GUIDELINES FOR “STATE INITIATIVES FOR MICRO & SMALL

ENTERPRISES CLUSTER DEVELOPMENT”

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1. Short Title:

Operational Guidelines for activities under “State Initiatives for Micro &

Small Enterprises Cluster Development”

2. Objective & Strategy:

The objective of the scheme is to facilitate need-based but flexible (to

cater the requirement micro as well as macro level changes) interventions for

overall improvement of the MSE clusters both at unit & cluster level for their

sustenance with focus on group activities. Strategy for achieving the objective

& initiating cluster approach with funding under State Plan shall include:

i) Selection of Clusters,

ii) Capacity building of State Government officials through training,

refresher courses, etc

iii) Organizing Awareness Campaigns and Sensitization of Stake

holders & Support Institutions, Business Development Service

Providers,

iv) Preliminary Diagnostic Study through DICs and preparation of

Diagnostic Study Reports,

v) Initiating trust building & soft activities like holding meetings of

the stake holders,

vi) Supporting capacity building and other interventions, as per the

suggestions of the Diagnostic Study Report, if required,

vii) Facilitate exposure visits to adopt best practices,

viii) Support Public Private Participation (PPP) projects in consonance

with overall objective of Cluster Development Programme like

hiring of consultants for Preparation of Project Report for Hard

Component, etc;

ix) Supporting mobility of Cluster Development Executives (CDE) &

officials of the Cluster Cell for visiting the clusters, within the

cluster movements and other preliminary expenditures for the

purpose; and

x) Other activities as required to be supported for leveraging funds

under Micro& Small Enterprises Cluster Development Programme

(MSE-CDP) of Ministry of MSME, Industrial Infrastructure

Upgradation Scheme (IIUS) and such other schemes of

Government of India having larger implication for ultimate

development of the cluster.

3. Definition:

Terms used in this guideline carry the usual meaning unless otherwise

defined as under.

i) Cluster Cell : Cluster Cell functional at Directorate of Industries,

Orissa, Cuttack herein after referred as Cluster

Cell.

ii) Cluster : Concentration of economic activities producing

typical products / services and / or complimentary

range of products / services located within a

geographical area of about 20 km radius having

critical mass of approximately 25 enterprises or

more.

iii) Critical mass : Number of enterprises producing typical products /

services and / or complimentary range products /

services within a cluster

iv) Cluster

Development

Executive (CDE)

: Officer from the rank of Asst. Manager / Industrial

Supervisor / Industries Promotion Officer selected

by General Manager / Project Manager, DIC with

approval from Director of Industries, Orissa to

facilitate implementation of development

programmes in the cluster. However, for H & CI

clusters, engagement of CDE to be communicated

to Director, H & CI, to intimate revision, if felt

inappropriate.

v) Core stakeholders of

the Cluster

: Core manufacturing / processing / service

enterprises

vi) Other stakeholders

of the Cluster

Raw material suppliers & sub-contractors,

machine & spares suppliers, business development

service providers, support institutions, buyers,

exporters, etc.

vii) Consortium /

Network

: Informal group of core cluster actors having

common need & objectives.

viii) Identified cluster : Clusters identified by the Directorate of Industries,

Orissa for development (as described in clause 4.2

& 4.3).

ix) Diagnostic Study

Report

: A detailed study report highlighting the strength &

weakness of the cluster with details as described at

clause 4.6)

x) Soft activities : Activities related to development of social capital,

promotion of networks, introduction of business

service providers, establishing new/ strengthening

existing market, improving quality of product /

services, addressing critical gaps in the cluster.

xi) Hard component : Common Facility Centre(s) (CFC) fitting into the

broader & clearly stated long-term vision of the

cluster and is likely to facilitate productivity /

turnover / further value addition in the cluster.

x) Coordinational

expenses

: Expenses incurred by CDEs & officials of Cluster

Cell of the Directorate to visit the cluster. Besides,

it will include touring in the cluster irrespective of

its location within or outside the headquarters.

