MSE-CLUSTER DEVELOPMENT PROGRAMME

(MSE-CDP)

OBJECTIVES

Cluster approach is key strategy for enhancing productivity/competitiveness of small enterprises;

Facilitate economies of scale in terms of deployment of resources;

For integrated and focused development of micro and small enterprises;

WHAT IS CLUSTER? Concentration of units producing same/similar

products (or engaged in same line of industrial activity) located within a defined geographical area, such as Mohalla, Taluka or Tehsil;

Combination of villages/blocks and even smaller districts may also fall under the geographical extent of cluster;

Principal characteristics: commonality of production process, quality control, testing, energy conservation & application of technology;

Common challenges, bottlenecks and opportunities;

FIRM FIRM

FIRM

FIRM FIRM

Commercial service providers(Designer, Testing Laboratory, Transporter,

Financier, Import Agents etc.)

Public and Private service institutions

Policy Environment

International Environment

SellingAgents

DirectCustom

Machinery supplier

RawMaterial Supplier

SCOPE OF THE SCHEME Diagnostic Study– all aspects to suggest emphasis;

Forming Associations - Trust building & Developing Identity ;

Workshops, Seminars, Awareness Campaign, Training and Study visits;

Common Purchase, lower Costs ;

Re-sourcing of better technology ;

Technology transfer through training/ demonstrations;

(contd..)(contd..)

Apportion different aspects of production among Apportion different aspects of production among units – specializationunits – specialization

Setting up of Common Facility Centre (CFC), Mini Setting up of Common Facility Centre (CFC), Mini Tool Room, Testing Lab, Design Centre, Common Tool Room, Testing Lab, Design Centre, Common Raw Material BankRaw Material Bank

Common/complementary sales and branding Common/complementary sales and branding

Easier Credit – use of Micro Finance/Credit Easier Credit – use of Micro Finance/Credit Guarantee Guarantee

Handholding support in general Handholding support in general

SELECTION OF CLUSTER(S)

Importance of the Cluster(s) in terms of number of units, employment, production, export etc;

Existence of critical gaps;

Viability of the cluster;

Vibrancy of local Industry Association;

Social and Environmental considerations;

Preference for clusters having sizeable presence of women entrepreneurs.

SEQUENCING OF CLUSTERDEVELOPMENT PROGRAME (CDP) Selection of Cluster(s);

Selection of Cluster Development Executives (CDE) /Cluster Development Agency (CDA)/Local Organiser (LO);

Trust Building;

Diagnostic Study;

Preparation of Action Plan;

Approval of Budget;

Implementation of Action Plan;

Monitoring and Evaluation;

Handing over and Exit;

MSE-CDP MethodologyMSE-CDP Methodology

Selection of ClustersSelection of Clusters Size Size Scope for growth, Scope for growth, Cluster’s importance, Cluster’s importance, Imminent threats etc.Imminent threats etc.

Diagnostic Study Diagnostic Study SStudy about its constraints, tudy about its constraints, Potential, Potential, Local linkages and support mechanism. Local linkages and support mechanism.

Trust Building

Collective and collaborative efforts

Preparing a realistic action plan for the cluster

Support from clients, service providers and support agencies.

Action Plan

It is a road map that will help to develop and foster lasting relationships among the cluster actors while at the same time delivering visible results. It is based on the collective vision of the cluster. Identifying the suitable intervention and their sequencing are important.

Implementation

The cluster actors interact with one The cluster actors interact with one another and conduct their business. another and conduct their business.

The responsibility for their The responsibility for their implementation of various activities is implementation of various activities is progressively shifted to the private progressively shifted to the private sector with support drawn from local sector with support drawn from local institutions.institutions.

Monitoring & Evaluation

Quantifiable outputs as a result of Quantifiable outputs as a result of implementation are monitored and implementation are monitored and evaluated. evaluated.

IIntegrated Infrastructural Development (IID) Scheme (Subsumed in MSE-CDP)

To provide developed sites with basic infrastructural facilities like power, water, telecommunication, drainage,& pollution control facilities roads, Banks, Raw Material Storage, Marketing Outlets, common facilities services,& Technological Backup Services etc.

The GOI grant will be 60 % of the cost of project of Rs 10 Cr.(excluding cost of land). Fund will be released on reimbursement basis or on matching share basis.

Breakup of Fund :-

1. Land Development & Other Overhead infrastructure : Rs 7.50 Cr.

2. Administrative & Other services complex – Rs 1.50 Cr.

3.Effluent treatment facilities – Rs 0.80 Cr.

