be:

MSMEs that compose the Indian machine tool industry. The Indian Machine Tools Manufacturers Association (IMTMA).

Machine tools clustered already enterprises in Ludhiana, Batala and Jullundhar in the PunjabState (25 enterprises), Rajkot and adjoining regions in the Gujarat State (25 enterprises),

Bangalore in the Karnataka State (25 enterprises), Pune in the Maharastrta State (20enterprises), Coimbatore and other regions in the Tamil Nadu State (20 enterprises).

Institutional capacity of the Institute of Machine Tool Technology (IMTT), which will bestrengthened for sustained development and growth of this sector.

The governments of states through the enhanced competitiveness of manufacturing sector,which results in economic growth of the region and improved living conditions.

Other relevant state and national institutions and individual enterprises, which will bestrengthened for reaching out and providing technical support services to machine toolenterprises.

C.2 The UNIDO Approach

Project strategy and institutional co-ordination arrangements

UNIDO, in partnership with IMTMA, will implement the Phase II of the machine tool technologyupgrading programme within the framework of this project. To achieve these goals, UNIDO will makeavailable its tools, methodologies, competence and long-term expertise in technology and investment

promotion, capacity building and technical support services so that this industrial sector could growand perform on a sustained basis at a later stage.

UNIDO ICAMT will co-finance this project in line with its modality of operation, in particular ICAMT will act as a hub to enhance technological performance of manufacturing industry throughwide range of services, including enhancement of firm level productivity, demonstration and diffusionof new technologies, human resource development programmes, etc. In this specific project, ICAMThas plaid already a constructive role in the development and implementation of the 1st Phase of theproject and in the formulation of its 2ndPhase. It will support the implementation of this phase what


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includes financial support in order to speed up the start up of the implementation and will bring in the

best international practice and expertise.

In addition, the operational links with UNIDO International Technology Centres (ITCs), Investmentand Technology Promotion Offices (ITPOs), network of SPXs, UNIDO Field Offices and newly

established Centres for South-South Industrial Cooperation (ICSSIC) will be pursued in order to usetheir capacity and networks for technology sourcing and investment promotion opportunities as well asto acquire best international practices and expertise in managing these matters.

The project strategy will specifically aim at strengthening the machine tool industry in India through anumber of following focused approaches. In particular, the project will:

Act as a catalyst in public-private partnership development and provider of technologicalsupport services.

Provide industry with information and know-how on latest manufacturing technologies andbest international practices in managing technological change.

Link product development technologies with production technologies at the manufacturing unitlevel.

Establish links between the Indian enterprises and those in the industrialized and developingcountries and countries with economies in transition.

Upgrade technological capacity at a unit level followed by skill enhancement and marketdevelopment. There should be a relevant ratio between the promotional activities, technologyupgrading and market development.

Address issues related to technology transfer focusing on manufacturing technologies andinnovations at SME level.

Adopt new and innovative approaches to technology upgrading of the existing clusters in orderto improve their manufacturing competitiveness.

Increase the use of ICT in machine tool industry.

Leverage on strengths gained from the past experiences and apply best practices in newprojects.

Leverage on strengths of networked and cooperating institutions and organizations.

In this context, the present project will extend the Phase I objectives and programme activities and

play an important role in continuing management of technological change through facilitating thesourcing, selection, assessment, transfer and application of new manufacturing technologies to

machine tool sector of India. It will also enhance the trust between the participating in the projectinstitutions, enterprises and government agencies and increase the opportunities for furthertechnological cooperation and partnership between India and other countries.

Industry as the stakeholder of the project

The Indian Machine Tool Manufacturers Association (IMTMA) is one of the most active and

professionally managed institutions in the country. Almost all the important machine toolmanufacturers are members of this association and participate in its activities very actively. Theassociation has the experience of organizing developmental and promotional activities includingmanagement development and technical training programmes. In addition, IMTMA has also agreed to


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contribute with 30% of the programme outlay for this project having considered that this is a demand

driven programme, which would lead to its acceptance by the entire cross section of the machine toolindustry.

