MSME Scheme: Helping small businesses scale through Micro & Small Enterprises Cluster Development Programme

Run by: DCE MSME
Applicable to: Industrial associations, Consortiums, Clusters

When a group of organisations work within a similar area, produce similar products using similar production technologies, they are said to be a part of a cluster. Being a part of a cluster they can enjoy economies of scale, easier financing through lenders and pose a common front to face business related challenges.

Moreover, since the industries are engaged in similar activities, a cluster fosters healthy competition and helps businesses to grow. Keeping this sentiment in mind, the Government of India, through the Ministry of Micro, Small and medium Enterprises (MSME) is promoting the cluster development programme for MSMEs so that they can grow, increase their productivity and contribute better towards increasing the GDP of the country. Let's understand the programme in details.

Micro & Small Enterprises Cluster Development Programme
The cluster development programme would aim to form clusters of enterprises having similar activities. A cluster, according to the programme, would be defined as a group of enterprises situated within an identifiable, contiguous and a practical area which produce similar products or render similar services. The cluster would have similar production process, energy consumption, technology usage, pollution control measures, marketing strategies, communication channels and would face similar complications as well as opportunities. The scheme has been adopted with the following objectives in mind:

• To support MSMEs and promote growth by helping them solve their technical issues, improving their skill and quality of products, providing better access to capital as well as market, etc.
• To increase the capacity of MSMEs through the creation of self-help groups, consortiums, associations, etc.
• To create or upgrade facilities of infrastructure in new or existing industrial areas or MSME clusters and creation of Flatted Factory Complexes
• To establish Common Facility Centres (CFCs) for the purpose of training, testing products, as a depot for raw materials, for conducting complementary production processes, etc.

How would the scheme work?
The scheme would help in creating and monitoring clusters through the following activities:

• Diagnostic studies which would help in mapping of the business activities to find out the strengths, weaknesses, opportunities and threats to the business. The study would also create an action plan which would help clusters in meeting their problems themselves.
• Soft intervention in the form of awareness programs, counselling, creation of seminars and workshops, etc.
• Detailed Project Report (DPR) would be prepared to assess the technical feasibility and economic viability of the cluster. The DPR would include detailed financial statements and would be scrutinised by a bank or technical consultancy
• Setting up CFCs for various business activities
• Creation of Infrastructure Development Centres (IDCs)

The financial aid allowed by the scheme would depend on the activities being conducted. The assistance for each of the above-mentioned activities is as follows:

• The maximum project cost for diagnostic studies should be up to Rs 2.5 lakh
• For soft intervention, the maximum project cost should be up to Rs 25 lakh and the Government would provide assistance for up to 75% of the incurred cost. The assistance increases to 90% for States which qualify under special category and for clusters which have more than 50% women, micro units, village units, SC or ST units.
• For setting up CFCs, the maximum project cost should be limited to Rs 15 crore where the Government would provide assistance for up to 70% of the cost. This assistance is again increased to 90% for States which qualify under special category and for clusters which have more than 50% women, micro units, village units, SC or ST units
• For infrastructure development, the maximum project cost is limited to Rs 10 crore with Government assistance of 60%. 80% assistance is provided to States which qualify under special category and for clusters which have more than 50% women, micro units, village units, SC or ST units

Who runs the scheme?
The Ministry of MSME runs the scheme under the directives of the Indian Government.

Who can apply for the scheme?
Industrial associations, industrial consortiums or clusters can apply for this scheme.

How to apply for the scheme?
The scheme can be applied online. If offline application is done, the copy of the application form should be sent through the respective State Government, their autonomous bodies or through field institutes of Ministry of MSME. The application proposal would be processed and approved by the Steering Committee of MSE - CDP.

Marching Ahead
Till date, 964 clusters have been considered under the scheme out of which ongoing are 193 and completed are 771. In case of infrastructure projects, 179 projects have been undertaken out of which 135 have been completed.