xi) Exposure : Visit of State Government officials with or

without cluster stakeholders to similar clusters,

trade fairs, product-specific workshops &

seminars, etc within / outside the State / abroad

with an ultimate objective to improve productivity,

quality, sustainability of the Cluster

OR

Visit of experts / professionals / stakeholders from

similar developed clusters to the cluster.

xii) Special Purpose

Vehicle (SPV)

: A legal entity comprising of 10 or more actual /

likely cluster beneficiaries / enterprises

collaborated in a recognised form like cooperative

society, registered society, trust, company, etc

4. Procedure: Since cluster approach intends to involve all stakeholders of the cluster,

procedural details of various components are given below. 4.1 Capacity Building of management

Cluster Cell, depending on the need, will organize training programmes,

refreshers’ course, etc for its field functionaries through reputed organization /

institution / experts at suitable locations.

4.2 Selection of Cluster

General Manager / Project Manager, DICs will choose prospective

clusters with adequate critical mass in MSE sector and send the same to

Directorate of Industries, Orissa (as per Annexure I) along with sufficient

justification for development of the specific enterprises through cluster

approach after getting it vetted through District Level Single Window Clearance

Authority (DSWCA) under the chairmanship of Collector & District Magistrate

concerned.

Other agencies intending to be a part of the programme may route their

proposal through the concerned General Manager / Project Manager, DIC.

4.3 Identification of Cluster

On receipt of proposals from General Manager / Project Manager, DIC or

clusters chosen by the Cluster Cell, Head of the Cluster Cell will place the

details before the Director of Industries, Orissa for identification of Clusters to

facilitate implementation of cluster development approach. The list of identified

clusters shall be notified by Cluster Cell on approval of Director of Industries,

Orissa from time to time. The list of clusters in case of Handicraft & Cottage

Industries sector shall be notified with approval of DH & CI.

4.4 Preliminary Diagnostic Study

Preliminary Diagnostic Study in respect of identified clusters will be

conducted through CDE under supervision of General Manager / Project

Manager, DICs with support from State Plan scheme on following terms of

reference.

a. Basic information about the cluster: exact location, age of the

cluster, cluster products, number of micro and small units

separately mentioning average investment in plant and machinery,

employment, level of technology, turnover, exports, institutional

supports available in the cluster.

b. Profiles of the units owned by SC/ST/Minority/Women in the

cluster should be covered separately.

c. Rationality for cooperative initiative in major intervention areas

like Marketing, Technological upgradation, Credit, Institutional

Capacity Building, etc

d. Feasible Action Plan

e. Possible interventions / Common Facility Centre (CFC) (if any).

f. Comparative benefit between two stages i.e. before and after

implementation of the proposed measures.

Study Report should be at least 10-12 pages document in the line of

template enclosed at Annexure II. On the basis of Preliminary Diagnostic Study

Report, Cluster Cell, on approval of Director of Industries, Orissa, shall move

Development Commissioner (MSME), government of India for assistance under

MSE-CDP or facilitate Diagnostic Study through State Plan funding.

4.5 Organization of Awareness Campaigns and Sensitization programmes for

Cluster core & other Stakeholders

For preliminary Diagnostic Study & motivating core cluster actors to

adopt cluster approach, General Manager / Project Manager, DICs will organize

Awareness Campaigns & Sensitization programmes (and exposure visit to

similar clusters or important events, if required) for Cluster Stakeholders &

Support Institutions in identified clusters in different phases with support from

State Plan funding. Such programme should:

a. Involve core enterprises and other stakeholders like support

institutions, raw material suppliers, Logistic Support Providers,

Business Service Development (BDS) providers, market players

and representative from Cluster Cell of this Directorate.

b. Ensure active participation of Industries Associations / core

enterprise. The contribution of participants should not be less than

10% of the total cost of the programme. 4.6 Diagnostic Study

Diagnostic Study in respect of identified clusters will be conducted

through General Manager / Project Manager, DICs with support from State Plan

scheme / MSE-CDP. Draft Diagnostic Study Report (DSR) should be at least

25-30 pages document as per template at Annexure II. It should contain:

a. Basic information about the cluster: exact location, age of the

cluster, cluster products (traditional artisanal or traditional

industrial or modern / high tech products), number of micro and

small units separately mentioning average investment in plant and

machinery, employment, level of technology, turnover, exports,

institutional supports available in the cluster.

b. Profiles of the units owned by SC/ST/Minority/Women in the

cluster should be covered separately.

c. Need for cooperative initiative in major intervention areas like

Marketing, Technological upgradation, Credit, Institutional

Capacity Building, etc

d. Detailed need analysis in respect of each intervention area viz.

