1 Empowered Group of Ministers (EGoM) on Cluster Development 1 st Meeting : 09.07.2007.

1

Empowered Group of Ministers(EGoM)

onCluster Development

1st Meeting : 09.07.2007

2

1. To review the existing cluster development

programmes/ projects/ schemes being implemented by

the Ministries/ Departments of the Central Government in

accordance with the ToR.

2. To specify broad policy guidelines and implement measures

to bring about harmonization and synergy among

these programmes/ projects/ schemes and enhance their

outcomes in the XI Plan period including results in terms of

promotion of manufacturing, renewing industrial towns

and building new industrial townships etc. and

3. To decide any other matter considered important or

relevant.

TERMS OF REFERENCE

3

25 consulted. 7 Ministries (8 Departments)

-- MoMSME -- MoT

-- MoFPI -- DIPP-- MoRD --

DoC--Banking -- MoPR

16 Schemes/ Programmes.

MINISTRIES/ DEPARTMENTS/ COMMISSIONS/ COUNCILS

CONSULTED

4

Ministries Consulted

S.#

Ministry/Deptt.

Name of Scheme

1 MSME a) Micro & Small Enterprises Cluster Development Programme.

b) Growth Poles Proposed by NCEUS (under consideration)

c) Clusters for SC,ST, etc. (under consideration)

d) Scheme of Fund for Re-generation of Traditional

Industries (SFURTI)

2 DIPP a) Industrial Infrastructure Upgradation Scheme (IIUS).

b) Industrial Park Scheme

3 Commerce

Special Economic Zone (SEZ)

4 Textiles a) Scheme for Integrated Textile Parks (SITP) b) Integrated Handloom Cluster Development

Prog. c) Babasaheb Ambedkar Hastshilp Vikas

Yojana (BAHVY)

5

S.#

Ministry/Deptt.

Name of Scheme

5. FPI Scheme for Infrastructure Development.

6. RD Provision of Urban Amenities in Rural Areas (PURA)

7. Financial Services

a)   Project UPTECH of SBIb) Cluster Development Programme of

SIDBI.c) Cluster Development Programme of NABARD

8. Panchayati Raj

Rural Business Hubs

Ministries Consulted

6

1. Micro & Small Enterprises Cluster Development Programme (MSECDP): SCOPE:

i) Holistic approach – several types of interventions.

ii) Soft interventions like capacity building, exposure, etc.

iii) Hard interventions like technological improvement,

Common Facility Centres (CFC), etc.

iv) Creation/ up-gradation of physical infrastructure.

FINANCIAL PARAMETERS:

Max. project cost Rs. 10 Cr. – GOI share 30% - 80%.

Interventions in 69 clusters, GOI cost- Rs 47.04 Cr.

Diagnostic study of 148 clusters.

MoMSME

7

SCOPE:

A. Integrate several clusters for expanding production & employment in unorganised enterprises.

B. Improve the infrastructure with PURA principles.

I Phase: Institutional strengthening & Capacity Building

(GOI=1/3 of Rs. 12 Cr. Per Pole).

II Phase: Actual Pilot Pole on P.P.P. Mode (GOI : Pvt. = 1:5)

DPRs for 6 pilot projects taken up:- UTTARAKHAND - CHHATTISGARH,

- WEST BENGAL - RAJASTHAN

- ASSAM - KERALA

2. Growth Poles proposed by NCEUS:

MoMSME

8

TARGET: Rural unemployed youth, esp. SC/ST & minority etc. to take

up micro enterprises in every Block Train 500 per Block / year. Create Industrial Sheds etc. in rural areas for 150 per

Block / Year

FINANCING: * GOI = 80% * State = 10% * User = 10%

SCHEME:

Parameters being worked out in consultation with Planning Commission.

Rs.1200 Cr. from different GOI schemes, State Govt. & users during XI Plan.

3. Clusters Proposed for SC,ST, etc.MoMSME

9

4. Scheme of Fund for Re-generation of TraditionalIndustries (SFURTI)

SCOPE: Establishment of competitive traditional industries in KVI

& Coir. Building innovative & traditional skills, improved

technologies, etc. Charkha-replacement , CFCs, Product Development &

Design Intervention, Market Promotion, Capacity Building, Training, etc.

Interventions in 104 clusters (29 Khadi, 50 V I & 25 Coir).

FINANCIAL PARAMETERS: GOI assistance between 75% and 100%.( Rs.1 to 2 Cr.) Minimum 25% contribution from Implementing Agencies.

MoMSME

10

SCOPE:

To enhance competitiveness of the industry by providing quality infrastructure through P P P in functional clusters.

FINANCIAL PARAMETERS: GOI assistance - 75% subject to ceiling of Rs 50 Cr

per project. User industries - minimum of 15%

PURPOSE AND NATURE OF GOI ASSISTANCE:

One time Central assistance for physical infrastructure.

So far 26 clusters have been taken up under IIUS. Rs 579.10 Cr released so far. Proposed XI Plan outlay Rs. 1200 Cr.

