Cluster approach for the development of MSME's in India

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MINISTRY OF MICRO, SMALL AND
MEDIUM ENTERPRISES (MSMEs),
GOVERNMENT OF INDIA
CLUSTER APPROACH FOR THE
DEVELOPMENT OF MSMEs IN INDIA
Office of
Development Commissioner (MSME)
01.12.2010

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Micro, Small & Medium Enterprises
As per quick results of Fourth Census,
Employ 59.72 million People in 26 million MSMEs
ØGive 45% of Manufacturing Output
Ø Account for 40%+ of Exports
Ø Contribute 8% to GDP
Ø Industrial Growth Rate
MSMEs: 10.8%; Overall: 7.7%

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Definition of MSMEs
Manufacturing Enterprises:
ØMicro Enterprises - investment up to Rs.25 lakh
ØSmall Enterprises - investment above Rs.25 lakh & up to Rs. 5 cr.
ØMedium Enterprises - investment above Rs.5 cr. & up to Rs.10 cr.
Service Enterprises:
ØMicro Enterprises – investment up to Rs.10 lakh
ØSmall Enterprises – investment above Rs.10 lakh & up to Rs. 2 cr.
ØMedium Enterprises – investment above Rs.2 cr. & up to Rs.5 cr.

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DC (MSME): Major Schemes
Ø Credit Guarantee Scheme
Ø Micro Finance Scheme
Ø Skill Development Programmes
Ø Credit Linked Capital Subsidy Scheme
Ø Cluster Development Programme
Ø National Manufacturing Competitiveness
Programme
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5. MICRO & SMALL ENTERPRISES –
CLUSTER DEVELOPMENT PROGRAMME
(MSE-CDP)
Office of DC(MSME)
Ministry of MSME
Government of India

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What is Cluster
Group of enterprises located within an identifiable
contiguous area & producing same/similar
products/services. Essential characteristics:
• Similarity or complementarity in the methods of
production, quality control and testing, energy
consumption, pollution control, etc
• Similar level of technology and marketing
strategies/practices
• Common challenges and opportunities.

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Objectives of Cluster Development
• To support sustainability and growth of MSEs by
addressing common issues such as improvement of
technology, skills and quality, market access, access to
capital, etc.
• To build capacity of MSEs for common supportive
action through formation of self help groups, consortia,
upgradation of associations, etc.
• To create/upgrade infrastructural facilities in the
new/existing industrial areas/ clusters of MSEs.
• To set up common facility centres (for testing, training
centre, raw material depot, effluent treatment,
complementing production processes, etc).

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Strategy and Approach
Given the diverse nature of the MSEs, the MSE-
CDP scheme aims at addressing the needs of the
industries, through well defined clusters and
geographical areas. This enables in
• Achieving the economies of scale in terms of
deployment of resources
• Focusing on the specific needs of similar industries.
• Capacity building of associations
• Setting up of special purpose vehicles (SPVs),
consortia, etc.
• Leveraging the resources

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Scope of the Scheme
Overall improvement of MSE clusters by :
F Diagnostic Study
F Soft Interventions
FSetting up of Common Facility Centres (CFCs)
FCreation and upgradation of Infrastructure in industrial
estates/ clusters
o Development of land, Provision of water supply, drainage,
o Power distribution, non- conventional sources of Energy for
common captive use
o Construction of roads, Common facilities such as First Aid
Centre, Canteen, etc

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Project Cost and GoI Support
Intervention Cost (Rs. in
lakh)
GoI in %
Normal cluster
#
DSR P 2.50
*1.00
100 100
DPRfor i) CFC P
ii) Infra dev
5.00 100 100
Soft interventions **25.00 75 90
Hard Interventions 1500.00 70 90
Infra Dev 1000.00 60 80
*For MSME-DI, P 50% released after the approval, 50% after acceptance of report.
** Moderated as per size/ turnover of the cluster. Max Rs 25.00 lakh per cluster
# NE & Hill States, Clusters with more than 50% (a) micro/ village (b) women owned (c) SC/ST units

11. National Manufacturing Competitiveness
Programme (NMCP) for MSME Sector
Objective
¨Focus on increasing competitiveness of MSME sector
¨ Key for survival in domestic / international markets
Challenges
¨ Mainly supply side initiative
¨ Fear of disclosing data to others / Govt.
¨ Hesitant in giving Private contribution