4. Contingencies and pre-operative expenses – 0.20 Cr.

LEVELS OF IMPLEMENTATION 3 Level of Intervention :

• Mentor (Technical Institutions or MSMEs or Expert/ Consultants or even Big Buyers) who advises and provide handholding support ;

• CDE (Cluster Development Executive) who actually executes and monitors all interventions – can be DIC- Officer, MSME- Officer, Retired Expert or even Hired Person ;

• NDA (Network Development Agent) or Local Organiser (LO)– Local person from cluster;

CDE essential, Mentor & NDA/LO optional;

IMPLEMENTING AGENCIES State Govt’s (DICs, other Autonomous Bodies); Central

Govt (MSME-DI’s etc.) or Others (National and International Institutions/ Society / NGO);

In case the implementing agency is not the State Government or its organization, the agency will also need to necessarily come through the State Government;

For select interventions, Business Development Service (BDS) providers can be engaged (for identifying technology gaps, developing markets and export linkages);

FUNDING PATTERN:GENERAL Contribution of the Ministry of MSME (GOI) shall not

exceed 60% of the total project cost subject to a ceiling of Rs.10 crore per project;

In all cases (where required), the entire cost of land and building shall be met by the SPV/State Government concerned.

FUNDING PATTERN: CFC Special Purpose Vehicle (SPV), i.e., Society/ Trust/ Co. to

be formed by cluster beneficiaries before seeking funds for Common Facility Centre (CFC),

For CFC, GoI support is 70 % of the cost of project of maximum 15 Cr.

Cluster beneficiaries’ share should not be less than 10% of the total cost of CFC, the cost of project includes Cost of Land( subject to maximum 25 % of project cost), Building, Pre- Operative expenses, Machinery & equipment etc.

State Government contribution will be considered as the viability gap funding.

PROCEDURE FOR APPROVAL

Development Commissioner (MSME) for project costing less than 1 crore.

Steering Committee under the Chairmanship of Secretary (MSME) for projects costing Rs.1 crore and above.

Disbursement of funds to be made to SPV/Implementing Agency, under intimation to the State Government.

Internal Finance scrutinizes and gives final clearance.

PROGRESS

Intervention so far in of more than 400 clusters.

Combination of soft and hard interventions.

Setting up of CFC, Mini Tool Room, Testing Centres (Some clusters are spending Rs.5 Crore to Rs.6.5 Crore)

Diagnostic Studies/ Viability Studies for more than 100 new clusters

3 CFC proposals - one each in Kerala, Orissa & Gujarat

Opportunities for BanksOpportunities for Banks

Common procurement of Raw Material Common procurement of Raw Material Common Facility CentersCommon Facility Centers Technology Up gradation under CLCSSTechnology Up gradation under CLCSS Mutual Credit Guarantee FundsMutual Credit Guarantee Funds Integrated Infrastructure Up gradation Integrated Infrastructure Up gradation

SchemeScheme Industrial parksIndustrial parks Credit required for Export, Term Loan etc.Credit required for Export, Term Loan etc.

NATIONAL MANUFACTURING

COMPETITIVENESS PROGRAMME (NMCP)

NATIONAL MANUFACTURING COMPETITIVENESS PROGRAMME (NMCP)

► FORMULATION OF NMCP Announced in 2005-06 Budget

► It is to Support MSMEs and:► Ensure MSME Sector Grows at a Healthy Rate.► Draft a ‘National Strategy for Manufacturing’ ► 10 Schemes Drawn Up under NMCP, at

Rs.1000 crore► Implementation of Schemes to be in PPP

Mode.► NMCP deals with Firm-Level Competitiveness► Is ‘Hands On’ and Benefits Groups

Full Name of the Scheme Short Name

Support for energy Conservation and Quality TechnologyENERGY

Promotion of ICT in Indian MSMEs ICT

Design Clinic Scheme for Design Expertise DESIGN to MSMEs Marketing Assistance/ SMEs and Technology MARKETING upgradation Activities- Ministry of to MSME in co-operation with TIFAC/CSIR

NMCP-COMPONENTS ON THE DRAWING BOARD

LEAN MANUFACTURINGIntroduction► Lean Manufacturing was conceptualized by the

Toyota Motor company to synergize the flexibility of small scale production with the economies of scale of large scale manufacturing.

► The basic components of the concept of Lean Manufacturing are – Cellular Manufacturing Pull Scheduling (Kanban); Six Sigma / Total Quality Management; Rapid Set-up and Team Development

- 2 -- 2 -► The programme that has been tried out successfully in

industries abroad as well as well as in the large enterprise sector in India, is basically a business initiative to reduce ‘waste’ in manufacturing end products.

► It also brings improvement in the quality of products and lowers costs, which are essential for competing in national and international market.

► The MSMEs under the programme will be assisted in reducing their manufacturing costs, through proper personnel management, better space utilization, scientific inventory management, improved processed flows, reduced engineering time and so on.