DIPP1. Industrial Infrastructure Up-gradation

Scheme (IIUS):

11

SCOPE:

Encourage investment in development of industrial parks, etc., in which high quality infrastructure is made available in a centralized manner, so that the units operating from such parks can have the benefit of lower transaction cost and shorter start up time.

FINANCIAL PARAMETERS:

Tax incentives – Developer eligible for 100% deduction of profits and gains from the industrial park for a period of 10 consecutive years in a block of 15 assessment years. 

PHYSICAL AND FINANCIAL ACHIEVEMENTS:

So far 270 approvals given under the Scheme for claiming tax benefit u/s 80 IA of IT Act.

2. Industrial Park Scheme:DIPP

12

SCOPE:

– For economic development, export promotion & boost manufacturing

– Provide industrial townships, so that increased economic activity does not create pressure on the existing infrastructure.

– SEZ Developer responsible for all civic amenities / infrastructure in SEZ.

FINANCIALS: No Govt. grant , only Incentives.

Developers get :- * I-Tax exemption for 10(of 15) yrs. U/s 80/1AB of IT- Act .

* Custom, Excise exempt. * MAT, DDT, CST,ST exempt.

Exporters get : -* Duty free imports * MAT, CST,ST etc. exempt.

* I-Tax exempt u/s 10AA [100% 5 yrs & 50% next 5 yrs]

3. Special Economic Zones: DoC

13

Special Economic Zones (Contd):

CONTRIBUTION OF OTHER STAKEHOLDERS :

– Delegation of powers to enable single point handling of land use, labour regulations, environmental issues, etc., through DC (SEZ),

– To exempt the SEZ area from levies like Octroi, Sales Tax, etc.

ACHIEVEMENTS:

– Total 101 SEZs / 32,578 employed.

– Rs.35,145 Cr. Private Investment

– SEZ Exports in 2006-07 = Rs 34,787 Cr.(52% growth).

– Projected exports for 2007-08 = Rs. 67,300 Cr.

– Of 1298 functional units in SEZs, 1107 (85%) are MSMEs.

DoC

14

SCOPE:

Provide world class infrastructure facilities by setting up Textile Parks through PPP mode for the textile units.

FINANCIAL PARAMETERS:– Grant or Equity based assistance provided.

– 40% of the project cost (infrastructure) up to Rs. 40 Cr.

– Total state / Central Govt. / PSU equity up to 49%.

X PLAN OUTLAY :-

30 projects (Rs.88.27 Cr.) sanctioned.

XI PLAN (Proposed): Rs.2000 Cr. for 50 ITPs proposed BE 2007-08: Rs.435 Cr to complete 30 ITPs

1. Scheme for Integrated Textile Parks (SITP):

MoTex

15

SCOPE:

Holistic development of handloom clusters.

FINANCIAL ASSISTANCE:

Recurring and non-recurring grant up to 4 years.

– 100 % of project cost (infrastructure) up to Rs.2 Cr.

– CFCs to be on PPP Mode 80:20.

– X Plan - 20 Clusters developed, 100 under study.

– XI Plan - Rs. 173 Cr. (300 clusters) proposed .

2. Integrated Handloom Cluster Development Programme:

MoTex

16

SCOPE:

i) Develop Handicrafts clusters for empowering artisans

ii) Organize artisans into community-based enterprises

FINANCIAL PARAMETERS:

• Need based assistance (usually Rs.75-125 lakhs, as 75% grant).

• CFCs etc. to be on PPP Mode 80:20.

ACHIEVEMENTS:

701 projects (Rs.98.5 Cr.) taken up in the last 6 years.

PROPOSED XI PLAN OUTLAY: Rs. 496 Cr.

3. Babasaheb Ambedkar Hastshilp Vikas Yojana (BAHVY):

MoTex

17

SCOPE: To provide infrastructure & common facilities for food processing, packaging, marketing, providing intelligence platform to SMEs and setting up of testing laboratories for quality assurance & quality control through initiatives for Food Parks, Packaging Centres, Integrated Cold chain facilities, etc.

PURPOSE AND NATURE OF GOI ASSISTANCE: Grant-in-aid for provision of common facilities like cold storage, food testing and analysis laboratory, effluent treatment plant, common processing facilities, power, water supply, etc., on one time basis.

MoFPI

Scheme for Infrastructural Development:

18

Scheme for Infrastructural Development (Contd):

CONTRIBUTION OF OTHER STAKEHOLDERS: Assistance is restricted to 33.33% of the project cost in difficult areas and 25% in General areas subject to a ceiling for different interventions.

PHYSICAL / FINANCIAL ACHIEVEMENTS:

Till 2006-07 - 54 FOOD PARKS / Rs.203.5 Cr.

X Plan outlay : Rs. 180 Cr.

XI Plan outlay (proposed) : Rs. 3160 Cr.

[ Mega Food Parks on PPP/SPV model proposed]

MoFPI

19

SCOPE: To bridge the rural-urban divide and achieve balanced socio-economic development by providing physical and social infrastructure in the identified rural clusters to further their growth potential.