Institutional backup

The institutional capacity of IMTMA was fully utilized during the implementation of NPDMI phase Iproject. It facilitated the integration of IMTMA with the location specific major machine toolmanufacturers associations in the Punjab, Gujarat and Karnataka States of India. The strengthenedinstitutional back up of IMTMA and the Institute for Machine Tool Technology in Batala is aneffective arrangement for horizontal transfer of technology, particularly amongst the small scale units.

Furthermore, such institutions as the Central Manufacturing Technology Institute (CMTI) inBangalore, the Central Institutes of Tool Design in Hyderabad and the Small Industries Service

Institutes in every state of the country offer institutional support for research and development,information dissemination and training programmes enabling to meet the needs of enterprises.

Special consideration

The main goal of this project is to place the machine tool industry of India on the worlds map oftechnology suppliers, thus supporting economic development of SMEs in the country. The machinetool sector is a labour intensive industry in India and the developments of this sector will, therefore,not only lead to enhanced exports but would also create more jobs and sustainability in other industrialsectors.

Coordination arrangementsThe project will be implemented and coordinated by UNIDO within the framework of its ICAMTproject and Integrated Cluster Development Programme (ICDP). The project will also be linked toother UNIDO ongoing projects and programmes on technology transfer, investment promotion andpartnership development. In particular, strong coordination in the implementation of this project will

be done with the UNIDO Regional Office in New Delhi and within the framework of the CountryProgramme of cooperation between the Republic of India and UNIDO for 2008-2012 beingimplemented now.

C.3 RBM code and thematic area code

The relevant RBM codes are CD.13 Competitive Manufacturing and Enterprise Upgrading for TradeEnhancement and CD.14 Technology Management. The thematic area code is TCB TradeCapacity Building.

C.4 Expected outcomes, outputs and activities

UNIDO technical support services/expertise will be focused on providing the sector with access tonew technologies and innovations enabling to develop new product range and use advancements intechnology and best international manufacturing practices for enhancing the competitive position of


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the machine tool industry. Its assistance will also aim at strengthening technological capability and

technology transfer mechanisms for further sustainable development, advising on ways and means tomanage the technological change, providing support to networking and funding arrangements and

fostering international cooperation.

Expected outcomes of the project and national strategic goals

Production processes improved and technology upgrading of the participated in the projectMSMEs accomplished, in particular: Annual growth of at least 20-25% (for participated in the project enterprises). Export growth of 50%. Production of machine tools competitive with their counterparts in the world. Professional management of machine tool enterprises. Annual growth of 100% in manufacturing machine tool components.

Technical, managerial and market development capacities of MSMEs and relatedstakeholders increased for further sustained growth.

Model for further technology upgrading developed and verified for replication across thecountry.

The envisaged deliverables and milestones of the project

Approximately 500 specialists trained on machine tool design techniques.

The exports of enterprises participated in the programme will be enhanced by up to 50%per year.

The project would play an important role in attributing overall growth of the industry at20% per year through increase in production of components and accessories.

The number of produced CNC machines would grow by 35% per year.

At least 15 distinctively new types of machine tools or those with considerable technology

leap will be designed, developed and introduced to the market comparing to this status atthe IMTEX 2004.

Immediate Objective 1

To benchmark technology and new product needs at the global market and the existing status of theIndian machine tool market and manufacturing technology base.

Output 1 for Immediate Objective 1

The production of reliable and high productive machines following global trends increased by 20 percent and CNC machines by 50 percent in the target beneficiary enterprises (please see p. 19).

Activities for the Output 1-1

No. Activities Activity Start/End Month

Responsibility Remarks


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1. Identification of technology needs

after appropriate exposure in theinternational and export markets. 01/30

IMTMA, other

relatedassociations

Periodical

review oftechnological

needs iscritical.