Marketing, Technological upgradation, Institutional Capacity

Building, Quality improvement.

e. Recommendation of remedial measures to be followed for each

analysed need corresponding to the intervention area appropriate

for respective clusters, if any, in an appropriate time frame.

f. Comparative benefit between two stages i.e. before and after

implementation of the proposed measures. It would quantify the

benefit in monetary terms, percentage, numbers, tons or other

suitable units.

g. Broad strategy for inducing interventions in the cluster.

h. Detailed Action Plan including budgetary provision for entire

project duration separately for development of the clusters,

showing clearly the contribution from Cluster Actor / Association/

Other stakeholder which in any cost not less that 10% of the

proposed project cost.

i. Need for setting up of Common Facility Centre (CFC) in PPP

mode (if any) in the cluster.

j. Areas of convergence with National Manufacturing

Competitiveness Programme (NMCP) of GoI to the extent as

possible.

After finalization of the Diagnostic Study Report through workshop mode

involving all Stakeholders of the Cluster, proposal for soft activities & hard

component will be submitted by the Directorate of Industries to Development

Commissioner(MSME), Ministry of MSME, New Delhi for assistance under

MSE-CDP. 4.7 Trust Building activities

Trust building (as a part of pilot activities) amongst the stakeholders of

the cluster is critical for their confidence in the approach. In order to enhance

Social Capital, General Manager / Project Manager, DIC should facilitate

frequent meetings among cluster members so as to:

a. Promote forums for a dialogue among cluster stakeholders by

initiating / reactivating consortium / network (group of more than 5

stakeholders having common need) / cluster specific associations.

b. Encourage cross-fertilization of ideas,

c. Disseminate awareness about the advantages of joint action

through cluster,

d. Enable cluster leaders to conceptualize and implement joint

initiatives.

e. Facilitate capacity building of SPV through workshop / training

and

f. Initiate pilot social & technical interventions for workforce in the

cluster

Expenses of such meeting may be met from the funds under State Plan /

MSE-CDP, as the case may be. However efforts may be made to seek at least

10% contribution from cluster members. 4.8 Exposure

On receipt of proposals from General Manager / Project Manager, DIC or

otherwise proposed by the Cluster Cell, Head of the Cluster Cell will place the

details of proposed exposure to best practices (in better performing cluster OR

in-house OR both) before the Director of Industries, Orissa and Industries

department, as the case may be, for approval. The expenses will be met out of

funds under State Plan / MSE-CDP. However, in case of outside tour by Cluster

member(s), the Government funding for their visit will be limited to 80% for

first visit, 70% for second and 50% for subsequent visits. The cost of the visit

includes cost of to & fro Journey, lodging, boarding & other essential incidental

expenditure related to it in respect of all participants. The cluster member(s)

other than Government servants participating in the visit shall be entitled avail

benefits as applicable to Pay Band 3 officers under Orissa TA Rules. Average

size of the team for exposure visit should 10-15 but for particular activity it

should be limited to 2-5.

In case of in-house exposure, cost of national and international experts /

professionals / delegates is limited to Rs. 1 lakh and Rs. 2 lakh respectively. After completion of exposure, a detailed note shall be submitted along

with documentary evidence of expenditure to the Cluster Cell for

reimbursement. Format for the visit note is given at Annexure III. 4.9 Preparation of Project Report for CFC

In order to facilitate assistance under MSE-CDP, the SPV may be

provided with assistance under State Plan Scheme towards preparation of

Project Report for Common Facility Centre in the cluster, which is not

supported under MSE-CDP or any other scheme. However, proposal for CFC

should base on the findings of the DSR & emanate from the SPV of the Cluster.

