SME Cluster Development

Cluster Development Programme of Govt. of India

The Cluster Development approach is a key strategy for enhancing the productivity and competitiveness as well as capacity building of Micro and Small Enterprises (MSEs) A cluster is a group of enterprises located within an identifiable and as far as practicable, a geographical area and producing same/similar products/complementary products/services

1.     Common Facility Centers (CFCs): This component would cover creation of tangible “assets” as Common Facility Centers (CFCs) like Common Production/ Processing Centre (for balancing/correcting/improving production line that cannot be undertaken by individual units), Design Centres, Testing Facilities, Training Centre, R&D Centres, Effluent Treatment Plant, Marketing Display/Selling Centre, Common Logistics Centre, Common Raw Material Bank / Sales Depot, Plug & Play facility, facilities that can support marketing systems, collective Geographical Indications (GI), development of common production & product standards, development of new product designs, improved systems for better hygiene & working conditions for workers, systems for higher overall productivity & capacity utilization of the cluster, systems for skill upgradation of the cluster, as well as supporting diversification activities of enterprises and startups in the cluster, etc. Backward/Forward linkages for value addition in bi-product/waste of cluster units would also be admissible for enhancing productivity/profitability of individual units subject to condition that CFC itself would not sell/market products/bi-products directly.

2.     Infrastructure Development: This component would cover development of land, provision of water supply, drainage, power distribution, non-conventional sources of energy for common captive use, construction of roads, common facilities such as first aid centre, canteen, any other need based infrastructural facilities in new industrial (multi-product) areas/estates or existing Industrial Areas/Estates/Clusters. Development of Flatted Factory Complexes can also be undertaken under this component.

3.     Marketing Hubs/Exhibition Centres by Associations: The GoI assistance to Associations for establishing Marketing Hubs/Exhibition Centres at central places for display and sale of products of Micro and Small Enterprises.

4.     The GoI grant will be restricted to 70% of the cost of Project of maximum Rs.20.00 crore. GoI grant will be 90% for CFCs Clusters with more than 50% (a) micro/ village or (b) women owned or (c) SC/ST units. The cost of Project includes cost of Land (subject to maximum of 25% of Project Cost), building, pre-operative expenses, preliminary expenses, machinery & equipment, miscellaneous fixed assets, support infrastructure such as water supply, electricity and margin money for working capital. (b) The entire cost of land and building for CFC shall be met by SPV/State Government concerned. In case existing land and building is provided by stakeholders, the cost of land and building will be decided on the basis of valuation report prepared by an approved agency of Central/State Govt. Departments/FIs/Public Sector Banks. Cost of land and building may be taken towards contribution for the Project. CFC can be set up in leased premises. However, the lease should be legally tenable and for a fairly long duration (say 15 years). In case CFC is established on leased land the Lease Period should be more than.

5.     There should be a minimum of 20 MSE cluster units serving as members of the Special Purpose Vehicle (SPV). No ceiling on the maximum number of members. In special cases, where considerations of investments, technology or small size of the cluster warrant lesser number of units, a minimum of 10 MSE units may be considered for the SPV.

         (a)      In short 20 Members from Micro or small Units are required.

         (b)      SPV is to be created.

         (c)     Common Facility Centre can be created with Support from MSME Dept.

         (d)     Total Project Cost Rs. 20 Crores Excluding Land and Building.

         (e)      Land and Building is required to be arranged by SPV or State Govt.

         (f)      From 70% to 90% grant depending upon the categories of participating Units.