2. Technology mapping of the machinetool industry and documentation oftechnology gaps in the Indianindustry vis--vis technologies in thedeveloped countries.

06/24

IMTMA, otherrelatedassociations,UNIDO

This will becoupled withdisseminationofdocumentedinformation tofacilitateadoption ofrequired

technologyand features indifferentclusters.

3 Development of machine tool designand features to suit the needs ofmachine tool users based uponemerging technology practices.

01/36


Periodicinteractionwith userindustries

4 Sourcing of technology features for

adoption within the WTO framework(this is generally an expensive option

and at times affects the viability ofthe enterprise).

12/36

UNIDO, IMTMA,

other relatedassociations,

Government

Patents and

licensing

5 Workshops and training programmeson mechatronics.

01/36UNIDO

6 National and internationalseminars/conferences on technology

trends to facilitate adoption ofemerging technologies cost-effectively in different aspects ofmachine tool production.

03/30

UNIDO, IMTMA Differenttechnology

groups in eachconference.

7 Institutional training of personnel on

skills, technology absorption andmachine tool applications.

03/30

UNIDO

8 Financial packages for up-gradationof machine tool enterprises for each

major cluster / location.06/30

UNIDO

9 Delegation of machine toolmanufacturers on exposure ondevelopments in technology indifferent countries.

03/30

UNIDO


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25/36

7 Identification of gaps in supply chain

in terms of range, quality andquantity.

03/24

IMTMA, UNIDO

8 Workshops on initiatives and supportfor capacity creation for manufacture

of critical components for CNCmachines.

03/30

UNIDO Design anddevelopment of

criticalcomponents


Cost effective production of efficient and high quality machine tools for domestic and export marketachieved.




1. Documentation of prevalent

transaction costs in machine buildingvis--vis desirable cost foroptimizing cost of production andCE certification of machine toolenterprises, including documentation

of needs of CE certification andother quality requirements in the

buyer countries.

03/24

IMTMA, other

relatedassociations,UNIDO

Cost analysis

andcomparisonwith bestforeigncompanies

2. Verification of casting practices toreduce waste and use of excessivematerial, etc.

01/24


3 Documentation and training onimproving appearance andoperational conveniences in themachine tools and productivityimprovement.

01/12

UNIDO

4 Training on good management

practices for enhancing efficiency inoperations.

03/36

UNIDO

5 Exposure programmes forcooperation amongst enterprises for

specialization and evolvingstrategies for in-house productionand outsourcing of machine toolitems.

03/36

UNIDO, IMTMA

6 Clustering of machine tool

enterprises at different locations for03/30

UNIDO


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reducing input costs, overhead costs,

marketing costs.7 Strengthening networking with SSI

sector for sub-contracting andoutsourcing.

03/30UNIDO

8 Buyer seller meetings forprocurement of machine toolcomponents, sub-assemblies andother inputs.

03/30

UNIDO

9 Publishing of a directory of machine

tool components, sub-assemblies andother input suppliers / importers /manufacturers.

12/36

IMTMA, UNIDO

10 Online linkages with machine toolinput suppliers. 12/30

UNIDO


To increase share of domestic and global market through support to the Indian machine tool industryenabling to become an important player in the export market.


Increased exports of machine tools by 50% in the target beneficiary enterprises (please see p. 19).




1. Documentation of marketing trendsand needs of machine tools in thedomestic and global markets.

01/24UNIDO

2. Assessment of machine toolconsumption and production in thedomestic and global markets,

including regular updating ofcustomer database.

01/30

UNIDO, ITMA,relatedassociations

3 Survey and identification of targetmarkets for the type of machine tools

manufactured by Indian machinetool industry.