It should be routed through the General Manager / Project Manager, DIC for

approval by Director of Industries, Orissa. SPV, promoting the CFC, shall bear

the cost of the preparation of project report to the tune not less than 50% of the

total cost. 4.10 Monitoring & Evaluation To facilitate regular monitoring of the programme, General Manager /

Project Manager, DICs are required to furnish cluster-wise Report on monthly

progress in the format enclosed at Annexure IV within 15th of the succeeded

month. Further, SPVs of the supported clusters are required to furnish details of

activities / interventions undertaken during a financial year annually within 1st

quarter of the next financial year to the concerned General Manager, DIC in the

format enclosed at Annexure V. And it should be forwarded by the General

Manager, DIC to the Cluster Cell along with his/her comments thereon. Besides, Cluster Cell will organize review meeting involving General

Manager / Project Manager, DICs / SPVs of the Clusters / agencies assigned

with DSR in respect of MSE-CDP assisted clusters. Expenses in this regard will

be met out of State Plan scheme. On completion of the development programme in a particular cluster,

Cluster Cell, on approval of Director of Industries, may undertake third party

evaluation to ascertain the outcome with state plan funding.

4.11 Other activities Cluster Cell, on approval of Director of Industries, Orissa, may take up

other activities as required to be supported for leveraging funds under MSE-

CDP or any other similar schemes of various ministries / agencies of

Government of India. 5. Sourcing of fund, placement of funds & mode of payment

However, funds from State Plan scheme shall be sourced from the State

Budget on yearly basis. Funds, so sourced, will be placed with Directorate of

Industries, Orissa and General Manager / Project Manager, DICs for

implementation of various activities. Payment to DICs will be made though

Government drafts. 6. Coverage of Expenditure (State Plan)

i) Organisation of sensitization programme & related expenditure can

be met out of this fund.

ii) Compensation to officials for their visit to the cluster can be

covered limited to:

a. As per Orissa TA Rules for cluster located outside the

headquarters of the concerned CDE &

b. Suitable compensation not more than Rs.500/- per month to the

designated Cluster Development Executive (CDE) as decided

by the GM / PM, DIC for cluster located within the

headquarters of the concerned CDE.

iii) Cost of documentation including video, report preparation,

printing, etc can be met.

iv) Other activities as deemed proper by Director of Industries, Orissa 7. Utilization of funds (State Plan) Utilization of funds shall be monitored by the Cluster Cell on the basis of

report received from CDEs through General Manager / Project Manager, DICs. 8. Miscellaneous:

Director of Industries, Orissa may issue clarifications / suggestions not

inconsistent with the provisions of this guideline for smooth implementation.

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Annexure I

FORMAT FOR SELECTION OF CLUSTER

1. Name of the Cluster

2. Geographical location of the Cluster

covering radius in Kms.

3. Items produced

4. No. of Micro, Small & Medium Sector

5. Total employment in the Cluster

a) Full Time

b) Part Time

6. Total investment in the cluster

7. Present Turnover both in quantity &

amount

8. Availability of raw material

9. Present status of export, if any, along

with details of organisation through

which export are being made

10. Details of Financial Institutions &

other Business Development Services

available

11. Present market avenues

12. Problems of the Cluster

13. Support required to increase production

& employment in sustainable manner

14. Is there any scope for strengthening the

units through Cluster Development

Programme

15. Interventions required in the cluster

16. Remarks (Any other relevant

information)