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National Manufacturing Competitiveness Programme
(NMCP) Summary (Rs. crore)
S.
No.
Approval
Date
Name of the Scheme Scheme
GOI Contr.
Total
cost
1. April - 07 Marketing Support / Assistance to SMEs (Bar Coding) 1.50 1.50
2. May – 08 Enabling Implementation of Quality Management Standards and
Quality Technology Tools (QMS/QTT) for SMEs
41.10 50.00
3. April – 08 Entrepreneurial & Management development of SMEs through
Incubators
66.50 79.45
4. Aug – 08 National Campaign for awareness in Intellectual Property Rights 50.00 55.00
5. Aug – 08 Setting up Mini-Tool Rooms on PPP Mode 135.00 210.00
6. July - 09 Application of Lean Manufacturing 25.87 30.57
7. Jan – 10 Design Clinic Scheme 49.08 73.58
8. Jan – 10 Technology & Quality Up gradation support for MSMEs 65.73 140.98
9. Feb – 10 Marketing Assistance & Technology Upgradation for MSMEs 18.61 23.00
10. Aug – 10 Promotion of ICT in Manufacturing sector 47.70 105.00
Total 501.09 769.08

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• Scheme to support knowhow & implementation of Quality Systems Tools in
MSME sector
Ø Conforming to International Standards, 5S, S-sigma, TQM, TPM
Ø ISO 9000, ISO 14000, ISO18000, ISO 22000 etc.
• Major activities to propagate Quality Management in MSMEs are:
1) Compulsory Courses in 1800 ITIs / Polytechnics
2) Awareness Programmes in Clusters on QMS / QTT
3) Implement Quality Mgt Techniques among MSMEs
4) Special Studies for Threatened Products
5) Assist International Study Missions for SME groups
Quality Mgt. Systems/Tools (QMS/QTT)
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• Objective:
Ø Assist Incubation of Innovative Ideas
Ø Promote Emerging Technological & Knowledge-based Innovative
Ventures
Ø Encourage Ideas to Become MSMEs
• 100 BIs to be Located in engineering colleges, management
institutions and R&D Institutes @ 25 p.a in 4 yrs.
• Govt. Grant (Max. 85%) = Rs.4 - 8 lakh per Idea
• Each BI to Assist 10 Ideas / Units – Max. Rs.62.5 lakh
• BIs to support and Nurture ideas for commercialization in a year
Incubators
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• IPR Tools :
– W Patents W Trademark W Indl. Design
– W Copyrights W G.I. W Trade Secret
• Most MSMEs are unaware of IPR Benefits / Norms
• Focused Activities
1) Awareness & Sensitization Programmes
2) Pilot Study
3) Interactive Seminars / Workshops
4) Short / Long Term Training
5) IP Facilitation Centre
6) Assistance for Grant on Patent / GI Registration
IPR Campaign

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• Lean Manufacturing (LM) is Better Production of Goods by
Ø Eliminating Non-value Added Activities / Wastes
Ø Helping to Produce More with Same Resources
• LM is very important of Quality and Cost Management tools
• Scheme is under operation on pilot basis for 100 mini clusters
• NPC is working as monitoring & Implementing Nodal Agency
Ø Initially cluster units to be made aware regarding lean techniques
Ø ‘Mini Clusters’ of 10 units (appx.) to be created
Ø SPV to be formed by ‘Mini Cluster’.
Ø GOI : Private Share – 80:20 (1st year only)
Lean Manufacturing Scheme
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17. SRIVARI INDUSTRIES
Before After
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18. SA INDUSTRIES
Before After
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19. AFTER
BEFORE
AASHISH AUTO COMPONENTS
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20. SHIVAKRISHNA INDUSTRIES
BEFORE
AFTER
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Ø Bring the industrial design fraternity closure to the MSME sector
Ø Increase the competitiveness of local products and services through
design
Ø Develop an institutional base for the industry’s design requirement
Ø Major activities :
ü Setting up of design clinic centre - HQ
ü Regional Centres – 4 Nos.
ü Awareness seminars and workshops – 200 Clusters.
ü Design projects for individual MSME or a group of MSMEs
ü Students Projects
ü Orientation Programme for Designers
NID to work as a nodal agency
Design Clinics Scheme
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Objective:
• Focuses on Energy Conservation, CDM and Product Certification
• Activities Proposed:
1) Capacity Building of 30 Clusters in Energy Efficient
Technology
2) Credit Linked subsidy for EET Projects
3) Cluster level CDM initiatives
4) Encourage MSMEs through subsidy to acquire National as well
as International Certification of Products
Technology and Quality Upgradation Support

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• Major activities:
Ø Technology upgradation in packaging
Ø Skill upgradation /development for Modern marketing techniques
Ø Special component for NER clusters
Ø State/District level local exhibitions
Ø Corporate governance practices
Ø Marketing hubs for B2B meets
Ø Reimbursement to ISO 18000/22000/27000 certification
Marketing Assistance and Technology
Upgradation Scheme for MSMEs
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• Demonstrative Programme for 100 clusters
• Implementation in following areas:
• Components of scheme :
Ø ICT Awareness, through IT Cos.
Ø Preparation of Cluster DPRs on ICT interventions
Ø E-readiness centres
Ø Cluster based local ICT Solutions
Ø E-Marketing – through E-Catalogues / cluster websites
Ø Skill Development of Workforce on IT application for MSMEs
Ø Setting up national portal for integration
Promotion of ICT in SMEs
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Thank You