FINANCIAL PARAMETERS: Viability gap funding as per the needs. Concerned States are expected to source additional funds or meet requirements by convergence from other programmes run by Central/ State Governments.

PURPOSE AND NATURE OF GOI ASSISTANCE: Grant-in-aid on one time basis for providing physical and social infrastructure in identified rural clusters to bridge critical gaps and further their growth potential.

MoRDProvision of Urban Amenities in Rural Areas

(PURA):

20

Provision of Urban Amenities in Rural Areas (PURA) ( Contd.):

CONTRIBUTION OF OTHER STAKEHOLDERS :

– 100% centrally sponsored. The States were supposed to converge funds from existing schemes into selected clusters.

X PLAN OUTLAY :

– Rs. 20 Cr. ( 7 clusters) during 2004-05 & 2005-06.

– Rs. 10 Cr. Provision in 2006-07.

XI PLAN (Proposed):

– Rs. 5950 Cr.

MoRD

21

SCOPE: Upgradation of technology of SMEs in the cluster for making them more competitive quality and cost wise.

FINANCIAL PARAMETERS: Implemented with the Bank’s funds only, no GOI assistance.

CONTRIBUTION OF OTHER STAKEHOLDERS: Sporadic contribution – Detailed guidelines not available.

PHYSICAL AND FINANCIAL ACHIEVEMENTS: Rs 3 Cr. incurred on development of 24 clusters.

1. Project UPTECH of SBI:MoF

22

SCOPE:

Upgrade Technology, Skills, Market etc. RESULT:

48 Clusters intervened, 50 clusters identified for intervention.

No specific scheme on cluster development. Mainly functioning as implementing agency of the Government run schemes for cluster development and also doing part funding.

FINANCIALS : No Govt. assistance, Partly from World Bank Fund.

NB: - SIDBI (term loan), Bank (WC) have coordination problem

- SIDBI does not lend below Rs. 10 lakhs/ Most Micro units

can not benefit.

2. Cluster Development Programme of SIDBI:

MoF

23

SCOPE: Holistic development of clusters. FINANCIAL PARAMETERS:

No GOI assistance extended. 2 modes:

A. On participative mode :- Rs.15 lakhs for Cluster.

B. In intensive development mode: 100% grant up to Rs.1.00 Cr.

ACHIEVEMENTS: X Plan:- 65 Clusters (Rs.1.82 Cr.) XI Plan (Proposed):- 46 Clusters (Rs.21.9 Cr.) &

9 more Clusters (Rs. 12.5 Cr.) SPECIAL FEATURES:-Focuses on clusters based on

agro & allied activities, food processing, small and micro enterprises in rural areas, traditional arts, such as handicrafts and handlooms.

3. Cluster Development Programme of NABARD:

MoF

24

SCOPE:

It is envisaged as Public-Private-Panchayat Partnership for combining latent skills at local community level production and marketing networks of CII member companies to reach larger markets by developing latent livelihood skills for additional financial returns to local craftsmen, farmers and entrepreneurs. Joint initiative of Ministry of Panchayati Raj and CII.

PURPOSE AND NATURE OF GOI ASSISTANCE:

GoI and State Governments to facilitate the signing of MoUs between Panchayati Raj Institutions and Private Companies. No financial assistance by GOI.

MoPRRural Business Hubs:

25

Rural Business Hubs ( Contd.):

CONTRIBUTION OF OTHER STAKEHOLDERS : The financing of RBHs is envisaged as a business

proposition on the public-private-panchayat-partnership principle which could be supported by such ‘top-up’ funds as may be available for the purpose. It is also expected that PRIs will converge Centrally Sponsored Schemes and State Government Schemes for funding RBH in rural areas. Support is also envisaged from institutions like NABARD, KVIC, etc.

ACHIEVEMENTS: – 846 RBHs identified & 97 MOUs signed.– Marketing Links Established.

MoPR

26

Observations:

1. There are differences in the perception as to what constitutes a cluster from scheme to scheme, even within the same Ministry.

2. The relevant schemes (overlapping, at times) could also be categorized as under: -

a) Schemes assisting the technical upgradation, etc., of enterprises in existing small clusters.

b) Schemes promoting infrastructure development in existing clusters.

c) Schemes assisting establishment of new estates/clusters.

3. There are both: (a) specific-sector or product-specific group-oriented schemes, like those of Handicrafts, Handlooms, Textiles, SFURTI and Food Processing; and (b) schemes applicable for different sectors like IIUS, MSECDP, etc.

27

Observations ( Contd.):

4. Cluster schemes could also be categorized as:-

a) Those involving direct government assistance (by way of budgetary allocation), and

b) Those involving exemptions/tax incentive-oriented benefits for developers.

5. So far, cluster development schemes are designed only for manufacturing enterprises and not for service enterprises.

6. Almost schemes (current form) introduced 2-4 years ago.

7. All of them went through “Learning Curves”

8. Unanimity : Focus on “Cluster”-rather than dispersed “Scattered”assistance.

28

Thanks You