► The programme is sought to be implemented through industries and their associations in clusters, with substantial initial assistance from the Ministry of MSME.

- 3 -- 3 -

► It is expected that through entrusting the implementation to the units/beneficiaries themselves, with the active assistance of their industry associations.

► Awareness and Motivational Campaigns are expected to be organized in targeted clusters of Micro, Small and Medium enterprises all over India to spread awareness about the concept and their advantages.

► Once 10 or so units are sufficiently convinced /encouraged to accept the programme, they would get together as a “Mini Cluster” and formalize their relationship through a legal frame-work i.e. a Special Purpose Vehicle (SPV) to approach the Central Government via their Industry Association to take up the Lean Manufacturing Programme in its Mini Cluster.

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► This SPVs is free to select a (certified) Lean Manufacturing Consultant or request Government to select one on their behalf.The programme is being implemented in 100 mini clusters with a budget allocation of Rs. 35 crores.The programme will be continued during the second and third years in those Mini Clusters only whose participating units sign up and agree to share the burden of funding the Programme. 100 Consultants Required immediatelyGovt: Private Funding=80:20 (1st yr),0:100(2nd yr)

MARKETING ASSISTANCE AND MARKETING ASSISTANCE AND UPGRADATION OF TECHNOLOGIESUPGRADATION OF TECHNOLOGIES

Introduction:Introduction:► The Micro, Small and Medium Enterprises (MSMEs) in India produce a diverse

range of products - with the very simple products produced by household enterprises at one end of the spectrum and highly advanced ones at the other end. With globalization and changes in communication technologies, new challenges and opportunities have arisen for MSMEs. The concept and techniques of marketing have also been continuously undergoing a change with the rapid changes in technology and consumer preferences.

► Marketing, a strategic tool for business development, is critical for the growth and survival of MSMEs. Due to lack of information, scarcity of resources and unorganized ways of selling / marketing, MSME sector often faces problems in exploring new markets and retaining existing ones. Such asymmetries in information, with not aware of the new market where they may sell their products and buyer also having lack of knowledge about the products manufactured by MSMEs result in severe impediments to the growth and survival of MSMEs in a highly competitive environment.

- 2 -- 2 -OBJECTIVE :-OBJECTIVE :-The objectives of the scheme will be achieved by performing the following

major activities for MSMEs through Government of India financial assistance in the manner laid down in these guidelines. Page 5 of 26

i) Technology Upgradation in Packaging.

ii) Skill Upgradation/ Development for modern marketing techniques.

iii) Competition studies.

iv) Special component for North Eastern Region.

v) New markets through State/District level local exhibitions/Trade fairs.

vi) Corporate Governance practices.

vii) Marketing Hubs.

viii) Reimbursement to ISO 18000/22000/27000 certification.

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Target cluster/product Groups: A tentative list of MSME clusters/product groups is given below which are

proposed to be covered under the scheme. As the list is only indicative, the SSC may add or delete any cluster/product group, as necessary. Page 6 of 26

S.No. Name of Cluster/Product group S.No. Name of Cluster/Product group 1. Surveying Instruments 2. Scientific Instruments

3. Rice Milling 4. Auto components

5. Packaged food 6. Confectionery 7. Pharmaceuticals 8. Leather Goods

9. Plastic components 10. Electronic toys 11. Readymade Garments 12. Agricultural Implements 13. Brassware and

builders Hardware 14. SS Utensils 15. Hand Tools 16. Ball Bearing 17. Scissors and Knifes 18. Electric Mixer and Grinder 19. Corrugated Box and Packaging 20. Glass laboratory wares

Fund sharing patternFund sharing pattern Sl.No. Sub-Activities Max. Cost provision Physical target

2009-10 2010-11 2011-12

(a) Awareness programmes on new packaging concepts & Technologies

Rs. 0.50 lakh per programme (GoI: unit:: 80:20)

nil 50 Nos. 50 Nos.

(b) Cluster based studies on packaging status & needs for upgradation

Rs. 10 lakh per study (GoI: unit:: 80:20)

nil 10 Nos. 10 Nos.

(c ) Unit based interventions for specific packaging requirements in 20 clusters. (approx. 20 units per cluster)

Rs. 9.0 lakh for a group of 10 units. (GoI: unit:: 80:20)

nil 10 Nos. 10 Nos.

The awareness programmes at (a) above, will normally be of one day duration. The selected agency along with the MSME-Development Institutes and concerned industries associations would conduct the proposed awareness programmes. The admissible cost will cover, as applicable, the expenses towards rent for venue, training materials, audio/video aids, TA/DA/ honorarium to the guest faculty, expenditure on transport for arrangement, stationery items, refreshment and related miscellaneous activities. The norms for these items will be decided by the Screening-cum-Steering Committee.