03/30

IMTMA, relatedassociations,

UNIDO

4 Inward mission of distributors anddealers from target countries.

12/30UNIDO, IMTMA

5 Participation in domestic exhibitions

like IMTEX, NTMS, IIFT, Tooltec,06/36

UNIDO, IMTMA


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etc.

6 Participation in international

exhibitions in Europe, the UnitedStates and China.

03/36

UNIDO, IMTMA

7 Development of an action plan forbringing improvements and changesin the machine building, machinefeatures, displays, marketingapproach, etc. after participation ineach national and internationalexhibition to ensure improved resultsin the next exhibition.

01/24

IMTMA, relatedassociations,UNIDO

8 Publishing of a common and unit

specific brochure in print and CD forparticipation in each domestic andinternational exhibition.

12/30

UNIDO, IMTMA

9 Networking with dealers in different

countries for long term marketingand after sales service.

06/36

UNIDO

10 Creating a directory of machine toolmanufacturers with basic details foreach major group machine tools.

12,30UNIDO, IMTMA

11 Brainstorming workshops ondomestic and international marketing

strategies.03,24

UNIDO Develop aconcept

12 Training programmes on business

excellence, marketing and use of ITin marketing, both for domestic andoverseas markets.

01,30

UNIDO

13 India Brand Image buildingworkshops and meets in the overseasmarket during internationalexhibitions and interaction meetswith the dealers.

03,30

IMTMA, relatedassociations,Government,UNIDO

DevelopMade ofIndia brand

14 Delegation of machine toolmanufacturers for exposure onmarket trends in the internationalmarket.

03,36

UNIDO


To build up institutional capacity for continuing training and formulation and implementation ofdevelopment programmes needed for machine tool industry for its sustained growth.


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Institutional linkages for continuous upgrading of machine tool enterprises and applied research and

development carried out.




1. Strengthening of IMTT Batala forconducting regular trainingprogrammes on the needs of machinetool industry.

06/30

UNIDO, IMTT

2. Strengthening of IMTMA for

providing facilitation services andconducting technology related anddesign development programmes onsustainable basis. 01/30

UNIDO, IMTMA Develop

DesignSchool, Tech.Div,Productivity

andMechatronicsSchool atIMTMA

3. Development of an annual training

calendar for machine tool industry atdifferent locations with support of

existing institutions.

03/24

UNIDO, IMTMA,

IMTT

4. Tie up with institutions for developingspecialization in the machine toolsector.

06/36UNIDO, IMTMA,IMTT, relatedinstitutions

5. Development of linkages with R&Dagencies for sponsored research output

and moderation of availabletechnologies as per specific needs ofmachine tools industries.

01/36

UNIDO


To prepare industry to meet the emerging global challenges and strategic plan designed. This plan willbe subject to modification due to national strategy and global trends.


A self-sustainable model for sustained growth of the machine tool sector developed, proven andbecome ready for its replication across the country.


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1. Development and implementation of

an action plan and a vision 2020 forthe Indian machine tool sector.

03/30

Government,

IMTMA, relatedassociations

2. Two workshops on emergingchallenges in the machine toolindustry every year.

03/36

Government,IMTMA, relatedassociations

3 Workshop and training in survivaland excellence in post WTO era.

06/30UNIDO

4 Workshops on institutional support,including financial avenues, for up-gradation.

03/30UNIDO, I


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C5. Timeline of activities

Outputs/Activities 1st

year 2nd

year 3rd

year

1 2 3 4 1 2 3 4 1 2 3 4

Output 1-1: Production of reliable and high productive

machines following global trends by 20 per cent and

CNC machines by 50 percent.1. Identification of technology needs after appropriate

exposure in the international and export markets.2. Technology mapping of the machine tool industry and

documentation of technology gaps in the Indian industry

vis--vis technologies in the developed countries.

3. Development of machine tool design and features to suit

the needs of machine tool users based upon emergingtechnology practices.

4. Sourcing of technology features for adoption within the

WTO framework (this is generally an expensive option andat times affects the viability of the enterprise).