Annexure II Template for Diagnostic Study Report

1. Industry Scenario:

World, India, Cluster details

The world scenario in the particular product; world production figures; world trade; which countries are major producers; (Mostly through internet) How India is is placed in the world scenario; which are the main clusters in India; what are India’s strengths and weaknesses (Mostly through internet) Cluster details; total production; total production units; range products; main markets; significance of the cluster in national and international markets; (Discussion with Cluster actors) 2. Evolution of cluster When did the cluster start, when was the first firm established, how, who did it, what were the reasons, the overall business environment at that point of time, policies and their effect on the growth of the cluster, major activities/ changes which took place in the cluster, e.g. when & how did a new technology came in, how did it got up-scaled, how the number of firms in the cluster have grown or reduced over the past years and is there any relationship of these changes with some factors, bring a chronological sequence of these events to the present status and link these with local, national or international environment/ policy as far as possible (Discussion with Cluster Actor) 3. Structure of cluster Main stakeholders in the cluster; their interrelationships; no of firms at all levels; nature of subcontracting linkages with in and outside the clusters; cooperatives of the artisans, their reach in the clusters; number of SHGs operating; (Discussion with Cluster Actors/ Cross checking of information/ Analysis) 4. Production process- description of value chain What is the sequence of the activities carried out in the cluster from raw material to final product, little technical explanation of each process and the details of the machinery and skills involved in each of these processes, (Discussion with Core Cluster Actors / Analysis) 5. Analysis of value chain A mapping of value addition process – how much value is added at each of the stages of production (Information from all concerned / Deeper Analysis) 6. Analysis of Business operations Here list down and explain in detail all the problems (as per their presence in the cluster) related to:

Raw material procurement and its quality, costs, etc. if there is improvement necessary and possible

Production process related problems Design related problems Technology related problems

Credit issues Marketing issues Organisational issues

(Information from all concerned / Deeper Analysis)

7. Presence of support institutions in the cluster & their role Category wise description of public / private institutions involved in the cluster, their past and ongoing activities, their successes and further areas of cooperation ( that is how failures need to be presented) (Collection of Information/ Analysis) 8. Presence of BDS in the clusters & their role What kinds of services are available in the cluster and what is the relationship between the cluster stakeholders and the service providers, their terms and conditions of working, what seems to be the gap. How BDS view the cluster (Collection of Information/ Analysis) 9. Infrastructure analysis of clusters What are the problems of the cluster which can be removed by some infrastructure which is either not there or is not functioning properly? What possible common infrastructure are required by cluster actors (Collection of Information/ Analysis) 10. Credit analysis of the cluster What are the credit requirements of the different cluster stakeholders, how do they get it, what are the problems, their credit history and relations with the banks, how banks see these people (Discussion with Core Cluster Actors / Analysis) 11. Mapping of social capital- Associations; their role; informal leaders in the cluster (Discussion with Core Cluster Actors / Analysis) 12. Present Cluster Map 13. SWOT (Strengths, Weaknesses, Opportunities and threats of the cluster)- this

should be a detailed analysis…..here all gaps in the cluster on which action plans will be based should be detailed out

14. Vision of the Cluster (both at firm as well as cluster level) 15. Strategy for development (based on analysis & requirement of the Cluster

stakeholders). Details of Common Facilities need to be suggested along with required soft activities.

16. Detailed Action Plan along requirement fund & source

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Annexure III

FORMAT FOR EXPOSURE NOTE

1. Brief details of the cluster(s)

exposed along with

observation of evolution of

the said cluster in case of

outside tour

OR

Details of expert /

professional / stakeholder of

other cluster visiting the

cluster

:

2. Details of units visited in the

cluster(s) exposed

(Date-wise)

:

3. Highlights of discussion with

stakeholders of the Cluster

exposed (date-wise)

:

4. Learnings from the exposure

visit

:

5. Potential activities / strategies

for replication in the cluster

under consideration

:

6. Details of initiatives

undertaken / proposed & its

time frame

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Annexure IV Name of the Cluster :

Name of the Designated CDE : A. Activity details i. Activities (each one to be

mentioned)

ii. Purpose of the activities

iii. No. of participant

iv. Outcome of the activities

v. Details of beneficiaries

B. Expenditure details (Broad head of expenditure) Sl. Head of expenditure Total

Expenditure

State

Share

Industry Association

/ SPV Share

i.

ii.

iii.

iv.

C. Problems, if any

Signature of the CDE

D. Suggested future activities

Signature of GM / PM, DIC

Annexure V Name of the Cluster :

Name & address of the SPV :

A. SPV details i. Contact No. & email ID

ii. No. of members (with details

of additional members during

the year)

B. Activity details i. Activities undertaken during

the year (each one to be

mentioned)

ii. Purpose of the activities vis-à-

vis proposed activities of

preceding year

iii. No. of participant

iv. Outcome of the activities

v. Details of beneficiaries

vi. Proposed activities (details to

be indicated with proposed

expenditure)

C. Problems, if any

Signature of the CEO