DESIGN CLINICSDESIGN CLINICS

INTRODUCTION –INTRODUCTION –

► Design Clinic is a tested strategic model of design Design Clinic is a tested strategic model of design intervention, where a solution to an existing design problem is intervention, where a solution to an existing design problem is diagnosed and remedial steps are suggested by a multi-diagnosed and remedial steps are suggested by a multi-disciplinary team of design experts.disciplinary team of design experts.

► In this model, the value additions to an idea or a concept are In this model, the value additions to an idea or a concept are imparted through interaction and a lesser cost to a specific imparted through interaction and a lesser cost to a specific industry/sector.industry/sector.

► Industrial design here can provide the essential inputs in Industrial design here can provide the essential inputs in terms of its design features, its form and colour etc., ease of terms of its design features, its form and colour etc., ease of its use, consideration of safety factors, new products features, its use, consideration of safety factors, new products features, its positioning in the market etc.its positioning in the market etc.

- 2 -- 2 -► Understanding of customer requirements, his taste, his Understanding of customer requirements, his taste, his

behaviour patterns, aspirations etc. and designing behaviour patterns, aspirations etc. and designing products based on these, i.e. ‘user centric design products based on these, i.e. ‘user centric design approach’ can greatly increase the rate of success when approach’ can greatly increase the rate of success when the product is ultimately launched in the market.the product is ultimately launched in the market.

► Equipping the SME to seek design solutions is a necessity Equipping the SME to seek design solutions is a necessity and Design Clinic model is expected to be an innovative and Design Clinic model is expected to be an innovative technique in the right direction.technique in the right direction.

The SchemeDesign Clinic will be guided by the following key principles: Rigorous yet applicant friendly process� Promotion, dissemination in regional/local languages understood by�the MSME’s Establish benefits clearly without overwhelming the MSME’s� Learn from other successful design support programs� Establish a clear process pipeline�The purpose of the scheme is two-fold: increase the awareness of the value of design and establish design�learning in the micro, small and medium sized industries, and increase the competitiveness of local products and services through�design.

Initial Design Work Funding• All applications for funding support for design projects under theScheme must be in collaboration between a MSME requiringassistance in design and a designer/design company / academicinstitution which will provide that assistance.• The funding support will be given by way of a grant upto amaximum of 60% of the total approved project cost or Rs. 9.0Lakhs, whichever is less, in case of a individual MSME or a groupof not more than three MSME applicants.• The funding support will be given by way of a grant upto amaximum of 60% of the total approved project cost or Rs. 15 Lakhs,whichever is less, in case of a group of four or more MSMEapplicants.

Design Project FundingThrough Need Analysis, Consulting and Funding, the fundingassistance will be provided to the MSMEs in their selection andengagement of design consultants and professionals.

Design Project FundingObjectives• To assist local enterprises with engaging external design expertisein the form of consultancy• Projects supported should lead to new design strategies, and/ordesign-related products and services• Projects supported must be impactful and effectively develop thecapabilities of the local enterprise

Financial Assistance• The Design Clinic program shall support initial design work byreimbursing 60% of the designer fee up to a maximum limit of Rs.9.00 Lakhs (Rs. Nine Lakh only) in case of a group upto threeMSME applicants.• The Design Clinic program shall support initial design work byreimbursing 60% of the designer fee up to a maximum limit of Rs.15 Lakhs (Rs. Fifteen Lakhs only) in case of a group of four or moreMSME applicants.• Funding assistance up to Rs. 2 Lakhs (Rs 1.5 lakh as GoI) shall beavailable for final year student projects done for the MSME’s.

Project Duration• Project duration will be less than one year.

Project Budget• The principal applicant is required to submit a budget proposed forthe project, showing all expenditure and the relevant documents,such as quotation, project brief, or contract.• When preparing the project budget, the principal applicant isrequired to provide a brief description of the work steps involved,and the cost breakdown for such steps. Other information such asduration of time and manpower required (e.g. in man-days) will alsobe helpful. Unspecified cost items such as miscellaneous, sundryand contingency etc. will not be accepted.• A list of unallowable cost items which cannot be charged to theproject account is set out in another point below.• Both the applicant design company/academic institution and theapplicant MSME are required to declare in the application whetherany or both of them have sought or are seeking funding support forthe project from other public funding sources. Double subventionwill not be allowed.

Design Clinic centreThe design clinic centre will be established for the effectiveimplementation of the design clinic scheme. The centre will function asthe headquarters and an initiator of all activities under the scheme.

Design Regional Centers• Four nos. regional centers will be established by NID initially for thepurpose of administering Design Clinics.• The regional centers to be set up, will be decided by the PMAC,keeping in view the proximity of MSME clusters potential for DesignInterventions.

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