5. Workshops and training programmes on mechatronics.

6. National and international seminars/conferences on

technology trends to facilitate adoption of emergingtechnologies cost-effectively in different aspects of machine

tool production.

7. Institutional training of personnel on skills, technologyabsorption and machine tool applications.

8. Financial packages for up-gradation of machine tool

enterprises for each major cluster / location.

9. Delegation of machine tool manufacturers on exposure

on developments in technology in different countries.

10. Outbound missions to encourage technological

alliances.


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Output 1-2: At least 15 distinctively new types of

machine tools produced, as per new and updated designand processes.

1. Verification of machine tool designs using latestCAD/CAE technology.

2. Machine tool design programmes for in-house design

capacity building. Training of designers in CAD/CAEtechniques.

3. Documentation of good manufacturing practices forproduction of machine too l components including machine

tool castings and fabricated items.

4. Training programmes to facilitate exposure on goodmanufacturing practices and their adoption by selected units

to demonstrate the viability of options in different clusters.

5. Standardization of machine tool components and

promotion of use of standard components / items in

machine building for enhanced productivity and efficiency.

6. Half yearly interaction meetings amongst machine tool

manufacturers and suppliers of machine tool components,

sub-assemblies and other inputs to review the desired

changes in design and technology for production of

machine tools.

7. Identification of gaps in supply chain in terms of range,

quality and quantity.

8. Workshops on initiatives and support for capacity

creation for manufacture of critical components for CNCmachines.

Output 2-2: Cost effective production of efficient and

high quality machine tools for domestic and export

market achieved.

1. Documentation of prevalent transaction costs in machine

building vis--vis desirable cost for optimizing cost ofproduction and CE certification of machine tool enterprises,


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including documentation of needs of CE certification and

other quality requirements in the buyer countries.

2. Verification of casting practices to reduce waste and use

of excessive material, etc.

3. Documentation and training on improving appearance

and operational conveniences in the machine tools and

productivity improvement.

4. Training on good management practices for enhancing

efficiency in operations.

5. Exposure programmes for cooperation amongst

enterprises for specialization and evolving strategies for in-

house production and outsourcing of machine tool items.

6. Clustering of machine tool enterprises at different

locations for reducing input costs, overhead costs,marketing costs.

7. Strengthening networking with SSI sector for sub-

contracting and outsourcing.

8. Buyer seller meetings for procurement of machine tool

components, sub-assemblies and other inputs.

9. Publishing of a directory of machine tool components,

sub-assemblies and other input suppliers / importers /

manufacturers.

10. Online linkages with machine tool input suppliers.

Output 1-3: Increased exports of machine tools by 50%

1. Documentation of marketing trends and needs of machinetools in the domestic and global markets.

2. Assessment of machine tool consumption and production

in the domestic and global markets, including regular

updating of customer database.

3. Survey and identification of target markets for the type of

machine tools manufactured by Indian machine toolindustry.


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4. Inward mission of distributors and dealers from target

countries.

5. Participation in domestic exhibitions like IMTEX,

NTMS, IIFT, Tooltec, etc.

6. Participation in international exhibitions in Europe,

United States and China.

7. Development of an action plan for bringingimprovements and changes in the machine building,

machine features, etc.

8. Publishing of a common and unit specific brochure in

print and CD

9. Networking with dealers in different countries for longterm marketing

10. Directory of machine tool manufacturers with basicdetails for each major group machine tools.

11. Brainstorming workshops on domestic and international

marketing strategies.

12. Training programmes on business excellence, marketing

and use of IT in marketing, both for domestic and overseasmarkets.

13. India Brand Image building workshops and meets in the

overseas market during international exhibitions andinteraction meets with the dealers.

14. Delegation of machine tool manufacturers for exposure

on market trends in the international market.

Output 1-4: Institutional linkages for continuous up-gradation of machine tool enterprises and appliedresearch and development carried out.

1. Strengthening of IMTT Batala for conducting regular

training programmes

2. Strengthening of IMTMA for providing facilitation

services and conducting technology related and design


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development programmes on sustainable basis.

3. Development of an annual training calendar for machinetool industry

4. Tie up with institutions for developing specialization inthe machine tool sector.

5. Development of linkages with R + D agencies forsponsored research output and moderation of available

technologies as per specific needs of machine tools

industries.

Output 1-5: A self-sustainable model for sustainedgrowth of the machine tool sector developed, proven andbecome ready for its replication across the country.

1. Development and implementation of an action plan and a

vision 2020 for the Indian machine tool sector.

2. Two workshops on emerging challenges in the machine

tool industry every year.

3. Workshop and training in survival and excellence in post

WTO era.

4. Workshops on institutional support, including financialavenues, for up-gradation.


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C.7 Risks

Different segments of the industry may derive varying degree of benefitsdepending upon their absorption capability.

Outlook of beneficiaries could be different.

Some may keep pace, some may lag behind.

However, with proper review mechanisms, these risks can be minimized.

D. MONITORING, REPORTING AND EVALUATION

The monitoring, reporting and evaluation of the project will be done in line of the UNIDOrules and regulations. A Steering Committee will be created, as in the 1stphase of the project,under the chairmanship of the Joint Secretary, DIPP, Ministry of Commerce and Industry,Government of India, to oversee and monitor this programme. The following organizationsshall be represented in the Steering Committee:

UNIDO.

Department of Industrial Policy and Promotion (DIPP).

Development Commissioner (Ministry of Micro, Small and Medium Enterprises).

Department of Heavy Industry, Ministry of Commerce and Industry.

Small Industry Development Bank of India (SIDBI).

Indian Machine Tools Manufacturers Association (IMTMA).

Machine tool associations of major clusters in Punjab, Gujarat and Bangalore.

Central Manufacturing Technology Institute (CMTI), Bangalore.

Government of Punjab, (IMTT, Batala).

The project will be subject to review by the Steering Committee established for the project.The Steering Committee may appoint an independent agency to assist it in the projectevaluation, if necessary, according to UNIDO rules and regulations. The mid-term projectPerformance Evaluation Report will be prepared at the end of the 1.5 years so as to enable

mid-course correction, if it is felt necessary. The final project Performance Evaluation Reportwill be prepared at the end of the 3 years within the six months prior to the completion of the

project.

E. PRIOR OBLIGATIONS AND PREREQUISITES

The project shall be deemed to have commenced as soon as the Government of India and/orIMTMA organizes funding.

Both, the Government of India and UNIDO will ensure the support of its counterpartagencies. These agencies will cooperate with each other through appointed project authorities(ICAMT in the case of UNIDO). UNIDO will also make sure that its Field Office in NewDelhi as well as its Investment and Technology Promotion Offices (ITPO) and InternationalTechnology Centres (ITC) in other countries will be involved in the implementation of

project objectives and, in turn, this project will provide substantial inputs to overall UNIDOoperations in the country.


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F. LEGAL CONTEXT

The present project is governed by the provisions of the Revised Standard TechnicalAssistance Agreement concluded between the United Nations and Specialized Agencies andthe Government on 31 August 1956 and amended on 3 October 1963, at New Delhi, India.

These provisions are applicable to the present project by virtue of the Declaration of theGovernment appended to the Project Document, accepting the application of the above-mentioned agreement to the present project.

G. CONCLUSION

The project analysis shows that the Indian machine tool industry has the potential andinherent ability to embrace the changes required. It also outlines that intervention at this stageis both required and will make a significant and measurable difference to the industrys

prospects. This in itself makes this project eminently implementable with good chances of

success.

Documents

4 Technology Upgrading and Productivity Enhancement of the Machine Tool Industry in India